McGrath contradicts self on Chinese property boom

imgres By Leith van Onselen John McGrath from McGrath Real Estate has hit back at claims made yesterday by buyers’ agent, David Morrell, that "real estate agents and property lawyers are willingly helping foreign investors to illegally buy prestige homes in Melbourne and Sydney" and that this was "causing a domino effect" in the local market and helping to price-out locals. From The AFR: Prominent Sydney estate agent John McGrath says he hasn’t seen Asian buyers rorting foreign investment rules to buy blue-chip real estate. “I am not aware of any such practices,” said the founder and chief...
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D&B business expectations see boom, baby!

dfgwrew The Dun and Bradstreet business expectations index continues to trade in the Twilight Zone: Business earnings are expected to return to pre-GFC highs during the final three months of this year on the back of sustained levels of optimism and healthy sales forecasts, with retailers particularly upbeat about increasing their profits. According to Dun & Bradstreet’s latest Business Expectations Survey, the profits expectations index has lifted to 29.1 points, up from 19.9 in the last quarter and 21.1 last year. With 40 per cent of businesses anticipating higher profits during Q4 2014, compared to 11...
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Hockey’s super guarantee pause is good policy

ScreenHunter_3902 Aug. 22 15.25 By Leith van Onselen The Abbott Government has set to delay the planned increase in the superannuation guarantee - the amount that employers must contribute into employee's super accounts - by three years in a bid to ease pressures on the Budget. From Peter Martin: Superannuation contributions at present are set to climb from 9.5 per cent of salary to 12 per cent over the next five years. The Coalition wants to delay the next scheduled 0.5 percentage point increase for three years to ease pressure on the budget. Rushed through the House of Representatives on Monday as part of the mining tax...
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Daily iron ore market update (absolutely smashed)

anvil Here are the iron ore charts for September 1, 2014: Paper markets tanked, including rebar futures which are at new record lows. In physical, spot is at a new low for the move and just 50 cents above the post-2009 low. There's no contango any more and it's going to break. Worse, steel prices just keep falling indicating that the entire price deck is shunting lower with any rebound distant and likely very subdued. Texture from Platts: "The large international traders still have a lot of cargoes they have yet to sell off, and the medium and smaller ones don't dare to buy more because...
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China’s steel PMI deteriorates

sertwe Regular reader will know that within China's official PMI there is a partial PMI for steel. It's out today and in August showed a mixed result but in total further signs of deterioration. The headline number was relatively unchanged showing modest weakness for the third month running at 48.4. Output was strong at 54.3, the best turnout this year. However new orders fell to 44.6, the lowest since February and signalling growing weakness in domestic markets. Export orders were some offset at 53.6 but are a much smaller component. Inventories of steel remained high and inventories of raw materials...
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Abbot Point coal play gets even weirder

imgres The strange and weirdly uneconomic Galilee Basin coal play just got weirder and more uneconomic: Plans to dump 3 million cubic metres of material dredged from the ocean floor into the Great Barrier Reef area will be abandoned under changes to already approved plans to expand the Abbot Point coal terminal in Queensland. North Queensland Bulk Ports, GVK Hancock and Adani Group will re-submit a proposal as early as this week to Environment Minister Greg Hunt proposing alternative dumping sites on land. The change is designed to neutralise controversy over potential damage to the reef and avoid a...
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Commodity price index posts small rebound

ScreenHunter_07 Nov. 26 16.13 By Leith van Onselen Yesterday evening, the RBA released its commodity price index for August, which registered a 1.6% rise in Aussie dollar terms – the first monthly increase in 2014 – and also a 1.6% rise in SDR terms – the first increase since December 2013: Preliminary estimates for August indicate that the index rose by 1.6 per cent (on a monthly average basis) in SDR terms, after declining by 1.3 per cent in July (revised). The largest contributor to the increase in August was the price of iron ore. The base metals subindex rose in the month while the rural commodities subindex...
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Chinese house price falls continue

images101-200x2001 Cross-posted from Investing in Chinese Stocks. In August, new home prices fell 0.59% on average. Prices fell an average of 0.8% in July, and 0.5% in June. There were larger price gains at the top and larger declines on the bottom, while in the middle home price declines moderated slightly. One of the most important cities is Hangzhou. It lifted some buying restrictions at the end of July, but home prices fell 1.81% in August versus 1.53% in July. The initial easing of restrictions was for larger homes, which the government data will break out. However, prices declines have been stronger on...
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China accelerates carbon pricing

imgres Ah, the irony of it all, as the communists go where the capitalists fear to tread. From the AFR: China is accelerating plans to introduce a national carbon trading market, with a framework expected to be in place by 2016, as the government puts environmental policy at the top of its agenda. The National Development Reform Commission said over the weekend it would finish its draft rules for how the scheme would work by the end of this year and send them to the State Council, China’s cabinet, for approval. It then expects to set emissions caps and allocate carbon credits under a national...
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Links 2 September 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Has the market overpriced stocks and long bonds? - Econbrowser How the relentless bid from share buybacks has driven this rally - The Reformed Broker How sports betting is similar to the stock market - CNN Money Private debt funds are the new banks - Financial Times Alarm at Basel impact on shorts and swaps - Financial Times Hedge Funds Cut Gold Bull Bets to Lowest Since June - Bloomberg UN predicts climate hell in 2050 - The Guardian A global economy divided into the good, bad and ugly - The Guardian North America: Why many Americans...
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ASX at the close

ScreenHunter_31-Jun.-04-16.423-200x200 Chris Weston, Chief Market Strategist at IG Markets Asian indices and other futures markets have got off to quiet start in what is shaping up to be a very interesting week for a number of closely watched macro themes. Naturally, developments between Russia and the Ukraine will be in the cross sights. However, despite more concerning rhetoric that tensions are nearing a point of no return, we haven’t really seen a heavy bias towards defensive trading strategies today. China has dominated the local news front, with the official manufacturing PMI falling 60 basis points to 51.1, while the HSBC...
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The Economist warns on renewed bubbles

20140830_FNC602 From The Economist: Since some recovery was bound to occur after the housing slump, how worrying are the renewed signs of exuberance? To assess whether house prices are at sustainable levels, we use two yardsticks. One is affordability, measured by the ratio of prices to income per person after tax. The other is the case for investing in housing, based on the ratio of house prices to rents, much as stockmarket investors look at the ratio of equity prices to earnings. If these gauges are higher than their historical averages then property is deemed overvalued; if they are lower, it is...
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Joye warns again on housing bubble

perfect_bubble From Chris Joye at the AFR: I believe that Australian home values measured relative to disposable incomes are currently breaching the all-time records set in both 2007 and 2010. Yet I expect the current boom, which is arguably turning into a bubble, to continue until the RBA starts raising interest rates. Importantly, you do not require mania or double-digit credit growth to have a bubble, as some pundits claim. What you do need is asset prices way above reasonable estimates of fair value and high levels of leverage, both of which Australia possesses today. Credit growth numbers are only...
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UBS says market missing BHP iron ore value

imgres From Dow: The market’s fixation of BHP Billiton Ltd.’s (BHP.AU) spinoff and the absence of a buyback at its results means it appears to have missed the value being created in its iron-ore unit, says UBS analyst Glyn Lawcock, who lifts his NPV estimate on the stock 10% to A$46.09. BHP’s Western Australia iron-ore division is now expected to expand to 290 million tons from 225 million tons for under US$50/ton of capex. It had previous been expected to lift capacity to 270 million for around US$100/ton, Lawcock says. “The reduction in capital intensity alone is a saving of around US$3...
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Australia’s world-class health system

ScreenHunter_64 Sep. 01 14.23 Cross-posted from The Conversation: There is an old joke about one fish asking another about the state of the water and the other answering “what’s water?” When you’re immersed in something and that is your daily experience, you are not able to step outside it – all you see is what you know. But with all the talk about Australia’s health system being unsustainable, it’s useful to step back and look at the Australian health system in an international context. So, how do we perform against our peers? The short answer is pretty well. Comparing inputs and outcomes Much of the...
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Inflation fading fast

hes From Westpac: The Gauge was flat in August (–0.01% at two decimal places) following a  0.2% increase in July and a flat print in June. The annual pace has  accelerated eased back to 2.5%yr in August from 2.6%yr in July and a recent peak of 3.0% in June. The most recent low was 2.1%yr in Oct 2013. • Whereas a few months ago the gauge was threatening to breach the RBA’s inflation target band, now it has eased back into the mid-point. Westpac had been forecasting inflation to pick up in late 2013/early 2014 and then ease but we have to admit we are surprised by the rate of deceleration. •...
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Don’t mention the war

imgres From Crikey: Why did Labor join with the government this morning and head off the Greens' motion for a debate about our return to war in Iraq? As soon as the Senate convened this morning, Greens leader Christine Milne moved to suspend standing orders "to move a motion relating to the parliamentary approval for the deployment of Australian troops to Iraq". Labor opposed the motion. It was supported by NSW Senator David Leyonhjelm -- who expressed support for Australia's involvement and the hope it would lead to a separate Kurdish state -- PUP Senator Jacqui Lambie and Nick Xenophon. The...
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Australia’s growing youth unemployment scourge

ScreenHunter_3946 Sep. 01 12.43 By Leith van Onselen The Brotherhood of St Laurence has today released a new report on the growing scourge of youth unemployment and underemployment in Australia, which is at the worst level since records began in 1978, with more than 580,000 Australians aged 15 to 24 either under-employed or unemployed: Today, young people are more likely to be underemployed – to have some work but want more hours – than at any time in the last 36 years... Presently, there are more than 310,000 people aged 15 to 24 who are underemployed in Australia. When you add the numbers who are without any work,...
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Phat Dragon on China’s fading PMIs

xdb From Westpac's Phat Dragon: In the previous reading the two surveys were in reasonable accord for the first time in a while, with the headline and the new orders series both in close proximity. August saw a consistent directional move from that common starting point, but consistent with the historical characteristics of the two surveys, the decline in the HSBC measure was greater – or alternatively, the NBS was more resilient. Scaling the two headline outcomes by their respective long run averages, we have the NBS at –3.7% and HSBC at –2.4%. The inventory story, which is so often...
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Iron ore paper resumes tumble, miners rise

majors The news out of China this morning was more deceleration and but that's not affected most miners today with only FMG down at this stage. Here is the up-to-date relative performance chart for juniors: And the majors: Despite equity resilience, the idiocy spread appears to have bottomed. Remember that it's an indexed 7-day moving average so it is still catching up to last week's falls: As mentioned, FMG is most sane today, down nearly 2% and following Dalian and rebar futures in China which are also off 4 and 10 points...
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Mining exploration falls, petroleum lifts

ScreenHunter_03 Jul. 23 09.31 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released its Mineral & Petroleum Exploration data for the June quarter, which revealed a sharp fall in mineral exploration expenditure, but a large lift in petroleum exploration expenditure. Nationally, expenditure on minerals exploration fell by a seasonally-adjusted $35.8 million (-7.5%) over the June quarter. The fall was driven by Queensland, where exploration expenditure fell by $30.2 million (-24.5%): The various components, presented below in non-seasonally adjusted raw terms, actually rose over the quarter by...
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GDP partials save the day

url A couple of Australia's GDP partials are out today and have saved the day regarding Q2 national accounts: The trend estimate for inventories fell 0.5% in the June quarter 2014. The seasonally adjusted estimate rose 0.8% this quarter. The seasonally adjusted estimate for company gross operating profits fell 6.9% in the June quarter 2014. The seasonally adjusted estimate for wages and salaries rose 1.1% in the June quarter 2014. Inventories are well ahead of expectations and will add a huge 2.5% to GDP, erasing the embarrassing figure that was coming down the pipe owing to the -2.2% in...
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Today’s cigarette tax hike will punish the poor

ScreenHunter_3942 Sep. 01 11.09 By Leith van Onselen Today, the price of a packet of cigarettes is scheduled to rise by between $1.12 and $2.81 due to the decisions of the former Rudd Government to raise the tobacco excise by 12.5%. Excise also will be increased under the normal twice-yearly indexation introduced 30 years ago by the Hawke government, although now it will rise in line with average weekly ordinary-time earnings, rather than the Consumer Price Index, as was previously the case. Last year, in response to the Rudd Government's decision to raise tobacco excise, Sam Oldfield, who is an economics student at...
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China’s official PMI eases

images101-200x2001 China's official PMI for August is out at 51.1 versus 51.2 expected. Last month was 51.7 so it confirms the second derivative downshift shift in Chinese manufacturing growth seen in the Flash.  The slowing was broad based with production, new orders and input prices all down. Not that it matters terribly for Australia. Despite the market focus, the non-manufacturing PMI is the more important given it covers...
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Shadow RBA says hold

aggregate_september2014_0 Tomorrow is the RBA's September meet where the chances of either rate cut or rise are zero, even if the RBA shadow board want to be a little more circumspect about it: The picture of the Australian economy painted by the latest data is murky. The housing market and indicators of sentiment are strengthening but growth remains slightly below trend and the unemployment rate rose to 6.4% in July. Relative to the previous month, the CAMA RBA Shadow Board has become slightly more cautious in its recommendations for interest rates. The Board attaches a 74% probability that the cash rate ought to remain...
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