The global economic crisis has temporally been banished from the local media coverage by the Fairfax virtual surrender earlier this week and then News' far more positive 'consolidation for growth'. The purchase of Alan Kohler's business and investment advisory venture provides Alan and his henchmen with a nice payday and long-term contracts, and gives hope to other digital pioneers.
The deal, or rather clump of deals, is reported at length in News corp's local papers. Here is a good example.
Watch out for Macrobusiness, just getting started but a potential future plum for any media enterprise serious about new age publishing.
Fairfax bites the bullet, 19/6.
1900 jobs will go, SMAGE will have a new tabloid format and online content will involve paywalls.
Rumour has it that News is about to have its own day of the long knives. Friends and colleagues will lose their jobs, and will be mourned.
Those from the SMAGE who have libelled Henry and his friends will not be mourned. Indeed, there may well be discreet celebrations as the casulty lists are published, or listed by bloggers.
There are pros and cons for us independent bloggers. Retrenched staff may create their own websites to offer fresh competition, and good luck to any who give it a go.
The once considerable (paid) competition will be of lesser quality and this may boost traffic to the sites of the independent bloggers. Those of us who have subscription and/or advertising revenue may gain a few sheckels as a consequence.
Henry presided over several downsizings of businesses he ran, and it is never pleasent, and in fact beyond the necessary pruning does great damage to the cultures involved.
As one (heavily overweight) HR manager put it: 'You cannot shrink your way to greatness'. His life was cut short by heart problems, and on reflection he may have agreed that it is possible to shrink oneself to a longer (probably less enjoyable) existance.
The smartest journos will be pondering whether they bail out now, or fight to extend their careers in straitened circumstances.
GDP surprises on the upside, 7/6.
The good folk at NAB said: 'Today's headline GDP report was a staggering result, growth coming in at a whopping 1.3% growth in the quarter (NAB and market 0.6%; the top end of market expectations was +1.0%), with annual growth in Australian GDP a very large 4.3%. This followed upwardly-revised growth of 0.6% in the December quarter (revised up from 0.4%).
'The big growth drivers this quarter have been private business investment and surprisingly strong household consumption, the latter aided by not only solid growth at least for now in aggregate employee compensation up 2.5% in dollar terms in Q1, up 5.3% in the past year, but also attractive pricing/discounts from merchants with the retail price deflator that fell 0.9% in Q1, the largest quarterly decline in the over 20 years of history of the series and only the second outright decline for the past eight years. All up, not exactly signs of a consumer spending with gay abandon.
'Employment headcount is only up 0.2%/0.3% over the course of the past year while hours worked rose 0.4% in y/y terms but down 0.5% in the quarter, adding weight to the thesis that it was not a higher propensity to spend.
'Indeed, the household saving ratio was virtually unchanged at 9.3%, from 9.4% in Q4.
'The other big driver of growth this quarter and over the past year has been private business investment that rose 5.5%, up 20.0% over the past year, contributing 1.0% to growth in the quarter (offset somewhat by higher capital goods imports to feed the resources boom) and on the same statistical basis contributing three quarters of the growth in spending over the past year. This contribution is entirely consistent with recent Construction and Capex Survey and industry reports on the recent momentum of resource sector expansion'.
The RBA presented its usual calm response to the clearly dangerous state of the global economy.
One respected RBA 'outside insider' (one of the Trusties) even said a 50 basis point cut would have suggested panic at the highest levels. When the parlous state of the world was realised in 2008 'panic' was a word used only by Henry, but clearly more people are now attuned to the dangers being flirted with around the world.
Wayne Swan, of course, claimed credit for the rate cut, asserting that his surplus had 'made room' for the RBA to act. I do not recall him saying his budget blowout - correction, necessary stimulus - had required the RBA to raise rates.
Joe Hockey, of course, pointed out that the RBA chief, Glenn Stevens, had not mentioned the budget in his remarks about the economy, merely some rather gentle words about the unfolding global crisis. One assumes that the calming drug is administered in the Governor's water each day; wouldn't look good if the boss was agitated about anything so trivial as the state of the global economy.
But also that Australia's structural problems require welfare, tax, regulatory and IR reform. Further rate cuts are appropriate now but there is a risk of putting the monetary policy cart before the structural reform horse. I fear that it is up to Glenn Stevens and his board to provide easier monetary policy while politicians fight about who can best run the economy more generally. Roll on the next election, and we must hope for a government seriously interested in economic reform. There is a mighty job to be done.
Australia's competitiveness slumps, 1/6.
'The release today of the independent international competitive rankings on Australia’s economic performance', says Joe Hockey, 'has confirmed that almost five years of Labor economic mismanagement is putting jobs and household incomes at risk.
'The rankings, developed by the World Competitiveness Centre, reveal that in only two years, Australia’s competitive position has plummeted ten places from 5th to 15th.
'They also reveal that “government decisions” is now seen as a national weakness with Australia ranked 42nd out of the 59 countries. Click here to see the World Competitiveness scoreboard'.
'RBA offers few clues on next rate cut' says James Glynn, 15/5.
'THE Reserve Bank of Australia has offered few hints about its next rate cut move, saying the reduction in rates had returned the cash rate target to "appropriate" levels.
"Inflation was likely to remain in the lower half of the (2 to 3 per cent) target range over the foreseeable future, with cost pressures expected to be contained given the forecast for moderate growth in the economy," the central bank said in the minutes which were released to the public today.
'Lower-than-expected inflation, weak economic growth and home-loan rate hikes formed the case for the Reserve Bank's 50-basis point cut in interest rates at the start of May.
'The board said it saw evidence that the economy was growing "somewhat below trend" and that inflation readings meant price pressures would remain well contained for some time'.
Last week the RBA said it had misread the economy and things were so dire they needed to cut the cash rate by 0.5 %, or 50 basis points.
This week, the ABS says jobs are growing and the rate of unemployment has plunged from 5.2 % to 4.9 %.
Gor blimey, guv'nor, what is going on?
A respected journalist says: 'If you believe them, the seasonally adjusted jobs figures show unemployment plunged in April from 5.2 per cent to 4.9 per cent, the lowest for a year. Employment grew by 15,500, the first time in six months that we’ve had jobs growing for two months in a row.
'As Shorten said, that is a surprise. The headlines are full of job losses at this or that firm. Job ads plunged 3 per cent in the month, and business surveys showed more employers planning to cut staff than to hire them.
'At face value, Shorten was quick to point out that the figures show more Australians have a job than ever before, and that the benefits of the mining boom are flowing throughout Australia'.
RBA credit rises 0.4% again, TD-Sec Inflation edges higher, New home sales still poor, 30/4
NAB's analysts report: 'Private sector credit was slightly stronger than expected in March, up by 0.4% in the month (median 0.3 %, NAB 0.3%) and up 3.4 % yoy. The February and March gains are the strongest back-to-back gains since this time last year, and credit growth is trending up slowly after the very weak outcomes in mid-2011. The monthly TD Securities inflation is also moving higher, with the trimmed mean up 0.4 %/2.3 % in April after 0.3 %/1.9 % in March. But housing activity remains poor - HIA new home sales declined 9.4% in March, the third fall in the past four months.
'All up, nothing in today’s data to change the RBA’s thinking ahead of their expected cut in the cash rate tomorrow. But the slight pickup in business credit and the higher monthly CPI data would, at the margin, further support the case for a 25 bps cut rather than 50 bps'.
Uren notes the volatility of the employment data and net overseas migration which has in the past been subject to large revisions. (Henry's time as a forecaster included news that a whole bundle of employment survey responses had been found behind a filing cabinet.)
Yet he acknowledges that job ads and the latest NAB survey point to an improving economy.
Despite the RBA's heavy hint that May is likely to produce a rate cut, reinforced one imagines by the ANZ's rate increase, an official cut is 'not yet sealed'.
This week's CPI release may seal the deal or (should it surprise on the upside) cast more doubt on the rate cut case.
Last week saw the Melbourne Institute index of inflation expectations take a leap. This is often a leading index of CPI inflation and is just as important as job ads in judging the state of the labor market.
Jobs growth (and job ads) confounds the pessimists, 12/4.
Crikey! reports: 'More than 44,000 new jobs were added last month (backing up Tuesday's solid ANZ job ads report), with new employment split between full- and part-time work. The unemployment rate was steady at 5.2% and unemployed fell slightly and more hours were worked as well.
'A rate cut had been urged by the likes of experts such as Solomon Lew (Premier Investments, Just Group), business groups, such as the Australian Chamber of Commerce and Industry (which wants a 0.5% slash), the heads of many other companies, such as Wesfarmers, tourism groups, the banks such as Westpac where CEO Gail Kelly is calling them lower, as her chief and economist Bill Evans, who has been banging on about the need for a rate cut for months.
'Building approvals and home loans are slack, retail sales are weak, consumer confidence is weak (that's from the Westpac and the Melbourne Institute survey. But the rival, weekly survey of consumer confidence from Roy Morgan rose last week.). But car sales remain solid, overseas travel is still strong, the rural sector is looking at a bullish year, mining investment is growing. Exports are moderating (two monthly trade deficits in a row), but that's not a concern.
'But the jobs machine rolls on. On Tuesday the ANZ said the number of jobs advertised on the net and metro newspapers (down to a 4% share and falling) had risen to three-year high. While reported, no one wondered if that was sending a message that the jobs market had not died, as so many people have claimed with the spate of losses in cars, retailing, banking and finance, manufacturing generally and airlines, plus the media.
'In fact the number of new jobs advertised, as measured by the ANZ, is up a very strong 12% so far in 2012.
'The spate of job loss reports saw quite a few market estimates for job losses of 5000 to 15,000 (some saw a small rise) and a rise in the unemployment rate to 5.3%. So this morning's report from the ABS of a steady unemployment rate of 5.2%, came as some of a shock (for the second month in the last three)'.
So there you have it, gentle readers. The result will not stop people who are not handling well hard times calling for rate cuts, but the RBA will be loth to cut rates will jobs growth is so strong.
Next weeks March quarter CPI may also influence the outcome, so we should not bet the house either way just at present.
'Confidence and conditions grind higher but with little jobs growth', 10/4.
'Forward indicators marginally improve but remain subdued. Multi speed economy still to the fore – with non mining edging up a touch. Domestic forecasts edge lower with unemployment up'.
'RBA is signalling a rate cut in May provided inflation is low. We have not changed our rate views and with our Q1 core CPI forecast of around ½% – we expect a rate cut. We then expect the RBA to be on hold through 2012. Our core inflation forecasts are unchanged – with core (ex carbon tax) 2.2% in 2011/12 and 2.5% in 2012/13'.
(Summary of NAB’s Monthly Business Survey for March 2012 released today).
I have no doubt that many people are doing it tough. This itself is no reason to cut interest rates. Tough times make, or should make, for powerful responses. The Rudd-Gillard government has produced no powerful or convincing responses.
It failed to produce a vision for Australia that focuses on what is needed for success in the modern world, or policies to implement such a vision. 'Play to our strengths' should be its call, meaning making the most of our world beating industries of mining, food production and competitive sport. Lower interest rates will do little to help these industries, although removing restraints by slashing unnecessary regulation would.
Medical research and modern medicine make up an industry in whose research is of world-beater standard and where we could develop a leading medical export business, with its focus on our region. Giving more money to medical research would be a far better thing to do with taxpayers' hard-earned money than subsidising vehicle production.
This government is privately supportive of consumerism as the doctrine of the modern working-person’s Labor party, ‘a flat-screen television in every lounge room’. And its ‘stimulus’ package in response to the Global Financial Crisis was itself wasteful and boosted Australia’s by-no-means-trivial total debt. Equally important, this also sent the wrong messages to the people of Australia, who have themselves adopted a more frugal set of wealth management standards. Cutting interest rates would derail this most important development.
Nor will the Gillard government produce sufficient fiscal restraint to warrent further rate cuts, though honest endeavours might be rewarded with a token rate cut.
I expect Glenn Stevens to ignore the siren calls of the arguments for rate cuts now. If inflation remains low, and wage claims also, the Reserve may make a further rate cut in response to a responsible budget in May.
Henry's regular advice for the board of the RBA is published in today's Australian newspaper. This version is linked here.
Labor's war on business heats up, 3/4.
Treasurer Wayne Swan has been attacking business 'fat cats' on several fronts, honest opposition to the carbon tax being the most prominant.
Now the fine print of another promised 'reform' makes being a company director a riskier matter. Great way to encourage enterprise, Mr. Swan. will do little for your 27 % support, incidentally. Modern unionists know what is bad for business is bad for their prosperity, even if you do not.
Here is an idea for the Australian Institute of Company directors (AICD).
Start a campaign to have politicians liable to follow all of the rules of the Corporations Law.
Severe penalities for telling bare-faced lies would then be punished appropriately, as they are for company directors.
And, from today's press: 'COMPANY directors are facing increased jail terms for everyday business decisions under new federal laws that backtrack on promised national reforms originally meant to ease burdens on board members.
'The move has ignited a new row between business and government as company directors rebuked Canberra and the states for failing to deliver on plans unveiled four years ago to cut unnecessary criminal sanctions.
'While federal Labor led the reform plan, the Gillard government is now being accused of adding to the conflicting penalties on company directors rather than removing some of the red tape that imposes $3.5 billion in annual costs on business.
'The new federal bill doubles the jail term for company directors who miss the deadline to lodge their annual report with the corporate regulator, taking the penalty to one year in custody'.
Consumer confidence slumps, or does it, 14/3.
'CONSUMER confidence slumped in March as uncertainty over the global economy persisted and major banks raised their home-loan rates in spite of two successive rate cuts by the Reserve Bank of Australia.
'The Westpac-Melbourne Institute's index of consumer sentiment fell 5 per cent in March from February, taking it below the level in mid-2011, as confidence was also dampened by job cuts in certain export sectors of the economy hurt by the country's high currency.
'The downward drift in the benchmark interest rate in the second half of 2011 was partly offset by major banks lifting their own mortgage-lending rates citing rising funding costs, a direct knock-on effect of the ongoing instability in global markets.
'The consumer-confidence index fell to 96.1 points in March in seasonally-adjusted terms from 101.1 points in February. In annual terms, it dropped 7.7 %.
The new union boss plans to morph the ACTU into an explicit branch of the ALP and attack Tony Abbott. Days lost through strikes are sharply up this year. As the GDP and employment data shows clearly, activity growth has slumped.
China's growth has been reduced and commodity prices are likely to slide further as a result. And 'no-one knows' whether or not Greece has defaulted on its debt and what this means for the future of the Eurozone and global growth. Worst case is a Greek default followed by a disorderly exit from the Eurozone leading to other 'Club Med' nations to follow suite and precipitating a run of bank failures.
Henry has been selling resource stocks and other Australian stocks (as outlined here) in case there is a further downturn in global prospects. Unhelpful local industrial relations activity will greatly exacerbate the effects of any such downturn and ensure our capital markets underperform by even more than in the peroiod since the global crisis began to be manifest in 2007.
Today we present the latest Raff Report, and here are its principle conclusions. Raff Report - March 2012.
'At the same time, the number of employed rose 46,300 to 11.464 million, the Australian Bureau of Statistics said today.
'Economists on average had expected an unemployment rate of 5.3 per cent in January, seasonally adjusted, and the number of employed to rise by 10,000.
'The number of people in full-time work rose 12,300 to 8.1m in January, while the number of people in part-time work rose 34,000 to 3.4m'.
Consumer confidence lifts, 15/2.
Westpac says: 'On the face of it this is a strong result and provides some lagged recognition from consumers of the two rate cuts which the Reserve Bank and the commercial banks delivered to mortgage and business borrowers in November and December. Recall that, until now, the overall Index was actually slightly below its pre-rate cut level in October. The Index is now 4% above that benchmark. However the Index is still 5.2% below the level of a year ago and 13.6% below its level of two years ago.
'Events last week made it difficult to interpret this result. The survey period was February 6 to February 10. Media coverage for February 6 and most of February 7 gave households strong reason to believe that the Reserve Bank was about to cut interest rates for a third time. While there was some speculation that the commercial banks would not pass the cut on in full respondents were likely buoyed by the prospect of even lower mortgage rates. Of course, the last three days of the survey were marked by “disappointment” that the Reserve Bank had not cut rates; speculation in the media that the Bank was likely to be on hold for the foreseeable future; and other speculation that the commercial banks were now likely to actually raise rates'.
BHP investors unimpressed, 10/2.
'IT was inevitable that lower prices for some commodities and interruptions to production of coal (floods in Queensland) and copper (strikes at Escondida) would mean BHP Billiton was going to be hard pressed to match the $US10.7 billion earned in the first half of last year.
'So this year's first-half earnings of $US9.94bn ($9.19bn), while slightly lower than the consensus forecast, was still a credible result.
'BHP's share price reacted by dipping 15c to $37.75 on Wednesday, but yesterday, after reflection, investors marked the price down a further 59c to $37.16, after the price went as low as $36.75. That's a fall of 1.5 per cent compared with a dip of only 0.18 per cent in the S&P ASX 200 index'.
What can be done for Australia's manufacturing industry?, 9/2.
There are things that could be done to prevent the decline of manufacturing and indeed of tourism, tertiary education and other non-mining enterprises. Re-fix the currency at a ‘reasonable’ level, say 85 cents per US dollar. Reintroduce tariffs. Make sure wage settlements are made largely by unions in front of tame (union dominated) tribunals. Impose a really effective tax on mining, and indeed any other activity that threatens to take resources from manufacturing and other ‘desirable’ industries. A newly bolstered industry department could dispense more funds for research designed to keep otherwise declining industries afloat. It could also, perhaps, devise increasingly onerous regulations to slow the pace of mining expansion.
Before long, Australia would again become a working industrial museum. Tourists would again flock to visit Australia’s magnificent natural features and their children would again come to Australia’s universities in large number, in both cases encouraged by the cheap dollar if not the high costs of getting a meal on weekends. High-ranked visitors might be given special tours of our quaint industrial outposts by former minister of industry (and later Prime Minister) Kim Carr. ‘I was the architect of all this’, Kim Carr would comment, ‘after the failure of the Rudd and Gillard Labor governments’.
'BHP Billiton has posted a mammoth first half profit of $US9.94 billion ($9.2 billion) that fell just short of market expectations.
'The result is one of the biggest in Australian corporate history, but fell short of the record $US10.52 billion set by BHP last year and the expected $US10 billion level analysts had predicted.
'The 5 per cent drop in profits came despite a 9.7 per cent rise in revenue. Sales rose even as prices for iron ore, copper and coal fell, and the company warned that markets would remain volatile because of Europe's woes and weak global growth'.
'At today's meeting, the Board noted that interest rates for borrowers have declined to be close to their medium-term average, as a result of the actions at the Board's previous two meetings. With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy was appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation'.
Worst retail year since 1984, but job ads jump, 6/2.
'Retail sales in Australia posted their weakest annual growth in 27 years in 2011, as consumers cut spending in favour of saving and paying down debt.
'Annual retail sales grew 2.4 per cent in 2011, easing from a 2.5 per cent rise in 2010. Last year’s increase was the weakest since 1984 when the Australian Bureau of Statistics began the data series.
'The lethal mix of consumer caution, rise of online spending, worsening global economic conditions and weather woes led to a slump in retailing not witnessed since the 1980s,’’ said Bank of Melbourne chief economist Besa Deda said'.
'There are a lot of people hurting out there', 4/2.
'There are a lot of people hurting out there' one of Henry's more reliable sources of opinion from the real world of opportunity shops, people working part-time in poorly paid jobs battling to find a half-decent house to rent and to pay the rent when they do.
A rise in youth unemployment in January is normal, as is a rise in total unemployment. But the numbers this year are large, indeed set new records.
Gary Morgan says: “The rise in youth unemployment is occurring alongside the broader trend of rising unemployment — which has now risen in six out of the last eight months from a 2011 low of 818,000 in May 2011 (up 460,000 in eight months) — unemployment has now reached a record high of 1,278,000 (10.3%). This is the highest ever recorded Roy Morgan unemployment estimate in Australia. Additionally, a further 934,000 Australians are employed part-time but looking for more work. Incredibly, this means a record high total of 2,212,000 Australians (17.8% of the workforce) are either unemployed or underemployed'.
This helps to explain the unpopularity of the current government, and also why there has been no wages breakout.
The case for another cut to interest rates are supported both by the polling (political and economic) and the anecdotes, but we must wait for the Reserve to pronounce its verdict at 2.30 pm on Tuesday.
Henry's regular column will appear here and in the Oz on Tuesday morning.
The RBA reports: 'Preliminary estimates for January indicate that the index rose by 0.2 per cent (on a monthly average basis) in SDR terms, after falling by 1.3 per cent in December (revised). The largest contributors to the rise in January were increases in the prices of gold and oil, while the prices of base metals and most rural commodities also increased. The estimated export price of coking coal continued to decline in the month, reflecting a further decline in spot and contract prices. In Australian dollar terms, the index fell 3.0 per cent in January.
'Over the past year, the index has risen by 6 per cent in SDR terms. Much of this rise has been due to the earlier increases in the prices of coal, gold and oil. The index has risen by 1 per cent in Australian dollar terms over the past year'.
'Confidence up a touch in December, despite global economic worries. Conditions consistent with an economy going sideways – but multi-speed. GDP forecasts lowered & two rate cuts now expected in 2012.
'Business confidence strengthened a little in December, although it remained below the series long-run average. Business sentiment over recent months has been seemingly resilient to the weakness in Europe, which has contributed to a slowing in global activity, perhaps reflecting the effects of the RBA’s recent interest rate cuts.
'Business conditions were unchanged in December, after edging higher in November, to remain consistent with an economy growing at around trend. While conditions remained fairly soft in December, they continued to hold up in the face of slowing global activity. As for the survey’s other indicators of activity, trading conditions, profitability and stocks all improved in the month, but employment, capacity utilisation and forward orders weakened. Credit demand and capex was also significantly weaker. Nonetheless, the survey’s activity readings over the December quarter are consistent with underlying demand growth of around 3½% and GDP (ex. coal) growth of around 3½-3¾% in the December quarter (6-monthly annualised rate).
'Business conditions remained varied across industries but the disparity between the weakest and strongest performing industries narrowed in December. Conditions recovered remarkably in construction and manufacturing, while mining, recreation & personal services and retail conditions weakened. By state, conditions recovered very strongly in SA, which was the equal strongest mainland state with WA, while conditions were poor in Queensland and Victoria'.
First half 'bloodbath', 31/1.
'Reporting season for first-half results is expected to be a bloodbath for the retail, manufacturing, media and housing-related sectors, with only those companies connected to the resources sector likely to escape relatively unscathed.
"The two-tiered economy will again be in evidence," UBS equities strategist David Cassidy said, adding he expected reporting season to show "further evidence of subdued profit conditions and more trimming of estimates".
"Top-line growth will be subdued across most sectors, while margins will also remain under pressure in many areas," he said.
Henry has heard of a major insolvency business presenting to a leading broker. Its headline story is the large number of insolvencies expected this year, especially in the retail, manufacturing, media and housing-related sectors and small business generally.
Credit growth slow and steady, 31/1.
The RBA reported today: 'Total credit provided to the private sector by financial intermediaries rose by 0.3 per cent over December 2011, after rising by 0.3 per cent over November. Over the year to December, total credit rose by 3.5 per cent.
'Housing credit increased by 0.4 per cent over December, following an increase of 0.4 per cent over November. Over the year to December, housing credit rose by 5.4 per cent.
'Other personal credit declined by 0.1 per cent over December, after rising by 0.1 per cent over November. Over the year to December, other personal credit decreased by 1.0 per cent.
'Business credit rose by 0.3 per cent over December, after increasing by 0.2 per cent over November. Over the year to December, business credit increased by 1.4 per cent'.
Economy slowing, says Westpac survey, 25/1
'AUSTRALIA'S economy continues to show signs of strain, slowing into the final months of 2011, justifying the Reserve Bank of Australia's decision to begin slashing interest rates, Westpac said today.
'The Westpac-Melbourne Institute leading index of the economy grew at an annualised rate of 1.6 per cent in November 2011, compared with growth of 2.3 per cent in October.
'Westpac chief economist Bill Evans said the economy slowed in the second half of 2011, after showing signs of a strong recovery mid-year'.
'Economists had expected CPI, the key measure of inflation used by the Reserve Bank of Australia (RBA), to rise 0.2 per cent from the previous quarter and rise 3.3 per cent from a year earlier.
'Commsec economist Savanth Sebastian said that the weaker-than-expected figures added to the case for the RBA to cut the official interest rate again in February. The RBA cut the rate by 25 percentage points in November and again by the same amount in December'.
“I think it is a done deal now that the Reserve Bank will cut rates,” he said. “The Australian economy has been quite sluggish, global growth forecasts have been cut and I think the Reserve Bank will take out a little bit more insurance in these volatile times.”
Employment growth stalls, but we need a low CPI for the RBA to cut in February, says NAB, 20/1
Today’s labour market report confirms that employment growth is slowing, but not weakening to the extent that it has caused an increase in the unemployment rate, which has now been at 5.2% for the past three months. It could be argued that with no jobs ( in net terms) created in 2011, the RBA needs to lower interest rates further, but it’s a question of how much stimulus the RBA is prepared to inject having cut rates in November and December. With the unemployment rate quite stable in the second half of 2011, we clearly need a low underlying CPI (0.5% or lower) next week to give the RBA enough reason to provide further monetary stimulus.
Total employment fell 29,300 in December (NAB forecast +5K, median +10K), with part-time employment down 53.7K and full-time up 24.5K. It meant the total number of people employed at the end of 2011 was the same number as at December 2010, so annual employment growth is at zero, after the 23K jobs gained in the first half of 2011 were lost in the second half of the year. The unemployment rate has also been steady – in the 5.0-5.3% range since May 2011.
Be happy, confidence is crucial, 17/1.
Downunder, the pervading journalistic mood is gloom, producing strangled cries for more interest rate cuts to bail out the overcommitted and resume business as usual in the capital city property markets.
Adam Creighton said on p 2 of yesterday's Oz, with no link I can find: 'The latest batch of economic data, pointing to higher unemployment and lacklustre economic growth', have strengthened [the] expection of further rate cuts early this year'.
Job ads fell by 1 % in December, although job ads in resource rich states are way up - no surprise here, surely?
The rate of unemployment is expected by ANZ's economists to rise by 0.1 % to 5.4 %. We'll know tomorrow.
Headline goods and services inflation is measured unofficially at 2.4 % for the year to December, well below the latest 'official' (underlying goods and services) inflation.
Loans to fund house purchases increased by a 'tepid' 1.4 %, making the eigth successive monthly increase. 1.4 % times 12 was 16.8 % when Henry was at school - a boom, not a 'creep' or in any way 'tepid'.
And my old mate, John Macfarlane, says all is well except everyone lacks confidence.
Be happy, people. Inflation is (apparently) under control, the next housing boom is underway, there are plenty of jobs for people prepared to head for the Pilbra, China's boom continues, jobs are growing in the United States and you could be a Greek (or fill in ancestral nation of choice) retailer, would have been if your ancestors had not emigrated Downunder.
'An analysis by the The Australian of the mid-year budget updates finds state and territory net debt is forecast to surge by more than 40 per cent from $129 billion at June this year to $183.7bn in 2015 to fund infrastructure upgrades and spending on health, education and other services, while their net financial liabilities - which also include liabilities from superannuation schemes for public servants - are forecast to rise from $302bn to $352bn over this time'.
Most of us had noticed the massive increase in Commonwealth securities on issue, $ 192 billion at last count. This comes on top of significent levels of state and Commonwealth pension liabilities and very large private (household and business) debt. Companies and households are making some progress in deleveraging, and the commonwealth says it intends to do so - ie Treasurer Swan's frequently reiterated 'return to surplus'. Time will tell, but one is entitled to be skeptical.
But Hepworth and Kerr show that the situation with the states is bad and rapidly getting worse.
Put the states, Commonwealth and private debt together and we see a blowout at least as serious as that which became evident in 1985 and which resulted in severe policy action by the Hawke-Keating government.
UK follows Australia on executive remuneration, 9/1.
'BRITAIN is following Australia's lead on executive remuneration after the country's Prime Minister, David Cameron, said he would allow shareholders to veto excessive packages.
'Bowing to increasing political pressure, Mr Cameron said at the weekend that the market for "top people" was not working and needed to be "sorted out".
"Let's empower the shareholders by having a straight shareholder vote on top pay packages," he told Britain's Sunday Telegraph newspaper.
'Big Australian companies that are dual-listed in Britain, such as BHP Billiton, are unlikely to be greatly affected by Mr Cameron's move, as they already adhere to new local executive pay laws.
'In Australia, shareholders have been given a stronger voice on executive pay and bonuses amid a volatile global financial environment that has wiped billions of dollars from bourses.
'...The Gillard government's new "two-strikes" rule was tested during the company reporting season in November, when at least 13 big-name companies -- including BlueScope Steel, Cabcharge and Crown -- recorded their first "strike" under the new regime.
'Under the new law, if 25 per cent or more of votes at two consecutive annual general meetings oppose a remuneration report, shareholders are then able to vote to spill the board'.
The Economist's cover story this week is a plea to retain the current 'City' dominance as a global financial centre, suggesting that the UK no longer prizes that position.
'... the City can compete successfully with other financial centres only if Britain has the right policies on regulation, tax and immigration. On regulation, there is an understandable fear that an outsized financial-services industry means an outsized risk for taxpayers. The proposals from Britain’s Vickers Commission go a long way to deal with this, dividing a tightly regulated domestic banking system (the bit that puts taxpayers at risk) from a more freewheeling international market for global capital. By contrast, the thrust of many of the proposals coming out of Brussels looks harmful. ...
'The British government’s own policies on tax and immigration are also doing a lot of damage. The 50% tax rate, introduced by the previous Labour government in 2010, brings in little money and has made London the most taxed out of ten financial centres for high net-worth individuals. The present generation of financial bosses, who live in and like London, may tolerate it for a while, but younger ones are feeling the pull of Switzerland, Hong Kong or Dubai. As for immigration policy, the best way to win Asian business is to lure the young Asian financiers to London. Tight limits on talented immigrants damage the City’s prospects—and indeed the prospects of every bit of British business'.
Since our regulators follow the UK experience closely, this article is well worth a close read, altong with related articles in the latest Economist magazine.
As widely acknowledged, 2011 was a Keating of a year. The master blaster himself emerged from retirement to claim the crown as Australia's principal economic reformer, but as usual this was exaggerated. What about Bob Hawke, Bob Johnston, Ross Garnaut, Barry Cohen, even Henry himself. (Posted 4/1)
The past is gone, and we are entitled to ask what the current crop of leaders are doing for us. By the look of Henry's share portfolio, 'not bloody much' is the verdict. We sincerely hope that 2012 is the year in which Australia's labor market is reformed.
This government's 'fair work' legislation is arguably fair for union officials, giving then a nenewed reason for existance. But it is not fair to workers, or more particularly people who would like to be workers but are prevented from doing so by this legislation. Apart from matters like above market costs of employing people, there is the basic fact that if it is hard to fire someone this is a material fact when employment is being considered.
But 'fair work' is also unfair on business owners, especially for owners of small business. It is not widely perceived that almost all new jobs are in small business, large business being forced by global competition to keep raising productivity, which is most easily achieved by successive waves of downsizing workforces.
Small business lacks the IR and legal expertise required to get rid of excess or poorly performing workers available to large businesses, and thus suffer additional barriers to growth and prosperity.
It is good to see that three big business chiefs have entered the fray on the need for IR reform. Well done Graham Kraehe, Lindsay Maxsted, Leigh Clifford. All these men have business records that entitle then to have their say, and that demand a hearing. The Gillard government has a tin ear on most unsolicited advice, but on this matter it would be wise to listen carefully and act in accord with the advice.
From the coalface, H1 2012 
Courtesy SMH
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