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Perpetual no longer

The era of the financialisation of Western economies has come to a grinding halt, replaced by an era of de-leveraging, dis-leveraging or whatever term one wants to coin. The shrinking of the finance sector is partly ameliorated in Australia because of the $1.3 trillion super pool and inflow of funds from the levy, but there is nevertheless a new era


McKibbin looks beyond the boom

At the AFR today, Professor Warwick McKibbin offers us a ball tearing narrative for our times. It’s worth taking some time to dissect this piece as it is rare that we get something beyond the usual drivel. McKibbin begins: Many policymakers fail to realise that a long-term transformation of the global economy is under way


China’s, ahem, “stabilising trade”

Courtesy of Also Sprach Analyst. While country A’s import from country B should be equal to the export from country B to country A, statistics from different countries do not always match up.  That is understandable as there are differences in how things are counted. In the China case, the difference itself is not what interests me


The European summit is a write off

Spain took a beating overnight after Moody’s downgraded the long term debt and deposit ratings of 28 Spanish banks on the back of the sovereign downgrade earlier in the month. Yields on short term debt spiked at auction: Spain’s short-term borrowing costs nearly tripled at auction on Tuesday, underlining the country’s precarious finances as it struggles against


Are bonds or equities right about the future?

The stress in the global capital markets has some strange consequences. In an environment in which most developed economies have, in effect, have little or no cost of capital, many of the usual inter-relationships do not behave normally. The centre  may not hold, as it were. Dividend yields are above bond yields in all major developed economy markets. Macquarie is pointing out that


Ten trends in a yuan float

ANZ has produced an interesting note on the capital market and currency shifts we are likely to see in the build up to a full float of the Chinese yuan. To put it mildly, this is a big deal. The beginning of the end of US hegemony, if we’re not already past that point… Greater


Bill Evans abandons July cut

From my favourite bank economist: The Reserve Bank Board meets next week on July 3. We had expected the Board to decide to cut rates by 25bps. However, the contents of the Minutes for the June Board meeting make it clear that a cut in July is unlikely. Despite what we considered to be a


REIV capitulates

By Leith van Onselen The release of the 2012 REIV State of the Victorian Property Market report (below) provides a sobering assessment. According to the REIV, transaction levels – both private sales and auctions – are well down on the five-year average (see below table). Which, given that transaction volumes typically drives prices, suggests that


China’s hot and cold shipping

Bloomie has got some new indexes for shipping that are showing a rather mixed picture for the Chinese economy: On the on hand, we see a pretty healthy bounce in containerized traffic (red). At the same time, however, China’s Coastal Bulk Freight Index(white) is flat following the big fall last year. The orange line is


Australian banks most profitable in the world

The Bank of Interntional Settlements (BIS) released its 2011/12 annual report over the weekend and the results were spectacular for Australia’s banks for the year: As a percentage of total assets, that’s Australian banks at number one, with net interest margins at fourth, loan loss provisions at sixth and operating costs at second. No wonder


‘Twas the land bubble that killed productivity

Even though more words have been written about Australia’s productivity performance than most other economic issues, I have learnt very little about what our productivity trends really mean. Recently, the RBA tried to unravel the mystery. Here at MacroBusiness my wise colleagues have often penned their interpretation of events. To throw a little more confusion


The semiotics of markets

The Economist this week had an interesting discussion about the epidemiology of financial contagion. It is interesting to observe the use of language. The article starts out with a correct observation about how economists choose a particular type of language used to lend their observations credibility: “Economists, who like to borrow medical terms to lend themselves


The US triple dip panic arrives

Sigh. Here is the Citi economic surprise index courtesy of Sober Look: The Citi Economic Surprise Index continues its relentless slide. The US PMI (52.9 vs. 53.3 expected), the Philadelphia Fed Diffusion Index (-16.6 vs 0 expected), Empire Manufacturing, Industrial Production, etc. are all coming in below expectations. It would seem that economists would adjust their


The productivity perfect storm

In today’s RBA Bulletin, Patrick D’Arcy and Linus Gustafsson produced a fascinating study of what has caused Australia’s post-millennium productivity slump. Called Productivity Performance and Real Incomes, this thing is a piece of work. It begins with a chart of the slump: Then blames a fair slice of it on the mining and utilities sectors: In


The Fed pours heat onto Europe

Find below the full Fed Statement from last night: Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears


G20 minus 20 = 0

As H&H posted this morning, there appears to have been some confusion over just what happened in the European camp at the G20, stemming from some overzealous reporting by a couple of UK papers. The problem is that, as far as I can tell, none of it is true. From Reuters: There was no discussion


Dwelling starts miss big

The pain in housing construction is becoming very palpable indeed with a huge miss in first quarter dwelling starts from the ABS today. Consensus for some reason expected a minor fall of -2.3%, as opposed to what was delivered, -12.6%: The internals are all a bit depressing too: To give you some perspective, that total


The letter from Fairfax staff to Gina (updated)

From the SMH, the following has was sent to Gina Reinhart on June 7 (republished with permission). Dear Mrs Rinehart, The journalists employed at Fairfax metropolitan media – The Sydney Morning Herald, The Sun-Herald, The Age, The Sunday Age and The Australian Financial Review – have asked us, as their representatives, to write to you about recent reports concerning your attempts


RBA Minutes suggest cuts are done for now

Find below the RBA minutes. Looks like the bank was more sanguine than I going into the last meeting but cut anyway as insurance against the likelihood that “precautionary behaviour both abroad and at home would intensify”. Quite sensible. The “finely balanced” rhetoric of the decision suggests strongly that I have been right in arguing