RBA’s Lowe mulls depression economics

sp-dg-2015-03-05-graph10-small From Phil Lowe the RBA deputy today comes a speech that makes a reasonable fist of depression economics. One wonders why more of this thinking doesn't permeate bank decision-making. Low Inflation in a World of Monetary Stimulus Philip Lowe* Deputy Governor Speech to the Goldman Sachs Annual Global Macro Economic Conference Sydney - 5 March 2015 I would like to thank Goldman Sachs for the invitation to speak today. It is a pleasure to be here and be part of your annual Macro Economic Conference. It is perhaps stating the obvious to say that an important part of the macroeconomic environment...
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Intergenerational report outlines ageing challenge

ScreenHunter_6389 Mar. 05 12.13 By Leith van Onselen The Australian Treasury has released its much anticipated 4th Intergenerational Report, which attempts to assess the long-term sustainability of current Government policies and how changes to Australia’s population size and age profile may impact on economic growth, workforce and public finances over the next 40 years. As expected, the report highlights the rapid ageing of the population. Male and female life expectancy are forecast to rise  - from 91.5 years today to 95.1 years in 2055 for males, and from 91.5 years today to 95.1 years in 2055 for females (see next...
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“Mad” Adam does China

2008-Chinese-Summer-Olympics-Fan-2LG It's a treat when he does Australia but when he travels it's even more fun, from The Australian: Given Australia’s (apparent) dependence on China, it would make sense to think that that any growth downgrade to our largest trading partner is bad news...Except that it will. ...The fact is this slowdown has been largely engineered by the Chinese authorities. The top policy making body – the State Council – actually wants slower growth: Why? For the simple reason that a $16 trillion economy growing at 12 per cent annual rate, or what have you, would be unmanageable – economically and...
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Capital Group plunges deeper into FMG bog

Cow Stuck in Bog 2 From The Australian: US fund management giant The Capital Group has raised its stake in iron ore miner Fortescue Metals Group. The investment manager increased its stake in Australia’s third-biggest iron ore miner to 6.05 percent from 5 percent previously, buying 32 million shares over the past month at an average price of $2.447 each, it said in a statement. I hope that they know something that I...
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China drops growth target to “about 7%”

123 From the AFR: China has signalled a tightening in credit this year as economic growth slows to 7 per cent and the government pledges to smooth the path for foreign companies looking to invest in the world’s second biggest economy. In his annual speech to parliament on Thursday, Premier Li Keqiang said inflation would increase to “around 3 per cent” while money supply or M2 would contract to 12 per cent. “The difficulties we are to encounter in the year ahead may be even more formidable than last year,” he said. I'll take the under on both targets. Modestly for growth and moderately...
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Live: Launch of the Intergenerational Report

ScreenHunter_08 Feb. 03 14.45 ...
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Retail sales continue to slow

ScreenHunter_13 Jul. 15 15.13 By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released retail sales figures for the month of January, which registered a 0.4% seasonally-adjusted rise in sales over the month, meeting economist’s expectations. Annual sales growth clocked in at 3.6% and are slowing fast: The below chart maps out seasonally-adjusted sales growth by segment on a monthly and annual basis: As you can see, this month's rise was led by department stores (+2.2%), cafes, restaurants and takeaway food (+2.0%), and "other" retailing (+1.0%), whereas sales actually dropped in food...
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David Murray urges negative gearing reform

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen The final report of the Murray Financial System Inquiry, released in December, was critical of Australia's tax incentives that enable investors to claim losses from their investments against unrelated wage/salary income. Specifically, the report noted that the extreme growth in mortgage debt had been driven, to a large extent, by the favourable tax treatment provided to housing, and recommended that the Abbott Government's White Paper on tax explicitly seek to remove these tax concessions, specifically capital gains tax and negative gearing concessions: Capital gains tax...
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Dollar-exposed industrials soar over market

234 Another quick update today on one of MB's consistent memes, the strength of non-resources, dollar-exposed industrial stocks in the equity market. From UBS: That's some very useful out-performance. UBS also notes a shift toward cyclicals in recent...
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Macro Morning: Mixed risk

marketmorning-200x200 By Chris Becker Risk is mixed to say the least with weak leads from Asia translated into a bullish mood in Europe, helped along by solid service PMI prints and retail sales growth, but then slammed again in the US session even as the non-manufacturing ISM surprised to the upside. Even the oil markets were confused with WTI up but Brent down. In Asia yesterday the only bourse printing positively was the bubble-ish Shanghai Composite, up 0.5% while the rest of Asia was down 1% or so including the ASX200 and Nikkei 225. Both are providing nice entries for the brave shorts out there as they rollover...
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Roy Morgan unemployment jumps

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Roy Morgan Research (RMR) has released its unemployment estimate for the month of February, which registered a 1.2% lift in the unemployment rate to 11.0% from 9.8% in January. However, unemployment was down 1.3% over the year (see next chart). The jump in unemployment in February was mostly seasonal, according to Gary Morgan: “Looking at the month-to-month Roy Morgan Australian figures shows the usual February patterns with full-time employment falling compared to a month ago – full-time employment has fallen in February in ten out of the last twelve years while...
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Fortescue embraces debt

Capture From The Australian: Struggling Australian iron ore miner Fortescue Metals has announced a new $US2.5 billion senior secured debt issue, and will also extend the maturity on its existing $US4.9 billion credit facility beyond 2021. The move gives strength to Fortescue’s balance sheet after continued weakness in the iron ore price has left investors wary of the company. “The refinancing will extend Fortescue’s debt maturity profile while maintaining flexibility and minimising interest cost. This initiative complements the great work done in reducing costs and...
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Big Australia is making us poorer

ScreenHunter_277 Nov. 14 12.57 By Leith van Onselen Former head of the Business Council of Australia (BCA) and Audit Commission chair, Tony Shepherd, has called on the Government to lift Australia's immigration intake in a bid to raise living standards and add $1.6 trillion to the economy. From The Australian: Tony Shepherd, has warned that the ­migration intake should be maintained at current levels and then rise in the years ahead to confront the challenges of an ageing population... In a sign that Australians will live healthier and longer lives, by mid-century there will be about 35,000 people over the age of 100. The...
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Hockey targets more illegal foreign property sales

ScreenHunter_4459 Oct. 13 10.08 By Leith van Onselen Following the shock announcement on Tuesday that the Foreign Investment Review Board (FIRB) has ordered the sale of the $39 million Point Piper home Villa de Mare, purchased illegally by Chinese national Xi Jiayin, Treasurer Joe Hockey has announced more illegally purchased homes are being pursued by FIRB. From The AFR: "It's amazing how many phone calls we've received this morning...We want to be in a position where we maintain, preserve and enhance the integrity of the foreign investment regime and Australians ... any Australian that goes to an auction needs to know that they...
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RBA: Reactive, anachronistic, stuffed

web-about-header The Reserve Bank of Australia is the slowest reforming central bank on earth. It is staid, reactive and sees itself as James Joyce did in Portrait of the Artist as a Young Man, paring its fingernails while waiting for the economy to signal its needs. This was always something of a convenient fiction, used by central banks around the world to ignore asset bubbles and protect their independence. But the ruse serves as a very useful political foil so is not something that will be voluntarily cast aside in a nation where politics poisons everything. Other central banks abandoned this...
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FIRE sector party pushes Australian risk back to GFC eve

Capture By Leith van Onselen Yesterday's national accounts release for the December quarter confirmed that Australia's FIRE economy - Finance, Insurance and Rental, Hiring & Real Estate Services – continues to bath in sunshine, maintaining its record high 11.3% share of the Australian economy (see next chart). With finance and insurance doing especially well, hitting an all-time high 8.6% GDP share (see next chart). Since financial markets were first deregulated in the mid-1980s, the FIRE economy has grown at nearly twice the pace of the rest of the economy, sucking the life out of the...
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AFG: Mortgage demand explodes after rate cut

ScreenHunter_06 May. 13 11.32 By Leith van Onselen Australian Finance Group (AFG) has released its housing finance data for the month of February, which registered a massive increase in monthly mortgage applications, with both the number and value of applications also up strongly on the same time last year. The number of mortgage applications rocketed by 49.3% in February and were up 12.1% over the year to 9,799, whereas the value of applications jumped by 58.1% over the month and by 16.2% over the year to $4,368 million (see next chart). According to AFG: The $4.3 billion of mortgages processed in February included a...
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Living standards falling faster than any modern recession

ScreenHunter_28 Jun. 12 16.40 By Leith van Onselen To add some perspective on why MB believes the Australian economy is so fragile, and why living standards are falling, I have once again taken the time to deflate three measures of the domestic economy, as provided in the December quarter national accounts (released yesterday), by the ABS' population data, in order to ascertain the underlying strength of the economy in per capita trend terms. The three measures chosen are: National Disposable Income (NDI), which is "considered a good measure of progress for living standards because it is an indicator of Australians'...
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The Abbottalypse rolls over climate skeptics

2594090-3x2-940x627 Where's Maurice Newman when you need him? From the SMH comes sudden progress on the Renewable Energy Target: It has been more than 12 months since the Abbott government launched a review of the bipartisan target, which calls for 41,000 gigawatt hours of annual renewable energy production by 2020. Environment Minister Greg Hunt has resumed talks with the sector and both sides say momentum is now building toward a deal. ...It is understood a compromise could address the volume of surplus renewable energy certificates in the market, a problem that has arisen in part because of ongoing investment...
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RIO job losses mushroom

url From The Australian: MORE than 1000 Rio Tinto jobs on the east and west coasts and many more around the globe could be in the firing line as chief executive Sam Walsh strengthens his cost-cutting drive by ­targeting duplication. Mr Walsh has given six of his eight executive committee members instructions to remove duplications in their businesses and to form plans to revise their structure in the coming weeks. And it is believed that one of the two direct reports who was not given the instructions in this round, iron ore boss Andrew Harding, is in the process of slashing 800 staff and...
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Daily iron ore price update (crack!)

anvil-200x200-200x2001-200x200 Here are the iron ore charts for March 4, 2015: Uh oh. Paper markets just gave off a loud "crack" as the floor gave way. Singapore 12 month swaps broke to new post-GFC lows. Dalian six month futures were flogged late in the day and sit a few points above the same. Rebar average also gave way. Qingdao spot held up very well in the circumstances with minor falls and benchmark fell 20 cents to $61.10. Also out are the Port Hedland shipping statistics for February (largely BHP and FMG) which showed firm demand with 35.7 million tonnes (mt) shipped, of which, 30.2mt went to China....
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Daily LNG price update (overflow)

elephant-clipart-black-and-white-13285-cartoon-elephant-clip-art-design-200x200 The Brent oil price was pushed around by a number of forces last night but ended flat for the day at $60.39 as I write. On the upside for prices, there were attacks on oil infrastructure in Yemen and Iraq and the Saudi's declared the correction over, from CNBC: Saudi Arabia's oil minister said on Wednesday he expected oil prices, which hit a near six-year low in January, to stabilize, signalling cautious optimism about the market outlook. Giving a speech in the German capital, Ali al-Naimi also urged non-OPEC producers to help balance the oil market, saying it was not up to Saudi Arabia to...
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A Chinese anti-pollution tipping-point?

imgres A new Chinese internet video called Under the Dome is suddenly making huge waves. The film is by journalist Chai Jing and covers China's incredible  pollution problems in the style of Al Gore's Inconvenient Truth: The video has been viewed by 160 million Chinese and via BeyondBrics comes Deutsche Bank: We believe this video may have macro implications… The video addresses a sensitive issue which the official media seldom covers. The video has triggered an intensive discussion on the internet. To our knowledge, this is the first time a video by an independent journalist has been allowed...
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Links 5 March, 2015

ScreenHunter_01 Apr. 02 06.19 Macro & Markets Saudi Arabia ups official oil prices amid signs of stronger demand - Reuters It's no JK: Oil spread blow-out portends new price slump – Reuters March Economic Update – The Short Side of Long The Price of Oil Is About to Blow a Hole in Corporate Accounting – Bloomberg Only mass default will end the world's addiction to debt – Telegraph   Asia China services sector picks up in February, new orders at three-month high – SCMP India’s infrastructure push could be envy of West – Reuters India surprises with second interest rate cut - BBC As...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets We have seen some shaky price action in Europe yesterday with the DAX at the centre of this, although our opening calls suggest a more positive open today. Worryingly, the German market printed a bearish outside day reversal at the trend high and this could be the start of something more pronounced, especially with the January uptrend being tested. A move higher in European peripheral bond yields (by way of example, the Italian ten-year bond pushed six basis points higher) has given traders reason to take profit in these markets it seems. On a...
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