Official rate review schedules
Europe ECB - no change
Australia RBA - 7 July
UK BofE - 10 July
Japan BofJ - 15 July
NZ RBNZ - 30 July
Europe ECB - 7 August
US Fed (FOMC) - 13 August

Can the lucky country escape?
Australia’s economy, which has so far skirted the global recession, may stall after reports showed exports dropped to a 14-month low, bank lending fell and home- building approvals declined by the most since 2002. Australia was one of few major economies including China and India to grow in the first quarter as government cash handouts and record interest-rate cuts stoked consumer spending. Gross domestic product expanded 0.4 percent from the previous three months, in contrast to a 3.8 percent decline in Japan and a 1.4 percent contraction in the U.S. >> more

US unemployement up
Employers in the U.S. cut more jobs than forecast in June and the unemployment rate rose to the highest in almost 26 years, offering scant evidence the Obama administration’s stimulus package is putting Americans back to work. Payrolls declined by 467,000 last month following a 322,000 drop in May, according to Labor Department figures released today in Washington. The jobless rate rose to 9.5 percent, the highest since August 1983, from 9.4 percent. >> more

Eurozone unemployment up
Unemployment hit a 10-year peak in the euro zone in May and US jobless figures were expected to reach their highest level in 26 years on Thursday, dimming any prospect of a quick recovery from recession. In Sweden, the central bank pulled out the stops to revive its economy with a surprise cut in rates to a fresh record low and more loans to banks to foster lending, but the European Central Bank was expected leave rates on hold. The jobless rate in the 16-nation euro zone rose to 9.5 per cent in May from April's 9.3 per cent, the highest rate since 1999, European Union data showed. >> more

CBA's NetBank still hurting
Commonwealth Bank says it still cannot pinpoint the source of a presumed cyber attack blamed for preventing customers from accessing their online accounts, highlighting a security risk expected to become more common in coming years. Thousands of Commonwealth Bank's 2.5 million NetBank customers continue to be prevented from conducting transactions today, nearly a week after the bank was target of what it says was probably a denial-of-service attack by hackers. >> more

Trade deficit doubles on adjusted basis
The trend estimate of the balance on goods and services was a surplus of $448m in May 2009, a decrease of $251m (36%) on a revised surplus in April 2009. In seasonally adjusted terms, the balance on goods and services was a deficit of $556m in May 2009, an increase of $274m (97%) on a revised deficit in April 2009. >> more

Commodity prices still a drag
Preliminary estimates for June indicate that the index fell by 1.7 per cent (on a monthly average basis) in SDR terms, following a decrease of 4.1 per cent (revised) in May. The largest contributors to the fall in June were decreases in the estimated prices of coking coal, thermal coal and iron ore (see below). The prices of nickel, copper and aluminium rose. In Australian dollar terms, the index is estimated to have fallen by 4.9 per cent in June, following a decrease of 8.8 per cent (revised) in May.
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Retail sales surprise
Figures released by the Australian Bureau of Statistics indicate that May retail turnover was up 1% in May on the previous month, on a seasonally adjusted basis, double what a market poll had expected. Year on year, retail turnover was up 7.1%. >> more

Manufacturing index up a touch
Australian manufacturing activity continued to contract in June, as new orders suffered a setback, though the pace of decline slowed and employment intentions improved somewhat, a survey reported on Wednesday. The Australian Industry Group/PriceWaterhouseCoopers Performance of Manufacturing Index (PMI) rose 0.9 points to 38.4 in June, from May. That was the highest reading in eight months, though still well below the 50 threshold separating growth from contraction. >> more

Melbourne house prices strong....
A five month surge in Melbourne house prices has undone the damage to the property market wrought by the global financial crisis, pushing the median house price to $469,357 and the median unit price to $377,077 — both record highs. So far this year, Melbourne prices have soared the fastest in the nation, jumping 6.1 per cent in five months to eclipse 5 per cent-plus gains in Sydney and Darwin. Only Perth prices continued to fall. >> more

...and Sydney
Sydney house prices have bucked the global downturn and risen solidly this year amid a flurry of interest from first-home buyers, latest figures show. They posted one of the biggest capital city gains of 1.1 per cent in May. A typical house fetched $582,543, according to an index published by RP Data and Rismark International yesterday. >> more

UK growth misery
The U.K. economy shrank more than previously estimated in the first quarter in the biggest contraction since 1958 as the recession choked industries from construction to services. Gross domestic product fell 2.4 percent from the final three months of 2008, compared with the prior measurement of a 1.9 percent drop, the Office for National Statistics said today in London. The median prediction in a Bloomberg survey of 28 economists was for a 2.1 percent decline. Construction activity plunged almost three times as much as originally estimated.
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Credit growth still moribund
Total credit provided to the private sector by financial intermediaries fell by 0.1 per cent over May 2009, following a rise of 0.1 per cent over April. Over the year to May, total credit rose by 3.9 per cent. Housing credit increased by 0.5 per cent over May, following an increase of 0.6 per cent over April. Over the year to May, housing credit rose by 7.0 per cent. The rise in housing credit over May was mostly due to growth in lending to owner-occupiers, with only weak growth in lending to investors. >> more

APRA's bank reserve view changes
Banks will be forced to take account of sharemarket levels and the health of the economy when making provisions for bad loans under new rules being drawn up by the banking regulator. With governments worldwide weighing how to prevent a repeat of the subprime collapse that morphed into the global financial crisis, the Australian Prudential Regulation Authority believes it is better placed than the Reserve Bank to regulate the growth of credit in the economy. The prudential regulator wants banks to adopt the methods used in the life insurance industry to manage their "resilience reserves", which protect against adverse movements in asset markets. APRA's views, set out in a speech by its general manager, David Lewis, last week, are that banks should be required to make provisions for losses that might occur throughout the life of a loan. >> more

ASX wants to list govt bonds
Ordinary investors will be able to buy commonwealth and state bonds on the Australian Securities Exchange (ASX) if a new proposal goes ahead, according to The Australian Financial Review newspaper. The ASX has held talks with the federal government's debt agency as well as a number of state treasury corporations about quoting their bonds on the exchange, under a plan that could provide a new source of demand for bonds, the paper said. >> more

CBA's NetBank under attack?
Commonwealth Bank's web banking service NetBank failed today, in what could be a hacker attack, leaving thousands of customers unable to access their accounts via the internet. A recorded message on the bank's phone access line acknowledged the problem with NetBank, saying it was ''working to resolve this as a matter of emergency.'' The bank blamed "intermittent network issues" and gave no set time for the entire system to be restored. >> more

The interest rate game has changed
The global financial crisis has changed the rules on interest rates. As everyone knows, the former seemingly fixed relationship between the Reserve Bank's official interest rate and the variable rates the banks charge on mortgages and small business loans hasn't been working since 2007. At first, when the Reserve was putting the official interest rate up, the banks would flow the increase through, but then add unofficial increases of their own. More recently, as the Reserve has been cutting the official rate, the banks haven't been passing on the full cuts. So what's going on? Why has the old simple pass-through broken down? >> more

Consumer confidence up
In late June the weekly Roy Morgan Consumer Confidence Rating is 113.9 (up 5.1 points in a week). The weekly Roy Morgan Consumer Confidence Rating is 23.2 points higher than June 2008 (90.7), based on interviewing conducted last weekend, June 20/21, 2009. This week’s rise in the weekly Roy Morgan Consumer Confidence Rating is driven by decreasing worries amongst Australians regarding the next 12 months. Fewer Australians say we’ll have ‘bad times’ financially over the next 12 months (31%, down 12% this week and down 27% since May 2/3, 2009 and the lowest since March 2008) compared to 27% (up 3% and up 15% since May 2/3, 2009 and the highest since March 2008) of Australians that say we’ll have ‘good times.’
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NZ GDP in doldrums
New Zealand’s economy contracted for the fifth consecutive quarter in the March quarter as Gross Domestic Product (GDP) fell 1% from December and was down 2.7% from the same quarter a year ago, figures released by Statistics New Zealand (Stats NZ) show. The median economist expectation had been for a 0.7% contraction during the quarter and a 2.3% contraction over the year. The quarterly contraction was in line with the Reserve Bank of New Zealand’s forecast. In the full year to March 2009, GDP fell 1% compared to the full year to March 2008. “The main contributor to the decline this quarter was manufacturing activity, which fell 7.2%,” Government Statistician Geoff Bascand said. >> more

Margin loans to be regulated
Margin loans are to be specifically regulated for the first time in Australia. Financial Services Minister Chris Bowen yesterday introduced to parliament amendments to the Corporations Act to protect consumers from harmful lending practices and reduce the risk of them losing their homes. Mr Bowen said that while margin lending had dropped during the past 12 months, it had skyrocketed during the past decade -- from $4 billion in June 1999 to $37bn in December 2007. "Over the past 12 months, in the fallout from several high-profile financial collapses, many investors lost hundreds of thousands of dollars due to margin loans," Mr Bowen said. "And in some cases they even lost their family homes. >> more

House prices rising
ANZ Bank has just released their June Housing Snapshot today. It contains an interesting chart comparing the ABS, Residex and RP Data-Rismark house price index results. What is interesting from this chart is that the RP Data-Rismark hedonic index appears to have “led” both the ABS and Residex indices in terms of measuring the peak of the cycle (February 2008) and the recent recovery evidenced since January 2009. It is also encouraging to observe the Residex “repeat-sales” numbers confirm the RP Data-Rismark trend (ie, prices are rising again). >> more

Fixed rates not popoular
Home owners are not being panicked into switching to fixed rate loans, despite the nation's largest home lender recently raising its standard variable mortgage rate, a broker says. Earlier this month, the Commonwealth Bank of Australia raised its variable rate by 10 basis points, blaming higher funding costs. Loan Group executive director John Kolenda said the company's brokers had received few inquiries about fixed rates despite the increase. "The lack of demand to switch to fixed rates indicated the majority of home owners believed they would be better off sticking to variable rates while the economy remained in decline," Mr Kolenda said. >> more

New protection for borrowers
New national consumer credit laws, which include tougher penalties for dodgy lenders, are being introduced by the federal government. Financial Services Minister Chris Bowen says the measure will make it less likely that families who can't meet their debts will lose their homes. Mr Bowen told parliament on Thursday the measures will replace the present state-based system of consumer credit protection, which operates inconsistently across the eight jurisdictions. >> more

OECD bullish on Aust economy
Australia is set to soar out of its economic downturn sooner and more sharply than forecast in the budget, according to updated forecasts from the Organisation for Economic Co-operation and Development understood to have the Australian Treasury's backing. The OECD says the Australian economy should shrink by a mere 0.3 per cent this year, less than any other OECD economy and far less than the contraction of 1 per cent that underlies the forecasts in the May budget. Next year, the economy should roar back 2.4 per cent, also more than assumed in the budget and more than any other OECD economy apart from those recovering from collapse in 2009. >> more

CBA talks about higher rates
One of Commonwealth Bank's most senior executives says the group may be forced again to increase its variable mortgage rate outside of the Reserve Bank's official cycle. CBA head of retail banking Ross McEwan told BusinessDaily that if conditions persist in wholesale markets, the bank is likely to face extra costs equivalent to 0.6 per cent on its variable mortgage book over the next 18 months. Mr McEwan said this would leave the bank with the choice of either absorbing the expense or passing it on to borrowers over the same period. >> more

US leading indicators up
The index of US leading economic indicators rose in May for a second consecutive month and a regional factory gauge climbed more than forecast in June, showing the worst recession in five decades may soon end. The leading index increased 1.2 per cent after a 1.1 per cent gain in April, the best back-to-back performance since November- December 2001, the New York-based Conference Board reported today. The Federal Reserve Bank of Philadelphia’s general economic index jumped to the highest level in nine months. >> more

A mild recession, please...
The big news of the past few weeks is that Australia's recession looks much milder than the deep downturns of the early 1980s and 90s. We're still not out of the danger zone given that the big fall in iron ore and coal prices is yet to fully hit. But the consensus now suggests the official budget forecasts of zero economic growth in 2008-09 and a 0.5 per cent contraction in 2009-10 are a touch too pessimistic. This is partly why interest rates are now nudging up. If this new consensus proves on the money, it would be a world-beating result given the deep recessions in North America, Europe and Japan. It would be the payoff from Australia's economic attributes, such as our resource exports to China, and more than two decades of policy reform. >> more

House starts, are not...
Home building fell to its lowest level in eight years in the first three months of 2009, with work starting on just 30,949 properties. This was a 4.0 per cent seasonally-adjusted decline compared to the December quarter 2008. Australian Bureau of Statistics data, released on Wednesday, shows dwelling commencements were 22.5 per cent lower than a year earlier. >> more

RBA more likely to cut, but....
The Reserve Bank has signalled it is still more likely to cut interest rates than raise them this year, but mortgage borrowers could face higher costs regardless as banks drive rates up independently. Interest rates have become a sensitive political issue, as the independent Senator Nick Xenophon called yesterday for tougher regulation to crack down on bank gouging, and business lobbies calling on the central bank to lower rates further to offset bank increases. The public derision was sparked by the Commonwealth Bank's controversial 0.1 percentage point increase in its standard variable rate last week. Since then other banks have been increasing fixed mortgage costs because of higher borrowing costs in world markets.
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BoJ cautious on recovery
Bank of Japan Governor Masaaki Shirakawa said there’s no guarantee the economy’s revival will be sustained, signaling it’s too early for the central bank to end its unprecedented steps to channel cash to companies. “The Bank of Japan remains cautious about the strength of final demand once companies at home and overseas complete their inventory adjustments,” Shirakawa said in Tokyo today after his board left the overnight lending rate at 0.1 percent. >> more

WBC and NAB raise fixed mortgage rates
Westpac and National Australia Bank have followed the Commonwealth Bank in lifting their fixed-term home loan rates in the wake of the storm unleashed by the country's largest lender raising the price of its standard variable mortgages. In a further sign that the major banks are prepared to weather criticism that they are squeezing consumers during the economic downturn, the cost of longer-term mortgages has jumped by as much as 0.8 per cent in the last two days. With the Commonwealth bearing the public brunt of political and consumer anger over the 10-basis-point increase in its main floating interest rate home loan to 5.74 per cent, and across-the-board rises in its fixed-rate mortgages, two of its Big Four rivals have quietly followed suit. >> more

Fixed term rates rising
The fall in fixed-rate mortgages, particularly longer-term offers, has bottomed out and prices are beginning to rise again in a further sign of the pressure being applied to bank financing costs. While one- and two-year deals still offer good value in comparison to floating standard variable home loan rates, those of three years and longer are creeping up in price as lenders pass on their own higher cost of borrowing. Industry commentators believe that fixed rates have now reached their low point after the huge falls in prices seen since October when the Reserve Bank began slashing the official cash rate by four percentage points to offset the impact of the recession on the economy. >> more

House prices to rise?
House prices could rise by as much as 22 per cent during the next three years, an economic forecaster says. "The conditions are ripe for a sustained recovery in residential property prices," according to BIS Shrapnel's Residential Property Prospects, 2009 to 2012, report. "Low interest rates, solid growth in rents and housing shortages are evident in most markets. “However, the current economic malaise will mean confidence will only recover slowly during 2009/10." >> more

Consumer confidence bounces
In early June the weekly Roy Morgan Consumer Confidence Rating is 110.8 (up 6.1pts in a week). This is the highest rating since February 2008 (115.8). The weekly Roy Morgan Consumer Confidence Rating is 20.1 points higher than a year ago (June 2008, 90.7), based on interviewing conducted last weekend, June 6/7, 2009. The rise in the weekly Roy Morgan Consumer Confidence Rating has been driven by an increase in confidence amongst Australians about the future. Fewer Australians, 34% (down 14% in a week — and the lowest since March 2008) say we’ll have ‘bad times’ financially over the next 12 months compared to 22% (up 3% — and the highest since September 2008) of Australians that say we’ll have ‘good times. >> more

Variable mortgage rates on the rise
The Commonwealth Bank today raised its main standard variable mortgage rate in a surprise move that reverses a trend of cuts in the wake of the economic downturn. The move means that customers of the country's largest home loan lender will be paying an extra $18 a month on an average loan of $300,000 from Monday. And soon after the Commonwealth's announcement, ANZ Bank said its rates were also under review. And the other two major banks, the National Australia and Westpac, said their rates were always under review. >> more

US retail, jobs reports positive
US retail sales rose for the first time in three months in May and the number of workers filing new claims for jobless benefits last week hit the lowest level since January, suggesting the recession was abating. The Commerce Department said on Thursday that sales at US retailers rose 0.5 per cent last month, lifted by strong gasoline and building material receipts. A separate report from the Labour Department showed the number of US workers filing new claims for jobless aid fell 24,000 to 601,000 in the week ended June 6, the lowest since the week of Jan. 24. >> more

No surprises on unemployment rate
Australia's economy shed 26,200 full-time jobs last month, as companies cut staff to weather the economic downturn. The job losses pushed the unemployment rate up to 5.7 per cent, the Australian Bureau of Statistics reported. Economists had tipped the nation's workforce had shrunk by 30,000 jobs during the month, sending the jobless rate to 5.7 per cent from April's 5.4 per cent.
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Unemployment rate expected up
Economists are expecting official job figures for May to show a sharp jump in the unemployment rate. The jobless rate is tipped to bounce back to at least 5.7 per cent, where it stood in March and prior to the questionable fall to 5.4 per cent in April. >> more

RBNZ holds, sees emerging recovery
The Reserve Bank has left the Official Cash Rate on hold at 2.5%, arguing there are initial signs emerging of a recovery in both the global economy and the New Zealand economy. An unexpected rebound in activity in the housing market from March through to May indicated consumer spending could be stronger than forecast, but the Reserve Bank said this was unsustainable given a likely rise in unemployment and still-high debt levels.
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Consumer sentiment bounces
Australia's miraculous escape from a technical recession has delivered a massive boost to household confidence, with optimism among consumers rising at its fastest rate for 22 years. The Westpac-Melbourne Institute index of consumer confidence, released this morning, rose a near-record 12.7 per cent in June to 100.1 points. This means economic optimists now outnumber pessimists -- albeit by the narrowest of margins -- for the first time since the global financial crisis started to bite at the start of last year. >> more

Housing finance holds up well
Australian housing finance commitments for owner-occupied housing rose 0.9 per cent in April, seasonally adjusted, to 63,395 the Australian Bureau of Statistics said. Total housing finance by value rose by 3.6 per cent in April, seasonally adjusted, to $21.547 billion. Economists had expected the number of owner-occupier housing finance commitments to rise by 1.5 per cent in April. >> more

Job ads fall a touch
Job advertisements fell again in May, pointing to further tough times for job seekers in the months ahead. Positions advertised online and in newspapers edged down 0.2 per cent, seasonally adjusted to a weekly average of 136,457 in May, following a 7.5 per cent drop in April. It marks the thirteenth month of falls in the gauge, as future demand for staffing remains low. "Job advertising appears to have stabilised in recent months although the number of job ads recorded in newspapers and on the internet remains at recessionary levels,'' ANZ head of Australian economics, Warren Hogan, said. >> more

Where to for the non banks?
The Australian Office of Financial Management (AOFM) has announced that it will be awarding the final series of mandates for residential mortgage backed securities (RMBS). Since early November last year the AOFM’s support has enabled approximately $A8 billion of RMBS issues and enabled competition for the big 4 banks. The list of issuers splits into three types: smaller or regional banks (AMP Bank, Bank of Queensland, Bendigo and Adelaide Bank, Members Equity Bank), non bank approved deposit takers (Credit Union of Australia, Australian Central Credit Union, Wide Bay Building Society) and mortgage aggregators (Challenger, FirstMac, Liberty Financial, Resimac). Interestingly, the amount raised by mortgage aggregators, some $A 4.6 billion, compares to the $4.1 billion the Australian Bureau of Statistics reckons was committed to housing finance by non bank and non building society lenders between November and March. Without the RMBS market, mortgage aggregators and the network of underlying mortgage brokers, will have a hard time competing with the banking behemoths. Even though at their peak, the non bank sector captured only 20% odd of the market (compared with 5% odd now), they priced aggressively (about 0.3% below on variable rate mortgages according to the RBA) and kept pressure on the big lenders. Without AOFM support, and with the underlying market structure of structured investment vehicles and “money market” funds which supported RMBS issuance pre credit crisis severely compromised, it will be interesting to see how mortgage pricing strategies develop when the interest rate cycle turns.

One rate cut outlook
Despite an avalanche of data and RBA communication, markets have been relatively stable over the last week. They are flirting with only one rate cut in the final quarter and continue to price in 100-125 bps' of rate hikes in 2010. In response to our reading of the Governor's latest statement we pushed back our timing of the next rate cut to September from August but expect that cumulative cuts (probably including at least one 50bps) will total around 100bps before rates reach their low. This 'fine tuning' of the rate cycle will be important although our much more significant observation is that rates will be on hold in 2010 in direct contrast to market pricing. >> more

Oz the lucky "financial system" country?
It's a bit daring, putting this question when we are barely halfway through the show — and at any moment the next twist could pitch us out of our seats. But after this week's unexpectedly good gross domestic product (GDP) figures, after the banks' strong profit reports, we could fairly ask: why hasn't the global financial crisis hit us like it hit the rest of the Western world? ' >> more

Strong auction clearance rates
The results last week, which I have enclosed below, speak for themselves. Probably the strongest clearance rates across the country that I have seen… >> more

MIS investors unprotected?
Revelations that a Timbercorp company charged with protecting the interests of investors has no money and is "hopelessly insolvent" have thrown the spotlight on how managed investments are regulated, and prompted calls for more protection for investors. >> more

RBA wants to see "durable" recovery
Reserve Bank Governor Glenn Stevens has reiterated that the central bank remains prepared to cut interest rates further to help secure a "durable upswing'' in the economy. Mr Stevens says the Australian economy is well-placed for expansion towards the end of this year, with the recovery expected to be fairly gradual and inflation "most likely'' to decline for some time. "That in turn means, as the statement following this week's board meeting indicated, that some scope remains to ease monetary policy further, if that were to be helpful to securing a durable upswing,'' Mr Stevens said in Townsville today. "The emphasis on durable is important.'' >> more

Trade balance surprise
The nation's trade balance is in deficit for the first time in almost a year, dashing hopes that exports will keep Australia out of recession. The dollar slumped on the news. The surprise result, revealed by the Australian Bureau of Statistics this morning, shows that for the month of April, the trade deficit was $91 million, seasonally adjusted. It was last in deficit in July 2008. Economists had expected the balance of trade to ease $1.7 billion for the month, but to remain in surplus as the global economy cooled. >> more

Growth up in March quarter
Australia has dodged a recession, with data released today showing the economy expanded in the first three months of the year. Gross domestic product for the March quarter grew 0.4 per cent, the Australian Bureau of Statistics said, following a revised 0.6 per cent decline in the final three months of last year. Two straight quarters of a shrinking economy are the textbook definition of a recession. Analysts had expected the Australian economy to have risen 0.2 per cent in the first quarter. The last time Australia experienced a technical recession was in 1991. >> more

Has the RBA stopped cutting?
It wasn’t only official rates that the Reserve Bank left unchanged today. Its reasons for inaction were eerily similar to the views of the global and Australian economies it expressed last month. However, there was one potentially telling shift in the language the bank used. In May it saw signs of stabilisation in some countries. Now evidence is continuing to emerge that the global economy is stabilising. >> more

Eurozone unemployment shocker
Eurozone unemployment jumped in April to its highest level in almost a decade, data showed on Tuesday, boding ill for any quick recovery from the worst economic recession since World War II. The unemployment rate in the 16-nation euro zone rose to 9.2 per cent from March's 8.9 per cent as 396,000 people lost their jobs, bringing the number of people out of work to 14.579 million, the European Union statistics office said. >> more

RBA holds rate at 3%
At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per cent. >> more

Building approvals surprise
Approvals for new homes rose in April as home buyers seized on low interest rates and cash grants aimed at bolstering growth. Permits for new home building increased 5.1%, seasonally adjusted, in April from a 3.5 per cent rise in March, according to the Australian Bureau of Statistics. In the year to April, building approvals fell 16.1 per cent. It is the third consecutive month of gains. The market had forecast a 2 per cent increase in April building approvals, according to Bloomberg. >> more

Good trade figures
Australia may have avoided a technical recession after better-than-expected national balance of payment figures today. Australian Bureau of Statistics data showed the nation recorded a seasonally adjusted current account deficit of $4.61 billion in the March quarter, which was narrower from a revised deficit of $6.36 billion in the December quarter. The median market forecast was for a deficit of $5.43 billion in the March quarter. Meanwhile, a decrease of $5.964 billion in the deficit on goods and services in inflation-adjusted terms is expected to add 2.2 percentage points to growth in the March quarter measure of gross domestic product (GDP), the bureau said. >> more

Retail sales up
Consumers spent a record $19.35 billion in April, making the most of the Federal Government's cash handouts and despite experts' negative predictions for the economy. Sales rose 0.3 per cent for the month, seasonally adjusted, the Australian Bureau of Statistics said. That follows a 2.2 per cent increase in March. April's sales marked six months of increases out of the past seven. Economists had expected a 0.5 per cent increase for the month. >> more

Commodity prices falling
The Reserve Bank of Australia's (RBA) index of commodity prices dropped 3.5 per cent in May in special drawing right terms reflecting estimated falls in contract prices for coal and iron ore. That followed a revised fall of 12.8 per cent for April, and leaves the index down 24 per cent so far this year. In Australian dollar terms, the index was estimated to have fallen by 8.2 per cent in May, following a revised drop of 18.1 per cent in April. The largest contributors to the fall in May were decreases in the estimated prices of coking coal, iron ore and steaming coal, the RBA said. The prices of gold, nickel, sugar and wheat rose. >> more

Manufacturing on the turn
Manufacturing in Australia has climbed to its highest point in seven months, indicating the pace of decline in sector is easing, a survey found. The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index (PMI) rose by 7.4 points to 37.5 points in the month of May, seasonally adjusted. An index reading above 50 points indicates that manufacturing is generally expanding, while below 50 means it is declining. While still below 50, the index is at a seven month high Australian Industry Group chief executive Heather Ridout said in a statement on Monday. >> more

Credit growth slows
Total credit growth slowed to its weakest pace since 1994 with businesses borrowing less as the economic downturn hit. In April, private sector credit was 4.6 per cent higher than for the same month a year earlier, slowing from the previous month's 4.9 per cent expansion, according to data from the Reserve Bank of Australia. In month-to-month terms, overall borrowing was 0.1 per cent higher, matching the previous month's rise. >> more

APRA's ideas on financial pay
Company boards of financial institutions must take direct responsibility for the pay of sales staff, traders, agents and risk personnel, as well as senior executives, under new draft rules released by the prudential regulator. Golden parachutes will be frowned upon, as will company loans given to executives to buy shares, in a bid by the Australian Prudential Regulation Authority (APRA) to link remuneration with risk in banks and other authorised deposit-taking institutions. >> more

Not Big 4, Bigger 2...
The banking sector's Big Four has morphed into the big two, according to research that has brought a warning from the Australian Competition & Consumer Commission boss about growing concentration of power among our largest banks. A report obtained exclusively by The Australian has shown that while all Big Four banks expanded their mortgage books in the March quarter, Australia's two banking behemoths -- the merged Commonwealth Bank/BankWest and Westpac/St George Bank -- took a combined 85 per cent of Big Four mortgage growth during the period. >> more

New statistics reveal Australia's two largest banks -- the merged Commonwealth-BankWest and Westpac-St George -- are dominating rivals not only in mortgages but also in retail deposits. The new figures obtained by The Australian show that by March, the merged CBA-BankWest held a 40 per cent share of retail deposits among the Big Four banks with a $137.1 billion book, and the merged Westpac/St George had a 28 per cent share with $98.6 billion. This meant Australia's two largest banks had a 68 per cent share of Big Four retail deposits by March, according to the review commissioned by Brandmanagement, a market research firm specialising in the finance sector. >> more

USA to lose AAA ?
Bill Gross, manager of the world's biggest bond fund, has warned the United States will eventually lose its top AAA credit rating, a fear that had already spooked financial markets on Thursday and could keep the US dollar, stocks and bonds under heavy selling pressure. The United States will face a downgrade in "at least three to four years, if that, but the market will recognise the problems before the rating services - just like it did today," Gross said. Gross, the co-chief investment officer of Pacific Investment Management Co and manager of the Pimco Total Return Fund, which has $US154 billion in assets, earlier said that market declines on Thursday were due to investor fears that the United States is "going the way of the UK - losing AAA rating which affects all financial assets and the dollar." >> more

Bank of Japan sees the bottom ?
The Bank of Japan raised its view of the economy for the first time in almost three years on signs that a record contraction in the first quarter represented the worst of the recession. “Economic conditions have been deteriorating, but exports and production are beginning to level out,” the bank said in a statement in Tokyo today. Previously it said the world’s second-largest economy had “deteriorated significantly. >> more

NAB raises funds without mummy...
National Australia Bank has scored a huge coup in becoming the first Australian bank to raise money offshore without using the federal Government's guarantee, in a move that is further evidence that life is returning to normal after the financial crisis. NAB's successful raising offshore, the first among the Big Four in these times, came at a hefty cost. In a well supported sale last night, National Australia Bank raised £500 million ($1 billion) in five-year notes at 230 basis points over Libor, which is expensive money, but nevertheless groundbreaking. >> more

Australian banks not learning?
Australia prides itself on the fact that we have four banks with AA credit ratings. Yet Citi analysts say we are in danger of losing those ratings because our banks, led by the Commonwealth, have over-expanded lending, particularly in housing. We have all been around long enough to know that these analysts’ reports require elaboration and qualifications, but overnight it suddenly hit me that Australia was in danger of losing this treasured bank status because of our own version of sub-prime.
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Bank fees bouyant
Banks gouged up to $1 billion more in fees from households and businesses last year as they received unprecedented support from taxpayers to help deal with the global financial storm. Figures due to be released today are expected to show that fees are rising at the fastest pace for five years, with banks collecting between $11 billion and $12 billion in fees last year, up from $10.5 billion in 2007. The figures, to be released by the Reserve Bank, will expose the banks to another round of condemnation from the federal Government and consumer groups. >> more

Wage growth muted
Wage growth slowed in the first quarter of 2009 as a slowing economy relieved some of the previous tightness in the labour market. Total hourly rates of pay, excluding bonuses, rose 0.8 per cent in the March quarter, seasonally adjusted, the Australian Bureau of Statistics (ABS) said today. The result was in line with market expectations but slower than the upwardly revised 1.3 per cent growth pace recorded in the December quarter. Over the year ended March, wages grew by 4.2 per cent.
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Consumer sentiment down
The Westpac Melbourne Institute Index of Consumer Sentiment fell by 4.3% in May from 92.7 in April to 88.8 in May. Westpac Chief Economist, Bill Evans, commented, "The key factor behind the fall in the Index would have been consumers' assessments of the Federal Budget which was released prior to the survey being conducted. Our records indicate that this is the second biggest fall in the Index following the release of a Budget in the last ten years. >> more

Japan sinks further
Japan’s economy shrank by a record last quarter amid an unprecedented collapse in exports and a drawdown of inventories that could pave the way for a recovery later this year. Gross domestic product contracted an annualized 15.2 percent in the three months ended March 31, following a revised fourth-quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. Economists predicted the economy would shrink 16.1 percent. >> more

Interest rates in holding pattern
Australian interest rates are at historically low levels as global economic recovery beckons, the nation's central bank chief said today - in comments that reinforced the market's view that he would keep rates on hold. But Reserve Bank of Australia governor Glenn Stevens said he did not expect the domestic economy, widely considered to be in recession, to bounce back to above-average growth quickly.
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World growth not falling...as fast
The pace of contraction in world economic output appears to be easing and recovery could begin at the end of this year, World Bank President Robert Zoellick told Spanish television on Tuesday. "I'm neither an optimist nor a pessimist, I am uncertain, a realist. Clearly the fall has been interrupted. I think there's a good chance that while we face declines, they will be smaller in size. The majority expect a recovery at the end of this year, at the beginning of next year," Zoellick told an interviewer in remarks translated into Spanish by an interpreter. >> more

Houses more affordable
Housing is the most affordable it has been in seven years thanks to a boost to the First Home Owners Grant, record low interest rates and relatively stable house prices, and affordability is only expected to get better in the June quarter, according to the HIA-CBA First Home Buyer Affordability Index. >> more

Fighting for deposits?
A bit of a tussle seems to have broken out between the Big 4 for longer term (1 year and longer) deposits. Rates on offer vary from 4.20 for 1 year to 5.00 for 5 yrs.

Australians feeling better
In mid May the weekly Roy Morgan Consumer Confidence Rating rose 7.2pts to 104.5, now 7.4 points higher than a year ago (May 2008, 97.1), based on interviewing conducted last weekend, May 9/10, 2009. Driving the rise in the weekly Roy Morgan Consumer Confidence Rating is an increase in confidence amongst Australians about the next 12 months. Now 38% (up 5%) of Australians expect their family to be ‘better off financially’ this time next year compared to 17% (down 5%) of Australians that expect their family to be ‘worse off financially.’ >> more

First home owners grant drives housing
The total value of owner occupied housing commitments excluding alterations and additions was up 29% year on year in March. Seasonally adjusted, they were up 7.3%, compared with February, according to figures released by the Australian Bureau of Statistics. Personal finance commitments fell 2.2% on a seasonally adjusted basis.
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US retail sales down more than expected
Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash. The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Other reports showed companies continued to cut stockpiles as demand slowed, and climbing oil costs pushed up prices for imported goods. >> more

Rethinking super?
Baby boomers are having to rethink their retirement plans as a result of this week's budget. Advisers are concerned many will lose confidence in superannuation and opt for riskier strategies such as negative gearing or putting their money in the bank, where it will earn lower returns. While current pensioners were the big winners from changes to retirement policy, the big losers were those approaching retirement. Many will be forced to work longer than they intended, due to the pension age being lifted from 65 to 67 and superannuation savings incentives cut back.
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First home buyers grant extended
Those buying their first home have another six months to locate their dream dwelling and still benefit from last year's boost to the first home owners grant scheme. The first home owners grant was lifted from $7000 to $14,000 for existing dwellings and from $14,000 to $21,000 for new homes as part of the $10.4 billion stimulus package unveiled by the government in October last year. The more generous scheme was set to expire on June 30 but has been extended due to the ongoing impact of the global financial crisis. But under changes announced in the budget on Tuesday night, people who enter into contracts on or before September 30 will still be eligible for a grant of $14,000 for an existing dwelling and $21,000 for a new home. >> more

Housing approvals bounce
Home loans increased more than expected in March, as Australians took advantage of the first home owners grant and lower interest rates to enter the housing market. The number of home loans, seasonally adjusted, increased 4.9% in March from 0.4% in February data from the Australian Bureau of Statistics. A survey of economists expected them to gain 4.5%, according to Bloomberg data.
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Budget may taper retirement income
Wealthy retirees could have their pensions cut to help fund a $30-a week increase for almost one million single age pensioners to be announced in today's Budget. The Government is expected to tighten the taper rate on the age pension, a method by which it claws back the welfare payment from retirees with an independent income.
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RBA cuts GDP forecast
In its May Statement on Monetary Policy, the RBA has cut its growth forecast. It sees GDP in the June quarter at minus 1.25% and minus 1% overall in 2009. In its February statement, the forecast was plus 0.25% in the June quarter, plus 0.5% in calendar 2009, plus 2.5% in 2010. For 2010, the RBA now expects growth to be turning positive by the June quarter at plus 0.5% and by plus 2% over 2010. >> more

ECB cuts rate by 0.25% to 1.00%
The European Central Bank cuts its main refinance rate by 0.25% and will provide additional liquidity by conducting 12 month refinance operation. It also surprised the market by announcing the purchase of up to Euro 60 bn of covered (i.e. mortgage ) bonds. >> more

BoE holds its rate at 0.50%
Holding its central discount rate steady, the Bank of England also took the market slightly unawares by increasing its asset purchase programme by Stg 50 billion. >> more

Australia adds jobs
Australian employers unexpectedly added workers in April and the jobless rate dropped, driving the local currency to a seven-month high on signs the nation’s economy is skirting the worst of a global recession. The number of people employed climbed 27,300 from March, the statistics bureau said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a decline of 25,000. The jobless rate fell to 5.4 percent from 5.7 percent. Bonds yields rose on speculation the Reserve Bank of Australia’s record round of interest-rate cuts may be close to an end. >> more

NZ unemployment rate touches 5%
New Zealand’s jobless rate rose to a six-year high in the first quarter as the worst recession in more than three decades prompted companies to cut production and fire workers, cutting employment by the most in a decade. The unemployment rate increased to 5 percent from 4.7 percent in the previous three months, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. The median estimate of 13 economists surveyed by Bloomberg News was for 5.3 percent.
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Trade surplus stronger
The trade surplus unexpectedly widened to $2.5 billion in March, the second highest on record, as exports held up better than expected and imports sank. It follows a downwardly revised $1.75 billion surplus in February, according to the Australian Bureau of Statistics. Economists had expected the trade surplus to narrow to $1.7 billion with many analysts tipping Australia's return to deficit this year as the pace of activity in the nation's Asian trade partners slows. >> more

Retail sales surprise
The Government's cash splash is paying off with consumers driving retail sales higher than expected in March. Department stores were the big winners. Sales climbed 2.2 per cent, seasonally adjusted, in March as consumers spent $19.3 billion for the month, Australian Bureau of Statistics figures show, reversing a 2 per cent slump in February. Economists had expected a 0.5 per cent increase. >> more

Bernanke soothes stress test concerns
Federal Reserve Chairman Ben Bernanke, seeking to soothe markets worried about the eagerly awaited government stress tests of 19 big banks, on Tuesday downplayed the possibility of new taxpayer bailouts.The central bank chief told a congressional panel that many of the banks testing out as deficient on capital will be able to bolster their balance sheets through private-sector funding, but he left open the option of more government support. >> more

Vehicle sales keep falling
Official VFACTS data released by the Federal Chamber of Automotive Industries (FCAI) shows that 63,965 passenger cars, SUVs and commercial vehicles were sold in April 2009 – down 23.9 per cent (20,096 vehicles) compared to the same month in 2008. >> more

RBA leaves cash rate as is at 3%
The global economy contracted further during the first few months of this year. While the near-term outlook remains weak, there are further signs of stabilisation in several countries. The Chinese economy in particular has picked up speed in recent months and many commodity prices have firmed a little. The considerable economic policy stimulus in train in most countries should help contain the downturn and support an eventual recovery. >> more

Housing approvals increase
Approvals for new homes rose more than expected in March as home buyers took advantage of low interest rates and cash grants. Permits for new home building increased 3.5%, seasonally adjusted, in March from a 7.8% increase in February, according to the Australian Bureau of Statistics, showing Australians warming to the easing costs linked to home ownership. >> more

RBA expected to hold, not twist
Australia’s central bank may leave borrowing costs unchanged today to gauge whether the lowest benchmark interest rate in 49 years and government spending will pull the economy out of its first recession in two decades. Governor Glenn Stevens will keep the overnight cash rate target at 3 percent at 2:30 p.m. in Sydney after cutting it by a quarter point four weeks ago, according to 18 of 19 economists surveyed by Bloomberg. One expects a quarter-point cut. >> more

House prices keep falling
Home prices have slumped the most on record, undermining the value of the biggest asset for most Australians. In the year to March, home prices fell 6.7%, from a downwardly revised 3.9% fall in the 12 months ending December 31, according to the Australian Bureau of Statistics. Home prices slumped 2.2% in the March quarter, following a downwardly-revised 1.2% drop in the December quarter, the ABS said. >> more

Coal contract prices drive commodity index
In Australian dollar terms, the preliminary commodity index is estimated to have fallen by 20.1 per cent in April, following a fall of 7.3 per cent (revised) in March. The largest contributors to the fall in April were decreases in the estimated prices of coking coal, iron ore and steaming coal. The prices of copper, nickel and wool rose. The large falls in the estimated prices for coal and iron ore in April reflect the renegotiation of annual contracts. Benchmark thermal coal contract prices have fallen by 44 per cent, while metallurgical coal contract prices have settled around 60 per cent lower. Benchmark iron ore contract prices are yet to be agreed; however, large falls in iron ore export prices are anticipated. >> more

Manufacturing sinks further
The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index fell 3.1 points in April from March to 30.1, well below the 50-point mark which separates contraction from expansion. One glimmer of hope for manufacturers was record low inventories, which could spur production levels as companies replenish spent stocks. Companies pinned the slump on weaker domestic and overseas demand, tighter credit and project cancellations. The slump adds weight to views that despite being in relatively good economic shape, the worst effects of the global recession are still ahead for Australia. >> more

House prices up
Despite the silly predictions of some commentators – forecasts of up to a 50 per cent decline in house prices have made it into the media in the past year – Australia’s residential property market delivered a resilient performance during the first quarter of 2009, with the RP Data-Rismark National Dwelling Value Index rising a robust 1.6 per cent. >> more

Business confidence
Business confidence brightened ''moderately'' in the first three months of the year but the outlook for Australian firms is far from positive, a report said. National Australia Bank's quarterly survey shows its business confidence index came in at minus-24 points for the March quarter, an improvement from minus-31 points in the last three months of 2008. A negative result implies more companies are negative about the economy than positive.
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Business credit continues to fall
Figures released by the RBA for the March quarter show that the decline in business credit continues (down 0.6% month on month), as invesment plans are put on hold. Bouyed by the First Home Owners grant, housing credit was up 0.6% month on month. APRA figures show that CBA and WBC continues to win mortgage market share.
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RBNZ cuts OCR -0.50% to 2.50%
RBNZ has announced a 50 basis point cut in the Official Cash Rate to 2.5% and said he expected to keep it “at or below the current level until the latter part of 2010.” Reserve Bank Governor Bollard said the global economy had worsened since the Reserve Bank’s most recent forecasts in the Monetary Policy Statement on March 12, and the inflation outlook was lower. “We consider it appropriate to provide further policy stimulus to the economy,” Bollard said in a statement. “The OCR could still move modestly lower over the coming quarters,” he said. >> more

Fed leaves fund target rate unchanged
The Treasury market sold off on the announcement that the purchase program for longer term Treasuries was going to remain unchanged. >> more

US GDP shrugged off
Markets were looking forward rather than back as advance US GDP for the March quarter printed at -6.1%. Decreases across the board were offset by a pickup in personal consumption. >> more

Commercial property warnings
The Senate Committe on the Australian Business Investment Partnership (aka the Rudd Bank) is being told that without its support the level of bank exposure to the sector ("we can't take no more") and the lack of liquidty (i.e there is none) in the commmercial mortgage backed securities (CMBS) market could mean properties that are otherwise sound would not be able to refinance debt and send the sector into a tailspin. >> more

Keeping non-bank lenders kicking
One of the most powerful influences on the Australian mortgage market has been the growth in non-bank lenders. But they relied on obtaining their funding from precisely that source that has been closed off in the current credit market dislocation: the residential mortgage backed securities (RMBS) market. At their peak non-bank lenders had about 20% of the market. They are now surviving on 6%. The Government has been trying to breathe life back into this market through the AOFM (the Australian Office of Financial Management) supporting issues of RMBS. Comments are now filtering through that “real” investors are not being encouraged back as the AOFM is pricing the RMBS issues below what those “real” investors would buy them at. Interestingly the UK has just outlined moves to offer a government guarantee to UK RMBS issues. Perhaps a similar guarantee here would benefit those non-bank lenders looking to survive. >> more

First home owners grant to end?
The boost to the first home owners grant will not be extended beyond June 30, Prime Minister Kevin Rudd has suggested. "The first home owner's boost, as you know, we have indicated that will conclude within a very fixed and finite time frame," he told reporters in Perth. "It's had strong useful results so far, but I have got to say all good things must come to an end." >> more

March CPI up less than expected
Consumer prices increased by less than expected in the March quarter as banking, fuel and clothing costs fell, giving the Reserve Bank more scope to cut interest rates. The headline consumer price inflation in the first three months of the year was 0.1%, compared with the 0.5% inflation rate expected. In December, consumer prices fell 0.3%. From a year earlier, prices were up 2.5%, the Australian Bureau of Statistics reported. Economists had tipped a 2.8% rate, from a year ago. In December, the annual CPI was 3.7%. >> more

Fixed mortgage rates rising?
CBA announced that it would be raising fixed mortagge rates from 22 April by between 0.20% and 0.45%. >> more

Producer prices fall
Australian producer prices have fallen for the first time in almost six years on the back of falling oil and construction prices. The unexpected fall suggests the central bank has more room to cut interest rates. An index of final producer prices eased 0.4 per cent in the first quarter from the fourth quarter and rose 4 per cent on year, the Australian Bureau of Statistics said today. This is the first quarterly fall in the producer price index since the June quarter of 2003, when the index fell 0.4 per cent. Economists had expected a quarterly increase of 0.6 per cent and an annual rise of 4.95 per cent. >> more

A glimmer at the end of the tunnel?
In mid April the weekly Roy Morgan Consumer Confidence Rating is at 103.4 (up 0.8 points). Improvements in confidence about the future have driven the Roy Morgan Consumer Confidence Rating higher this week. 37% (up 2%) of Australians expect Australia to have ‘good times’ economically over the next five years. This measure has not been higher for nearly 18 months, since December 2007 (39%). Only 17% (down 4%) of Australians expect ‘bad times’ economically over the next five years. Looking forward to the next 12 months, 17% (up 2%) of Australians say that Australia will have ‘good times financially’ over the next 12 months compared to 52% (down 3%) that say we’ll have ‘bad times’ over the next 12 months. >> more

Building work holding up
The seasonally adjusted December quarter estimate of the value of total building work done fell 1.6%, following a rise of 0.7% in the September 2008 quarter. New residential work done fell 1.8%, with work done on new houses down 1.0%. The value of non-residential building fell 0.9% in December, following a rise of 0.3% in September. >> more

Terms of trade down a touch
The price of exports fell in the first quarter, dragged down by lower metals prices, undercutting a key source of revenue of the Australian economy. Export prices slipped 4.6% in the first quarter of 2009, following a 15.9% gain in the final quarter of last year. Analysts surveyed expected a 3.5% fall in quarterly prices, according to Bloomberg.
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Chinese GDP down
China’s gross domestic product, battered by collapsing exports, grew at the slowest pace in almost ten years, probably marking the low point for the world’s third-biggest economy. GDP expanded 6.1 percent in the first quarter from a year earlier, after a 6.8 percent gain in the previous three months, the statistics bureau said in Beijing today. >> more

House lending up, others down
On a seasonally adjusted basis, housing finance was up 2.6% compared to January, whilst personal finance was down marginally at -0.2% and commercial finance down a substantial -14.7%. >> more

Jobless numbers rise more than expected
More Australians lost their jobs last month in yet another sign that the global economic slowdown is dragging on the local economy. The jobless rate in March climbed to 5.7%, seasonally adjusted, from 5.2% in February, the most since December of 2003, and considerably more than the 5.4% rise expected by analysts. >> more

Consumers happier
The Westpac–Melbourne Institute Index of Consumer Sentiment increased by 8.3% in April from 85.6 in March to 92.7 in April. >> more

CBA gives a bit, NAB holds, WBC and ANZ ?
National Australia Bank can most afford to take a gamble in again decoupling variable mortgage rates from the cash rate, because it is the least exposed of the banking giants to Australia's housing market. >> more

RBA lowers cash rate -0.25%
Recent information from abroad indicates that the contraction in the global economy continued during the first few months of this year, and most assessments of the near term outlook have been further marked down.
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Overseas vistors stable
On a trend basis, overseas visitors were down only 0.7% year on year. Long term migration remained high, with net total migrants for the last 12 months 30% higher than in the previous 12 months. >> more

Australian equity raisings are tops
Australia has led the world in the amount of new equity raised by companies from global sharemarkets over the past six months. Superannuation money has filled the gap left by debt, which previously satisfied the need for additional capital. Australia's share shot up from 5 per cent of the worldwide total between April and September to just under 15 per cent by the end of December, as 29 of the top 50 companies on the ASX started tapping shareholders for new funding. That then soared to more than 20 per cent in the first quarter of this calendar year. >> more

Trade balance shocks, in a good way
The February trade balance hit + A$ 2.8 billion on an unadjusted basis. On a seasonally adjusted basis, the A$ 2,109 million surplus was well above the $700 million the market expected. The positve balance was driven by falls in consumption in non-industrial transport equipment and consumption goods and a rise in non rural and other goods exports, especially gold. The A$ reacted strongly, trading over US$ 0.70.
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Commodity life blood thins
PreliminaryRBA commodity index figures have all sector prices down, compounded by the fall in the A$ / US$ exchange rate. In Australian dollar terms, the index fell by 5.0 per cent in March, following a rise of 0.6 per cent (revised) in February. Coal and iron ore were hardest hit. >> more

Building approvals bounce
Australian building approvals rose 7.8% to 10,050 units in February, seasonally adjusted, from an upwardly revised 9.327 units in January, the Australian Bureau of Statistics said on Wednesday. The market forecast was for building approvals to have recorded a rise of 1.5% in February.
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Retail sales resume post Xmas fall
Retail sales dipped 2%, seasonally adjusted, in February following a revised 0.5% gain in January, Australian Bureau of Statistics figures show, suggesting consumers cut spending after Christmas. >>> more

Manfacturing activity decline slows
Weak demand, especially from China, lack of credit and project being put on ice helped keep manufacturing activity falling, according to the Australian Industry Group - PricewaterhouseCoopers report for March. Inventory run down continued as new orders fell. Capacity utilisation is at its lowest since 1992. >>> more

Confidence creeps up
In mid March the weekly Roy Morgan Consumer Confidence Rating is at 97.2 (up 3.7 points).Thinking about the longer-term, 33% (up 1%) of Australians expect Australia to have ‘good times’ economically over the next five years compared to 22% (down 5%) that expect Australia to have ‘bad times.’ >>> more

Housing OK......in the medium term
In a speech to the Annual Housing Congress, RBA Head of Economic Analysis, Anthony Richards held out hope for positive developments in the housing market, on a number of counts. Falling interest rates, a rise in average income compared to house prices since 2003 and an improvement in the national savings rate, has improved house affordability. The balance of supply and demand for housing also remains tight and the level of mortgagee sales will not reflect the US experience, where lax lending standards and low "teaser" rates caused such grief. Mr Richards did not however refer the the short term effects a substantial increase in unemployment or a deep prolonged recession would have. >>> more

A honest banker....
National Australia Bank chief executive Cameron Clyne says bank funding costs may continue to increase for the foreseeable futures. Mr Clyne also indicated there was no guarantee NAB would pass on in full any interest rate cut by the Reserve Bank of Australia (RBA) next month.
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Is retail ready for a bit of bonding ?
With bank lending becoming more restrictive, large corporate borrowers may start looking to the retail investor. Tabcorp, rated BBB+ by Standard & Poor, has announced a $200 million 5 year issue, to be listed on the ASX and with a minimum subscription amount of $5,000. The word is that the margin will be equivalent to 4.00% to 4.50% over bank bill rates. Senior debt issues (i.e. ranking equally with bank loans) targeted at retail money are as rare as hen's teeth in Australia, although they are a common sight in New Zealand. There, a moribund equity market has driven investors to seek retirement security through yield rather than capital gain. With one third of Australian super self managed, will we see more corporate retail issuance seek to tap that liquidity?

No surprise - Aussies are worried
Australians are increasingly concerned about their family’s financial situation over the next year with 23% (up 4%) of Australians expecting their family to be ‘worse off’ financially in a year’s time. >>> more

Housing starts at 8 year low
Dwelling unit commencements fell 9.9% seasonally adjusted, in the December quarter to be 19.5% lower than a year before and at a near-eight year low. >>> more

US Tres Sec cops a Keating serve
When Barack Obama announced his champion to rescue the world from economic ruin, it was the first time most Americans had ever heard the name Tim Geithner. If anyone in the US media had thought to ask a former Australian prime minister for his assessment, they would have heard a different view. And they would not have been so surprised at Geithner's performance since.
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CBA to give unemployed an interest breather
Home owners who lose their jobs will be thrown a lifeline by the nation's biggest mortgage lender, which yesterday announced interest deferrals of up to 12 months to stop customers falling into arrears and triggering a wave of forced sales . >>> more

House prices to fall ?
The Australian housing market faces a "perfect storm" of financial pressures which could push prices down as much as 30 per cent, according to a report by BCA Research in Canada. >>> more

Vehicle leasing down 25% year on year
The January lending commitment figures have total vehicle lease commitments, on a trend basis, down 25% on last January. On a seasonally adjusted basis, housing finance was up 2.3% and commercial finance was up 6.5%from December. >>> more

Unemployment through 5%
Australia's unemployment rate has hit 5.2% after the economy suffered the biggest monthly drop in full-time jobs since 1991. The jobless rate is now the worst it has been in four years, further proof the economic downturn is getting worse. >>> more

Housing finance up a tad
The total value of dwelling commitments excluding alterations and additions (trend) increased 1.4% in January 2009 compared with December 2008. The seasonally adjusted series for the total value of dwelling finance commitments excluding alterations and additions increased 0.7% in January 2009. >>> more

Consumer confidence holds firm
The slump in consumer confidence may be flattening out as Government handouts start to arrive, raising hopes the economy will continue to outperform overseas rivals.
>>> more

Jobs like hens teeth
The number of job ads has plummeted 40% in the past year, hitting a new low in February, as employers halt hiring and start shedding staff.
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Aust new home approvals down - 3.7%
Approvals for new homes dropped in January, despite the Government's supersizing of grants to new home buyers and a rash of interest rate cuts over the past half year. New home building approvals dipped 3.7% in January, according to data from the Australian Bureau of Statistics, as homeowners looked past stimulus plans and focused on the recession looming. The market forecast was for building approvals to gain 1% in January. >>> more

Aust imports and exports both down
The Australian balance of goods and services was a surplus of $970 million, seasonally adjusted, in January, from a downwardly revised $417 million surplus in December, figures from the Australian Bureau of Statistics (ABS) show on Thursday. During the month, exports fell by 5.0% in adjusted terms, while imports were down 7.0%. Economists were expecting a surplus of $1.2 billion in January. >>> more

US keeps sinking ...
The US economy "deteriorated further" in almost all corners of the country over the last two months as consumer spending slumped and manufacturing declined, the Federal Reserve said in its regional business survey. >>> more

Australian car sales plunge
The car industry continues to bear the brunt of the economic downturn, with new car sales down 22% last month. >>> more

Aust GDP down -0.5% in quarter
In seasonally adjusted terms, GDP decreased by 0.5% in the December quarter. Through the year GDP growth was 0.3%, while non-farm GDP was flat. >>> more

Corporate borrowing costs at all time high
The cost of corporate borrowing has risen to levels not seen since the peak of the credit crunch amid growing concerns governments could default on their debt repayments. >>> more

RBA surprises with no cut
"Market and mortgage rates are at very low levels by historical standards and business loan rates are below recent averages, reducing debt-servicing burdens considerably. Together with the substantial fiscal initiatives, the cumulative decline in interest rates will provide significant support to domestic demand over the period ahead. On this basis, notwithstanding evident economic weakness at present, the Board judged that the stance of monetary policy was appropriate for the moment." >>> more

Business confidence hits all-time low
A quarterly gauge of business confidence has fallen to an all-time low as companies hunker down for a year ahead of weak profits and faltering growth. Companies' confidence dropped to minus-31 index points in the three months to December, the lowest level since the data series began in 1989, according to the National Australia Bank's quarterly survey. >>> more

RBA makes another big cut
"Measures to stabilise financial systems have contributed to an improvement in the functioning of credit markets over the past couple of months. This, in conjunction with expansionary macroeconomic policy measures being taken around the world, should assist in promoting global recovery over time. But the near-term outlook for the global economy is the weakest for many years." >>> more

Australian economy heading for 'scarily fast' fall
Australia is heading for the sharpest economic slowdown in its history and recent prosperity will fall "scarily fast" on the back of waning demand from China. "This is not just a recession. This is the sharpest deceleration Australia's economy has ever seen," the Access Economics think-tank said. >>> more

Deposits guarantee is 'a moral hazard'
The OECD has warned that the Government's unlimited guarantee of bank deposits may encourage reckless lending, making the financial crisis worse. Although the Government has promised to remove the guarantee in three years, the OECD says that both depositors and banks will now believe the Government will always come to their rescue in times of trouble. >>> more

Housing slump fuels bets on deep interest rate cut
A sharp fall in the number of homes approved for construction in November has increased the odds for another rate cut next month. >>> more

Happy new year
We will be expanding our service in 2009, so keep an eye out for our new features, coming soon.

Super funds hit hard
Australian superannuation funds have lost A$91 billion in the year to September 30, the equivalent of about 8% of the nation’s economic output, as the global credit crisis devalued assets globally, according to data released by APRA, said Bloomberg. >>> more

US Fed slashes rate to zero-0.25%
The Federal Reserve cut the main US interest rate to “a target range” of between zero and 0.25% and said it will do whatever is needed to end the longest recession in a quarter-century and revive credit. >>> more

Banks ignored loan risk warning
Australia's biggest banks were "relaxed" about the high number of mortgage defaults in western Sydney and "sanguine" about the quality of secured housing stock, according to Reserve Bank accounts of confidential meetings with the lenders. Despite warnings from regulators to be more careful when lending money, the big banks persevered with low-document loans and high loan-to-value ratios - even as the number of customers in arrears increased - to see off competition from smaller lenders. >>> more

Interest rate cut creates 43,000 losers
The 43,632 borrowers who opted for fixed-rate mortgages between March and August this year, when interest rates were at a decade-high peak, face hefty fees if they now want to switch back to a standard variable loan. >>> more

A big 1.00% cut
"Weighing up the international and domestic developments of recent months, the Board judged that a further significant reduction in the cash rate was warranted now, to take monetary policy to an expansionary setting. As a result of today’s decision, the cash rate will be at its previous cyclical low point. Given trends in money market yields, most lending rates should fall significantly and will also reach below-average levels". >>> more

RBA cuts rates to 4.25%
The Reserve Bank has slashed its key interest rate by more than expected in its latest effort to prevent Australia's economy from sliding into a recession. The central bank lopped a full percentage point, or 100 basis points, off its key cash rate, reducing it to 4.25%. That level matches its previous record low - reached in the wake of the 9/11 terrorist attacks in the US in 2001 - since the RBA began targeting rates about two decades ago. >>> more

A mountainous bet
An academic predicting a collapse in house prices has made a bet with Macquarie Group economist Rory Robertson ("Rate Cut Rory") that commits the loser to walk from Canberra to the top of the nation’s highest mountain. A forecast by University of Western Sydney Associate Professor Steve Keen that house prices will collapse by 40%, double the current plunge in the US, has a 1% chance of being correct, Robertson was reported by Bloomberg as saying. >>> more

Babcock on the brink
The debt-stricken investment group Babcock & Brown was clinging to its corporate life as it sought to persuade one of its key bankers, HypoVereinsbank, to release a substantial sum of the company's own money to which the lender has frozen access. However, the German bank has struck its own troubles and Hypo Real Estate, a lending arm associated with the bank, was forced to receive E50 billion (A$100 billion) recently as part of the German Government's bailout. >>> more

More rate cuts coming
Australia's central bank signaled it's prepared to add to the most aggressive interest-rate cuts in 17 years as it tries to ensure the economy sidesteps a looming global recession. The bank cut its 2008 economic expansion forecast to 1.5% from 2% and said it had been forced to make ``unusually large'' reductions in the overnight cash rate target in October and November because renewed global turmoil raised the risk growth will stall. >>> more

Budget takes a $40 billion hit
Australia's economy will slow, unemployment will rise and the Federal Budget will take a $40 billion hit from the global economic crisis, according to the Government's mid-term economic forecasts. The financial woes mean that economic growth will slow to 2% in 2008-09, down from the 2.75% growth predicted in the May budget. Growth for 2009-10 was cut to 2.25%, compared to a budget forecast of 3%. >>> more

Allco: an investor's tragedy
It was just a matter of time. Another tranche of bull-market heroes has bitten the dust, victims of leverage and their own greed and ambition. The Allco boys were pretty special though, some of the smartest guys in the boom, and veritably outdone by their own smartsambition. >>> more

RBA slices another -0.75%
"Consumer price inflation in Australia remained high in the September quarter. As expected, CPI inflation in year‑ended terms picked up to 5 per cent, while underlying measures were just over 4½ per cent. Nonetheless, capacity pressures are now easing and, given the outlook for more moderate growth in demand and activity, it is reasonable to expect that inflation in Australia will soon start to fall. Global disinflationary forces will assist in this regard, though the depreciation of the exchange rate means that the decline of inflation to the target could take longer than would otherwise be the case". >>> more

No need to fear house price dive, says RBA
House prices in Australia are not set for precipitous falls, as in the US, nor are household balance sheets suffering too badly, says the Reserve Bank deputy governor, Ric Battellino. >>> more

First-time buyers storm housing market
First home buyers captivated by the lure of $21,000 in new government grants have stormed builders and real estate agents in search of bargain.The mini-boom was the most tangible sign yesterday that Prime Minister Kevin Rudd's $10.4 billion economic rescue package was taking effect. >>> more

Home buyers face cost blowout
There could be further pressure on home-buyers seeking to get a foot into the residential housing sector after the peak body for builders reported costs were racing ahead of inflation. >>> more

Banks are safe: Wood
Although the unlocking of bank lending in world markets won't happen overnight, lending between banks will resume, the key to restoring credit flows to business and households. The turning point was the announcement of injections of large sums of government money to recapitalise banking systems in the US, Europe and Britain. >>> more

Tackling panic
The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression. The Danes, however, have been caught in a currency trap, and raised their official rates. >>> more

RBA eases credit even more
The RBA has announced a significant expansion of domestic market facilities for authorised deposit-taking institutions, to meet the crisis in "global money markets [that] have deteriorated significantly". >>> more

RBA slashes rates 100 bps
"Given [the international tumoil], the Board judged that a material change to the balance of risks surrounding the outlook had occurred, requiring a significantly less restrictive stance of monetary policy. The Board also took careful note of movements in funding costs in wholesale markets. Having weighed these considerations, the Board decided that, on this occasion, an unusually large movement in the cash rate was appropriate in order to bring about a significant reduction in costs to borrowers. The Board does not, however, regard that movement as establishing a pattern for future decisions". >>> more

Banks turn to Future Fund for cheap cash
Three of Australia's biggest banks tapped long-term loans from the Future Fund as cash dried up from other sources in the wake of the collapse of US investment giant Bear Stearns. Documents obtained by The Australian under Freedom of Information laws show the ANZ, Westpac and the National Australia Bank obtained funding for as long as 10 years. >>> more

Rates set to be slashed - will banks follow?
Interest rates will be cut deeper and faster than previously expected, as the global financial crisis continues to bite. Financial markets are expecting the Reserve Bank to cut the official cash rate by 50 basis points on October 7, bringing the rate to 6.5%. Banks are refusing to guarantee they will pass on the cuts in full and analysts have warned they are unlikely to. >>> more

Bank run hits Hong Kong
For the first time since the Asian financial crisis more than a decade ago, Hong Kong has faced a bank run. Hundreds of depositors lined up at the city's third-largest lender Bank of East Asia as the bank hit out at ``malicious rumors,'' and Chairman David Li rushed back to Hong Kong from the US to reassure clients and investors. The city's central bank jumped to BEA's defense and police said they're investigating phone text messages questioning its health. >>> more

Regulators in pact to respond to any financial crisis
Financial regulators have forged a pact for a joint response to any financial emergencies that emerge. The move is designed to avoid the lack of co-ordination that has hampered efforts in the United States to respond to the crisis. The agreement struck between Treasury, the Reserve Bank, APRA and ASIC says that private sector or market-based solutions are the preferred means of responding to financial system distress. >>> more

Australia surviving financial storm
The turmoil in global financial markets continues to have muted impact on the profits of Australian banks or the ability of homeowners to repay their loans, the Reserve Bank of Australia said in its September Financial Stability Review. They also noted "The general increase in uncertainty has also meant that most banks are taking a more cautious attitude to lending and paying increased attention to their funding". >>> more

Australia's banks sound: IMF
Australia’s banks have demonstrated their soundness during the recent global financial turmoil, but some vulnerabilities remain, says the IMF in its latest report. >>> more

Aussie banks to ride out storm, says Murray
Former Commonwealth Bank chief David Murray has declared the investment banking model "broken", warning the Australian financial sector will pay for Wall Street's excesses even though local banks are well-placed to ride out the storm. >>> more

Economy in slowdown, but keeps growing
The economy slowed in the June quarter, according to today's national accounts figures, but fears it might signal the start of a slide towards recession proved unfounded. The Government was bracing for a poor growth result but instead Australia's real GDP rose by a seasonally adjusted 2.7% for the year to June. >>> more

First cut in seven years
Announcing a -0.25% cut of the cash rate to 7%, the RBA said "it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead. Inflation is likely to remain relatively high in the short term, with the CPI affected by the high global oil prices in mid year and other increases in raw materials prices. But looking further ahead, the outlook for demand suggests that inflation in both CPI and underlying terms is likely to decline over time, provided wages growth remains contained. The Bank’s forecast remains that inflation will fall below 3 per cent during 2010." >>> more

RBA in a position to cut rates
Australia's central bank is in a position to cut interest rates from a 12-year high because consumers have trimmed spending enough to cool the economy and inflation, said Deputy Governor Ric Battellino. "We cannot wait to see a fall in inflation before we start cutting rates because by then it would be too late," Battellino told a parliamentary committee in Sydney. "We try to be pre-emptive when we start tightening and pre-emptive when we start easing". >>> more

Easing bias
"Weighing up the available domestic and international information, the Board judged that the cash rate should remain unchanged this month. Nonetheless, with demand slowing, the Board’s view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing". >>> more

Critical months ahead
The next three months could be critical. If what has happened so far is just a one-off adjustment to higher interest rates and perceptions of risk, then the economy will just have a below-average year or two before resuming its course. But if activity keeps falling, and the job losses keep mounting, business and households will pull in all sails to ride out the storm. That's when the Reserve will have to change tack, and start loosening rates, even if inflation remains high. >>> more

Rates signal credit heat is rising again
The subprime credit crisis, like a sturdy young'un, is going from strength-to-strength as it approaches its first birthday, with troubling consequences for Australian borrowers. >>> more

Looking the other way on inflation
"Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, while the inflation outlook remains concerning, the Board’s assessment continues to be that demand growth will be moderate this year. The most recent flow of information has given additional support to that assessment. Inflation is likely to remain relatively high in the short term, and the CPI will be further boosted in coming quarters by the recent rises in global oil prices. Looking further ahead, inflation in both CPI and underlying terms should decline over time, provided demand continues to evolve as expected." >>> more

Rates staying high
Interest rates will have to remain high for as long as the commodities boom lasts, with Reserve Bank governor Glenn Stevens making no apology for the pain being inflicted on parts of the nation missing out on the mining riches. >>> more

Fears we're on stagflation path
Falling employment and rising inflationary expectations are raising fears that the economy is headed for a period of stagflation, last experienced in the 1970s. >>> more

Shock drop in jobs
Australia's economy shed jobs in May, a surprising slump that snapped 18 months of jobs growth, relieving pressure on the Reserve Bank to raise interest rates further to cool demand. >>> more

RBA: We've got it about right
"Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, the Board’s current assessment is that demand growth will be moderate this year. In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected. Should demand not slow as expected, or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed." >>> more

Money supply now $1 trillion
The broad measure of Australia's money supply, M3, pushed on through $1 trillion at the end of April 2008. It grew at 20% year-on-year, although that growth rate was slower than at any time in the past six months. >>> more

Companies stuck in subprime mire
The credit crunch arising from the US subprime mortgage crisis has started to hit Australian small and medium enterprises, affecting their investment decisions and growth plans. >>> more

Investment growth slows
Australian business investment growth probably slowed in the first quarter, adding to signs the highest borrowing costs in 12 years are prompting companies to review spending plans. >>> more

Budget won't take pressure off inflation
Market economists agreed. The Government has produced a reasonable budget, but not one that will take the pressure off inflation or interest rates. >>> more

CRT held again, but inflation a worry
"Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, the Board’s current assessment is that demand growth will remain moderate this year. In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected. Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed." >>> more

Higher rates from broader objective
Australia's monetary policy has arrived at a critical point, and how the Reserve Bank handles it will have profound long-term consequences for the economy and the central bank itself, indeed for all of us. >>> more

Swan: Global downturn to keep rates, inflation high
Australians should brace for a tough budget and a protracted period of high interest rates as the Federal Government tackles an unstable international outlook and inflation, the Treasurer, Wayne Swan, warned after attending meetings of the International Monetary Fund in Washington. >>> more

RBA holds CRT
"Sentiment in global financial markets remains quite fragile and Australian financial intermediaries are experiencing increases in funding costs, which are being passed on to borrowers. Some tightening in credit standards for more risky borrowers is occurring.As a result of the recent monetary policy decisions and rises in borrowing costs that are occurring independently of changes in the cash rate, the overall tightening in financial conditions since the middle of 2007 has been substantial. That is working to foster the moderation in demand growth that will take pressure off inflation. In the short term, inflation is likely to remain relatively high, and both the CPI and underlying measures will probably rise further in year-ended terms in the March quarter. However, inflation should decline over time, provided demand slows as expected". >>> more

Higher bank rates, raisings on the cards
The double prospects of further mortgage rate increases outside officially-sanctioned Reserve Bank rises and possible capital raisings by the leading banks remains high even after across-the-board home loan increases this week of as much as 0.35 percentage points. >>> more

RBA lifts rates as expected
"This adjustment was made in order to contain and reduce inflation over the medium term. Inflation was high in 2007, with an annual CPI increase of 3 per cent in the December quarter and underlying measures around 3½ per cent. Domestic demand grew at rates appreciably higher than the growth of the economy’s productive capacity over the year. Labour market conditions remained strong into early 2008 and reports of high capacity usage and shortages of suitable labour persist. Inflation is likely to remain relatively high in the short term, and will probably rise further in year-ended terms, before moderating next year in response to slower growth in demand". >>> more

Swann: Economy to remain strong as rates rise
Treasurer Wayne Swan said the nation's economy will remain ``very strong'' on high commodity prices, even as interest rates are expected to rise. >>> more

ANZ's higher exposure to Centro
A review of problem corporate loans on the books of the big five banks has revealed a larger than expected $680 million unsecured exposure by ANZ to ailing property group Centro. >>> more

RBA poised to lift rates
The Reserve Bank has predicted economic growth will slow considerably this year, but not by enough to halt the upward march of interest rates. The bank's hawkish statement, tipping a long period of high inflation even as the economy lost power in the months ahead, shocked investors. >>> more

Gross: Don't rescue the monolines
Bill Gross, the founder and managing director of US bond fund manager Pimco, attacks the ludicrousness of relatively small bond insurers guaranteeing the debt of America’s state governments and how the world’s financial markets were taken in by this. >>> more

Cost of bank switches to be cut
The government is fast-trackeding a Treasury plan to make it easier for customers to switch banks, by reducing fees, amid escalating anger at the banks' haste to raise mortgage rates faster than the Reserve Bank. >>> more

CBA's mortgage sting
Commonwealth Bank has added extra sting to the 0.25% rate rise by the Reserve Bank by lifting the interest rate on its variable home loans by 0.30%. >>> more

Westpac's $30 bil. adds liquidity to lending
Westpac has underlined the "dash for cash" needed to keep credit markets from seizing up amid the global liquidity crisis by disclosing that it has $30 billion to meet corporate borrowing demands. >>> more

Credit crunch lays siege to Macquarie
Macquarie Bank's troubled Fortress Notes suffered another calamitous fall in January, bringing their losses to $75 million or almost half their value since the global credit crunch hit in July. >>> more

RBA raises cash rate target
"Recent information points to significant inflation pressures. CPI inflation on a year ended basis picked up to 3 per cent in the December quarter, with underlying measures around 3 1/2 per cent. This was a little higher than was expected a few months ago. Indicators of demand remained strong through the second half of 2007, and reports of high capacity usage and shortages of suitable labour persist. In the short term, inflation is likely to remain relatively high and will probably rise further in year. Having weighed both the international and domestic information available, the Board concluded that a tighter monetary policy setting was needed now." >>> more

"Rate dip by year end"
Thousands of people will be affected by a widely-tipped hike in interest rates today but the rate cycle should turn around by the end of the year, Aussie Home Loan founder John Symond predicts." >>> more

Fed cuts again
The US Fed cut its rate again to 3%, saying "Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets." >>> more

New home sales fall under the weight of rate rises
New home sales fell in the final month of 2007, the second consecutive monthly decline, as higher interest rates and further pressure on house prices bit into the new home building industry. >>> more

Fed slashes rates to quell panic
In this emergency reaction, they said "The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets." >>> more

Credit unions to raise rates
Credit unions are being forced to raise their mortgage rates even if they are not directly exposed to rising wholesale funding costs, in a bid to prevent the major banks from luring away their deposit base. >>> more

Kangaroo bonds leave investors exposed
Australian superannuation investors have billions of dollars linked directly to US companies at the centre of the credit crisis, through the sale in recent years of unsecured "kangaroo bonds". Potential exposures include $1.2 billion raised in 2006 for Northern Rock in Britain, $1.6 billion for US mortgage provider Sallie Mae, and $925 million for US lender Countrywide. >>> more

Financial risk harder to track
The complexity of the global financial system and the imbalance of information available to market participants means the ability to track risk has declined "probably forever", Moody's has said. "It is extremely unlikely that in today's markets we will ever know on a timely basis where every risk lies," analysts at the ratings agency, led by chief international economist Pierre Cailleteau, wrote in a report. The warning touches on a hot topic in the credit crisis that engulfed markets in 2007. >>> more

Policy shift pushes up yuan
China's central bank is again revaluing its currency, the yuan - but in contrast to the sudden one-off move that jolted global markets in 2005, the current rise is being engineered over weeks and has been signalled. The yuan's sharp climb against the US dollar in the past few weeks, which Shanghai traders are calling a "mini revaluation", suggested the central bank was adopting a new approach to the currency market as it battled rising inflation, the Sydney Morning Herald reported. >>> more

Rates rise without the RBA
Two of Australia's biggest banks are to defy political pressure and raise interest rates for tens of thousands of homeowners. National Australia Bank will add 0.12% to its standard variable home loan, independent of any move by the Reserve Bank. The increase will take the bank's standard variable lending rate to 8.69%. Business loans will be increased also. Its rival ANZ is likely to move as well, and analysts believe homeowners should prepare for a rush of rate rises from all major banks. The Australian reports. >>> more

Season's greetings
We wish all our readers happy holidays, good weather, and a properous New Year. Enjoy your break.

Inflation pressures rise
Australian inflation will rocket to 4% by March, making further rate hikes here a near certainty in the new year. The Australian reports. >>> more

China raises rates - again
The PBoC has raised interest rates for the first time since the government announced a shift in monetary policy from "prudent" to "tightening", but the 6th time in 2007 It is doubtful that the latest tightening moves will create any serious dent on rising inflation or heated investment growth. Their government's reliance on non-market policy tools such as administrative controls on bank lending could generate additional distortions in the economy down the road. >>> more

Prompt corrective action
The European Central Bank is keen these days to spew cash into troubled markets. On Tuesday December 18th it accepted bids from 390 banks for close to €350 billion in short-term money, at below-market rates (between 4.21% and 4.45%). Is this is a $500 billion Christmas present, or a justifiable measure to avert an unseasonal crisis? The Economist investigates. >>> more

Credit dries up as banks price in fear
The second wave of the US sub-prime crisis yesterday caused a logjam in Australia's very short-term money market, as seasonal demand for cash out of the US and the liquidity squeeze triggered a surge in Australian rates. >>> more

Why the credit squeeze is a turning point for the world
"These are historic moments for the world economy. I felt the same during the emerging market financial crises of 1997 and 1998 and the bubble in technology stocks that burst in 2000. This “credit crunch” may, I believe, be an equally important turning point for financial markets and the world economy. Why do I believe this? Let me count the ways." Martin Wolf of the Financial Times reports. >>> more

Central banks work together to ease credit crunch
The US Federal Reserve, European Central Bank and three other central banks moved in concert to alleviate the credit squeeze threatening global growth, in the biggest act of international economic cooperation since the Sept. 11 terrorist attacks. The Fed said it will make up to US$24 billion available to the ECB and Swiss National Bank to increase the supply of dollars in Europe. The Fed also plans four auctions, including two this month that will add as much as US$40 billion, to increase cash in the US economy. >>> more

Lending dries up as China slams brakes on banks
China's annual inflation rate has accelerated to 6.9%, the quickest pace in 11 years, as the Government takes extreme steps to choke off new lending to private business in order to bring prices under control. New lending for November was constricted to less than half of last year's figure. "It effectively means that banking activity has ground to a halt," said one analyst in a Sydney Morning Herald report. >>> more

RBA leaves rates unchanged
The cebtral bank remains concerned about the outlook for inflation. But given the heightened uncertainty about the international outlook and the local trends in wholesale borrowing costs, both of which could have a bearing on inflation over the medium term, it judged that the current stance of monetary policy should be maintained for the time being. >>> more

Rudd stays hands-off on interest rates
Labor is committed to promoting competition in the market but has warned banks to remember the plight of their customers when setting interest rates. >>> more

Reverse mortgages 'should be banned'
NA leading expert on debt has called for reverse mortgages to be banned, claiming they are a big risk to the banking system. Reverse mortgages differ from conventional loans because the borrower initially makes no repayments. Instead the principal and the compounding interest are recovered when they die or house is sold. The total loan amount grows over time. With reverse mortgages the lenders are building in an expectation of continued asset price inflation for the next 15 to 25 years. >>> more

US$40b extra to ease crunch by ECB
In another indication that the credit crisis is not over, the European Central Bank is to supply the money markets with an extra €30 billion in one-week funds. >>> more

US$8b extra to ease crunch on Wall St
Central bankers are becoming nervous that a renewed credit crunch could destabilise financial markets around the end of next month, and the US Federal Reserve has pumped an additional US$8 billion into the market to help ease the mounting pressure. >>> more

NAB may hold RAMS short-term debt
National Australia Bank, the nation's largest, said it may have to hold short-term debt of Rams Home Loans Group on its own balance sheet if the mortgage company fails to secure refinancing. >>> more

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