ANZ looks for another 100bps in 2013

ANZ’s coverage of China maybe looking up, but that hasn’t stopped them moving their forecasts of the Australian interest rate up to DefCon Magenta.

Due to the further sharp weakening in mining business conditions in recent months, the tepid improvement in the non-mining sector, the deterioration in job advertising trends and the strong AUD, we now expect a further 1 percentage point cut in the cash rate over the course of 2013. This will help limit the prospective rise in the unemployment rate that job advertising is signalling. If realised, such rate moves will provide significant further support to the non-mining sectors, including the housing market.

The key issue for markets and policy makers is whether the weakest sectors of the economy will strengthen sufficiently to offset the anticipated slowing in mining investment. The RBA’s two rate cuts in recent months suggest the central bank wants some further insurance on this front.

Overseas, lead indicators have rebounded modestly as inventories continue to be liquidated. However, we are yet to see a solid pick-up in new orders globally. As a result, we see industrial production momentum picking up only modestly through the first half of 2013, led by the US and China. In Europe, recent PMI and German IFO surveys indicate a stabilisation in growth over coming months. We forecast the central banks of the US, Japan and Europe will maintain extremely accommodative policies which will anchor bond yields. Further asset purchases or non- traditional monetary policy actions are expected to continue through 2013 – this is likely to continue to put upward pressure on the AUD.

So it looks like the ANZ holds some strong doubts about the RBA’s strategic belief that construction can offset the Capex decline. More string pushing to come by the looks of this

Australian Monthly Chartbook – December 2012


  1. More entirely predictable policy recommendations from the Merchants of Debt.

    Cut rates and hope that stimulates growth in debt and the spending keeps the wheels on the wagon for a little longer.

    Naturally they are not so crude to put it in such blunt terms or to linger on the self interest involved in banks giving such advice.

      • GunnamattaMEMBER

        Thats what I think. 100 bpts off takes Australia effectively under ZIRP.

        But ultimately, if you think we are starting from AVERAGE (sorry I cant do bold or underline) private debt levels of 145% then we cant possibly be far off having to pay people to take on more debt.

      • For Bold Text: <b>Your Bold Text Here</b>

        For Underlined Text: <u>Your Underlined Text Here</u>

        For the eager learner: <span style="font-weight: bold; text-decoration: underline;">Bold and Underline</span>

        Make sure you always close your markup with a less-than sign, followed by a slash, element-tag name, eg. b, and then a greater-than sign.

        Now you can express and emphasis your posts.

      • Gunna – the average Aussie house owner with a mortgage is 1.5 years ahead in repayments.

        They are absolutely fine, and when rates drop below 5% they will be making out like bandits. It’s savers and pensioners who rely on interest income to make ends meet who are suffering.

      • Peter. This is one of the most misrepresented and misused statistics by the RBA; and now by you.

        The average is clearly so skewed by those holding a small principal (having bought many years ago or with more equity) and those nearing retirement and trying madly to minimise debt. The average FHB is likely to be 2-3 months ahead at best in the first few years.
        In any serious stressed situation (unemployment rising, asset prices falling) it would be shown to be a fallacy and no safeguard at all.

      • GunnamattaMEMBER

        Believe it or not I am using opera and nothing i try in terms of creating bold or italics or underline works.

        Sorry Peter I dont buy that either.

        The last data I saw suggested that yeah the average repayment schedule was some way ahead but it was also indicating that the number mortgages which would ostensibly be scheduled to be completed after retirement of the mortgage taker was also at all time highs.

        I agree for sure it is savers being taken to the cleaners by monetary policy – an absolute disgrace.

      • Nick and Gunna – the figure that I quoted was from a poll, not from the RBA. Polls are not places that howeowners with little debt frequent, but still I do concede the polls only give indications not exact data.

        People do take out income protection cover which can cover redundancy, almost anything really. It’s not something that I am involved in so I’m hardly an expert. Here is one offering but there will be others –

        One of my clients had a heart attack recently and her cover paid out the $300,000 loan in full plus a bit more.

        Most banks offer their clients Consumer Credit Insurance.

    • Getting slightly off topic, but to do with merchants of debt. I saw a great documentary on the weekend, Food Inc, which touches on how debt is used as a mechanism by multinationals to control their suppliers. Basically the multinationals require their suppliers to meet ever changing standards, meaning the supplier borrows to upgrade their production facilities. With the supplier in debt, the multinational can then push prices paid down knowing the supplier is trapped by the debt burden.

    • From the same bunch who made a cool $100m by delaying the last rate cut. Probably add another $400m to their bottom line over the next 12 months.

    • Inflation low as $A is far to high
      All tools need to be used to reduce the $A.
      Australia’s non mining economy MUST be protected.
      It is sad that the RBA has got it wrong for years and still reacts only after more and more damage is done. In a global economy we have no choice but to lower rates. Lower rates can lead to reduced debt for many.

      • In an environment of rampant out of control money printing lower rates don’t cut it. The free and floating exchange rate mantra is BS.
        Stop eh speculative capital flows…any way will do. There is no policy that could be dreamed up by the world’s greatest idiot that could possibly be worse or more stupid than what we are now doing.

      • Are we anything like Canada?
        Their guy Just got the big job in London
        Their rate ?? 1%
        I think he proved that he is not a corrupt bank puppet!

  2. Debt is slavery

    You can’t negotiate a price if you hold none of the cards.

    Point to note that historically the big players are stupid and arrogant enough to kill off the smaller.businesses as they screw them down to almost “at.cost” production. I’m.sure Ford did this at least once.

    But just like all bullies the effects go much further than the two parties, when they then try and suck in the next poor sap eventually they find themselves black balled.

    • Debt can be used with canny smarts to create huge wealth.

      Debt is not always slavery, Debt can deliver freedom.