Posts tagged 'Australia'

Could immigration controls be the solution to New Zealand’s frothy housing market?

Here’s an interesting thought from Grant Spencer, the Deputy Governor in charge of financial stability at the Reserve Bank of New Zealand:

While boosting the capacity for development and housing supply is paramount, it is also important to explore policies that will keep the demand for housing more in line with supply capacity…We cannot ignore that the 160,000 net inflow of permanent and long-term migrants over the last 3 years has generated an unprecedented increase in the population and a significant boost to housing demand…There may be merit in reviewing whether migration policy is securing the number and composition of skills intended. While any adjustments would operate at the margin, they could over time help to moderate the housing market imbalance. Read more

Dirt, rocks, and sunshine: the story of Australia’s external balance

Australia has handled the commodity bust surprisingly well — so far, anyway. We’ve already looked at how a strong job market and a housing boom have helped offset some of the pain from cuts in mining capex.

Now we’re going to focus more on changes in the external balance, which has helped push the growth rate in total output significantly above domestic demand:  Read more

How much longer can Australia be the “lucky country”?

Australia hasn’t had a recession in 25 years.

About 18 months ago, we wondered whether China’s slowdown might break this remarkable streak. The latest figures, released Wednesday, suggest not. Real output continues to grow around 3 per cent each year — significantly faster than the rest of the rich world. So far, anyway, Oz seems to be adjusting smoothly to a world of markedly lower Chinese demand for Australian dirt and rocks. Read more

Australia less bubbly than it looks?

Australia has a lot in common with other rich English-speaking countries, but unlike them, it basically missed the global financial crisis. Was that good luck, or a temporary postponement of the inevitable?

We’ve considered the case before, but we were struck by a recent speech by Glenn Stevens, the governor of the Reserve Bank of Australia, which spends considerable time on this question. Read more

Getting around the “safe asset shortage”, Australian style

For those who forgot to mark their calendars, January 1 marked the official start date of the Liquidity Coverage Ratio, which will be fully phased-in by 2019. The LCR aims to reduce bank vulnerability to runs by requiring lenders to hold a certain proportion of safe, easy-to-sell assets to offset their short-term obligations.

The easiest way for a bank to satisfy this requirement is to buy government debt and hold reserves with the monetary authority. In the US, domestically-chartered commercial banks hold about $600 billion in US Treasury debt — a shade less than 6 per cent of the total held by the public (excluding the Fed), as well as $1.5 trillion in cash and reserves at the Fed. Add in the $1.4 trillion of MBS guaranteed by Fannie and Freddie, which for regulatory purposes counts as a liability of the US Treasury, and you have roughly 28 per cent of the total value of domestically-chartered bank assets held in the form of safe and liquid securities. Read more

Australia’s collapsing yield curve

We haven’t seen any commentary on this yet but the Australian yield curve has been flattening like a pancake this year:

 Read more

What the rest of the world can learn from Aussie banks

Buried in the Reserve Bank of Australia’s most recent Financial Stability Review is a discussion of how Australian banks have heroically managed their costs over the past two decades.

The lessons could be useful to banks in the US and Europe, which are currently caught between regulators who (rightly) want lenders to stop threatening the financial system with excessive leverage and shareholders who yearn for a decent return on equity. Read more

Real GDP per capita growth over the past 10 years: not what you’d think

A recent speech by Reserve Bank of Australia boss Glenn Stevens contained this striking chart:

 Read more

Taking the Billiton out of BHP

Nothing has been decided yet, but it looks increasingly like BHP Billiton is going to spin off its unwanted smaller assets in a new company — effectively undoing another dud mining industry deal what’s left of its 2001 merger with South Africa’s Billiton.

But lots of questions remain unanswered. Two stand out in particular: What does this mean for a share buyback and what will PLC shareholders get out of it? (Remember BHP is a dual-listed company with Ltd shares in Australia and PLC shares in the UK). Read more

Is the Australian model in trouble?

Officially, Australia has avoided recession for more than two decades — an impressive achievement for a small open economy that has become increasingly dependent on exports of iron ore, copper, and coal as a source of growth. Many have attributed this track record to Australia’s fortunate position as one of China’s biggest commodity suppliers, while others have argued that the Reserve Bank of Australia deserves the credit. Australians should hope that their success is due to the skill of their policymakers, rather than luck, because the newest data suggest that Oz’s luck is beginning to change. Read more

Selling StanChart… to Australia

The share price is down a fifth in 12 months. It’s cheaper than Lloyds (on price to tangible book), as a bank with Asia supposedly at its feet. The boardroom is a mess and last week’s “reorganisation” may not fend off an eventual cash call.

Still, after that excellent year for Standard Chartered — Citi’s analysts suggest it’s time for ANZ to buy it: Read more

Australia’s debt ceiling, we barely knew you

From “noted” to gone in less than 2 months…

From Nomura’s Martin Whetton:

With just over a week before Australia was expected to hit its borrowing limit, the government reached a deal with the Green party in the Senate to abolish the Commonwealth debt ceiling, which is expected to pass Parliament sometime this week.

 Read more

So, Australia has a debt ceiling too

Noted simply because we didn’t know it existed before:


Limit on stock and securities on issue

(1) The total face value of stock and securities on issue under this Act and the Loans Securities Act 1919 at any time must not exceed $300 billion

 Read more

Australia and the curious case of the highly politicised interest rates

Politics has definitely been an element in the discussions around who will replace Ben Bernanke at the Fed. That’s probably putting it mildly. But we suspect even the US doesn’t have quite the partisan obsession Australia boasts.

Australia’s central bank cut its cash interest rate to 2.5 per cent today, a record low. Australians being a rather highly leveraged bunch, the RBA’s interest rate decisions are almost always reported with focus on the implications for mortgagees. And this cut happened to be made a few days after an election was called which, surprise surprise, is set to be tightly contested… Read more

China, Australia and a very hard landing

Kevin Rudd 2.0 has been quick to highlight the dangers posed by slowing Chinese growth since he was returned as Australia’s prime minister.

For exampleRead more

QE down under

Another day, another Aussie GDP downgrade.

From BofA Merrill Lynch: Read more

Don’t mention the R word

That’s recession and the merest hint of the word sends Australian policymakers in to paroxysms of anger.

For example, here’s David Gruen (the Treasury’s chief macroeconomist) speaking before a Senate hearing last week.

From the Sydney Morning HeraldRead more

The Aussie dollar – from south pacific peso to southern Swiss franc and back again

The pain goes on for the currency dubbed until recently the southern Swiss Franc

 Read more

Down, down, deeper and down

We are, of course, talking about the Australian dollar — now going head to head with the Syrian pound for the title of the world’s worst performing currency.

The latest drop follows a call from Pimco of even lower interest rates. Read more

An unusual bear market

We are, of course, talking about iron ore which has slipped into bear market territory overnight (defined here as 20 per cent fall from a recent high).

 Read more

Lessons in monetary policy – Use it or Lose it


Economists mostly failed to predict that the Reserve Bank of Australia would cut rates to a record low of 2.75 per cent at its monthly meeting today. Yep, lower than during the height of the financial crisis — another sign that we’re living in different times now. Read more

The great Aussie bank share price bubble

Via UBS:

The Aussie banks are very good companies. They are profitable, resilient, well capitalised, well managed, shareholder focused and have a very strong industry and regulatory structure. However, following the significant leveraging of the Australian & NZ households over the last thirty years they are now low growth and remain heavily exposed to housing, funding markets & unemployment risk.

 Read more

Iron pyrite – Australian edition

The biggest ASX fallers on Monday…

… all gold.

(yes, even PanAust)

 Read more

In Memoriam – Australia’s inverted yield curve

Remember Australia’s inverted yield curve in 2012?

 Read more

HFT woes Down Under

Australian authorities have been considering how to deal with algorithmic and high-speed trading since 2010. Long story short; the local Australian Financial Review says that the federal Treasury has decided that fees on high frequency trades orders are the way to go.

This prompted protests from the chief of Chi-X Australia, Peter Fowler, that market makers should be treated differently: Read more

Australia’s $20 trillion oil find

Move over Gulf Keystone; there’s a new wannabe supermajor in town.

It’s a small Australian exploration and development company called Linc Energy – tagline ‘Fueling our Future’ – and according to some hysterical media reports down under it’s found oil worth $20 trillion. Read more

Location, Location, Location

Time for some property porn.

It comes from the 2013 Demographia International Housing Affordability Survey – a piece of work often quoted by bubble hunters and rubbished by the property bulls who babble on about flawed methodology. Read more

When waning Aussie bond enthusiasm is not enough

The Reserve Bank of Australia cut its cash rate on Tuesday to 3 per cent — making a total of 175bps worth of cuts since November 2011, and bringing the rate to its lowest level since the depths of the financial crisis.

The RBA’s governor’s statement alluded to the bank’s discomfort over the stubbornly high Australian dollar, which is not doing what it tended to do in the past and falling to provide a fillip to the economy: Read more

AAA ratings, alternative universes, and hindsight

Yes, it’s very bad for S&P. Australia’s federal court found that the ratings agency had misled local councils through assigning AAA credit ratings to CPDOs which it had failed to check properly.

But since this could well be a landmark case for credit ratings as causes of financial harm… Read more