Latest posts


Rate cut flops with consumers

It appears consumers are not easily bought at the moment with the Westpac/Melbourne Institute Consumer Sentiment reading a measly gain of 0.8% following a 50bps rate cut and cash splash Budget. Here are the major components: Nice pop in family finances which reverses April’s dump. Otherwise, nada. Full details below. er20120516BullConsumerSentiment


MacroBusiness Morning – May 16th

by Greg McKenna filling in for Chris Becker Macro Wrap More downside price discovery overnight as the woes and fears over Greece continue to impact sentiment and thus trading in markets. Greece was unable to form a government and the President felt it necessary to call fresh elections. Consequently stocks were lower across the board, the


Europe’s growth gulf

European Q1 GDP data came out overnight. Germany was better than expected with a rise of 0.5% in the quarter and to 1.2% over the previous 12 months. France stagnated and the periphery continued to contract. The German data was obviously a highlight, but as I spent much of last year explaining, good German data


A bottom in QLD mortgage volumes

By Leith van Onselen Following on from yesterday’s post showing a modest recovery in Queensland first home buyer mortgage commitments, below are some charts showing similar trends for Queensland taken from Department of Environment and Resource Management (DERM) data on housing transfers and mortgage lodgements, which were released earlier this week. Like the Victorian Department


Banking in the slow lane

Australia is lucky that it avoided the worst excesses of the pre-GFC years and that consequently we’ve been able to skirt the edges of the GFC. Mining booms Mark I and II have in no small way contributed to this, as has the 4 pillars policy, as well as timely funding and liquidity support from the


Wenzou’s debt deflation

In a debt deflation, debt liquidation leads to falling asset prices. As the process continues, the repayments of debt (and default) outpace extension of new credits, meaning that the banking system is destroying money through credit contraction.  That means deposits fall, and so does money supply. That leads to sharper falls in asset prices, more repayment


Links – May 16th

Morning All. Here is some stuff Reynard the Fox found interesting today. Global macro: Why the stock market sell off won’t stop here – WSJ The real reason Germany is trying to keep the euro together in one simple chart of recent economic performance – Scott Barber, Reuters. If the euro breaks up and the


ASX Shares Daily – Tuesday May 15th

By Greg McKenna in for Chris Becker Remember to read “Trading Week“, published Saturday morning, to put these events and ideas in context. The market in our time zone was under a little pressure in trade today but nothing terrible in the context of what happened in Europe last night. The Shanghai B shares fell 0.73%


Now Treasury confesses

It’s Treasury’s turn today to confess how they got their economic forecasts so wrong over the past eighteen months. Treasury head Martin Parkinson describes the Treasury’s errors at length in the attached speech. In short, they made the same errors as the RBA, over estimated exports, under estimated imports and assumed lot’s of capital gains


Car sales contract in April

By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released new motor vehicle sales data for the month of April: On a seasonally adjusted basis, new motor vehicle sales fell by -0.7% in April, but were 7.3% higher over the year. The reduction in sales over the month was driven by passenger


RBA Minutes alert to risk

Find below the Minutes of the May meeting of the RBA board. Nothing new that I can see beyond concern over Europe and the weakness spreading form the housing market at home. Minutes of the Monetary Policy Meeting of the Reserve Bank Board Sydney – 1 May 2012 Members Present Glenn Stevens (Chairman and Governor), Philip


In the poo

Incitect Pivot is a diversified primary sector play, it gives exposure to agribusiness and resource activity, albeit with the high levels of volatility that implies. The company has some pricing power from its dominant fertiliser market share in the eastern states, but in the US explosives market it is more of a price taker. The volatility of the stock was


State austerity to hit growth

By Leith van Onselen Last month, I noted how Australian State Government Budgets are under increasing pressure from falling stamp duty receipts on the back of the slowing property market: …last week, the Australian Bureau of Statistics (ABS) released Government finance statistics for the 2010-11 financial year, which revealed that Australia’s state and territory governments


MacroBusiness Morning

by Greg McKenna filling in for Chris Becker Macro Wrap It’s all about Greece and Europe again overnight as stocks fell across the board, commodities came under pressure and the USD was up once again. For mine, the Greece story is a convenient example of why, once again, the sanguine outlook that markets find themselves holding


First home buyers desert housing market

By Leith van Onselen Back in February, I made the following comments with regards to the upswing in housing finance commitments in December 2011 on the back of strong first home buyer (FHB) demand: No doubt the housing-addicted broader media will argue that the recent upswing in housing finance commitments, as well as the renewed interest from FHBs,


Rates are going lower for longer

Houses and Holes yesterday covered a speech by the RBA’s Phil Lowe in which the RBA confessed it had gotten the economy wrong. The conclusion was, rightly, that rates can fall further in the period ahead. For me, however, the thing that stood out was not just that rates are going lower but that the potential growth


Ratings agencies are the great enabler

The opinions of a few people in a small number of credit rating agencies (CRAs) dictate the operations of a significant part of the global debt markets.  As debt markets rule the financial markets, this is a very powerful position and comes with great responsibility. Yet CRAs are free to provide whatever opinion they decide.


How much does Greece owe?

Cross-posted from the excellent Sober Look: As discussed earlier, Greek exit from the Eurozone may be the only way the nation could gain some control over its monetary system. Given the complete “credit isolation” of Greece’s banks and the private sector from the rest of the Eurozone, the ECB is powerless to improve liquidity conditions in


Europe’s black cygnets grow

And so the black cygnets waddle from the shadows again. Over the weekend, Angela Merkel’s Christian Democrats suffered an 8.3% swing in North Rhine-Westphalia as the Social democrats (SDP) and the Greens garnered a majority. Although this is only a state election, called after the previous SDP led minority government was unable to get approval


Is China entering a debt deflation?

Yes, I am talking about the dreaded debt deflation (in Irving Fisher’s sense) in China. It works like this, more or less: Banks create money by extending credit; when banks lend you money, your deposit account balance increases.  That money created by bank’s extending credit is included in the money supply calculation.  Increasing debts in the economy means increasing


Links – Tuesday May 15th

Morning All. Here is some stuff Reynard the Fox found interesting today. Global macro: The world edges closer to a deflationary slump – Ambrose Evans Pritchard The Stock Sage has a “Petrifying Chart Comparison” between 2008 and now – here  Scott Barber in Reuters – Three Snap shots. His charts are brilliant. United States: My


ASX shares daily

By David Llewellyn-Smith in for Chris Becker Remember to read “Trading Week“, published Saturday morning, to put these events and ideas in context. Asian markets were all marginally up today. The local market, the S&P/ASX200, bumped around all day before finishing up 7 points to 4292. Telcos led the charge up almost 1% with financials up almost a


The RBA’s confesses

Deputy Governor of the RBA, Phil Lowe, delivered a speech today in which he explained why RBA forecasts for growth, inflation and capacity constraints have been wrong and what that means for monetary policy. The Deputy put the missed forecasts down to three factors. Exports were weaker than expected, especially for coal. Housing construction was


Mortgage finance flat in March

By Leith van Onselen The Australian Bureau of Statistics (ABS) released the March Housing Finance data this morning, which was largely a non-event. According to the ABS, in seasonally adjusted terms, the number of commitments for owner occupied housing finance (46,275) rose by 0.3% in the month of March, with the total value of dwelling


China links

Courtesy of Sinocism: In response to unexpectedly weak economic data the People’s Bank of China announced a 50 basis points reduction in banks’ required reserve ratio. Analysts now expect further easing, China bears are rejoicing that the end is nigh, and pundits like Walter Russell Mead are writing that “Authoritarian modernization always works until it quite suddenly


Finding yield

The era of the stock market bubbles is definitely looking over. After Western central banks spent most of the last decade trying to avoid a Japan-style asset deflation and economic shrinking, that is pretty much what has happened, although it is arguably far less extreme and will probably not go on as long. Western stock markets will not be