ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets There has been a marked increase in the use of the term ‘bubble’ in various asset classes over the past 24 hours. Some of the concerns are justified in my opinion, some not. In Australia the word ‘bubble’ has been used fairly liberally of late around the domestic housing market, although today’s super-strong building approvals print could alter that perception somewhat on the idea there is new supply coming on to the market. It seems the moves in property have been the key reason why the Reserve Bank of Australia left rates on hold,...
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Bill Evans: RBA to cut in April/May

unnamed From Westpac's Bill Evans: The Reserve Bank Board decided to leave the cash rate unchanged at 2.25%. When we forecast two rate cuts in February and March back on December 4 last year we expected that for such a significant about turn in policy the Bank would have been comfortable with consecutive moves. Since the February move we saw no compelling reason to change that view. That view has turned out to be a misjudgement. However it appears that the Governor has adopted a strong easing bias, effectively indicating that another cut can be expected over the next month or two. It is worth noting...
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We’re all suspects now thanks to data retention

ScreenHunter_6329 Mar. 03 14.37 Cross-posted from The Conversation: Australia’s Parliamentary Joint Committee on Intelligence & Security (PJCIS) last week endorsed the data retention bill, which means we’re all suspects now. The Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014 provides for mandatory retention by internet service providers (ISPs), phone companies and other entities of telecommunications metadata -– data that in aggregate provides a picture of our lives. The data will be accessible by a wide range of law enforcement and other bodies, potentially extending from the...
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RBA holds, adopts easing bias

scaredpassenger2-b04ecad64574418020cb16196efcd47cd5a20c9e-s800-c15 The Reserve Bank of Australia (RBA) has just announced its March interest rate decision to hold rates but they adopted an easing bias. Here's the statement: At its meeting today, the Board decided to leave the cash rate unchanged at 2.25 per cent. Growth in the global economy continued at a moderate pace in 2014. A similar performance is expected by most observers in 2015, with the US economy continuing to strengthen, even as China’s growth slows a little from last year’s outcome. Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular has...
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Australia’s terms-of-trade hammered

ScreenHunter_4044 Sep. 05 12.36 By Leith van Onselen Within today's data dump of partial measures that feed into tomorrow's national accounts release for December was the important news that Australia's terms-of-trade has fallen another 1.7% (seasonally adjusted) and 1.9% (trend) over the quarter to be down by 10.6% (seasonally adjusted) and 9.5% (trend) over the year (see below charts). As you can see, we are fast approaching the GFC low with much further still to fall. And since the terms-of-trade measures the price received for Australia's exports relative to the price paid for imports, the sharp fall in the...
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Net foreign debt approaches $1 trillion

url Ironically, we refer to Craig James today on Australia's net foreign debt which is growing exponentially as both public and private balance sheets leverage into the mining bust: Our high level of foreign debt represents a risk – if export income was to dry up it would constitute a problem. But exports continue to rise, resulting in our debt servicing ratio improving to the best levels in almost 30 years. Of further comfort in the current environment is the fact that the current account deficit improved markedly in the past quarter. And while the terms of trade fell, increased volumes of...
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A land of sweeping plains & shoebox apartments

ScreenHunter_6320 Mar. 03 12.27 By Leith van Onselen Below are some interesting charts compiled from today's dwelling approvals data from the ABS. They show the massive increase in unit and apartment construction across Australia's capital cities. First, the summary chart showing capital city approvals by dwelling type on a rolling annual basis: As you can see above, unit and apartment approvals across the nation's capitals were running at 79,659 in the year to January 2015, more than double the long-run average of 38,875. Next, here's a chart showing the share of approvals at the national capital city...
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US Economist: Aussies overpaid, dead wood

ben-stiller-dodgeball-fat-suit From SBS: The economy is struggling to grow because Australians get too much pay, too much annual leave and are too hard to fire, an American economist says. Bob Baur, chief global economist at Principal Global Investors, says the local labour market is in need of reform if the economy is going to shift from its dependance on mining for growth. Mining investment is dwindling and iron ore isn't fetching the prices that it used to, but other sectors have yet to step up to fill the breach. Dr Baur says Australia needs to start making things again, and exporting its services, like...
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Cabinet approves Australia Post doom loop

capture-300x300-200x200 Cabinet has approved the Turnbull plan for an Australia Post doom loop: The reforms will allow Australia Post to introduce a "regular" and "priority" letters service. Letters send with a "regular" stamp will arrive an average of two days later than they do currently, with mail within metropolitan areas to arrive a day later than the current timetable. Australia Post is expected to apply to the Australian Competition and Consumer Commission to increase the cost of a "regular" stamp from 70 cents to $1 when the new regulations come into effect. ...Australia Post will be able to charge what it...
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Westpac cuts GDP forecast

imgres From Andrew Hanlon at Westpac: Q4 net exports: +0.7ppts Net exports will make a sizeable positive contribution to Q4 GDP growth of 0.7ppts. That met our expectations (mkt median +0.6ppts, Westpac +0.7ppts) Exports advanced, up 1%, centred on expanding capacity in the resource sector. Imports were weak, contracting by 2.5%, against the backdrop of patchy domestic demand. Q4 public demand, +0.3% Public demand managed a rise of only 0.3% in Q4, coming on the back of a sharp fall in Q3. That was softer than we expected, (Westpac +0.7%). The surprise was public investment, which was...
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Dwelling approvals rocket on QLD apartment surge

ScreenHunter_06 May. 06 09.27 By Leith van Onselen The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of January. At the national level, the number of dwelling approvals rose by a seasonally adjusted 7.9% to 19,282. The overall surge was driven by the volatile unit and apartment segment, which jumped by 19.6% in January. By contrast, the more stable house approvals segment was relatively flat, rising by just 0.4% over the month. The result beat analysts’ expectations, who had expected a 2% fall in approvals over the month. In the year to January 2015, dwelling approvals rose by a...
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Net exports strong for GDP

0 Fresh from the ABS: DECEMBER KEY FIGURES Sep Qtr 2014 Dec Qtr 2014 Sep Qtr 2014 to Dec Qtr 2014 $m $m % change BALANCE ON CURRENT ACCOUNT Trend estimates -11 757 -11 279 4 Seasonally adjusted -12 130 -9 588 21 BALANCE ON GOODS AND SERVICES Trend estimates -3 526 -3 911 -11 Seasonally adjusted -3 899 -2 430 38 NET PRIMARY INCOME Trend estimates -7 689 -6 832 11 Seasonally adjusted -7 688 -6 621 14 LEVELS AT END OF...
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Charting the bank (CBA) bubble

1 From Morgan Stanley comes the growing bank bubble (my words not theirs): Or, more to the point, rampaging CBA:   As I've said before, these valuations can be seen as quite rational in a low interest rate environment. The problem in Australia's case, and what makes these valuations bubbly, is the economic adjustment associated with the unwinding commodities...
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Consumer confidence bounces

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index rose for the second week in a row, rising by 1.7 points to 112.5 in the week ended 1 March, to be tracking just below the long-run average (see next chart). The rise in confidence was driven by an overall improvement in the outlook of consumers for the next 1 to 5 years and an improvement in the answer to the “time to buy a major household item” question. Nevertheless, ANZ chief economist, Warren Hogan, remains unconvinced that confidence will continue improving over coming months, noting that the labour...
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Loony right in low blow attack on welfare

ScreenHunter_21 Apr. 10 19.29 By Leith van Onselen Sometimes you read a piece that makes you want to punch the screen. Today's effort comes from The Australian's Nick Carter, who has penned an extraordinary attack on welfare recipients, particularly those on unemployment benefits: 11.6 per cent. That’s the budgeted rise in real spending in social security and welfare between last year and 2018, and the minister will have to crack the whip night and day just to keep to it... Since state welfare provision is, in essence, the socialisation of risk, moral hazard is unavoidable. Put bluntly, any means-tested welfare payment...
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Munching on APRA’s wet lettuce regulation

4882224995_d35e7069be_b Today I thought I'd have ago at what kind of impact APRA's declared 10% growth limit for bank lending to property investors actually means for house prices. To begin, the top ten banks in Australia have seen property investor growth of $44.7 billion in the year to January 2015. In descending order, Mac Bank miles ahead on 73%, NAB is growing at 13%, SUN at 12.5%, WBC at 10.4%, ANZ is 10.3%, CBA at 9.2%, HSBC at 6.2%, ING at 2.3% and BOQ is at 2.2%.   So, half of the biggest banks are over the line. By my calculations, if APRA were to pull these five banks behind 10% then growth in...
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Macro Morning: NASDAQ 5000!

marketmorning-200x200 By Chris Becker On the back of an interest rate cut by China, the American bulls returned to risk markets last night, sending the NASDAQ Composite to its previous 2000 bubble high of 5000 points, as the latest ISM manufacturing report was solid amid higher consumer purchases across the US. This good news was shadowed by a mixed series of secondary reports from Europe with EZ core CPI still hovering at 0.6% while headline rate remains in the deflation zone. Some very minor good news on the job front with the EZ wide unemployment rate down to 11.2% as European peripheral bonds continued to rally as...
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Deloitte describes Australia’s Budget nightmare

ScreenHunter_6311 Mar. 03 09.16 By Leith van Onselen Deloitte Access Economics has prepared detailed analysis for the Business Council of Australia, which shows how commodity prices have already fallen to a level which, at the beginning of this decade, Treasury did not think they would reach before 2020 (see next chart). It also shows how the Budget deficit could be $76 billion higher than forecast over the next four years in the event that the terms-of-trade falls back to its long-run average (see next chart), or $114 billion worse-off if the terms-of-trade fall is accompanied by a slowdown in the real economy. From...
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The dumbest bubble in history

PatrickStar With warnings suddenly flying thick and fast, the history of bubbles has never seen the likes of what is unfolding in Australian property now. Some bubbles have sprung from unlikely sources such as tulips. Others have inflated around bright ideas that held little reality such as the South Sea Company. In stock markets bubbles have certainly been destructive but equity can handle that and they have also left historic legacies of technological advancement. The Roaring Twenties was one, built upon expanding railroads. The millennial tech bubble was another, launching the internet. On the other hand,...
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RBA shadow bolts door on ivory tower

Ivory_Tower_by_Hideyoshi From the RBA's infamously wrong shadow today: Contrary to the CAMA RBA Shadow Board, which on balance recommended a policy of no change, the Reserve Bank of Australia at its February meeting lowered the cash rate from 2.5% to 2.25%. The RBA pointed to a likely fall in economic growth over the next 12 months – around 2.25%, well below trend of 3% – as the main reason for lowering the cash rate. Weak labour market data confirms the soft economic outlook, and financial markets are anticipating another possible rate cut during the next few months. The CAMA RBA Shadow Board, however, on balance...
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Leading UK property economist done for crack

Doug1 The recent revelations of orgies and pimping around Dominic Strauss-Kahn of the IMF have surprised few given that august institution's record of debauched policy. And today we get further confirmation that contemporary economics is largely high with one the UK's most prominent economists, in his own words "world leading", getting done for smoking crack, from Zero Hedge: A leading economist is to step down as executive chairman of an influential City think-tank amid drug abuse allegations. Professor Douglas McWilliams, 63, revealed last night that he is to leave his role at the Centre for...
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TPP pimps grog and ciggies over medicine

Smoking-effects-on-human-body By Leith van Onselen A comprehensive review of the proposed Trans-Pacific Partnership (TPP) trade agreement - the US-led trade deal between 12 Pacific rim nations (including Australia) - has found that the agreement would force-up Australian medicine costs, stop some Australians from taking their medicines, and make it harder for the Government to regulate against tobacco and alcohol. Here's Fairfax's Peter Martin: The so-called health impact statement, compiled by the Centre for Health Equity Training Research and Evaluation at the University of NSW relies on leaked texts of draft chapters of...
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Australia dollar levitating as bond spreads collapse

Levitaatio In advance of the RBA meeting today, Australian short end bond yields have plunged to record lows. The 2 year yield is at 1.81%, almost fully pricing two more rate cuts, the 5 year yield is at 1.98% and the 10 year is at 2.49%, still 20 pips above its recent low: RBA easing has also reversed the curve flattening that's been in play for a year, indicating better hopes for growth:   And the US/Australia bond spread has completely collapsed: The last time the short end spread was at these levels the Australian dollar was trading at 50 cents and under. So which period is...
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Peak coal in China last year?

CO2-thumb-500xauto-18763-thumb-500x356-18764 From the Huff Post: Good news! China's coal consumption fell by 2.9 percent in 2014, the first drop in 14 years, according to official Chinese energy statistics released yesterday. Glen Peters of the Global Carbon Projectcalculates that China's CO2 emissions have also fallen, by 0.7 percent, for the first time this century. So contrary to grumbling in the U.S. Congress about the strength, or even existence, of China's climate commitments, it's clear that China's efforts to cut its coal consumption and carbon emissions are not only real but already producing results. There is a debate about...
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How Lang Hancock found the Pilbara

1234 From the archives, this is quite entertaining in various ways, not least the accents. How the Pilbara was...
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