It’s the economy, stupid

Capture Another day, another twist in The Abbottalypse, from the AFR: The latest monthly Fairfax/Ipsos poll shows the Coalition trailing Labor by just 51 per cent to 49 per cent on a two-party preferred basis. ...Mr Abbott still remains highly unpopular and Malcolm Turnbull has stretched his lead by 4 points to 39 per cent as the most preferred Liberal leader. Julie Bishop has moved into second place on 24 per cent, ahead of Mr Abbott on 19 per cent. Mr Shorten's rating as preferred prime minister fell 6 points in a month from 50 per cent to 44 per cent and Mr Abbott's same rating rose 5 points to 39...
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New Treasury head outlines reform challenge

ScreenHunter_6198 Feb. 25 09.00 By Leith van Onselen New secretary to the Australian Treasury, John Fraser, gave a speech on Friday to the Committee for Economic Development of Australia (CEDA) entitled “Australia’s Economic Policy Challenges”, which outlined some important observations about the economy and Budget, as well as priorities for economic reform. First up, Fraser claimed that tighter banking regulations are constraining growth in the real economy - a view I strongly dispute: [Australia's] economic growth has been below its long run average in 5 of the past 6 financial years, weighing on job creation and...
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RP Data: Home prices up 0.3% in February

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data's price results are in for February, with the daily index recording a 0.32% rise over the month at the 5-city level, with Sydney once again leading the way (see next chart). It was the third monthly rise in values since the unexpected fall in November, with values also up by 2.50% over the quarter (see next chart). The slide in price growth nationally has also been arrested, thanks to a second wind in Sydney (see next chart). Values are now 13.9% above the October 2010 peak at the 5-city level, with values in all major capitals except Brisbane also...
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Auction clearances remain fully mental

ScreenHunter_01 Jul. 19 09.10 Just when you thought the Great Australian Housing Bubble was running out of steam, the national auction clearance rate delivered another frothy result, driven again by strong demand in Sydney and Melbourne. The preliminary national clearance rate was a hot 77.1%, just a smidgen under last week's 77.7% and comfortably above the 74.2% recorded at the same time last year. Sydney’s clearance rate fell 5.0% to 82.8%, whereas Melbourne’s rose by 1.6% to 76.5%. Clearances in Brisbane, which typically only has a small number of auctions, fall sharply to 54.6% from 68.9% last weekend. Overall...
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RP Data weekly housing market update

ScreenHunter_6077 Feb. 15 19.10 Click to view Core Logic-RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 1 March 2015. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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Foreign investor fees still up in the air

ScreenHunter_4459 Oct. 13 10.08 By Martin North, cross-posted from the Digital Finance Analytics Blog Speaking on ABC Insiders yesterday, Josh Frydenberg, Assistant Treasurer made the point that the foreign investor regulations, recently announced were open for consultation, and that a number of issues had yet to be resolved. For example, should a foreign investor pay the fee each time they apply to purchase a property (so bidding on multiple properties would mean multiple fees)? Or should they pay one fee to cover multiple potential transactions? If they are not successful in purchasing the target property, is the fee refundable?...
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Now is the ideal time for WA to panic

broken-promises-logo-200x200 From the WA Treasurer, Dr Mike Nahan: The message from Western Australia's Treasurer Mike Nahan to business and consumers is simple: Do not panic. He said the mining construction boom had ended, but the mining production boom was ramping up, and the WA Government was successfully managing the transition. Dr Nahan was selling the slowdown of the WA economy to top level business audiences in Perth this week, hoping to stop the post-boom gloom about a state that has been the nation's economic powerhouse for a decade spiralling downward. "When we've had such growth as we've had in the last 10...
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Daily LNG price update (rig slow)

elephant-clipart-black-and-white-13285-cartoon-elephant-clip-art-design-200x200 The big news Friday night was more slowing in the US rig count down -43 to 1,267. The rate of decline continues to slow with the 6 week average at -70.9: I would have thought this was bearish for oil but the market went the other way with Brent up nearly 4% to $62.19. If markets can hold at these prices a while then shale is going to stabilise and the glut persist, but whatever! The indicative LNG contract price rose to $9.08mmBtu: In news, Sabine Pass moved another step forward with further DOE export approvals: The U.S. Department of Energy issued an order authorizing...
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China cuts interest rates as PMI falls

china-bubble-balloon Chinese growth is descending below the appointed glide slope and on Saturday the PBOC acted again which was absolutely no surprise given the recent crash in money supply growth. From Investing in Chinese Stocks: The PBOC cut interest rates by 25 basis points, lowering the one-year loan rate from 5.60% to 5.35%. The deposit rate falls from 2.75% to 2.5%. However, the PBOC increased the deposit band to 130% of the official rate, up from 120%. Banks could pay 3.30% interest on deposits before the cut, today it is 3.25%. This ends up being a rate cut across the board, unlike in November, whendeposit rates...
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Phat Dragon on the China rate cut

1 From Westpac's Phat Dragon: The People’s Bank has announced a 25bp cut in benchmark deposit and lending rates, taking the 1-year rates to 2.50% and 5.35% respectively. That follows a 40bp cut in rates late last year. Writing on February 5, Phat Dragon anticipated a near- term cut, the timing of which was “ ... more likely to be after the LNY (beginning February 19) than before, but not a long time after.” Spooky. Read...
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Links 2 March 2015

ScreenHunter_01-Apr.-02-06.192 Global Macro / Markets / Investing: Berkshire Hathaway's 2014 letter - berkshirehathaway.com A Dozen Things Taught by Warren Buffett in his 50th Anniversary Letter that will Benefit Ordinary Investors - 25iq.com Warren Buffett Rails Against Investment Bankers - New York Times Saudis’ Oil Price War Is Paying Off - Bloomberg 10 Things to Know About Negative Bond Yields - Bloomberg North America: How the West Is Owned - Big Think A Slippery New Rule for Gauging Fiscal Policy - New York Times The Solar Business Now Employs More Americans Than Coal Mining - Slate Janet Yellen...
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Weekend Links, February 28 – March 1, 2015

the-links1-300x233 China China atwitter over next ‘tiger’ to fall in corruption purge – FT.com Luxury labels embrace "new normal" as Chinese market shrinks – Want China Times S Korea-China FTA could hurt Japanese businesses in China – Want China Times China's real property problem - Fairfax The SPFTZ, a concrete first step towards China’s new development model? – Vox China unveils tax template for some foreign cross-border investments, sources say – SCMP City and rural banks in Zhejiang latest to gain from cuts to required reserve ratio - SCMP China to sign New Silk Road investment...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Greenback recovers on CPI and hawkish fedspeak Asia is facing a quiet finish to the week with renewed US dollar strength being the key theme. Earlier in the week, Fed chair Janet Yellen emphasised the significance of inflation and wage growth to the timing of rates lift-off. As a result, the CPI data released Thursday was always going to carry significant weight. While the headline inflation reading fell 0.7% and was a touch below expectations, the core CPI reading was up 0.2% and slightly ahead of estimates. This implied a...
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Washington Post: Beware the TPP

ScreenHunter_3418 Jul. 23 10.44 By Leith van Onselen The Washington Post has joined the chorus of experts warning about the dangers lurking in the Trans-Pacific Partnership (TPP) trade agreement - the US-led trade deal between 12 Pacific-rim nations (including Australia) - which is expected to be signed within the next month: Who will benefit from the TPP? American workers? Consumers? Small businesses? Taxpayers? Or the biggest multinational corporations in the world? One strong hint is buried in the fine print of the closely guarded draft. The provision, an increasingly common feature of trade agreements, is called...
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Weak labor folds on data retention

ScreenHunter_6181 Feb. 23 14.54 By Leith van Onselen As expected, the Labor Party has folded in its opposition to the Government's data retention plan, paving the way for the Government to pass legislation requiring internet providers to store customers' metadata for two years. From The AFR: Labor has called for some amendments but largely backed the most controversial parts of the plan – its duration and scope. There is also no firm push to detail exactly how much the government would pay for the plan, which internet service providers have warned could lead to higher service prices. Under the changes, the definition of...
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RBA meeting preview: Expect another rate cut

ScreenHunter_02 Apr. 22 19.55 From Bill Evans, chief economist at Westpac, who believes that the RBA will cut rates by another 0.25% at Tuesday's meeting and will adopt an easing bias: The Reserve Bank Board meets next week on March 3. We expect that it will decide to cut to overnight cash rate by 25bps from 2.25% to 2.00%. On December 4 last year we forecast that the Bank would decide to cut the cash rate by 25bps at both its February and March meetings. At that time market pricing put the probability of consecutive rate cuts at around 15% with the probability of the February rate cut alone (that has since been delivered) at...
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Investor mortgage growth keeps on rising

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of January: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.0% MoM; 0.0% QoQ; 0.8% YoY) remains in the gutter, whereas business credit growth (0.8% MoM; 1.6% QoQ; 5.5% YoY) and housing credit growth (0.6% MoM; 1.8% QoQ; 7.1% YoY) are stronger, but remain below their long-run average growth rates (although housing credit is still growing more than twice as quickly as wages and off a ginormous debt...
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Melbourne property “so far out of whack”

ScreenHunter_02 Apr. 23 10.34 By Leith van Onselen If you get a spare 10 minutes today, make sure that you listen to the above interview with property developer/investor, Michael Drapac, from Tuesday's Mornings With Jon Faine show. Drapac is a prominent developer/investor that has been in business since the 1970s. In the mid-2000s, he held the biggest portfolio of CBD land in Melbourne (now sold-off). And now, he holds a multi-billion dollar land portfolio in South Eastern United States. According to Drapac, Melbourne is home to one of the world's biggest property bubble, and anyone that "believes this time is different...
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Macro Morning: Mad World

marketmorning-200x200 By Chris Becker Following yesterdays "mini-stimulus" by Chinese authorities, almost all Asian bourses rallied, with the Shanghai Comp up 2% and the Nikkei up over 1%, while the local ASX200 was dragged down by the worse than expected private capex figures. The Nikkei is taking another step up into the stratosphere here, becoming seriously overbought on the dailies: SPI futures are pointing to a very modest open this morning on the ASX200, absorbing the good lead in Europe but dampened by the slip in Wall Street. The marginally poorer than expected German unemployment report, where the...
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Budget under more pressure as nominal GDP fades

ScreenHunter_88 Sep. 05 08.32 By Leith van Onselen Stephen Anthony, principal of consulting group Macroeconomics, has today warned that the Federal Budget is facing more downgrades as growth in nominal GDP disappoints. From The Australian: [Anthony] said “nominal” GDP, or the value of all the goods and services produced, was not rising as quickly as projected because of the fall in export commodity prices, a currency that was still too high and very weak wages growth. Although he commended Treasury for heavily marking down its forecasts for nominal GDP for 2014-15 in the midyear budget update, he said the outlook was...
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Bring light to the Council of Financial Regulators

blog1 Cross-posted from Martin North's DFA blog. Behind the scenes, it is the mysterious Council of Financial Regulators which is coordinating activity across the Reserve Bank, APRA, AISC and Treasury. This body, is the conductor of the regulatory orchestra, and although formed initially in 1998, it has only had an independent website since 2013.  It is the coordinating body for Australia’s main financial regulatory agencies. It is a non-statutory body whose role is to contribute to the efficiency and effectiveness of financial regulation and to promote stability of the Australian financial system. The...
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Glencore slashes coal output

1 This is interesting from Bloomie, Glencore is to cut Australian coal exports by 15 million tonnes in 2015. This represents 16% of Glencore's projected Australian output and 6% of total Australian exports. 15mt is roughly 1.4 of the global traded coal market. Any implications? Prices have been up the last few weeks as China restocks, passing $67:   The cuts can do the market balance no harm though change little longer term. Glencore was scheduled to open the 13mt Clermont mine in QLD this year so this is actually just cutting back expansion and may simply be some...
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Long-term unemployment soaring

ScreenHunter_6256 Feb. 27 08.10 By Leith van Onselen Fairfax's Ben Schneiders has penned two good pieces today (here and here) on the growing scourge of long-term unemployment, which has risen some 150% since the GFC hit in 2008: An analysis of Bureau of Statistics data by Fairfax Media shows that the number of people out of work for more than a year rose to 175,200 people in January, an increase of more than 150 per cent since mid 2008. ...both the young - without skills and experience - and the old, in particular those in declining industries, were being hit by long-term joblessness. The Bureau of Statistics data shows...
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RIO chops hundreds in Pilbara

images From the SMH: Rio Tinto is poised to cut several hundred jobs from its iron ore division in Western Australia, weeks after iron ore boss Andrew Harding sent a memo to staff warning of a "degree of urgency" to quickly achieve deep cost cuts and maintain its mantle as the world's lowest-cost exporter to China. Further deep cost cuts at Rio have been well flagged, and the miner is putting the heat on high-cost players around the world by drilling its world-beating production costs even further down. It exited the December quarter with cash costs just under $US17 a tonne. Rio declined to...
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“Mad” Adam: Interest rates at bottom

dads_army_t_shirt_-_dont_panic_cu From Adam Carr at Dad's Army: Basically, I think that whatever the cash rate is by June, it’ll be the trough, which means that he window for the next 50bp is quite narrow. There are two reasons for this: firstly, and taken at face value, the Federal Reserve is preparing the world for a tightening cycle sometime later this year. ...As simple as it sounds, that one small decision from the Fed will have a profound impact around the globe: it’ll effectively put an end to the global currency wars, or at least establish some form of hiatus. ...This brings me to the second reason: all in all, most...
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