As I mentioned on the 13th of September future rate hikes hadn’t been fully priced into the curve and the suggestion was that there would be better opportunities in the three-year part of the curve at a later date. Since then Glenn Stevens has spoken and lifted the possibility of an October rate rise. As such the curve has steepened in the short end and flattened in the long end. For instance, 30 day bills have gone up 9 points, 180 day bills up 13 points, 3 year government bonds have moved up 15 points yet the 10 year government bond was at 5.07% and while it has moved up and down in the interim is still at 5.07%. The margin between 3-yr and 10-yr bonds has moved from 35 bps in to 20 bps.
The reason the long end of the curve has stayed in the same area is two fold. The market is taking the view that while rates will need to rise in the future it’s impact in the long run will be to keep inflation under control (the main determinant of long rates). The other reason is one of supply and demand. We have a limited supply of government bonds in Australia and one trader I speak with informs me that there is an insatiable demand, from Central Banks around the world, for our AAA bonds. This is a shift in the way they operate and their focus in the past has almost exclusively been on the USA.
Despite the fact the short end has moved up I still believe there is further to go. IF the RBA tightens next week the market will start to factor in a tightening in November and possibly one in December or February. The RBA rarely moves rates in isolation.
Such a scenario could result in Australia having a humped yield curve or possibly even an inverse one. A humped curve would result in rates in the short and longer parts of the curve being lower than the middle (3 – 5 years) part of the curve.
If the cash rate ends up higher than 10-year rates, a distinct possibility, we’ll have an inverse curve. In this case the market will be telling us that cash has moved to a restrictive setting and that growth and inflation are likely to be subdued in the long run.
For this reason there could be some better opportunities from the 90-day to 3-year part of the curve in the next few weeks.
The caveat to the above however is a further deterioration in Europe, which could delay the RBA’s rate hike plans.
September 30, 2010
September 29, 2010
European Worries Not Over
Ireland seems to be coming in for a bit of a beating at the moment. With the Irish government suffering a series of downgrades over the last year and a half Allied Irish Bank has now had to be bailed out again placing them under further pressure. S&P have indicated that it may downgrade Ireland further as the AIB bailout looks like exceeding EU 35bn. Irish 10-yr bonds jumped 17bps to be 453 points over the German Bunds - a record. Irish CDS spreads are now 522bps, a lift of 33.
Portugal and Spain are now also feeling a bit of spill-over angst.
These issues will only impact on Australia if they worsen and could come in the form of; increased difficulties for global fund raising by domestic banks (in turn this will keep margins high for term deposits) and a potential delay by the RBA in the next cash rate rise - widely expected to be next week.
Portugal and Spain are now also feeling a bit of spill-over angst.
These issues will only impact on Australia if they worsen and could come in the form of; increased difficulties for global fund raising by domestic banks (in turn this will keep margins high for term deposits) and a potential delay by the RBA in the next cash rate rise - widely expected to be next week.
September 27, 2010
Rate Rise October 5?
All the majors have moved their forecasts for the next rate rise to the next board meeting on October 5. The currency traders are also certainly thinking that way with the currency moving up to 96 cents against the US dollar.
The yield curve has also adjusted, and in my opinion has more to go, in response to Glenn Steven's clear rate rise signals of last week. 180 day rates have moved up by 10 points and 2-year yields have moved up by just over 20 points since this time last week.
The yield curve has also adjusted, and in my opinion has more to go, in response to Glenn Steven's clear rate rise signals of last week. 180 day rates have moved up by 10 points and 2-year yields have moved up by just over 20 points since this time last week.
September 23, 2010
Rate Rise Timing
The NAB has moved forward it's expectations for the next rate hike to the RBA's next board meeting on October 5. This is prior to the Oct 28 CPI release and ahead of most expectations for a November move. They state that:
"With some recent abatement in global economic concerns, RBA Governor Glenn Stevens signalled in a speech on Monday that the Board were strengtheningtheir focus on the upside risks to inflation. His sentiment that ‘the task ahead is likely to be one of managing a fairly robust upswing’ reiterated RBA communication following the September 7 Board meeting that higher interest rates would be required at some point in the period ahead.
The tone of recent RBA language has echoed that published after the September 2009 and February 2010 meetings, both occasions that were immediately followed by a 25 basis point rise in the cash rate."
Their long term forecast of 5.50% by the end of 2011 remains unchanged.
"With some recent abatement in global economic concerns, RBA Governor Glenn Stevens signalled in a speech on Monday that the Board were strengtheningtheir focus on the upside risks to inflation. His sentiment that ‘the task ahead is likely to be one of managing a fairly robust upswing’ reiterated RBA communication following the September 7 Board meeting that higher interest rates would be required at some point in the period ahead.
The tone of recent RBA language has echoed that published after the September 2009 and February 2010 meetings, both occasions that were immediately followed by a 25 basis point rise in the cash rate."
Their long term forecast of 5.50% by the end of 2011 remains unchanged.
September 22, 2010
RBA Board Meeting Minutes
In the minutes released yesterday the RBA painted a 'stable' picture of various segments of the Australian economy. It touched on international risks including the USA but since the meeting many worries concerning the USA have dissipated. This is one of the factors that has been holding them back from lifting rates and with Australia heading to above trend growth the question regarding the next hike is now 'When' rather than 'If'. My thinking is still that post the CPI release on Oct 28 is the earliest but there is a slim chance they will preempt that release by raising rates next month.
I've pasted the concluding section below as usual but the key sentence is:
'While policy had to be alert to these risks, members considered that if the central scenario came to pass it was likely that higher interest rates would be required, at some point, to ensure that inflation remained consistent with the medium-term target.'
Considerations for Monetary Policy:
Members noted the increase in concerns over the past month about the outlook for the US economy and government debt in some European countries, which was weighing on market sentiment globally. However, at the same time there had been further evidence that the Australian economy had solid momentum and that firms expected to increase investment significantly over the period ahead. Prospects in the resources sector were especially positive, and the increase in investment in this sector would have significant flow-on effects to the broader economy. Members observed that previous investment booms and increases in the terms of trade had posed significant challenges for economic policy, and that high levels of resource utilisation were likely to put pressure on inflation.
The central scenario remained for the Australian economy to grow at trend pace, or a bit above, over the next few years. This forecast incorporated quite a subdued outlook for the main G7 economies and around trend growth in Asia, with domestic demand in Asia playing a more important role than it had done historically. Members noted the risks to this outlook, including that the recent loss of momentum in the United States could develop into a renewed downturn or that the moderation of growth in China and east Asia could prove to be larger than currently expected. If these risks eventuated, or if there were new financial shocks, another round of extreme risk aversion could result, with adverse implications for the global economy.
While policy had to be alert to these risks, members considered that if the central scenario came to pass it was likely that higher interest rates would be required, at some point, to ensure that inflation remained consistent with the medium-term target. For the immediate decision, there had been no significant change in the overall outlook, with conditions looking a little stronger domestically than they had at the previous meeting, but looking a little weaker internationally. With the economy currently growing at around its trend rate, underlying inflation having moderated and lending rates at around average levels, the Board's assessment was that the current setting of monetary policy remained appropriate for the time being.
The Decision:
The Board decided to leave the cash rate unchanged at 4.5 per cent.
I've pasted the concluding section below as usual but the key sentence is:
'While policy had to be alert to these risks, members considered that if the central scenario came to pass it was likely that higher interest rates would be required, at some point, to ensure that inflation remained consistent with the medium-term target.'
Considerations for Monetary Policy:
Members noted the increase in concerns over the past month about the outlook for the US economy and government debt in some European countries, which was weighing on market sentiment globally. However, at the same time there had been further evidence that the Australian economy had solid momentum and that firms expected to increase investment significantly over the period ahead. Prospects in the resources sector were especially positive, and the increase in investment in this sector would have significant flow-on effects to the broader economy. Members observed that previous investment booms and increases in the terms of trade had posed significant challenges for economic policy, and that high levels of resource utilisation were likely to put pressure on inflation.
The central scenario remained for the Australian economy to grow at trend pace, or a bit above, over the next few years. This forecast incorporated quite a subdued outlook for the main G7 economies and around trend growth in Asia, with domestic demand in Asia playing a more important role than it had done historically. Members noted the risks to this outlook, including that the recent loss of momentum in the United States could develop into a renewed downturn or that the moderation of growth in China and east Asia could prove to be larger than currently expected. If these risks eventuated, or if there were new financial shocks, another round of extreme risk aversion could result, with adverse implications for the global economy.
While policy had to be alert to these risks, members considered that if the central scenario came to pass it was likely that higher interest rates would be required, at some point, to ensure that inflation remained consistent with the medium-term target. For the immediate decision, there had been no significant change in the overall outlook, with conditions looking a little stronger domestically than they had at the previous meeting, but looking a little weaker internationally. With the economy currently growing at around its trend rate, underlying inflation having moderated and lending rates at around average levels, the Board's assessment was that the current setting of monetary policy remained appropriate for the time being.
The Decision:
The Board decided to leave the cash rate unchanged at 4.5 per cent.
September 21, 2010
RBA Jawboning
Glenn Stevens commented more directly on Monetary Policy yesterday in a speech than he usually does. The RBA has access basically to two tools. One is the actual cash rate and the other is the ability to influence the expectations of future cash rates. The latter is called 'Jawboning' and that's exactly what Mr Stevens did yesterday. The market has now factored in further rate hikes and just this action has a limiting effect on the economy.
Mr Stevens was preparing the country for a rate hike but at the same time justifying it to regional and other 'non-booming areas'. He explained that the 'two-tiered' economy notion was overblown as there is spillover from booming areas to the rest of the economy over time.
I've pasted a couple of key quotes below as well as a link to the speech - the first couple of pages are interesting in that it explains their approach to Monetary Policy.
"But if downside possibilities do not materialise, the task ahead is likely to be one of managing a fairly robust upswing. Part of that task will, clearly, fall to monetary policy."
"Often, the expectation of what will happen to the cash rate in the future is just as important as, or even more important than, the level of the cash rate today. For this reason what the Bank says – or what people think we have said – can be very influential on markets and behaviour. It is for this reason that central bankers are usually so guarded in public comments."
Mr Stevens was preparing the country for a rate hike but at the same time justifying it to regional and other 'non-booming areas'. He explained that the 'two-tiered' economy notion was overblown as there is spillover from booming areas to the rest of the economy over time.
I've pasted a couple of key quotes below as well as a link to the speech - the first couple of pages are interesting in that it explains their approach to Monetary Policy.
"But if downside possibilities do not materialise, the task ahead is likely to be one of managing a fairly robust upswing. Part of that task will, clearly, fall to monetary policy."
"Often, the expectation of what will happen to the cash rate in the future is just as important as, or even more important than, the level of the cash rate today. For this reason what the Bank says – or what people think we have said – can be very influential on markets and behaviour. It is for this reason that central bankers are usually so guarded in public comments."
September 20, 2010
RBA
Glenn Stevens will be speaking today and the minutes from the last board meeting will be released Tuesday. The market is yet to fully price in the potential for rate hikes next year (or even at the end of this year) and messages coming out of the RBA over the next couple of days may be the trigger the market needs. If this is the case expect the yield curve, which is still exceptionally flat to steepen a little.
September 17, 2010
INDIA
The potential future Governor of the RBA, Philip Lowe, spoke yesterday at great length about the continued growth in China and India and the link in our growth levels moving towards China and away from USA. He also talked about the increasing influence India could potentially have. It's timely therefore that India, in response to it's continued strong growth, lifted rates more than expected last night. Their repo rate went up by 25 basis points and the reverse repo rate by 50 points (25 was expected for both). It's the fifth time this year. The move was to step inflation and normalise their levels of growth.
September 16, 2010
Confidence
Westpac Melbourne Institute Consumer Confidence Index fell by 5% in September to an index number of 113.2. The fall follows solid rises over the two previous months up to a high of 119.2, which is a historically very strong level for the index. The current conditions component fell by 2.7% but expectations took a bigger fall, down by 6.5%.
September 15, 2010
NAB Monthly Business Survey
- showed business confidence rose in August by 9 points to +11, its highest reading since April 2010. Business conditions were unchanged on the month at +5 points, remaining well below the levels reported in H1 2010. As such, and due to other strong readings (GDP), NAB have revised their growth forecast up to 3.25% from 3.00% over 2010. They believe there is some chance of a hike in Nov but chances are that it will be early 2011.
September 10, 2010
Employment - Full-Time up 53,100
The unemployment rate dropped to a 19-month low of 5.1% in August. Of interest is the fact that full-time employment jumped by 53,100 while part-time dropped 22,100.
The labour force data highlights the solid pace of domestic activity thus far in 2010. There have been 350,000 jobs created in the past year, with the annual pace of employment growth now running at 3.2%yoy in August, up from 2.7%yoy in July
The RBA will be watching closely to see WHEN this strong employment trend puts upward pressure on wages and inflation. Expectations are still for a rate hike in the new year but November is still a very real possibility.
Average hours worked rose for the first time in three months, lifting by 0.9 per cent. Hours worked are up 4.4 per cent over the year. The working age population grew by 32,000 in August.
The labour force data highlights the solid pace of domestic activity thus far in 2010. There have been 350,000 jobs created in the past year, with the annual pace of employment growth now running at 3.2%yoy in August, up from 2.7%yoy in July
The RBA will be watching closely to see WHEN this strong employment trend puts upward pressure on wages and inflation. Expectations are still for a rate hike in the new year but November is still a very real possibility.
Average hours worked rose for the first time in three months, lifting by 0.9 per cent. Hours worked are up 4.4 per cent over the year. The working age population grew by 32,000 in August.
September 09, 2010
Housing Approvals
The number of owner-occupied housing finance approvals rose 1.7% in July, after a 3.2% fall in June. The July outcome is only the second rise in owner-occupied approvals since September 2009, as the regular interest rate rises between October 2009 and May 2010 led to consecutive declines in the series.
The total value of loans rose 0.7% in July, with owner-occupier values up 2.3% while investment approvals fell 2.3%, the second consecutive monthly fall. Investor approvals had been trending higher in early 2010, but with house price growth moderating after the rate rise, investor approvals have eased back
US Fed Beige Book
The Federal Reserve’s Beige Book reported ‘continued growth’ in economic activity through late July until the end of August, ‘but with widespread signs of a deceleration compared with preceding periods.’ Of the Fed’s 12 Districts, five of them highlighted mixed conditions or a deceleration in activity
The total value of loans rose 0.7% in July, with owner-occupier values up 2.3% while investment approvals fell 2.3%, the second consecutive monthly fall. Investor approvals had been trending higher in early 2010, but with house price growth moderating after the rate rise, investor approvals have eased back
US Fed Beige Book
The Federal Reserve’s Beige Book reported ‘continued growth’ in economic activity through late July until the end of August, ‘but with widespread signs of a deceleration compared with preceding periods.’ Of the Fed’s 12 Districts, five of them highlighted mixed conditions or a deceleration in activity
RBA Decision
There were no surprises with the RBA's decision to leave rates on hold yesterday. The statement accompanying the decision paints the picture of a board that seems to be happy with the cash rate staying where it is for some time. There were a few tweaks from the last statement however showing that they have a little more confidence in the Australian economy. The next CPI at the end of Oct is likely to be the only thing capable of changing their rates complacency for the time-being. I've pasted a few key sentences from the statement below and the full statement can be found HERE
Through to mid 2011, underlying inflation is likely to be in the top half of the target zone, while CPI inflation will probably be just above 3 per cent for a few quarters due to the impact of the tobacco tax changes.
The current setting of monetary policy is resulting in interest rates to borrowers around their average levels of the past decade. With growth in the near term likely to be close to trend, inflation close to target and with the global outlook remaining somewhat uncertain, the Board judged this setting of monetary policy to be appropriate for the time being.
Through to mid 2011, underlying inflation is likely to be in the top half of the target zone, while CPI inflation will probably be just above 3 per cent for a few quarters due to the impact of the tobacco tax changes.
The current setting of monetary policy is resulting in interest rates to borrowers around their average levels of the past decade. With growth in the near term likely to be close to trend, inflation close to target and with the global outlook remaining somewhat uncertain, the Board judged this setting of monetary policy to be appropriate for the time being.
September 07, 2010
Recent News
AAA Credit Rating Stable for Australia
Standard & Poor's have confirmed Australia's AAA credit rating is stable. All term deposits up to $1M with any eligible ADI (Banks, Building Societies, Credit Unions) are guaranteed by the Australian Government until Oct 2011 so their implied AAA status is affirmed.
ANZ Job Ads
The August report showed a rise of 2.6%, up a little from 1.4% in July with a rise in internet ads (up 2.6% after 1.4%) and newspaper ads, rising 1.5% after +1.4% after having fallen for three months. This points to continued solid annual growth in employment.
Employment figures to be released Thursday are expected to show around 35k more employed (including an extra 5k due to the election) with a rate of 5.2%
TD-Melbourne Institute CPI
The monthly TD-MI CPI gauge for August released yesterday remains
benign. The headline monthly CPI rose 0.2%/3.0% after +0.1%/2.8% in July with rises in alcohol and tobacco (seasonal), fruit and vegetables, and
furniture partly offset by falls in meat and seafood, holiday, and fuel
prices. The trimmed mean CPI measure was flat in August after rising just
0.1% in July. This measure points to an even softer reading on underlying
inflation in Q3, (0.3% for the quarter).
RBA
Expected to remain on hold today.
Standard & Poor's have confirmed Australia's AAA credit rating is stable. All term deposits up to $1M with any eligible ADI (Banks, Building Societies, Credit Unions) are guaranteed by the Australian Government until Oct 2011 so their implied AAA status is affirmed.
ANZ Job Ads
The August report showed a rise of 2.6%, up a little from 1.4% in July with a rise in internet ads (up 2.6% after 1.4%) and newspaper ads, rising 1.5% after +1.4% after having fallen for three months. This points to continued solid annual growth in employment.
Employment figures to be released Thursday are expected to show around 35k more employed (including an extra 5k due to the election) with a rate of 5.2%
TD-Melbourne Institute CPI
The monthly TD-MI CPI gauge for August released yesterday remains
benign. The headline monthly CPI rose 0.2%/3.0% after +0.1%/2.8% in July with rises in alcohol and tobacco (seasonal), fruit and vegetables, and
furniture partly offset by falls in meat and seafood, holiday, and fuel
prices. The trimmed mean CPI measure was flat in August after rising just
0.1% in July. This measure points to an even softer reading on underlying
inflation in Q3, (0.3% for the quarter).
RBA
Expected to remain on hold today.
September 06, 2010
Fears of Double-Dip in US abate
Slightly stronger employment figures than expected in the States has enabled some confidence to return to their economy. Headline payrolls fell 54K, another decline owing to the end of Government temporary census work. Private payrolls though rose 67K after last month’s 107K which along with prior months revealed a pleasing net upward revision to payrolls employment of 123K. The level of private payroll employment therefore in August was some 67K better than expected. The unemployment rate though remained stubbornly high, up from 9.5% to 9.6% from an up-tick in workforce participation.
RBA
Meets tomorrow but there are firm expectations for them to remain on hold. Despite recent strong GDP figures growth could soften slightly in the second half. If the CPI figures at the end of Oct show inflation starting to run away however the RBA will act then.
RBA
Meets tomorrow but there are firm expectations for them to remain on hold. Despite recent strong GDP figures growth could soften slightly in the second half. If the CPI figures at the end of Oct show inflation starting to run away however the RBA will act then.
September 03, 2010
Trade Surplus
Australia’s international trade balance recorded a surplus of $1.888bn, down from a surplus of $3.44bn in June (revised down slightly) and below the bottom of the market forecast range ($1.9bn to $4.0bn), so disappointing.
The positive trend in the surplus remains intact however despite yesterday's result The trend series surplus rising from $2.2bn in June to $2.4bn in July. The July surplus is not far below the average monthly surplus for the June quarter of $2.2bn ($1.6bn for the first two months). The dip in export prices for mining products reversed in August, with a substantial rebound in base metals prices and in iron ore prices (the latter now 20% above its July low). And the Super Hornet (Airforce jets) imports are likely to be a one-off. Consequently, expectations are for another positive contribution to GDP growth in Q3 from the trade accounts.
The positive trend in the surplus remains intact however despite yesterday's result The trend series surplus rising from $2.2bn in June to $2.4bn in July. The July surplus is not far below the average monthly surplus for the June quarter of $2.2bn ($1.6bn for the first two months). The dip in export prices for mining products reversed in August, with a substantial rebound in base metals prices and in iron ore prices (the latter now 20% above its July low). And the Super Hornet (Airforce jets) imports are likely to be a one-off. Consequently, expectations are for another positive contribution to GDP growth in Q3 from the trade accounts.
September 02, 2010
GDP
GDP was stronger than expected at 1.2% in Q2 (median 0.9%), for growth of 3.3%yoy. There was a sharper acceleration in domestic final spending, with real domestic final demand growing 1.3% in Q2 and 5.3%yoy. Dwelling investment and net exports also contributed strongly to growth.
This was the fastest level of growth in three years and the annual growth rate has now rebounded to it's long term average of 3.3%. So much for the recession we didn't have.
Household spending lifted 1.6% showing consumers, as well as miners, have been driving our economy away from the brink.
Despite these figures NAB's expectations for the next rate hike is early 2011 as they expect some moderation in growth through the second half of the year. If capacity constraints emerge however putting upward pressure on the Oct 28 CPI release then all bets are off.
Strength emerging overnight in the US, combined with the GDP figures, have resulted in interest rate futures being sold off pointing to higher wholesale yields today.
This was the fastest level of growth in three years and the annual growth rate has now rebounded to it's long term average of 3.3%. So much for the recession we didn't have.
Household spending lifted 1.6% showing consumers, as well as miners, have been driving our economy away from the brink.
Despite these figures NAB's expectations for the next rate hike is early 2011 as they expect some moderation in growth through the second half of the year. If capacity constraints emerge however putting upward pressure on the Oct 28 CPI release then all bets are off.
Strength emerging overnight in the US, combined with the GDP figures, have resulted in interest rate futures being sold off pointing to higher wholesale yields today.
September 01, 2010
Economic Releases
Some strong figures released yesterday show the Australian economy enters the second half of the year in good shape. There are some sensationalist headlines about rate hikes but the reality is that the RBA is still likely to wait until the CPI is released at the end of October before acting.
Retail trade: Up a much stronger than expected 0.7% in July. A big step up from the positive 0.4% in June that was originally reported as a 0.2% gain last month. There was also a 0.2% upward revision to May suggesting the retail sector has been stronger than thought for some months. Retail trade in July is already 1.1% above its average level in the June quarter. Even with some plausible pull-back in August; that’s still pointing to further growth in retail trade volumes overall in Q3.
Residential building approvals: Up a stronger-than-expected 2.3% in July, thanks to a continuing lift in private other (medium density) dwelling approvals that rose 7.7%, while private sector house approvals were virtually flat at -0.1%. The value of non-residential approvals was however relatively flat over the last few months.
House Prices: The RP-Data Rismark hedonic house price series rose 0.4% in seasonally adjusted terms in July, up 9.7% y/y, but that comes after an even larger 1.0% fall in June (+10.6% y/y). That was the first monthly fall since December 2008 to leave prices lower than where they were two months ago. The level of home prices in July remains below the recent May peak, by 0.6%. The trend cooling in house prices still looks to be continuing, but at a relatively measured pace.
Current account deficit Q2: Narrowed by a massive 11bn in just one QTR. It moved to $5.6bn in Q2 (1.7% of GDP) from $16.5bn in Q1 (5% of GDP), with the Balance on Goods and Services improving from a deficit of $3.2bn in Q1 to a surplus of $6.5bn in Q2. Export values rose 26% in Q2, with metal ores and minerals up 43% (volumes up 3% and prices up 39%), while coal and coke exports values rose 52% (volumes up 22% and prices up 25%). In contrast, import values rose just 5% .
Terms of trade: Up 12.5% in the June quarter; the fifth consecutive quarterly increase, with export prices up 14.2%, while import prices rose 1.6%
GDP Forecasts:
NAB -> Q2 GDP of 0.6%, (revised forecast from 1.0%) and 2.4% over the past year.
ANZ -> Q2 GDP of 0.9% and 2.7% YoY
Retail trade: Up a much stronger than expected 0.7% in July. A big step up from the positive 0.4% in June that was originally reported as a 0.2% gain last month. There was also a 0.2% upward revision to May suggesting the retail sector has been stronger than thought for some months. Retail trade in July is already 1.1% above its average level in the June quarter. Even with some plausible pull-back in August; that’s still pointing to further growth in retail trade volumes overall in Q3.
Residential building approvals: Up a stronger-than-expected 2.3% in July, thanks to a continuing lift in private other (medium density) dwelling approvals that rose 7.7%, while private sector house approvals were virtually flat at -0.1%. The value of non-residential approvals was however relatively flat over the last few months.
House Prices: The RP-Data Rismark hedonic house price series rose 0.4% in seasonally adjusted terms in July, up 9.7% y/y, but that comes after an even larger 1.0% fall in June (+10.6% y/y). That was the first monthly fall since December 2008 to leave prices lower than where they were two months ago. The level of home prices in July remains below the recent May peak, by 0.6%. The trend cooling in house prices still looks to be continuing, but at a relatively measured pace.
Current account deficit Q2: Narrowed by a massive 11bn in just one QTR. It moved to $5.6bn in Q2 (1.7% of GDP) from $16.5bn in Q1 (5% of GDP), with the Balance on Goods and Services improving from a deficit of $3.2bn in Q1 to a surplus of $6.5bn in Q2. Export values rose 26% in Q2, with metal ores and minerals up 43% (volumes up 3% and prices up 39%), while coal and coke exports values rose 52% (volumes up 22% and prices up 25%). In contrast, import values rose just 5% .
Terms of trade: Up 12.5% in the June quarter; the fifth consecutive quarterly increase, with export prices up 14.2%, while import prices rose 1.6%
GDP Forecasts:
NAB -> Q2 GDP of 0.6%, (revised forecast from 1.0%) and 2.4% over the past year.
ANZ -> Q2 GDP of 0.9% and 2.7% YoY
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