RBA Chart Pack unmasks sick underlying economy

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It’s that time of month when the boffins at Martin Place publish their updated Chart Pack, which you can find in full here.

Here are a few that standout for a closer look. First its interest rates, with the lagging RBA showing its hand:

Australian cash rate

As the rest of the world got moving beforehand, although Japan is only now playing catchup:

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Policy interest rates

This has caused a jump in Aussie 10 year bond yields but:

10-year bond yield
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It’s the differential with US Treasuries that will keep the Australian dollar depressed:

Bond differential

Moving on to housing with interest rates spiking across the board:

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Average housing interest rates

With house prices experiencing big retractions:

House prices

As loan commitments falter:

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Housing loans

Meanwhile inflation is still not really under control:

CPI

Largely due to tradable (external factor) inflation, like energy prices. If only we had some way of ensuring cheap, plentiful and reliable domestic energy?

CPI drivers
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Inflation combined with falling house prices and rising interest rates is having a big impact on consumer sentiment:

Consumer sentiment

Let’s end with a few business and banking indicators, with business investment still bottoming at multi-decade lows:

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Business investment

While the major banks remain insanely profitable, still pushing 10% plus ROE (when it should be 2-3% at most if they were nationalised):

Australian bank profitability
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Interestingly, Net Interest Margin (NIM) is still going down, now below the 2% level:

Bank NIM

The only chart to really watch and which explains the last 20 plus years of economic “miracle” – the Terms of Trade:

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Terms-of-trade

2023 will very likely see Australia avoid recession thanks to extreme immigration-driven population growth. But per capita living standards will fall, as was the case through the 2010s “lost decade”.