Iron ore enters late cycle delusion

.kjbjub Delusion appears to have seized iron ore markets. In recent days we've had Padbury Mining and its fantastic backer, Colin Barnett selling the same revival of Oakajee via Asian dough and now BHP is out selling the idea of more greenfields developments for the Pilbara. BHP Billiton iron ore president Jimmy Wilson at the official opening of its new Jimblebar mine reckons: ...greenfield mine developments are still possible in Western Australia this decade, even though the sector has crimped capital spending to shift focus on boosting production from existing assets. ...Jimblebar delivers 35 million...
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Hockey palms super reform to second term

images By Leith van Onselen Being a Budget commentator is never dull. After expending significant effort this morning slamming the Government for failing to include Australia's egregious superannuation concessions in its "war on entitlements", Treasurer Joe Hockey has now flagged changes to superannuation and an increase in the preservation age, which will be taken to the next Federal Election. From The AFR: Treasurer Joe Hockey has flagged changes to superannuation tax concessions and an increase in the preservation age over the medium term... Mr Hockey said on Thursday that while the government...
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RBNZ hikes, gets hawkish

ScreenHunter_2167 Apr. 24 08.26 By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) has once again hiked the official cash rate (OCR) by 0.25% to 3.00% on the back of growing strength in the New Zealand economy. From the Statement: New Zealand’s economic expansion has considerable momentum, with GDP estimated to have grown by 3.5 percent in the year to March. Growth is gradually increasing in New Zealand’s trading partners, but inflation in those economies remains low. Global financial conditions continue to be very accommodating. Prices for New Zealand’s export commodities remain very high, though auction...
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Mirabile dictu: A mention for manufacturing!

gva The wholesome MB effect on the mainstream echo chamber continues today at Business Spectator as Rob Burgess picks up the manufacturing banner: Commodity producers are price-takers, and Australia’s shortish terms-of-trade boom (which is now ending) has given us the false impression that we have a sustainable competitive advantage in the things that have made us rich: predominantly iron ore and coal. ...Sorry to dampen that romantic nationalism, but we can’t. A trade surplus is one thing, but to pay for our imported food, wine and clothes (and everything else) sustainably we need a current...
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Joe outlines Budget pain for all except the rich

ScreenHunter_152 Nov. 07 10.05 By Leith van Onselen Joe Hockey has outlined the Government's program of expenditure cuts in a bid to return the Federal Budget to surplus. There will be tighter means testing of welfare benefits, along with co-payments for some government services (e.g. GP visits), all of which are designed to reduce real spending growth to 1.75% per annum, eradicate the budget deficit in five years, and deliver a surplus equivalent to 1% of GDP by 2023-24. It's a monumental goal, which will be without precedent, according to Fairfax's Peter Martin: By way of comparison spending grew 7.6 per cent per year...
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Public servant fat cats won’t share Budget pain

ScreenHunter_23 May. 30 09.38 By Leith van Onselen The Australian Public Service's (APS) top brass is sadly starting to look like their private sector brethren, where excessive pay is the norm. While an axe is taken to rank-and-file public servants and pay rises are being held back, top executives of the APS won't share the pain or lead by example, enjoying 5%-plus pay rises this year. From the Canberra Times: Australia's top public servant will get a $42,000 wage rise in July as industrial strife looms over pay rises for the Commonwealth's 160,000 rank-and-file bureaucrats. Ian Watt, secretary of the Prime Minister...
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Holden, Ford subsidies to shift to tanks?

ScreenHunter_2166 Apr. 23 16.27 By Leith van Onselen The Abbott Government continues to take contradictory positions on industry support that risks undermining its legitimacy. After talking a tough on assistance to the car industry, and arguably hastening its demise, the Coalition has ear-marked tens-of-billions of taxpayer dollars to local defence manufacturing, including a $10 billion program for 700 locally produced armoured vehicles, as well as locally designed and built submarines for around $40 billion, and a multi-billion dollar warship program. While I acknowledge that there is an argument for retaining our own...
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Corrupting Piketty in the 21st century

images The media attention surrounding French economist Thomas Piketty’s new book Capital in the 21st Century is growing ever more fervent. Here are my two cents. To me three things are clear to be about this book. First, it is a timely reminder that distribution of resources within society matters. This is especially important for an economics profession who has often ignored the issue and whose core analytical framework is a completely inappropriate tool for its analysis. Second, and this is quite a surprise, the mainstream economics profession seems to be rather accepting of the book, which,...
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Baptists and bootleggers back gas lie

imgres A strange alliance has formed between manufacturers being killed by higher gas prices and the gas industry which is doing the killing. Both want more gas. The Australian Petroleum and Exploration Association (APPEA) continues its campaign expand coal seam gas production: Today’s draft decision on regulated gas prices by the Independent Pricing and Regulatory Tribunal (IPART) highlights the urgent need for increased natural gas exploration and production in NSW, the Australian Petroleum Production & Exploration Association (APPEA) said in a statement. Australia’s second biggest...
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Will a US shale bust save Australian LNG?

ifu1NaUawHck Bloomberg has a credible assessment today of US shale longevity that is worthwhile vis our own LNG boom: The problems arise when you look at how quickly production from these new, unconventional wells dries up. David Hughes -- a 32-year veteran with the Geological Survey of Canada and a now research fellow with the Post Carbon Institute, a sustainability think-tank in California -- notes that the average decline of the world's conventional oil fields is about 5 percent per year. By comparison, the average decline of oil wells in North Dakota's booming Bakken shale oil field is 44 percent per...
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Curtis Island module mechano

Picture-of-the-Day-LNG-Module-Arrives-at-Curtis-Island Courtesy of Bechtel, here's out latest LNG major projects...
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Andrew Forrest as Nietzschean ubermensch

imgres The entrepreneur as Nietzschean ubermensch is one of the more unfortunate features of contemporary business journalism. It is generally an ignominious experience for the writer, misses the real tensions and lessons in the entrepreneurial process and, worse, universally suppresses the function of markets in favour of the incumbent, ironically debilitating the core usefulness of capitalism. Today we have an example at the AFR where Julie-Anne Sprague offers some nice texture on Andrew Forrest but misses the real point of the story of Fortescue: In a rare one-on-one interview, Forrest opens up...
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Daily iron ore price update (Goan delays)

edfgvwed Here are the iron ore price charts for April 23, 2014:   More paper market weakness though tailing off. Rebar futures managed another small bounce. Physical too is eroding but the Baltic Dry capesize component is up another 3%, and is not at rock bottom levels, suggesting buyers are around. The news of week is get more textured too with India's return to exports not imminent. From Bloomie: “The Supreme Court order is too little too late,” said Fonseca, referring to the 20 million tonne-a-year mining cap imposed by the top court. The threat of job cuts still looms...
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Links 24 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Who’s in the Bubble Basket? - sl-advisors.com North America: US housing sector slumps in March - The AFR New-Home Sales in U.S. Unexpectedly Slump to Eight-Month Low - Bloomberg For some U.S. states, budget woes are on the horizon - Fortune An unemployed aid program could help millions. Why aren’t more states using it? - Washington Post Banks’ Profit Measure Hits Decade-Long Low - Wall Street Journal Obamacare’s Medicaid expansion just got cheaper for states - VOX Europe: Accounting rules unravel the mysteries of Britain’s economy -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets US and European markets have naturally taken heart from the raft of M&A deals (and speculation) in a number of geographies. With sentiment where it is, new all-time highs in the US benchmark look relatively assured. There will be a time to be tactically short US markets, but with the trend clearly higher, companies beating the relatively low earnings expectations, M&A activity lifting sentiment and the prospect that we get a decent weather-related payback in the economic data flow in the near term  all suggests that the time is not...
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Real Aussie house prices 1.8% below peak

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data’s Cameron Kusher has produced an interesting post this afternoon on Australian housing values in the wake of today’s March quarter CPI release from the ABS: Over the 12 months to March 2014, combined capital city home values have increased by 10.6% however, when you adjust for inflation the rise has been a lower 7.5%.  Across each city the rate of capital growth over the year is somewhat lower when you adjust for inflation and markets such as Hobart and Canberra which have recorded low levels of value growth have actually recorded value falls. Home...
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Joint Strike Fighter targets rent

unnamed From Crikey's Bernard Keane comes a tale of Lockheed Martin entitlement in Australia's quest to dominate SE Asian skies: The problem is, the F-35 program is not under control, even according to the US government. In September, thePentagon Inspector-General issued yet another in a long line of scathing reports about the program, having found over 700 separate problems with the program's administration that led to over 300 findings. "The F-35 Program did not sufficiently implement or flow down technical and quality management system requirements to prevent the fielding of nonconforming hardware and...
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Bassanese sees rate cuts!

imgres According to David Bassanese: As a result, the RBA is likely to remain comfortable in retaining its neutral policy bias. Indeed, if the Australian dollar remains uncomfortably high and business confidence continues to wind back, the RBA remains well placed to even consider a return to an easing policy bias. To my mind, the RBA has already been too spooked by the recent narrowly based rise in Australian house prices and was too quick to abandon its jawboning strategy of talking down the Australian dollar. The result is that there has been across the board strength in the Australian dollar so far...
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Roy Morgan consumer confidence bounces

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has been released for the week ended 20 April, which registered its first rise in four weeks, jumping 3.4 points (+3.0%) to be above its long-term average (113.0) but well below the highs reached after last year’s Federal Election: The improvement in the week was driven by strength in consumers’ perceptions of ‘economic conditions next year’ and ‘financial situation compared to a year ago‘; with the latter sub-index most correlated with household consumption growth. Below tracks the ANZ-RM...
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PBOC: No change to “prudent policy bias”

china-slow-down-red-flag-sign From ForexLive: People’s Bank of China (PBOC)  will cut the deposit reserve requirement for rural financial institutions: 2% cut for rural commercial banks and a 0.5 percentage point cut for rural cooperatives Will take effect from Friday This takes the reserve requirement for rural commercial banks to 15%; rural cooperatives to 13% (compared to most large Chinese institutions, required to maintain a 20% deposit reserve ratio) Note: From MNI, quoting an unnamed source: “In 2010, the PBOC launched the differential management of the reserve requirement for banks. This reserve cut for...
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REIWA: replace stamp duty with land tax

ScreenHunter_2162 Apr. 23 13.54 By David Collyer, cross-posted from Prosper Yesterday REIWA president David Airey issued a call in the West Australian newspaper for the WA government to abandon Stamp Duty and fund this by removing the many wheezes from the tattered State Land Tax. Hooray! Airey says: “It’s time to recognise that stamp duty on property as a means to raise revenue is clumsy, inefficient and out-dated. “REIWA calls on the Government to have a serious look at broadening the land tax base to all property owners with a view to abolishing stamp duty altogether. “The benefit to property owners is the...
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Australian dollar timbeeeer!

imgres The Aussie is still falling now, down a cent on the day: This looks to me a pretty decent move in the making. After all, if there's no inflation then there's no expanded carry coming. On the downside, there are few serious supports before 92 cents: It would probably take more bad news or a turn in the global "risk on" phase to take it below 92 cents but here's...
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Rents continue to decouple from population

ScreenHunter_2154 Apr. 23 13.16 By Leith van Onselen The March quarter consumer price index (CPI) data, released today by the Australian Bureau of Statistics (ABS), revealed a continued moderation of rental growth at the national capital city level. According to the ABS, rents nationally grew by 0.7% over the March quarter of 2013 - up slightly on the 0.6% growth recorded in December - but moderated to 2.9% growth in the year to March - the lowest annual growth recorded since June 2006 (see below charts). The outlook for rental growth is unclear. On the one hand, population growth is running strong, which...
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Bill Evans on the CPI and interest rates

images Fresh from our Bill: This number will come as a positive surprise for the RBA. Recall that following the 0.9%qtr print for underlying inflation for the December quarter they raised their forecast for underlying inflation to 3%yr from 2.5%yr. That implied they expected a probable 0.8%-0.9% print for March quarter underlying inflation. The implication is that the Bank expected that there would be 2-3 period inflationary impulse from the fall in the AUD in 2013, as their view on the state of underlying demand would allow for the same sort of pass-through or margin widening they felt they observed in...
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Bullhawks strut their stuff

imgres From the Kouk: It would be a wild exaggeration to say that Australia has an inflation problem, but the March quarter CPI highlighted the fact that the strength of the domestic economy is spilling over into a somewhat uncomfortable acceleration in the inflation rate. While the March quarter inflation rates came in under market expectations (which says more about those expectations than it does about the actual hard data), inflation is moving higher. Whether it is the annual headline inflation rate – which has risen from a low of 1.2 per cent in the June quarter 2012 to 2.9 per cent...
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NSW wankers deserve higher gas prices

imgres From the AFR: NSW households are set to be slugged with an increase of up to $225 a year on their gas bills as of July 1 as the start-up of LNG exports from Queensland places a squeeze on east coast supplies. The price hikes recommended by the state pricing regulator IPART on Wednesday are lower than those sought by AGL Energy and Origin Energy, but represent a hefty annual increase of 17.6 per cent, the third straight year of price rises. IPART put the rises down to rising gas costs. The report goes on to quote one Phil Laird, national co-ordinator for the Lock the Gate Alliance: “Gas...
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Australian CPI in detail

ScreenHunter_01 Jun. 08 23.33 By Leith van Onselen As noted briefly by Houses & Holes, the Australian Bureau of Statistics (ABS) has released the Consumer Price Index (CPI) data for the March quarter 0f 2014, which registered a modest quarterly increase in prices, with the result also coming in well below economists’ expectations. According to the ABS, headline CPI rose by a modest 0.6% in the March quarter, which follows December’s strong 0.8% rise. The 0.6% increase in the March quarter was 25% below analyst’s expectations of an 0.8% increase over the quarter. On an annual basis, headline CPI growth...
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China Flash PMI remains weak

dsfgdw China's April Flash PMI is out and contained no real surprises with still quite sluggish conditions: Flash China Manufacturing PMI™ at 48.3 in April (48.0 in March). Two-month high. Flash China Manufacturing Output Index at 48.0in April (47.2 in March). Two-month high. The internals are still weak: About as expected with a little lift in the second derivative of local conditions but a disappointing deterioration in export business. Dollar fell another 10 pips, full report...
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Australian dollar smashed as CPI fizzles

imgres The Australian Bureau of Statistics has released March quarter inflation numbers and the bullhawks can flee back to their their dung-bottomed eyries with an undershoot on every measure, headline at 0.5% and 2.9% annual and trimmed mean at 0.5% and 2.6% annual: No rate hikes are coming. The dollar was smashed lower by a half cent: More to come from...
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RBNZ slams the population ponzi

ScreenHunter_07 Mar. 19 12.02 By Leith van Onselen The Reserve Bank of New Zealand's (RBNZ) Michael Reddell has written an interesting paper questioning the merits of New Zealand's high immigration program, which appears to have crowded-out (through higher interest rates and a high average real exchange rate) other productive investment, lowering living standards in the process: Over the last 50 years (and more) New Zealand’s population has mostly grown materially faster than the populations of other advanced countries... All else equal - and in particular for an unchanged savings rate - faster population growth...
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ASX hits post-GFC high

5500 The ASX200 is trading above 5500 points today for the first time since mid 2008. It's daily chart look bullish: It weekly chart looks bullish: Pretty much everything is up today with the exception of iron ore miners. That situation is unsustainable I'm...
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No v-shaped recovery for DEEWR job vacancies

vacancies2 The Department of Employment and Education (DEEWR) has released its March job vacancies index and the news is pretty average, falling 2.6%: There is only stabilisation, no recovery: It's broad based weakness by state: And occupation: Those expecting a  sharp jobs recovery are very likely going to be disappointed. Full report...
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Padbury’s mystery man revealed

imgres From the ASX, Padbury Mining has confirmed that Roland Bleyer  is the mysterious private equity player behind the $6.4 billion deal to resuscitate the Oakajee iron ore project. Padbury has extended its trading halt. From The Oz recently: It might have been just another TV interview, save for the fact that a well-lubricated Willesee slurred his words and used the phrase “bullshit artist” as he questioned Mr Bleyer, who at the time ran a chain of hair regrowth, weight loss and cosmetic surgery clinics. I should have offered to fund it...
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Japanese currency war to go nuclear

imgres From the AFR: Japan’s $1.26 trillion Government Pension and Investment Fund this week announced changes to its investment committee that would fast-track plans to shift money out of Japanese government bonds (JGBs) into equities and foreign bonds. ...GPIF, which is roughly equal in value to Australia’s institutionally managed superannuation assets, holds more than half its assets in ultra-low yielding JGBs but could reduce its holdings by 15 to 20 per cent to move into stocks and foreign bonds, with about $60 billion expected to flow into the latter as early as June. “It’s...
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John Hewson: End the superannuation rort

ScreenHunter_2139 Apr. 23 09.33 By Leith van Onselen Former federal Liberal Party Leader, John Hewson, has written a well-argued piece in The AFR today, joining the chorus to wind-back superannuation concessions granted to high income earners: It’s worth reconsidering concessions granted for super: they’re as costly as the age pension ($44.8 billion compared to $44.9 billion in age pension), but are growing more rapidly... Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In...
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