The great Australian bust is upon us

Don’t kid yourself, the iron ore crash is the end of the great Australia boom and the beginning of the great Australian bust. Australia’s terms of trade are being put to the sword and worse is ahead. Iron ore will be at $30 by year end and the two coals will fall in sympathy though much

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Falling commodity prices to crush national income

By Leith van Onselen The RBA has released its commodity price index for March, which registered another 1.7% fall in SDR (currency weighted) terms – the key determinant of the terms-of-trade – and a 2.8% fall in Australian dollar terms: Preliminary estimates for March indicate that the index declined by 1.7 per cent (on a


RIO’s fat tail

It is a revealing fact about market sentiment that Australia’s large LNG players are trading reasonably healthily based upon the forward curve in the oil market. Because oil is seen rebounding in the outer years, that’s an excuse to not write down assets and raise capital. At the same time, however the forward curve in iron


Daily LNG price update (Iran fail)

Brent oil took off again last night up 3% to $56.90 as I write night with the oil market enjoyed a double win as Iran talks stalled and US production fell. On the first, the talks are not dead, via the BBC: The UK says key issues still need to be tackled at talks on Iran’s


China house price declines ease a little

Cross-posted from Investing in Chinese Stocks. CREIS reports prices in its 100 city index fell 0.15% in March, down from the 0.24% decline in February (in January, CREIS reported an increase in prices). Prices increased in 43 cities, declined in 55 and were flat in 2 cities. That’s up from 61 cities with falling prices


Links 2 April 2015

Global Macro / Markets / Investing: Why are interest rates so low, part 3: The Global Savings Glut – Brookings Investors Across the Globe Join the Party – Wall Street Journal Reckoning Arrives for Cash-Strapped Oil Firms Amid Bank Squeeze – Bloomberg Sam Zell: Why a stock correction could be coming – CNBC Forex reserves


ASX at the close

Chris Weston, Chief Market Strategist at IG Markets It’s been a fairly crazy session today in Asia and there has been a lot of head scratching as to the reason behind the sharp moves, which were predominantly centred in US futures. It’s not every day you see NASDAQ and S&P futures dropping 1.3% in around


Iron ore lobby dies with juniors

From the SMH: The Magnetite Network, which was formed in 2009 to represent the interests of Atlas Iron, BC Iron, Citic Pacific Mining, Karara Mining and Asia Iron Australia, has suspended activities as its member companies cut costs amid weak iron ore prices. “Just like a mine site that goes on to care and maintenance


Wealthy collecting $10b super tax free

By Leith van Onselen The Association of Superannuation Funds Australia (ASFA) has today released new research showing that wealthy retirees are collecting $10 billion worth of income tax free, courtesy of the Howard Government’s short-sighted decision in 2006 to scrap taxes on the retirement income from super. According to this report, there are over 200,000 people


Engineering construction levitates above mining cliff

By Leith van Onselen The ABS has released engineering construction data for the December quarter of 2014, which revealed a 0.6% seasonally adjusted fall in the value of work done over the quarter, a 12.4% fall over the year, and an ongoing reduction in the construction pipeline. According to the ABS, private sector engineering construction


Bassanese: Iron headed for $25

From David Bassanese: If you think the current rout in iron ore prices is bad enough, I have some potentially troubling news for you: by long-run historical standards, prices still appear relatively high. The implicit assumption from both the Federal Government and commodity analysts in recent years was that “this time is different”. Almost everyone


China PMI flops into expansion

The second of China’s PMIs (the official version) is out for March and did better than the private HSBC measure managing to flop over the line into expansion up 0.2 points to 50.1. Output jumped to 52.1 but new orders remain subdued at 50.2 and new export orders are contracting at 48.3:   Hardly spectacular and


How Howard expanded the negative gearing “tax shelter”

By Leith van Onselen Following the release Monday of the Australian Treasury’s discussion paper on tax, there has been lots of calls for the Abbott Government remove the 50% discount on capital gains tax (CGT), which has overwhelmingly benefited the rich by creating a tax shelter via, among other things, negative gearing. Here’s an example


How to generate a RIO “buy”

Big iron is again outperforming on the stockmarket today even as its business dissolves. Let’s take a look at how this magnificent fiction is achieved. Deutsche has just cut its iron ore prices to $51 for 2015 and $60 for next year and today recommended RIO as a buy (not picking on it especially): After


Lateline hammers TPP trade sell-out

By Leith van Onselen Last night, ABC’s Lateline dedicated an entire program to the Trans-Pacific Partnership (TPP) – the US-led trade deal being negotiated between 12 Pacific Rim nations, including Australia. The first segment showed how interests within the US political system – particularly the Democratic Party and unions – are opposed to the TPP,


Dad’s Army slams macroprudential

The new commentator at Dad’s Army, Miranda Maxwell, takes on macroprudential todayand gives it a panning: New Zealand’s experience with home loan limits is a cautionary tale. There, loan-to-value ratio ‘speed limits’ were introduced in October 2013 and dictate that banks limit residential mortgage lending at a LVR greater than 80 per cent to no more than 10


Formatting troubles with new site?

I’ve had a number of inquiries asking for help on formatting problems with the new theme. We’re working through many of your kindly suggestions but if the posts are not updating on your screen or there the formatting is amiss then clear your browser cache. That will solve most problems.


Competition review targets pharmacies, taxis, planning

By Leith van Onselen The final report of the Harper competition policy review has been released and urges the government to free-up rules preventing competition in the the pharmacy and taxi industries, as well as in the delivery of urban land supply. On pharmacies, the report recommends dumping pharmacy location and ownership rules: The current


Macro Morning: Risk awf

By Chris Becker Risk markets flopped last night even as German unemployment went down, UK GDP surprised on the upside but EZ CPI indicated a further slip into deflation across the continent. The moves down were probably end of month and quarter repositioning with no macro or central bank talkfests catalysts providing an answer. To


FMG, BHP apply for mine expansion permits

From The Australian: As iron ore prices threaten to slip below $US50 a tonne and Andrew “Twiggy” Forrest calls for production restraint, his Fortescue Metals Group and BHP ­Billiton have each applied for state government approval to boost iron ore output. In separate applications to the West Australian Environmental Protection Authority in recent weeks, the


Manufacturing PMI booms!

April fool! The manufacturing recession rolls endlessly on and really is the butt of all jokes: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) moved up by 0.9 points to 46.3 points in March (seasonally adjusted). This indicated a fourth consecutive month of contraction in activity (readings below 50 points indicate contraction) across the manufacturing sector


Au revoir Australian dollar safe haven?

The IMF has released its Commitment of Foreign Reserves (COFER) update for Q4 2014 and it registered a big fall:   The 5.2% fall was the highest among all of the currencies tracked by the IMF but is roughly equal to the fall in value. I expect central banks to remain leery given the notion that