World Economy
Representative in China, RBA, 30th Sept
‘The Reserve Bank of Australia is establishing representation in China. An office, located within the Australian Embassy in Beijing, will begin operations in mid October and will assist in the Bank’s ongoing monitoring of economic and financial conditions in China. It will also help build relationships with various government agencies and private entities.’
Be Afraid, The Economist, 1st Oct
‘Unless politicians act more boldly, the world economy will keep heading towards a black hole.’
Here we go again, The Economist, 8th Oct
‘The Europeans are pushing the global banking system to the edge…The chief executive of one embattled institution, Morgan Stanley, sent a memo to employees reassuring them that the bank’s balance-sheet was dramatically stronger than it was in 2008, when Lehman Brothers collapsed.’
China sovereign wealth fund buys bank stocks, The Australian, 11th Oct
‘China’s sovereign wealth fund plunged into the market yesterday as a high-profile buyer of the country’s banking stocks in a sign Beijing is again rattled by tumbling share prices and the risk of an economic hard landing.’
US Senate passes bill to pressure China on yuan, BBC News, 12th Oct
‘The US Senate has voted through a bill that aims to aims to put pressure on China to increase the value of its currency, the yuan.’
Some sought bolder action: US Fed minutes, The Australian, 13th Oct
‘When they met three weeks ago, Federal Reserve officials left a series of options on the table which they could use if the US economic recovery falters, including the controversial step of buying more securities.’
Credit Suisse thumps China’s banks, Macro Business Superblog, 13th Oct
‘It’s still at the periphery, but more investment banks are flipping to China bears. Interestingly, this Credit Suisse report (h/t Zero Hedge) projections a huge jump in Chinese banks non-performing loans based upon precisely the two stress test outcomes that I described via the IMF earlier this week, a combined realty and exporters crunch. It is interesting to note that CS sees the likelihood that 80% of bad loans will emanate from these two sectors.’
It’s tough driving in two-speed economy, says economist, The Australian, 14th Oct
Eminent economist Larry Meyer is confident the US will avoid a double-dip recession, but forecasting has never been more difficult in a two-speed world.
A trillion here, $500 billion there, The Economist, 15th Oct
‘The pension hole just keeps getting bigger. The assets owned by pension schemes have generally been falling in price while their liabilities have been relentlessly rising. One of the culprits is quantitative easing (QE), a tactic devised by central banks to revive the economy.’
Australia
Will Australia Catch a US Cold?, RBA, 21st Sept
‘Through the 1980s and into the 1990s, developments in the Australian economy showed a close correlation with those in the US economy. It was particularly striking that the recessions of the early 1970s, early 1980s and early 1990s were highly synchronised between the two countries and had many similarities in their nature and origins. As a result, it was common in the 1980s and 1990s to hear the phrase ‘when the US sneezes, Australia catches a cold’. ’
Bank funding costs move sharply higher
The Age, 4th Oct
‘A key measure of Australian bank funding costs has shot up to the highest level since the global financial crisis, on rising fears that Europe’s deepening troubles could trigger a worldwide credit crunch.’
Mortgage competition hits pre-GFC levels, The Age, 5th Oct
‘Competition between banks and other lenders for home loan customers has returned to levels last seen before the global financial crisis.’
Tax forum told of plan for young workers to use super payments for home deposits, The Australian, 5th Oct
‘Workers in their 20s and 30s should be able to use their superannuation for a house deposit, and Labor’s “Mickey Mouse” first home saver scheme scrapped, according to a Keating-era economics adviser who helped devise Australia’s super plan.’
Fears surface over Chinese debt amid lending practices, BBC News, 6th Oct
‘With its deep pockets and buoyant growth, China has been touted as a white knight for the world economy. But fears are growing that the country may face its own debt crisis as its economy shows signs of a slowdown.’
REITs face funding dilemma, The Age, 10th Oct
‘Investors in listed real estate investment trusts face being forced to shoulder the burden of another round of capital raisings as $7 billion in debt falls due this financial year. The concern has arisen as the sector evaluates the sting from exposure to lending syndicates involving teetering European banks.’
Business confidence surprisingly resilient, The Age, 11th Oct
NAB index for business confidence index rose for September. “The depreciation of the Australian dollar during the month is likely to have helped alleviate some stress on businesses competing on the global market, while the heightened expectation that domestic interest rates will be lowered by the RBA may also have provided some relief,” said NAB chief economist Alan Oster said.
Public not moved by regional relocation, The Age, 11th Oct
In NSW ‘fewer than 50 households have signed up to a state government scheme to encourage relocation from urban to regional areas in its first three months, casting doubt over a forecast take-up of 7000 a year.’
Housing affordability: the summit we really need, The Age, 11th Oct
‘Various cartoonists and political jokes ran misinformed lines about sundry “elephants in the room” during last week’s tax forum but they all missed the biggest one: housing affordability.’ (Clearly a major issue among Australian people, the article was ranked no. 1 ‘Top Business Article’ 12th Oct.)
Master Builders Australia survey warns of job losses, Herald Sun, 11th Oct
‘Building activity and profits in the sector are expected to fall, possibly leading to job losses, a survey shows.’
Liberals to support ‘covered bonds’ bill, The Australian, 12th Oct
‘Australia’s banks, building societies and credit unions yesterday won bipartisan support to issue “covered bonds”, after the federal opposition agreed to vote in favour of the government’s bill to introduce the debt instrument.’
Bad debts hit Bank of Queensland profit, The Age, 13th Oct
‘A near-doubling of impairment charges caused by its exposure to the ailing regional commercial property sector has seen Bank of Queensland’s annual profit slide by 13 per cent to $158 million.’
Jobless rate in surprise fall to 5.2 per cent, The Australian, 13th Oct
‘Australia’s unemployment rate fell to a lower-than-expected 5.2 per cent last month, with the economy adding more jobs than expected.’
Australia not immune from slump: IMF, The Age, 14th Oct
THE International Monetary Fund says a severe global slump would wipe 2 percentage points off the economy’s growth rate, and cause the mining investment boom to be scaled back sharply.
