Houses and Holes


RBA does some soul searching

From the above Wordle of today’s RBA Statement of Monetary Policy (SoMP), you get the impression that the bank is doing a little soul searching. “Growth” and “forecast” obviously feature more greatly than past favourites like “inflation”. And yes, the navel gazing has resulted in a downwards shift in bank forecasts. 2011/12 growth has been


NAB online retail index eases in March

Growth in online sales eased in March (vs. spike in Feb) – up by 19% yoy – in line with trends from last 6 months: For the 12 months ending March 2012, Australia’s total online spending was around $11 billion. This level is equivalent to 5.1% of traditional bricks & mortar retail spending (excluding cafés,


Will the PSI shock pass?

So, to put some context around yesterday’s horrendous Performance of Services (PSI) index, I’ve drawn the following chart of the history of the major components. As you can see, outside of the GFC, the collapse of the April PSI is without precedent in its ten year history. For comparison, check out the small shock delivered


Foreigners divide over Australian miracle

From Business Spectator/AAP today come some flattering comments from IMF President, Christine Lagarde: Australia’s renowned economic leadership will continue to extend its global influence in years to come, the head of the International Monetary Fund says. IMF Managing Director Christine Lagarde told the Global Foundation’s Australian summit that the nation had always shown “real leadership”


Fitch applauds bank margin expansion (updated)

From the AFR this morning: Australia’s banks have received support from a major credit rating agency to withhold part of the Reserve Bank of Australia’s super-sized interest rate cut. After Commonwealth Bank and the online arm of National Australia Bank yesterday became the latest lenders to pocket part of the cut from ­customers, Fitch Ratings


North Asia’s fading PMIs

It’s that time of the month again – PMI time! And the news is not much better than last month with the global zombie shuffling on in search of more “braaaiiins”, up 0.3 in the month to 51.4: This result was largely driven by the US which, as I’ve documented, is questionable given the clear


China links

Courtesy of Sinocism: Thanks for reading, feel free to recommend to friends or donate on the site… The big story today is Chen Guangcheng and his departure from the US Embassy. What looked like a positive outcome Wednesday afternoon turned into an apparent mess overnight as friends of Chen used Twitter to say that Chen


Something just snapped in the economy

The Australian Industry Group Performance of Services (PSI) for April is out and shows a precipitous drop: The latest seasonally adjusted Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI®) slumped by 7.4 points to 39.6 in April (readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of


Garnaut warns of end to commodity super cycle

Professor Ross Garnaut has published a seminal paper on the future demand for resources we can expect to emanate from China in the Agricultural and Resource Economics Journal and the news is not terribly bright. Below find the article’s abstract. Below that a longer version with the section of the paper that matter displayed and


Genworth fesses up

From the excellent Banking Day: Genworth will lift its premiums on lenders’ mortgage insurance by seven per cent in Australia, its US management disclosed last night. The rise will help offset a rise in the severity of claims that triggered a loss of US$21 million in the March 2012 quarter on Genworth’s Australian business. The company’s


Dr Hewson wants rates at 2%

From the AFR: Former federal opposition leader John Hewson says the Reserve Bank of Australia should continue slashing interest rates so they are in line with other developed economies. A day after the RBA cut the cash rate by 0.5 of a percentage point, to 3.75 per cent, Dr Hewson said it would be better for


Veda sees growing demand for business credit

From Veda late yesterday comes a trend that is consistent with this year’s RBA credit aggregates: SYDNEY, Australia, May 01, 2012 – The results of Veda’s Commercial Credit Demand Index for the first quarter of 2012 show that while overall business credit inquiries increased in the first quarter, with +8.8 per cent growth compared to the


Helloooooo Terry!

One of the joys and mysteries of writing an economics blog is that you get stuff off your chest through the chance to skewer poor analysis but often wonder if those responsible actually read you. Well, today we have our answer in the case of Herald Sun legend, Terry McCrann, who, in his post RBA


Uncle Sam powers on

Well, my four punch US data knock down thesis just got KO’d. Last night’s ISM came in hot: Economic activity in the manufacturing sector expanded in April for the 33rd consecutive month, and the overall economy grew for the 35th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business. The


RBA linkfest

Yes, it’s RBA madness time and what a show we have today. Fairfax has gone hog wild. The AFR seems to have deployed its entire staff to Martin Place: More cuts needed. Alan Mitchell Big cut, big risk. Philip Baker It’s the dollar! Jacob Greber and Laura Tingle It’s the Budget! Joanna Heath It’s the banks! George Lionidis and Vesna Poljak It’s the criticism! Paul Brennan and


BOQ keeps 15

From the AFR: Bank of Queensland has failed to pass on the full extent of the Reserve Bank of Australia’s interest rate cut to its customers. The Queensland bank said it would reduce its standard variable home loan rate by 0.35 percentage points to 7.11 percentage points. It cut its business lending rates by the


Flight of the bear doves

Find below a couple of takes from Westpac and CBA on today’s RBA move. In short, it’s the flight of the bear doves! Westpac: RBA cuts by 50bps – rate cut cycle likely to be extended by another 50bps over the course of 2012 In a surprise move the Reserve Bank Board has decided to lower


RBA commodity prices up a tad in April

From the RBA this afternoon: Preliminary estimates for April indicate that the index fell by 1.6 per cent (on a monthly average basis) in SDR terms, after rising by 0.5 per cent in March (revised). The largest contributors to the fall in April were decreases in the prices of coal, oil, gold and aluminium. In


Victoria slashes and burns (FHBs)

From the AFR, here is a summary of today’s Victorian austerity Budget: ■ Surplus of $155 million this year building to $2.5 billion in 2015/16 ■ Weak forecast of economic and jobs growth ■ Departments required to find a further $180 million in savings ■ Cutting 600 public sector jobs taking total cuts to 4200


RBA hits the panic button

In a tacit confession that got it wrong, the RBA has opted for emergency level rate cuts – 50 bps. Here is the Statement: At its meeting today, the Board decided to lower the cash rate by 50 basis points to 3.75 per cent, effective 2 May 2012. This decision is based on information received over the past few


China official PMI edges up

Courtesy of ANZ • The headline PMI rebounded to 53.3 in April, lower than market expected, but higher than with March’s 53.1. • The production index rose strongly to 57.2 from 55.2 previously. • While the new orders index declined by 0.6pts to 54.5; the export order index rose 0.3pts to 52.1. • Inventories of finished goods


The term deposits that saved the world

From Mark the Graph today comes this nice study of bank funding: Today’s credit aggregates for March (table d03) include a number of data items on money with the banks. These funds are available to banks for making loans. First we have current deposits with banks, which have been growing steadily. These are the everyday


Manufacturing ugly

The April PMI is out and ouch: Manufacturing activity declined sharply in April after having dipped in March following expansions in the first two months of the year. The seasonally adjusted Australian Industry Group-PwC Australian PMI® fell 5.6 points to 43.9. (Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the


Shadow RBA gives the bird to 50bps

From the AFR: Monetary policy needs easing to spur weaker than expected economic growth that has pushed core inflation to the bottom of the central bank’s target range, according to a group of economists acting as a “shadow” Reserve Bank of Australia. The nine-member board was set up by the Australian National University’s Centre for Applied


The US ducks a punch

The US took a clean left jab with the recent Q1 GDP report. Last night’s Personal Consumption Expenditures report (PCE) was better than I expected and was only a glancing right cross to the the temple: Personal income increased $50.3 billion, or 0.4 percent, and disposable personal income (DPI) increased $42.5 billion, or 0.4 percent, in March, according