Houses and Holes

11

MYEFO OMG

So, the MYEFO delivers a $20 billion black hole that is filled by fiscal cuts over the next four years. I’m going to leave a detailed analysis of this beast to Delusional Economics tonight. Right now I’m just going to take a few moments to run through the assumptions behind the updated forecasts to give

40

Mining projects go ballistic

From NAB today comes this little note on a big subject, the developing pipeline of major mining projects: AUS: Resource project listing sky-rockets to $232bn from $173bn in April Prior to the release of the Government’s mid year review of the Budget this morning, an updated listing of major resource development projects has also been

44

Swan’s unpopular razor

From AAP this morning: Deloitte Access Economics director Chris Richardson said the government planned to cut spending when the Reserve Bank of Australia (RBA) had cut its cash rate in early November. The RBA cut the cash rate from 4.75 per cent to 4.5 per cent to provide some stimulus for a slowing economy. “What

8

A picture of deleveraging

Overnight, the New York Fed released its quarterly report into US credit trends. To cut a long story short, US consumers continue to deleverage. The research has some killer charts, including the one above, which shows that after all of the fear and loathing of the past three years, aggregate credit has slid back only

6

Canberra is fighting the last war

In recent days, Ross Gittins delivered a spirited defense of the Australian Treasury’s embrace of Dutch disease. He based his defense on an endorsement of a speech delivered by the Head of Treasury’s Macro Group, David Gruen. I haven’t seen the speech before today but read it this morning and it’s got some fascinating material.

20

Iron ore weakens again

The SMH report this morning that Rio is striding towards ever greater expansions of its iron ore output: Rio Tinto has revealed plans to expand its flagship iron ore operations in Western Australia beyond previous expectations, but the news has been dampened by confirmation that capital costs for the project will also rise higher than

95

Australian austerity closes in

From Business Spectator via the AFR and The Oz comes the following news on the Budget this morning: Federal Treasurer Wayne Swan has said that larger than expected spending cuts will be needed to preserve Labor’s promise of a budget surplus in 2012-13, thanks largely to a $7 billion drop in capital gains tax revenue

140

MSM GFC porn

Australian media operates in a vested interests continuum. Over the weekend, every major paper carried headline stories about a looming credit crunch, but the analysis of the outcome was caught in a binary of false opposites with the stroking of banking vested interests at one end and house prices porn at the other. The irony is

70

Steven Keen on BBC’s HARDTalk

Find below a video of Steve Keen’s recent appearance on BBC HARDTalk. He stands up well under a withering barrage of questioning very much from within the neo-classical frame of reference, including some pretty weird ad-hominem attacks.

74

The Economist global housing comparison

The Economist has released its annual house price survey and on most measures Australia remains in the top category for most overvalued. I’ve extracted some charts from the interactive graphics to give you an idea of The Economist’s guide to relative merits. First, a straight comparison of house prices: Australia comes in second behind one

19

The ‘new normal’ in mortgage growth

There were two new mortgage industry reports released yesterday that painted a picture of an increasingly realistic industry. Genworth released its Home Grown Report, which surveys mortgage industry attitudes and expectations for the year ahead, and Deloitte released its Australian Mortgage Report, which seeks to define conditions for the year ahead. The Deloitte report is

45

When will markets price the guarantee?

Oh yes, it’s on. According to Ralph Norris, whose exit from CBA will have to register alongside that of Alan Moss from Macquarie for propitious timing, GFCII is here. From the SMH: OUTGOING Commonwealth Bank chief executive Ralph Norris has warned that the European debt crisis has entered a dangerous phase, likening the current turmoil

85

Should we guarantee the banks now?

Don’t blink because you might miss it. Today I agree with Chris Joye: Does cutting rates in December do anything to solve bank funding problems (only guarantees and liquidity facilities will), and will the banks pass on any cut given the turmoil in overseas funding markets? I personally think a better policy response is to

87

The credit crunch is coming

The SMH has very important story this morning on the funding crisis that is bearing down on the major banks: Australian banks are preparing for a potential freeze in global funding markets as Europe’s worsening stresses threaten to send the world’s financial markets into a tailspin. Renewed funding pressures for the big banks, which need to

13

China’s Flash PMI tanks

The Chinese Flash PMI for November just hit the market and it’s bad news falling from 51 in October to 48, a 32-month low. Worse, look at the components above. New export orders actually rose, as I expected, probably on US demand. That means the slowdown is internal and that’s before we get much flow through from

68

Rate cut fever

Don’t say I didn’t warn you. JPMorgan is out forecasting rate cuts in every meeting for the next four months (three cuts). Here’s what they say: It now looks likely that the RBA’s quarter point rate cut on Melbourne Cup Day will not be an isolated affair. Indeed, in a change of forecast, we now expect

53

Worst case scenario

Let me begin by saying that I am good fun at a party. Get a few beers into me and I’m even capable of taking over. In a good way that is, having fun with all and sundry, from atop a table. Usually it’s mocking myself because I’ve spent the prior couple of hours advising

95

The best way to help first home buyers

Property Observer has a piece today on an effort by the REIA to stimulate housing: The Real Estate Institute of Australia is urging the government to adopt a successful Canadian scheme that allows first-home buyers to tap into their superannuation to assist with making their first purchase. The Canadian Home Buyer’s Plan has been in

0

Eggheads still gloomy

Find below the Melbourne Institute November economic forecasts update. Nothing changed from last month, still forecasting lousy 2.4% growth over this financial year and benign inflation. I have to say though, their unemployment peak of 5.2% looks very optimistic to me. Rather out of the blue, they did include this rather provocative little paragraph that

50

Residex: House prices fell in October

Yesterday Residex released its October median house price indexes and, generally speaking, the downward shift in prices accelerated from September as the Spring selling season got going. Here is a chart for Sydney: The housing component fell 1.65% in October. I don’t want to be too alarmist, this is a median index and thus subject

25

The Pascometer red lines on China

You’ll have to forgive my focus on the media today. There’s no data so I’m forced to turn on my peers. Regular readers will know of the existence of the Pascometer. That is, Michael Pascoe’s uncanny ability to call the precise opposite of the impending outcome. Sadly for the nation, today he covers China and

27

Oh dear, covered bonds

Oh dear. Covered bonds have been rushed out by regulators with unseemly haste – in what Deep T. considers the biggest structural change to Australian banking in thirty years – and the banks, led by Westpac and ANZ, have also rushed to market. And the result? Not good. From Phil Bayley at Banking Day: The headline

37

MSM bear porn

From the Herald Sun yesterday: Stamp duty cuts are failing to lure first-home buyers into the market as their numbers tumble to a seven-year low. First-home buyers took out 6488 loans in the three months since the July 1 cut – 5 per cent fewer than the 6824 granted in the same period a year

6

When supercommittees fail

Check out this great chart from Abnormal Returns this morning: It says all sorts of wonderful things, including that it’s much more difficult to make successful bearish forecasts than it is a successful bullish ones.  But the point I wish to make this morning is about the big bounce in positive economic surprises since August

34

Move up buyer frenzy!

As I discussed earlier in the week, Domain has recently been trying to get first home buyers excited about the return of a weak pulse to that segment of the housing market. Today they take this conceit to the the next wave queuing up to buy: the “move up” group: Now could be a good

10

The RBA mixes its Europe signals

John Edwards of the RBA was on the hustings yesterday talking up the prospects for Australia amidst European worries. From MarketWatch: A European recession won’t be enough to seriously endanger growth in Australia and Asia as a whole, a recently-appointed board member of the Reserve Bank of Australia, or RBA, said Thursday. A likely European downturn

0

Mixed signals from the RBA on Europe

John Edwards of the RBA was on the hustings yesterday talking up the prospects for Australia amidst European worries. From MarketWatch: A European recession won’t be enough to seriously endanger growth in Australia and Asia as a whole, a recently-appointed board member of the Reserve Bank of Australia, or RBA, said Thursday. A likely European

22

Wages boom slipping away

So, the ABS has released its two wages reports now, Labour Price Index (WCI) yesterday and Average Weekly Earnings (AWE) today and the results show a clear slowdown in trend growth. These two measure slightly different things. The WCI is defined as: The wage, non-wage and labour price indexes measure changes over time in the

8

Oil vs QE3

So, last night, the US October CPI deflated. Yes, month on month it fell 0.1%. Year on year was less salutary, up 3.5%. Here is the breakup: The big fall year on year was in the energy index, down from 19.3 this time last year to 14.2 this year. So, with the CPI disinflating some

5

China reboots money supply

Unknown to everyone except the People’s Bank of China, at the time of announcement of the monetary statistics, the PBOC had quietly expanded the definition of M2 money supply, and announced it only last night in a statement. The statement essentially said that the new M2 definition has been used in the October monetary statistics, which showed