Houses and Holes


RMBS arrears above GFC

Fitch has released its monthly “Dinkum Index”, a read on the health of Australian RMBS and the reading is a concern: Fitch Ratings-Sydney-25 May 2011: Fitch Ratings said today that 30+ days delinquencies in the Australian prime RMBS sector reached a record high of 1.79% in Q111, up 42bp from Q410. Christmas spending, the Queensland floods and


Have trowel, will travel

The March quarter ABS Construction Done Survey (8755)  is out: MARCH KEY POINTS VALUE OF WORK DONE, CHAIN VOLUME MEASURES TOTAL CONSTRUCTION The trend estimate for total construction work done rose 0.3% in the March quarter 2011. The seasonally adjusted estimate for total construction work done rose 0.7%, to $42,326.6m, in the March quarter. BUILDING WORK


Saul cracks the mining tax nut

How’s this from Saul Eslake today: The resources super profits tax, as originally envisaged, was (among other things) impractical and relied on a commercially unrealistic assumption that financiers would believe a government promise to refund 40 per cent of the costs of failed mining ventures. But its replacement, the minerals resource rent tax, is arbitrary


King dollar

FT Alphaville today catches up to reality with an explanation of movements in the $US: Take everything you ever thought you knew about foreign exchange and bin it. According to HSBC’s stellar FX guru David Bloom, currency markets are trading through the looking glass, and will continue to do so for some while. As he noted


Is Greece Lehman II?

Over the weekend came this news from the WSJ: French Finance Minister Christine Lagarde signaled Paris might support a rescheduling of Greek debt, warning that Greece is at risk of default if it doesn’t do more to bring its public finances into order. The comments mark a shift in France’s position in a debate that


A bullhawk takes flight

The mightiest of Australia’s bullhawks (half housing bull, half rate hawk), Christopher Joye, today published his latest assessment of house prices at Business Spectator. Let’s take a look: A lot of fuss is being made about house prices doing, well, nothing. For the record, this is the outcome we have correctly predicted since early 2010. Year-on-year,


High time for Wallis

As predicted, the national media has sidelined the Moody’s decision. They could not be more wrong. It is time to revisit a new Wallis Inquiry. Australia has a big imbalance. Call it what you like. A housing bubble. An overvaluation. An external imbalance. It doesn’t matter. It just is, and the rest of the world knows


Richard Koo on QE3

Mr ‘balance sheet recession’ himself holds forth on the follies of QE. Highly recommended reading… As I spoke with investors in London and Geneva last week, markets were rocked by a resurgence of fiscal problems in Greece and a steep drop in the price of silver andother commodities.In London there was talk in the market that the drop in commodity


They’re onto us

There is no doubt that ratings agencies are on the nose. And it is probable that today’s Moody’s downgrade of the big four banks will be interpreted tomorrow by the broader media as a petulant and late attempt to recapture some lost credibility by picking on our perfect banks. Besides that, a one notch downgrade


Parko poses conundrum for self

Martin Parkinson, the new Secretary of the Treasury, gave an excellent speech last night. Gone was the uber-bullishness on China and India that has characterised Treasury rhetoric since the GFC and it was replaced with a recognition that we’re in for cycles in China and at times, it’ll be painful. The Australian covered these things well enough.


Having a good crisis

Recently I argued that the Australian economy is much closer to the US economy than we give ourselves credit for. One half of it at least is, the slow half (or should I say three-quarters): In the slow halves of the two economies, housing and services, the US is deflating much of its debt and


RBA’s hawkish minutes

Damn, looks like the RBA was setting up for a June hike: The main economic news over the preceding month had been the release of the CPI, which increased by 1.6 per cent in the March quarter, with the year-ended rate of inflation rising to 3.3 per cent. The March quarter outcome had been boosted by large


Lending finance solid

The ABS has released March Lending Finance. It shows strengthening business lending and stabilisation in conmsumer lending after three months of heavy falls: MARCH KEY POINTS MARCH 2011 COMPARED WITH FEBRUARY 2011: HOUSING FINANCE FOR OWNER OCCUPATION The total value of owner occupied housing commitments excluding alterations and additions fell 1.7% in trend terms and


Jawboning is the new black

Regular readers will know that I have little time for the complaints of vested interests. But, one can’t help noticing just how many are out there talking down their circumstances just now. Don’t get me wrong, MacroBusiness has led the nation’s understanding of the economies’ current travails, and there are losers, contrary to the post-GFC


Predictable duds

ABS has released Housing Finance for March and Car Sales for April. First up Housing Finance, which we knew from other indicators was going to come in weak, and it did: MARCH KEY POINTS VALUE OF DWELLING COMMITMENTS March 2011 compared with February 2011: The trend estimate for the total value of dwelling finance commitments


Employment thumps the bullhawks

The total number of people employed in Australia fell by 22,119 in April.   This is the third time in the past 5 months we have seen the total number of people employed in Australia fall. Yes, that’s right, the 3rd time in 5 months.   The market was looking for a gain of 17,000


Grantham calls the top

For those of you with a memory longer than a few days, it was Jeremy Grantham of GMO who famously called the bottom in the great GFC equity rout. Whilst I never put anyone on a pedestal, Granthan is one of the few equity strategists that sees the way markets actually work these days. Overnight


Mirror image

It’s an advanced Western nation with historically weak household debt and rising savings, booming exports but a weak external position, a set of cunningly guaranteed too-big-to-fail banks, slumping house prices and a dramatically two-speed economy. Pop quiz: Is it the US or Australia? It’s a trick question because the answer is it’s both. Last week


NAB survey goes to the hawks

The NAB April Business Survey is out and it’s got something for everyone. For the rate doves, the lead Business Conditions Index softened: And the internals dropped pretty substantially: However, two other key indexes for the RBA are strongly inflationary. First and foremost, labour: And employment: In sum, I would say that despite the weakness,


Senate endorses politico-housing complex

Well, I guess I can’t complain about no takers for the “Lost Child of Wallis Competition” over the weekend. If I couldn’t find the inspiration to give up my weekend on the document, I can’t blame anyone else for doing likewise. I’m glad I bothered this morning, though, because the results are, in a word,


June not a done deal

On Friday and over the weekend the consensus came down strongly in favour of a June rate rise. Those declaring June the day included Peter Martin, Terry McCrann and Michael Stutchbury (that gives you all the major papers). Amongst bank economists there is Westpac, RBS and ANZ, as well as, of course, the bullhawks, Adam


Will the RBA crash housing?

Well, I was right about one thing after the RBA meeting this week. There was something for everyone and the debate will rage! We had a dovish statement Tuesday and now a hawkish one today. Following this morning’s RBA SoMP, Adam Carr is back claiming victory: At the very least we know they are closer to my view


Pettis warns Canberra

Exclusively from Michael Pettis newsletter comes another warning for Canberra’s boundless China faith. Since January I’ve been writing about – and trying to figure out – the strange happenings in the Chinese copper market. The issue has been a regular topic of conversation in my central banking seminar at Peking University, where much of the


Milk money (QE3)

That was no ordinary night. The $US doesn’t bounce 2% without some serious spur. And the entire commodities complex (CRB) down 3.5%! This is a similar signal to the flash crash of last year, which presaged the sell off into the double-dip funk of mid last year. Here we have the first signal of the triple-dip


Retail sales unsurprisingly poor

Those poor bullhawks.  That strange creature – half housing bull, half rate hawk – must be having a few doubts. Personal crises even. Retail sales for March are in and look, well, crapola. First from the ABS itself: I will add that on a monthly basis there were a few eye-opening falls for different segments. Department stores


April car sales down 4.5%

Adam Carr won’t be happy. He’s relied on growing car sales in part to rationalise his intense campaign for rate hikes. Westpac has just released a note on the April sales figures from the Federal Chamber of Automotive Industries and it’s into reverse I’m afraid: Westpac Economic update Australia: new vehicle sales down 4.5% in


Good and evil in interest rates

According to Peter Martin: The Reserve Bank believes inflation has bottomed and it will soon have to lift interest rates, possibly even next month. The bank’s change of heart emerged during a three-hour board meeting yesterday that resolved to leave the cash rate steady at 4.75per cent but to be prepared to lift it without


Strength not weakness is hitting housing

The Unconventional Economist posted on the bearish musings of Louis Christopher overnight. Mr Christopher’s thoughts looks fine and good, but made little sense to me. Here is the quote: I still do not believe this is going to be the big one- that being the big 40% house price crash. However for many vendors, it’s


Take a chill pill

My kingdom for a rational media. Today’s selection of economic commentary, from interest rates to the Budget and carbon taxes is so full of amphetamines that one is tempted to conclude that everyone is still high from last night’s Logies. From the top, we have a piece from Alan Kohler that makes no economic sense: