A walk through the RBA Chart Pack

by Chris Becker

As a chartist, this is my favourite release by the RBA – it’s Chart Pack time! Let’s go and unpack what the boffins at Martin Place have done on their etch a sketches..

First some global GDP, inflation and Chinese economic activity. Worldwide GDP is tracking at 4% – nice and smooth as the second wave of the Great Moderation continues?

In East Asia the growing middle class – a fantastic and not enough celebrated triumph of capitalism for the non-West – continues:

Meanwhile inflation is getting out of control – nearly 2%! The question is will be see a repeat and a too fast tightening in the last cycle ca. 2010 or some moderation before it even gets out of control due to the trade war?

The Middle Kingdom continues to re-balance or is it? FAI is slowly melting alongside retail sales growth as financial conditions tighten:

Now closer to home with GDP growth still tearing along, all due to super-high immigration rates, but unable to generate the sort of growth in past decades:

 

While the official CPI print shows a hovering around the magical 2% mark:

Domestic non-tradable inflation remains elevated:

And now to the most important sector of the Australian economy: houses, with my absolute favourite chart, showing how nucking futs Australians are with what is just a utility…

Nothing like doubling down on your crippling debt. Price growth is finally negative again after ridiculous levels since the 2012 bottom:

The main culprit of supply remains apartments:

As investment finance starts to tighten due to macroprudential controls, but owner-occupiers keep lapping up the cheap debt:

Meanwhile, the business sector is doing 2/5ths of nothing in terms of investment, sitting on piles of cash:

While capex remains floating for years and years, missing a huge opportunitiy because of the overinvestment in mining:

Which continues to dominate exports despite lower commodity prices:

Keeping the artificially high terms of trade at levels that aren’t yet upsetting the populous:

As the nation still owes a mountain of debt to foreign investors:

Bringing it home,let’s look at monetary policy and equity/bonds plus how the banks continue to get away with taxpayer funded largesse. First, the Fed is pulling away fast:

The flatlining RBA holding at 1.5% is pushing the bond yield differential to late 90’s levels:

The worst chart in the pack – drawn by a six year old – shows how elevated the Aussie dollar is, I guess?

This chart goes to show how broken the Australian equity market is – still unable to do any decent capital raisings:

Crowded out by a huge increase in government bonds:

Finally to the banks. Keeping margins elevated:

As profitability remains intact, save a few minor fines to pay the wet lettuce macroprudential police:

That ROE is disgusting for what is just a mortgage business, but when risk is socialised…NPA are slowly lifting but nowhere near dangerous, and anyway, the government will bail them out:

That’s that!

 

 

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