Houses and Holes


Glenn Stevens macrobated

Well, so much for being the lunatic fringe. The Governor of the Reserve Bank of Australia has delivered a seminal speech on the Australain consumer this afternoon and regular readers can pretty much throw it away. They have read it here for the past six months. Glenn Stevens has been “macrobated” (that is, converted to,


Glenn Stevens on the cautious consumer

Find below the full text of Glenn Stevens speech this afternoon. The Cautious Consumer Glenn Stevens Governor Address to The Anika Foundation Luncheon Supported by Australian Business Economists and Macquarie Bank Sydney – 26 July 2011 Thank you for coming out once again in support of the Anika Foundation.[1] I want also to thank in


The bizarre retail debate

One of my favourite journalists, Adele Ferguson of The Age, today calls for a retail bailout: Other figures show that online spending is going gangbusters. There is an estimated $12 billion a year spent in online retail, but it could be much higher than this. Domestic online sales have been growing at 5 per cent


Trading the Guv’

Westpac offers a neat little observation this morning: The RBA Governor will today deliver a speech to the Anika Foundation  on ‘Issues in Economic Policy’. Recall in 2009 that it was this platform  that was used to shift the Bank’s stance away from an easing bias. Over the past 18 months, the Governor has made


Out of time

While markets remain fixated with the debt ceiling debacle in America, I am more concerned with Europe. We’ve had just two days of gains in European sovereign bonds and already the yield blowout has resumed. Both short term and long term Italian bonds were under pressure overnight: The same for Spain: It was the same


July 26 links: Contagion returns

Up: ore, gold (red and yellow metal!) Flat: Aussie, $US  Down: euro, energy , metals , CRB, grains Contagion returns! Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year


Access goes all in on rate rises

Boy, do we have a market in interest rates. From Bloomberg: Australia’s central bank will increase interest rates three times in the coming year as a mining boom boosts wages and helps the economy recover from natural disasters, a Deloitte Access Economics report showed. High resource prices and strong demand will boost Australian incomes and there


Producer prices ease, but…

JUNE KEY POINTS FINAL (STAGE 3) COMMODITIES increased by 0.8% in the June quarter 2011. mainly due to rises in the prices received for building construction (+1.2%), petroleum refining (+10.3%) and other agriculture (+7.9%). partly offset by falls in the prices received for industrial machinery and equipment manufacturing (-2.0%). increased by 3.4% through the year


Australian stagflation

Late last week, the venerable Melbourne Institute released its Monthly Bulletin of Economic Trends. In it, the economists of the institute predicted that Australia is headed back to the seventies with a bullet: Policy dilemmas ahead … In contrast to other forecasters, we have cautioned for some months now that GDP growth is likely to be


Don’t mention the savings

Two senior Australian business and economics commentators today make throwaway arguments about the struggles of the retail sector. First, it’s Alan Kohler, who dedicates his column to explaining how retail is suffering from Dutch disease. His argument is as follows: Retailing is the bedrock of the economy, employing about 1.3 million people directly and touching


Peak everything

Below find Jeremy Grantham’s latest quarterly newsletter. In it he draws out his thesis that the world stands at the edge of peak everything. Here is his executive summary on likely outcomes: Summary We humans have the brains and the means to reach real planetary sustainability. The problem is with us and our focus on


July 25 links: Auction surge!

FDR 1936 . Jesse Cafe Americain Q2 US growth. Calculated Risk Week ahead for Dow. Calculated Risk US inflation easing. Carpe Diem On Fed asset purchases. Econbrowser Madly in love with rationality. Andrew Gelman Iran and China price in barter. Zero Hedge Good company for the miners. Signs of life in Sydney property market. SMH Auction


CPI preview

NAB has produced a rather useful guide to next week’s CPI read, which all seem to think will be crucial in determining the August interest rate outcome. Personally, I think there’s little chance of a hike, not least because three days later, when it releases its quarterly Statement on Monetary Policy, the bank is most likely


A new bullhawkian argument

Today’s bullhawkian charge cannot go without a prod. According to Chris Joye writing in Smart Company: There is mounting evidence to suggest that Australia’s housing market rests at a critical juncture…In my opinion, the near-term destiny of Australia’s housing market very much depends on next week’s second-quarter inflation numbers. If inflation is low, the RBA


July 22 links: Selective default

Rockets: euro, energy, Aussie Up: ore Down: metals, gold, $US, CRB, grains Contagion reversal carnage: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year


China’s pressures intensify

h/t WSJ The HSBC China flash PMI was out this afternoon. According to the SMH: HSBC’s China Flash PMI for July dropped by its fastest pace since March 2009 and pointed to a monthly contraction in the country’s vast manufacturing sector for the first time in 12 months, the purchasing managers’ survey shows, while a


European risk rally?

News this morning is that there is something of a breakthrough in Eurozone negotiations. From the FT: Germany and France appeared to settle their differences late on Wednesday over a new rescue package for Greece. No immediate details were available but Steffen Seibert, a spokesman for Angela Merkel, the German chancellor, said “a common German-French


Fearful symmetry

Find below Westpac’s newish regular economic document, called “Fearful Symmetry”, a monthly chronicle of the Indian economy. The research effort of the institutional bank is hot so right now!


China warnings

In the past few days there have been three new interesting media outputs that warn of growing risks of a Chinese hard landing. The first is by, of all institutions, the Australian Treasury. In a new Working Paper full text below), Treasury offers a respectable assessment of Chinese macroeconomic navigation through the GFC, and the


July 21 links: Three dark clouds

Up: CRB, euro, energy, ore Flat: Aussie, grains Down: metals, gold, $US Contagion easing: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year


Should miners trade in yuan?

A month or so ago, before I was struck down with a monstrous lurgy, Rio announced that it was considering pricing some of it’s iron ore sales in yuan. From The Australian: In another sign of China’s growing power in world markets, the world’s third-largest miner is openly canvassing switching its iron ore settlements from


Leading indicators point south

The Westpac/Melbourne Institute Leading Indicators for May are out and point to more weakness ahead. Growth Rate of Leading Index well below Trend The annualised growth rate of the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 1.6% in May 2011, well below its long


All ahead slow

Interest rate discussion over the past week has been fascinating. Behind the media smoke, bullhawkian economists and commentators have capitulated on aggressive interest rate rises. Most have retreated behind the fallback position of a stalled RBA, in which rate rises are still coming, but later than thought. On the other hand, of course, we’ve seen


July 20 links: Relief

Rocket: Aussie, energy Up: CRB, euro Flat: ore Down: metals, grains, gold, $US Contagion easing: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year


Bill Evans has a panic attack

Mother of the economic gods (if there are any). Bill Evans, my hero of the past couple of days, has just trashed himself with one of the great weathervane moments in interest rate commentary. Following this morning’s RBA minutes, the Westpac Chief Economist has released the following note: Reserve Bank of Australia Board meeting minutes


RBA minutes fixated with risks

Below find the full RBA Minutes with commentary. Financial Markets Members began their discussion with a review of financial markets. Developments in Greece had again been the main factor influencing markets over the past month. Pessimism had been the dominant theme until late June. Sentiment improved after further fiscal measures were formulated and passed by


Bullhawk down!

Another of the bullhawks, Paul Bloxham, today concedes that his August rate hike call is wrong. Bravo! However, Mr Bloxham nicely demonstrates the maxim that there’s no better defense than a good offense, dedicating much of his conference call to hammering Westpac’s Bill Evans and his rate cut call. Click here for the conference call.


Bank CDS blowout

A credit default swaps (CDS) is a derivative that enables market players to insure holdings of bonds (as well as gamble on their price movements). CDS prices of Australia’s big four banks are on the move – the wrong way. Here is a chart of recent market action: On a longer term time time frame


July 19 links: Europe burning

Rocket: gold, $US Up: metals Down: CRB, euro, Aussie, grains, ore, energy Contagion raging: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10


Burying the hawks

Bill Evans of Westpac has certainly thrown a spanner into the interest rate debate. The papers all went nuts over the weekend, leading with stories of imminent rate cuts and there are more stories today of an ensuing housing boom. Meanwhile, pretty much every interest rate commentator in the country disagreed with him. Over the