Japanese fund to buy Australian dollars

images From Bloomie: Japan's second-biggest bond fund is looking to buy the Australian dollar on dips, predicting a slowdown in China won't derail the global recovery...Kokusai Asset Management Co. had 1 percent of its Global Sovereign Open Fund invested in Aussie-denominated assets on April 10, down from 4.5 percent at the end of September, data on the company's website show. Kokusai is looking to add to its Aussie holdings and is increasing its investments in New Zealand debt. "We don't think risks in China will have a long-term impact on the global economy," Masataka Horii, who runs the 1.18...
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Kohler laments Australia’s expensive land

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Alan Kohler has published a good post today at Business Spectator warning that increasing credit availability, brought about partly from the resurgence in securitisation, is combining with Australia's constipated land use/planning system to raise house prices, to the detriment of younger Australians: We are seeing two quite different markets being mixed together: one for credit that is active and plentiful (call this one nitro) and one for land that is short (call it glycerin)... There simply isn’t enough land being released in Australia to match either the demand for...
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Phat Dragon on the Chinese slowing

china Fresh from Westpac's Phat Dragon and check out that chart. It looks to me like an economy very quickly going "ex-growth": Looking at the breakdown of real activity from the production side of the accounts, primary output decelerated (3.5%ytd from 4.0%ytd in Q4) while both secondary (7.30%ytd from 7.85%ytd in Q4) and tertiary activity (7.8%ytd from 8.27%ytd in Q4) shed altitude. Tertiary activity growth had been very stable through 2013, despite considerable volatility in the business surveys. The somewhat abrupt Q1 adjustment remedies that historical lack of movement to some extent in a levels...
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Big coal buries itself on Twitter

BlLeQQaCUAEl3ui Earlier this week I noted that a great coal whinge had begun in the mainstream media and now it is clear why. From Crikey: When the brains behind the Minerals Council launched an advertising campaign to defeat Labor's mining tax, they nailed it. The tax was gutted, and the PM who dared propose it -- Kevin Rudd -- lost his job. Miners spent $22 million on the ads and saved billions in tax they never had to pay. Now the Minerals Council has a new multimillion-dollar ad campaign, this one to defend the coal industry. But "Australians for Coal" doesn't seem destined for the success of the...
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Is employment the real stimulus trigger in China?

shibor Ever since Chinese authorities committed to higher growth earlier this year, they've largely backtracked and fudged by emphasising quality over quantity, as well as the importance of the labour market over headline growth. Premier Li Keqiang has said China can tolerate lower growth as long as employment figures are solid. Today the Chinese National Bureau of Statistics did so again. From MNI: The government's response to this report is the key question for investors. Premier Li Keqiang said last week that his government won't respond to short-term economic volatility with major stimulus measures....
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Bye bye Barry

images Excerpted from Crikey's Bernard Keane: For three years Barry O'Farrell has been an excellent premier of a state that desperately needed both good government and an end to the blatant corruption that became a feature of New South Wales Labor's last years in power. Like any politician, he was not above compromise and deal-making -- his pandering to Legislative Council crossbenchers like the Shooters Party and Fred Nile was faintly sordid. The circumstances in which James Packer was given his way on Barangaroo -- enabled by both O'Farrell and Labor -- leave a particularly unpleasant taste in the...
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The pharmacy racket must end

ScreenHunter_2078 Apr. 16 12.28 By Leith van Onselen  The Australian's Janet Albrechtsen has written a cracking article today attacking the Abbott Government for refusing to free-up competition in the pharmacy industry, which she argues is one of the nation's biggest entitlement racket: So here we are again. A Coalition government is back in Canberra, with the same union-busting, free-market messages in addition to one heck of a new target — ending the age of entitlement. Yet, in a case of deja vu, one union behind one industry in Australia has done a clever job of removing itself from the dartboard of reform... [The]...
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FMG misses big on production

search Fortescue's March production report is out is clearly the worst of the big three: Completion of US$9.2 billion expansion of port, rail and mining operations to achieve production capacity of 155mtpa. • The 40mtpa Kings Valley project was opened in March 2014 following commissioning of the ore processing facility (OPF) which was constructed in record time, taking only 179 days from assembly of first steel to completion. • Achieved targeted 155 million tonne (mt) per annum annualised rate during March 2014. • Record shipments of 31.5mt achieved in the March 2014 quarter, lifting financial...
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Chinese growth is falling fast

china-slow-down-red-flag-sign China has released its combined Q1 GDP and March data today and, again, it's weakened. GDP fell sharply to 1.4% for the quarter and  7.4% for the year versus 7.3% expected: For March data, industrial production fell  to  8.8% versus 9% expected: Fixed asset investment was bashed lower to  17.6% versus 18% expected: Finally, chalk one up for rebalancing with retail sales coming in at 12.1%, as expected. If you annualise that quarterly figure you get 5.6%! The upshot is that China needs some non-stimulus quickly to prevent growth falling well below 7%. The dollar popped 40...
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Dwelling completions fell in Q4

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The ABS has just released dwelling completions data for the December quarter, which registered a 2.0% seasonally-adjusted fall in the total number of dwellings completed over the quarter, with the 3.3% rise in detached house construction more than offset by a 9.9% slump in unit & apartment construction (see next chart). The decline in dwelling completions nationally was driven by a big 10.9% fall in Victoria, where unit & apartment construction slumped by 21.3% and house construction fell by a more moderate 1.3%. The fall in Victoria more than offset increases...
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Chinese developer forecasts collapse

4cc59bb27434a63 Cross-posted from Investing in Chinese Stocks: The string of bad housing news out of Zhejiang province keeps on going. This is a paper napkin story: the situation is so bad that an executive can calculate disaster by adding up all the area under construction and dividing it by the population. Selected portions of this Google Translated article follows. (cleaned up in parts to convey meaning) 浙江海宁1.6万套库存压顶消化需8年 房企称就要崩盘 Similar to the recent housing crisis broke in Yuyao, the same as the Chinese economy Haining county, in 2013 Haining ranked No. 21 in...
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Housing sentiment lifts on record foreign demand

ScreenHunter_05 Jul. 07 22.22 By Leith van Onselen NAB has released its Australian Residential Property Survey for the March quarter of 2014, which revealed a small rise in sentiment nationally amongst property professionals, with house price expectations also strengthening is all states except Victoria. Concerns about rising interest rates are starting to rise, whereas employment security continues to be viewed as the biggest impediment to buying property in most states. The Survey also found that foreign buyers were significantly more active in both the new and established property market, accounting for a record...
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McAleese warns again

images Aside from the anti-Midas touch of Mark Rowsthorn, this is worth noting because McAleese's difficulties appear to go to demand as much as ineptitude: The McAleese Group, owner of Cootes Transport, has issued its second profit warning in two months, saying trading in the March quarter has been more difficult than expected due to safety breaches and falling demand for its heavy haulage services. The wholesale sector has been consistently more weak than other sectors in the NAB survey over recent months and has suggested the underbelly of the cyclical bounce was soft. This may also be the result of...
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Leading Index stuck sub-trend

refvaes From Westpac: The six month annualised deviation from trend growth rate of the Westpac Melbourne Institute Leading Index which indicates the likely pace of economic growth three to nine months into the future rose from –0.15% in February to –0.09% in March. Read...
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Barry O’Farrell resigns over Obeid gratuity

images NSW Premier Barry O'Farrell has resigned after a handwritten note  in which the premier thanked the head of a company linked to Eddie Obeid for a $3000 bottle of wine was tendered to the Obeid ICAC inquiry. The wine was sent during negotiations for a $1 billion government contract with Australian Water Holdings. O'Farrell had previously denied any such gratuity. Here's the note he could not recall: Not looking too good Arthur Sinodinos...
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Why incomes will bear the brunt of rising taxes

ScreenHunter_1797 Mar. 25 08.08 By Leith van Onselen The Australian has published a neat article today citing Parliamentary Budget Office (PBO) analysis warning of big rises in personal income taxes unless the Government embarks on widespread tax reform: PERSONAL income tax is the only prospective source of revenue growth for the federal government, with all other major taxes either falling or about to fall. ...company tax has come off its record high while other important sources of tax revenue including superannuation, fringe benefits and consumption taxes all look weak... “In the absence of explicit government...
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BHP iron ore production beats

images BHP has shown up Rio's thin weather excuse yesterday with boom quarter of iron ore production on good weather and annual output upgrade: BHP Billiton maintained strong momentum in the nine months ended March 2014 with record production achieved for four commodities and at 10 operations. Strong operating performance throughout the period, the relatively limited impact of the wet season and the continued ramp-up of Jimblebar underpinned record production at Western Australia Iron Ore of 163 million tonnes (100% basis). Full-year production guidance has been raised by a further five million...
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Coalition should tread carefully in Medicare rejig

ScreenHunter_2066 Apr. 16 08.37 By Leith van Onselen The AFR is reporting today that Health Minister, Peter Dutton, is planning major changes to Medicare in order to reign-in costs, including introducing a co-payment on GP and emergency hospital services, as well as introducing "private sector efficiencies" into the public hospital system and greater private health insurance involvement in chronically ill care: Mr Dutton says private sector efficiencies must be introduced in the public hospital system, the primary care system needs to be improved, and private health insurers should be involved in the care of chronically ill...
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US bond flattening rolls on

images   Last night's market action saw a decent bounce in stocks with the S&P up 12 points. However, the more important action was in bond markets which, despite the rise in stocks, remained strongly bid and again threatened to break yields down to new lows. Data for the night was modestly positive. The NAHB Builder Confidence Index rose slightly to 47, the Empire State manufacturing index fell slightly to 1.5 points and inflation data rose slightly (all charts from Calculated Risk): The upshot for bonds was that at the short end yields rose 1% on the two and five year and both...
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Coalition embraces the grey gouge

ScreenHunter_90 Oct. 24 08.28 By Leith van Onselen The Coalition's vow to "end the age of entitlement" has taken a serious hit, with Prime Minister Abbott seemingly ruling-out making changes to Aged Pension arrangements until after the next federal election. From The Australian: “If there is one lesson to be learned from the political quagmire that the former government got itself into, it is: keep your commitments. So we will keep them,’’ Mr Abbott said. “But one of the most fun­damental commitments of all was to get the budget back under control, to put the budget back on to a path to a sustainable...
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The Chinese pain you must position for

sdfvdsv Capital Economics has produced a little note on China with which I entirely agree. It examines the slowing growth base case, as well as very plausible Chinese hard landing scenarios if reform has a little accident on the way. China’s changing growth model Before getting into what a hard-landing would look like, it is important to stress that this is not how we see things playing out. We expect growth in China to ease over the coming quarters, as policymakers try to strike the right balance between structural reform and supporting short-term growth. Slower growth that is less reliant on...
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China’s local government bubble exposure

china-slow-down-red-flag-sign Cross-posted from Investing in Chinese Stocks. China Economic Weekly (中国经济周刊) and China Economic Research Institute (中国经济研究院)teamed up to study China's 23 provinces' exposure to land prices. Zhejiang topped the list as most exposed. First some background. China $3 trillion local government debt stirs alarm Analysts said this suggested China is not on a verge of a fiscal crisis - the figure is less than half the debt burdens in Japan and Greece where public finances are strained - but warned the world's second-biggest economy needed to urgently reduce debt...
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Ukraine battles begin

search From Bloomie: Ukraine unleashed an offensive to dislodge militants from cities in the eastern Donetsk region as authorities in the capital Kiev said Russian special forces were identified among the anti-government groups. From four to 11 militants were killed and two wounded when Ukrainian troops stormed an airfield in Kramatorsk, taking it under control, Russian state television reported...The government in Kiev is taking the battle to the restive east of the country after armed pro-Russian activists occupied administrative buildings in cities including Donetsk, a regional center about 100...
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ANZ’s BlueNotes is way ANZ

anz Here's the snapshot of ANZ's new media site, BlueNotes:   Even allowing for some future diversification of material, the site is so heavily branded that it can't be mistaken for anything other than public relations (PR) material, which is good. The main influence of the site to watch will be whether it's able to push greater quantities of ANZ material into the integrity and cash-starved main stream media. It seems to me there is an opportunity here for the media union or a journalism school to pursue a new journalism accreditation agenda. It's all very well for journos to flip...
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Pascometer burns red on macroprudential

imgres I missed this yesterday, the cause of macroprudential took another serious blow after it was backed by the Pascometer: ...if the strong dollar is restraining economic growth, it becomes much harder for the RBA to lift rates if they only reason is the perception that housing prices are rising too far, too fast. Which in turn is why I suspect, contrary to many commentators, that the RBA has not given up on trying methods other than its blunt and brutal monetary policy to temper housing speculation. The RBA heavyweights have made it clear that they don't much like macroprudential because its...
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Roy Morgan consumer confidence falls again

ScreenHunter_20 Apr. 10 19.28 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has been released for the week ended 13 April, which fell for the third consecutive week (down 1.3 points) to be a touch below its long-term average (113.0) and well below the highs reached after last year’s Federal Election: The fall in the week was driven by weakness in consumers’ perceptions of ‘financial situation in the year ahead’ and ‘… a year ago’, with the latter closely correlated with consumer spending. While this sub-index can be volatile, it is now around 5% lower than its average...
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Modelling housing rents

images I was motivated by this article in The Economist about housing costs in London to really dig down to how most economists think about housing supply and land markets.  Today I want to share a simple model I use to help understand compositional effects on measures of land and housing markets, and subsequently the reliability of particular measures for understanding potential supply issues. The model At time=0 a city has 20 people in 10 homes owned by out-of-town investors.  1 person from each home earns $52,000 per year, the other is a dependent.  Rent for each home is $250 per week and each...
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Robinson: An introduction to economic doctrine

imgres Imagine a modern economics textbook comprising of three parts, with the last two being Analysis and Modern Problems. What do you think would the first part would be called? I doubt your answer was Economic Doctrines. But that’s exactly how Joan Robinson began her textbook An Introduction to Modern Economics back in 1973. For Robinson, rebuilding modern economics teaching meant starting with an understanding of evolving economic doctrines. As such, she begins her revolutionary textbook with a summary of the defining battles within economic philosophy, tracing the key players and their moral...
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Arrow gas on the block?

imgres From the AFR: ...BG Group and Santos’ GLNG venture thought to have discussed with Arrow options around its gas. The volume in play is said to be one LNG train’s worth, rather than the two trains Arrow had planned in the stand-alone project. Part of the reason for that is the difficulty of accessing some of its best resources, which lie under good farming land near Cecil Plains on the Darling Downs. ...Also uncertain is whether Shell and PetroChina are open to selling their gas outright, or whether they want to use it in an expansion LNG train at one of the other three sites in which they...
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Daily iron ore price update (Rio bears-up)

dfva Here are the iron ore price charts for April 15, 2014: Paper markets continued their stall with rebar futures flat. Physical is becalmed too and the Baltic Dry capesize component fell another 2%. Rebar offers hope jumping again but there is some weirdness in my data so that may have been the day before and yesterday flattish. Reuters has texture: "The general market sentiment remains weak amid gloomy expectations for first-quarter economic growth, which keeps denting steel demand and prices," said Xia Junyan, an analyst with Wanda Futures in Shanghai. "I don't expect any big...
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Links 16 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Trillion-Dollar Firms Dominating Bonds Prompting Probes - Bloomberg North America: Social Security stops trying to collect on old taxpayer debts - Washington Post Working Women Help the Economy - New York Times Canada’s Climate Warms to Corn as Grain Belt Shifts North - Bloomberg In Many Cities, Rent Is Rising Out of Reach of Middle Class - New York Times Europe: Eurobank gears up for crucial but contentious capital increase - Macropolis How China is stoking London’s housing bubble - Breaking Views Why aren’t Chinese students at UK...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 By Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Equities in Asia have not quite mirrored the solid recovery in US trade with China lagging the region. Investors are digesting a raft of releases out of China including new loans, money supply, foreign reserves and aggregate financing data. There was a sharp drop in money supply through March while new yuan loans actually bounced back strongly. However, what caught analysts attention was a 19% drop in aggregate financing data on year. While this figure is alarming, it is important to also note that it was coming from the second...
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Australia must move up the manufacturing chain

ScreenHunter_20 Feb. 20 10.06 Cross-posted from The Conversation: Australia faces a fall in living standards unless policy action is taken. This is due to de-industrialisation and loss of economic complexity. The higher the economic complexity, the stronger the economy’s value-creation prospects. Australia languishes at 79 in global rankings of economic complexity. Modern industry policy could help correct this but is poorly understood. Hence it is frequently maligned in Australia. Any intervention should aim to improve business environments or influence a shift in the economy. The goal should be a structure that...
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Rio iron ore production misses

images Rio's first quarter production report was out earlier today and was a fizzer: Rio Tinto chief executive Sam Walsh said “Rio Tinto has started the year with a series of performance records as we continue to drive productivity gains across our operations. Our Pilbara iron ore business has again set new benchmarks for production, shipments and rail volumes for the first quarter and we are well on track to reach nameplate capacity of 290Mt/a by the end of the first half of 2014. Our mined copper production benefited from higher ore grades at Kennecott Utah Copper and production ramp up at Oyu Tolgoi...
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Second Sydney airport to be built out west

ScreenHunter_2062 Apr. 15 14.18 By Leith van Onselen Prime Minister Tony Abbott has today announced that Badgerys Creek in Sydney's west will be home to the city's second airport, with work on the $2.5 billion project expected to commence in 2016 and reaching full operating capacity within a decade. From The AFR: The federal government will bear some costs with planning but is expected to announce later this week a large investment of its own in roads and other transport infrastructure to service the new airport... Mr Abbott assured the roads would be built before the airport... Mr Abbott said “for more than 50 years...
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