Is Australia isolated on health care inflation?

ScreenHunter_3414 Jul. 23 08.19 By Leith van Onselen The New York Times has produced a report on the significant slowdown in health care cost inflation throughout the developed world, whereby every major high income country experienced a sharp deceleration in the growth of health care spending between 2001 and 2011: The rate of health cost growth has slowed substantially since 2000 in every high-income country, including the United States, Canada, Britain, France, Germany and Switzerland, according to data from the Organization for Economic Cooperation and Development... What’s behind the pattern? Economic growth...
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Q2 CPI preview

dfgwr From Westpac comes the following Q2 CPI preview (released today): Our Q2 headline CPI forecast is 0.6%qtr/3.2%yr. Core  inflation, as measured by the average of the trimmed mean and weighted median, is forecast to rise by 0.7%qtr/2.8%yr. We estimate that the 6 month annualised pace of core inflation eased back to 2.5%yr in Q2 from 2.8%yr in Q1 and 3.0%yr in 2013Q4. The pulse of core inflation has eased back from the top of the RBA’s 2-3% target band and the lack of wage inflation, well anchored low inflation expectations and a robust AUD suggests that the most likely outcome is for this...
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Australia’s roads investment “hideously inefficient”

ScreenHunter_02 Apr. 02 20.10 By Leith van Onselen Australia's independent infrastructure umpire, Infrastructure Australia, has launched a scathing attack on road-based infrastructure investment undertaken by Australia's governments, arguing that it has been "hideously inefficient" in a new leaked report. From The Canberra Times: More than $20 billion a year of national road funding is being spent in a “hideously inefficient” manner, according to a leaked assessment by Australia’s independent infrastructure umpire... “The unhealthy focus of road agencies appears set on ‘getting, controlling and spending’ more...
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Confessions of an unpopular Treasurer

MAGICAL MAESTRO 2 Joe Hockey has released an authorised biography, presumably to further his own leadership ambitions and it's got some interesting stuff in it. From the AFR: “In reality, the budget was much softer than Joe would have liked,’’ says the book by Madonna King, Hockey: Not Your Average Joe. “He wanted changes to pensions made earlier and the deficit levy to net more taxpayers. “But Abbott, who chaired each of the expenditure review committee meetings, was taking a much more cautious approach than his Treasurer, no doubt with one eye firmly on the reaction of voters.” ...And his...
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Markets have boxed in the RBA for another cut

InflationJune2014 The Australian dollar had a volatile night: The prime culprit was the US CPI which eased back from recent highs and showed even more weakness in the internals. From the Cleveland Fed (charts from Calculated Risk): According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.0% annualized rate) in June. The 16% trimmed-mean Consumer Price Index also increased 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the...
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APRA’s macroprudential-lite upsets banks

imgres From the AFR: In May, amid concerns lending standards were slipping, APRA published landmark guidelines on how it expected banks to manage and monitor their mortgage risks. But a new submission on behalf of the banking industry has hit back at the plan, saying it will add costs and invites a “tick the box” mentality among lenders. The Australian Bankers’ Association submission argues the regulator should stick to providing banks with top-level principles for lenders to implement as they see fit, rather than developing specific guidelines. ...In particular, the ABA took aim at proposals...
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World steel growth solid

Production_6 From the World Steel Association today: World crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 137 million tonnes (Mt) in June 2014, an increase of 3.1% compared to June 2013. World crude steel production in the first six months of 2014 was 821.3 Mt, an increase of 2.5% compared to the same period of 2013. The EU 28 showed an increase of 3.8% while Asia and North America reported growth of 2.9% and 1.7% respectively in the first half of 2014. South America and C.I.S. produced -1.0% and -2.6% less each. China’s crude steel production for June...
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Daily iron ore price update (head fake)

anvil Here are the iron ore charts for July 22, 2014:   A bad day at the office. Paper markets delivered a head fake as spot sold. The slavish devotion of iron ore equities to daily Dalian futures pricing is not foolproof. Rebar futures were soft and BDI cape flat. Worryingly, rebar average is falling steadily once more. The restock is done, whatever Dalian did for one day. Reuters has texture: "You can see from the relatively high stockpiles of iron ore at the ports that things haven't changed very much and demand isactually pretty weak from traders, and probably getting...
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China bank regulator warns on realty risks

images17 Cross-posted from Investing in Chinese Stocks. The China Banking Regulatory Commission's (CBRC) Shanghai office is two for two in its previous warnings on the dangers of steel firm borrowing and copper borrowing. Now Yicai is reporting that it's the real estate sector's turn. The CBRC's Shanghai office is warning banks about risks in the real estate market, specifically in cities such as Changzhou and Wuxi. Changzhou is NW of Wuxi, which is NW of Suzhou (all in Jiangsu province). The Shanghai office is warning local banks, but if this problem exists here, it likely exists in many parts of...
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Alaska’s LNG monster project moves forward

imgres Preparations for a North American gas boom are going gang-busters. From LNGWorldNews: In another important step forward for the Alaska LNG project, an application to export liquefied natural gas (LNG) was submitted to the U.S. Department of Energy. The export application requests authorization to export up to 20 million metric tons per year of LNG for a period of 30 years to countries that have existing free trade agreements with the U.S., as well as to non-free trade agreement countries. ...According to a study by NERA Economic Consulting, submitted in support of the application, the Alaska...
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Links 23 July 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Checking in on some market breadth measures - Short Side of Long How to reduce portfolio risk without going to cash - Pension Partners What traders have in common with climate change deniers - The Irrelevant Investor Value is at best a nebulous concept - Pragmatic Capitalism Investors are fleeing core bond funds for more exotic fare - Morningstar Millennials could use a good dose of inflation - Money When is housing too expensive a hedge to hold? - Principles & Interest North America: Why now is the time for business to really begin...
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ASX at the close

ScreenHunter_31-Jun.-04-16.424-200x200 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets The positive momentum witnessed post Barack Obama’s speech in US trade has extended into the Asian session, and seen most of the major Asian bourses edge higher. While US equities finished the session in negative territory, this is actually quite deceiving as markets managed to gain significant ground from their lows. Equities sold off heading into an Obama speech on the Russia situation, but the speech didn’t have an impact as it merely reiterated what markets already knew. We had already seen a degree of caution in...
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Kohler slams the super gravy train

ScreenHunter_2952 Jun. 24 12.41 By Leith van Onselen Business Spectator's Alan Kohler has written a stinging critique of Australia's superannuation system, slamming the high level of fees due in part to compulsory contributions and the lack of price regulation: A chart in the Financial System Inquiry’s interim report shows that since 2009 the average super fund has increased in size from $1.5 billion to $3.5bn, while the average fee has fallen from 1.3 to 1.2 per cent. That means the average fees received by each fund have doubled from $20 million a year to $40m. What better business can there be? Contributions are...
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Captain Glenn on the crisis

imgres Below find Captain Glenn's much anticipated speech this afternoon at the Anika Foundation. He's sorely let down markets which were primed for some more dollar jawboning and the currency popped 30 pips during the speech. It is good to see the Captain not using the egregious "North Atlantic" framing of the crisis any longer, as well giving some credence to Austrian economics. Thank you for once again coming to support the Anika Foundation[1], on the eighth of these annual fundraising occasions. Once again my topic is ‘challenges for economic policy’. It always seems as though there are some...
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Phat Dragon sees Chinese housing shortage

sger From Westpac's Phat Dragon: House prices remain under downward pressure across the board, with the negative impulse gaining further strength through June. The net balance of 70 cities seeing month-onmonth price appreciation in new dwellings has declined sharply to -67.1% (9 rising, 56 declining), not far from the previous cycle trough of –75.7%. The secondary market ‘cracked’ earlier but it now appears to be stabilising at a weak absolute state. Elsewhere in the space, Phat Dragon observes that year-ended sales growth is down, but by a lesser margin than in May, a comment that also...
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“Mad” Adam versus Ross Garnaut

mismatch "Mad" Adam Carr today launches a broadside at Professor Ross Garnaut: Australia does not have a debt problem. Professor Ross Garnaut should stop saying that we do. ...Professor Garnaut’s Melbourne Economic Forum appears to have adopted an unnecessarily alarmist position on Australia, our prospects and our prosperity. Debt is only one aspect of their alarmism, but it’s an important one as we come into what may be a rising interest rate environment. Professor Garnaut’s view, for instance, is that the country is ‘unusually vulnerable to international interest rates rising above their...
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Should Australia invest in mass public transit?

ScreenHunter_3402 Jul. 22 11.12 By Leith van Onselen Business Spectator's Rob Burgess has written a spirited post slamming the Abbott Government's roads fetish and advocating a massive lift in public transport investment: In the past decade there has been a shift back to public transport as sprawling Australian cities make commuting by car more expensive -- both in terms of fuel, time spent battling congestion, and skyrocketing parking costs... Infrastructure Australia... recommended recently: “Australia's transport systems are especially struggling ... with public transport growing rapidly in recent years and reaching...
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China leading index bounces

images17 I can take or leave these leading indexes but the Conference Board version for China just posted a strong result, up 1.3% in June, to 294.0. Forexlive reports that: Follows a 0.7% increase in May and a 1.1% increase in April Five of the six components contributed positively to the index in June Andrew Polk, resident economist at The Conference Board China Center in Beijing: “June’s pickup in the leading economic index for China is unlikely to be fully felt until the final quarter of the year, even though slight monetary loosening and better export performance could underpin more...
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Should markets be discounting conflict?

583381c7-3d7b-42a3-b6d4-cd1eada2c822 Chief Economist at Saxo Bank, Steen Jakobsen, thinks they should: “There are causes worth dying for, but none worth killing for” – Albert Camus The world is increasingly becoming engaged in civil wars and general turmoil where Camus' words could and should play a central but never will. This article is one of the hardest to write as war is never about right or wrong. They are per definition always wrong and extremely personal and emotional. The fact is, however, that we need to put "the risk of wars" into our macro outlook as they are increasing not only in intensity but also in the numbers...
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BDO fast retail index firms

kj With the solid bounce in Roy Morgan consumer confidence over the past two weeks, I thought I'd take a look at the BDO fast retail index, which tracks same store sales week-on-week. Here's the headline index showing an slightly positive ongoing struggle for momentum   Fashion especially appears to be struggling:   Other too: But furniture and homewares are riding the bubble to post-Budget recovery: And so too recreational goods: You might describe that a positive a non-discretionary...
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Consumer confidence recovers post-Budget losses

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has now more or less recovered from its Budget-induced slump, rising another 4.8 points in the week ended 20 July to 113.5, and is now basically in line with its long-run average reading of 113.7, and only some 2.2% lower than April’s pre-Budget high (see next chart). The below chart, which plots the most recent Westpac-Melbourne Institute’s Consumer Sentiment index against the ANZ-RM Consumer Confidence index, highlights the mood of the Australian consumer more clearly: Expect next month's Westpac...
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Modelling falling living standards

sock By Leith van Onselen The inaugural Melbourne Economic Forum was held yesterday, which brought together a wide range of economists to discuss the Australian macroeconomic outlook and policy choices following the end of the mining boom. The discussion was centered around new modelling by the Centre of Policy Studies at Victoria University, which found that real per capita incomes and consumption will continue to slide for the rest of the decade and beyond as the fallout from falling commodity prices and the terms-of-trade takes hold, with real income per Australian forecast to be around 2%...
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WSJ gives Australian LNG a deserved caning

MK-CO009A_AUSGA_G_20140721120604 From the WSJ today comes an overdue examination of the Queensland LNG white elephant: Big export projects each need thousands of wells to be viable. Unexpectedly weak flow rates at some wells have forced companies deeper into the Australian Outback to hunt for resources. The process harnesses sophisticated computer-directed drills that pinpoint pockets of gas trapped in coal seams buried hundreds of feet underground. Because salt water mixed with the gas is sucked out to depressurize the seam, the drilling process risks contaminating groundwater used by farmers. ..."There's still uncertainty...
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Mirabile dictu: MS says short Fortescue

anvil Now they're getting it. From Morgan Stanley today: We believe the share price will fall in absolute terms over the next 15 days. This is because the stock has traded up recently, making short term valuation much less compelling. Data points from the Chinese steel industry suggest the recent restocking cycle may be concluding. Total steel inventory of traders and mills combined has dropped below 12 days of production, down from the peak of 17 days in February, which suggests demand has eased as we enter the slow season. Also 37 days of iron ore inventory at ports is the normal operating level...
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Blundell-Wignall warns on China bubble

imgres From the AFR, Australian economist Adrian Blundell-Wignall, special advisor to the OECD’s Secretary-General on Financial Markets, and one smart cookie: “What people are doing when you have zero interest rates around the world is they go into higher risk assets and at the moment it’s basically corporate debt in Asia. There has been a huge super highway of money flowing into emerging market credit because it has got much higher yield. The question is whether this super highway is a dual carriageway.” ...“Things are fine at the moment, but when people try to get out of it, you get big...
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