Unconventional Economist


Saxo Bank: 50% chance of Aussie recession

By Leith van Onselen Steen Jakobsen, chief economist at Denmark’s Saxo Bank, has given a stinging critique of the Australian economy, claiming that it is afflicted by a housing bubble and has a 50% chance of falling into recession. From Yahoo Finance: The mining boom had inspired laziness and arrogance… There’s dangerous levels of investment


Fortescue ‘worthless’ at current ore prices

More scuttlebutt on Fortescue this afternoon, via The AFR: Fortescue’s stock is worthless at current spot iron ore prices, analysts at CBA calculate. Zippo, zilch… There is $US7.5 billion ($11.5 billion) in net debt squatting on Fortescue’s balance sheet. In Aussie dollar terms, that’s approaching twice the company’s market capitalisation – just a number, sure,


TPP so bad even the US congress is shocked

By Leith van Onselen More worrying details have emerged about the the Trans-Pacific Partnership (TPP) – the US-led regional trade pact between 12 nations (including Australia) – with the New York Times revealing that members of the US Congress have been viewing the secretive document and are disgusted by its contents: Members of Congress have


PIMCO shorts the Aussie dollar

Fixed income investment management company, Pacific Investment Management Co. (PIMCO), has told investors that it is short the Australian dollar, citing falling commodity prices and interest rates. From Bloomberg: “Our highest conviction views are in the currency markets, and we remain short the yen and the Australian dollar against a long U.S. dollar position”… According


Should Australia cut company taxes to boost growth?

By Leith van Onselen The Australian Treasury’s head of revenue, Rob Heffren, is pushing to cut the rate of company tax in order to boost foreign investment. From The Canberra Times: Mr Heferen said lower company taxes boosted foreign investment, resulted in more jobs, higher wages and increased productivity… “Let’s be clear: taxes have negative


Aussie banks borrow offshore like drunken sailors

By Leith van Onselen The release of the Australian Bureau of Statistics (ABS) National Financial Accounts yesterday revealed a large $33 billion (5%) jump in Australian banks’ gross external liabilities (offshore borrowings) in the December quarter, with borrowings now at all time record levels. This surge in offshore borrowings was driven by increases in One


More flawed arguments for a “Big Australia”

By Leith van Onselen The Australian’s David Uren wrote an extraordinarily one-eyed article yesterday in support of rapid population growth, which espouses all of the so-called economic positives without due regard for the negative consequences: …rapid population growth has been a vital support to the Australian economy since the global financial crisis… Apart from Luxembourg,


Links 27 March 2015

Global Macro / Markets / Investing: Dow Marks Third Straight Day of Triple-Digit Losses – Bloomberg Warren Buffett Quadrupled His Ketchup Investment – Bloomberg View Investors Scoop Up Companies’ Bonds – Wall Street Journal Why Bombing This Tiny Oil Producer Is Roiling the Energy Market – Bloomberg The financial stability risks of ultra-loose monetary policy


CommSec primes the population ponzi

By Leith van Onselen From CommSec this afternoon comes the following statements on Australia’s population (immigration) numbers, released by the ABS: Population growth is healthy although in recent quarter it has eased – largely due to a slowdown in migration. Importantly population growth is still amongst the fastest across the OECD nations and as such


Land shortages still holding back affordable supply

By Leith van Onselen Lindsay Partridge, the CEO of Building supplier Brickworks, has today echoed CSR’s warning that shortages of developable land are preventing a bigger construction uplift and helping to reduce housing affordability. From The AFR: “Despite surging demand, Sydney still has the lowest number of lots being released for housing development of all


Loan-to-income sky high in NSW

By Martin North, cross-posted from the Digital Finance Analytics Blog: We have now finished updating the DFA market model, to take account of the latest DFA survey data, and market data. So we can look across specific households, segments and locations. Specifically we have been looking at average loan to income (LTI – income after


Unions challenge overseas-sourced offshore labour

By Leith van Onselen The Maritime Union of Australia and the Australian Maritime Officers Union has launched legal action in the Federal Court to have the hundreds of foreign workers employed in offshore projects declared illegal. From The Canberra Times: [The Union] has argued a Ministerial Determination used by the Assistant Minister for Immigration and


ACTU lobbies to lower take-home pay

By Leith van Onselen The Australian Council of Trade Unions (ACTU) has urged the workplace regulator, the Fair Work Commission, to increase compulsory superannuation for workers on the minimum wage. From The ABC: It says nearly 2 million low-paid workers are $167 a year worse off because the Federal Government delayed plans for employer contributions


7.30 Report does Big Australia

By Leith van Onselen With Australia’s population set to hit 24 million this year, ABC’s 7.30 Report last night tackled the “Big Australia” debate. The program featured interviews with The Australia Institute’s (TAI) Richard Denniss and KPMG’s population ‘demographer’ Bernard Salt (amongst others). Bernard Salt noted that he has been quite shocked at the pace


Residex: Sydney housing bubble risks bursting

By Leith van Onselen Residex has released its house and unit price results for February, which revealed 0.39% growth in house values over the month, although unit values fell by 0.51%. Over the year, house values rose by 6.02% nationally, with unit values up by 5.95%: As shown above, growth has been patchy, with house


“No economic rationale for” Aussie housing

By Leith van Onselen ABC News published an interesting morsel on how foreigners view the Australian housing market: While the Reserve Bank warns of risks to specific markets, an experienced financial risk analyst recently returned to Australia from the Washington-based Institute of International finance said foreigners are puzzled about the entire Australian housing market. Deloitte


RBA warns on Melbourne apartment glut

By Leith van Onselen Below is another excerpt from today’s Financial Stability Review (FSR), released by the RBA, which warns of a budding apartment glut, particularly in Melbourne: Another risk arising from robust investor activity is that speculative demand could lead to an excessive increase in construction activity and future supply overhang. While dwelling construction


RBA endorses wet lettuce regulation

By Leith van Onselen In the bi-annual Financial Stability Review (FSR), released today by the Reserve Bank of Australia (RBA), the RBA has gone to great pains to explain and endorse APRA’s wet lettuce approach to prudential regulation of mortgage risks: Recent trends in housing and mortgage markets have raised some concerns about the level