Post Reply 
 
Thread Rating:
  • 0 Votes - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Consumer Confidence
07-12-2019, 04:11 PM (This post was last modified: 07-12-2019 04:13 PM by Warri the Wombat.)
Post: #1
Consumer Confidence
Disclaimer - I am still economically illiterate and have no idea how significant this information is. I post it to stimulate discussion.

Quote:Australia’s Rate Cuts Fail to Lift Gloom Hanging Over Economy

By Michael Heath
‎July‎ ‎10‎, ‎2019‎ ‎11‎:‎13‎ ‎AM

Australia’s interest-rate cuts failed to gain traction as households’ worries about the economic outlook sent consumer confidence slumping to a two-year low.

The sentiment index fell 4.1% to 96.5 in July, the weakest reading since August 2017, Westpac Banking Corp. said in a statement Wednesday. The biggest decline was in the sub-index tracking expectations for the economy in the next 12 months, which plunged 12.3%.

The Australian dollar fell after the report, and was down 0.1% to 69.24 U.S cents at 10:37 a.m. in Sydney.

“The fall in sentiment this month is troubling as it comes against what should have been a supportive backdrop,” said Matthew Hassan, Westpac senior economist, noting the combination of lower rates, tax cuts and a stabilizing housing market. “The main driver continues to be deepening concerns about the outlook for the Australian economy and prospects for family finances.”

[Image: 15g6x60.jpg]

Australia’s central bank executed its first back-to-back rate cuts in seven years in June and July to try to kick start economic growth that has decelerated sharply.

The consumer gloom is more surprising given the unexpected victory of Prime Minister Scott Morrison’s center-right government, which put an end to opposition plans to scrap tax breaks on property investment that were expected to deepen a recent property downturn.

The government has managed to pass its tax package that brings some immediate relief to households and the prospects of further reductions next decade.

“Deteriorating expectations for the economy outweighed any near-term support from the prospect of lower interest rates and tax relief,” Hassan said. “The sub-index tracking consumers’ expectations for ‘finances, next 12 months’ also recorded a sharp 8% fall, moving back into net pessimistic territory for the first time since late 2017.”

The survey was based on responses from 1,200 people and conducted between July 1 and 5. The central bank cuts rates by a quarter-point to a record-low 1% on July 2.

— With assistance by Myungshin Cho

https://www.bloomberg.com/news/articles/...er-economy

"Laugh and the world laughs with you. Cry and your nose runs."
Find all posts by this user
Quote this message in a reply
07-12-2019, 04:32 PM
Post: #2
RE: Consumer Confidence
It sounds like the hole America was in when their interest rate fell to zero, and below! Then they voted for Trump and interest rates are going up and so is production.

just sayin'.

But if you think that's scary ....

Quote:Aussies suffer from China’s ‘debt iceberg’

Distressed loans are rising
It’s different this time
China’s ‘debt ‘iceberg’

Melbourne, Australia
Thursday, 11 July 2019

Twitter: @shaearussell

Shae Russell
Dear Reader,

There are some things you just don’t say out loud in Australia.

You don’t criticise John Farnham.

You never admit you don’t like Vegemite.

You never ask for VB beer at a bar (but you drink it secretly at home).

And you never talk about how your wealth is entirely reliant on what the Chinese do next…

What’s worse than waking up to discover you’re down tens of thousands of dollars on the stock market?
Picture this
Distressed loans are rising

‘Debt is roaring back in China’, or so Bloomberg told me back in February.

It turns out that the past two years of Chinese officials reducing local banks’ lending ability was coming to an end.

Debt and the supply of money was back on the agenda in China, with Bloomberg writing, ‘From bank loans to trust-product issuance to margin-trading accounts at stock brokerages, leverage in China is rising nearly everywhere you look.’1

And Chinese banks were the ones writing the loans.

But there’s a problem with freshly issued bank debt.

That is, the banks need to get rid of the debts they’ve got.

In May this year, the South China Morning Post reported that China’s financing had grown to 8.18 trillion yuan (AU$1.7 trillion) in 12 months.

That’s an astounding 40% jump for new credit when compared to the previous year.

The majority of that went into Chinese stocks and property development.2

It didn’t translate into economic growth, which is what the government was looking for.

China is being hit with the law of diminishing marginal returns.

In other words, more and more debt equals less and less growth.

That isn’t stopping the Middle Kingdom writing rubber cheques.

Except now, China may be approaching the point where excessive debt levels send the economy backwards.

It’s different this time

China is currently the default capital of major economies.

In 2018, more than 122 billion yuan (AU$25 billion) of Chinese corporate bonds were defaulted on. That’s four times the defaults value in 2017.

And for the first half of 2019, already 55 billion yuan (AU$11 billion) worth of loans have defaulted.

These defaults are coming from the corporate sector and include both US dollar-denominated and local currency bonds.

However, the default over the last 18 months differs from those in the years preceding it.

Bloomberg noted that in 2016, the majority of Chinese distressed loans were from firms like steel and coal.

This time around, the defaults are spread amongst a wide variety of industries.

Private investment firm China Minsheng Investment Group, which has exposure to the aviation, property and health sectors, sank with 54 billion yuan (AU$11 billion) in debts. Not long after, a coal miner and an oil firm went under too.3

The variety of the distressed loans remind us that these defaults aren’t cyclical or tied to commodity performance.

Instead, they show us just how much debt was used for speculation.

To boot, the amount of ‘non-performing loans’ is as high as 40% in the smaller Chinese banks.4

Until recently, the smaller Chinese banks were allowed to call distressed loans ‘special mention loans’.

This clever disguise meant investors saw a relative low number of ‘non-performing loans’ when looking at a bank’s risk.

Special mention loans accounted for roughly 20% of the smaller banks’ books, and the number of non-performing loans was minimal.

Once banks were forced to call a spade a spade, a sudden influx of 1.75 trillion yuan (AU$36 billion) in more distressed loans became visible.

And all those bad loans just had to go somewhere.

China’s ‘debt iceberg’

The real worry lies in what some economists are calling China’s ‘debt iceberg’.

According to some estimates there is as much as AU$50 trillion in public and private debt floating around the Middle Kingdom.

But given the masking and clever accounting we’ve already witnessed, no one is actually certain what the real number is.5

What we do know is that these unrepayable loans have to go somewhere.

Mirroring how the West does business, Chinese corporate defaults are being flogged for cents on the dollar.

And these loans are finding their way into hedge funds in the US and Europe.

Apparently, Chinese distressed debt corporate bonds are being bought up for 20-30% of their original value…and returning around 10% in interest payments so far this year.

So billions of dollars of distressed loan sales have been forced into China’s nascent distressed debt market.

Let me put it another way.

Almost $2 trillion of loans — roughly one third of their original value — are being sold to the other side of the world.

We should most definitely be concerned about the repackaging of distressed debt as high-yielding assets to unsuspecting investors.

The distressed loans are basically being repackaged and spread throughout the financial system, meaning they are no longer ‘in-house’.

Distressed loans are being sold to others as a way to make money, spreading the risk to all corners of the financial system.

That is the very definition of systemic risk.

And more than anyone, Aussies have been riding on China’s debt-fuelled growth for a long time.

Until next time,
Shae Russell Signature
Shae Russell,
Editor, The Daily Reckoning Australia

1 ‘https://www.bloomberg.com/news/articles/2019-02-24/china-deleveraging-is-dead-as-34-trillion-debt-habit-roars-back’
2 ‘https://www.scmp.com/comment/insight-opinion/article/3009308/china-plays-waiting-game-economy-and-bets-everything-belt’
3 ‘https://www.bloomberg.com/news/articles/2019-07-08/why-china-s-debt-defaults-look-set-to-pick-up-again-quicktake’
4 ‘https://www.ft.com/content/06d70216-7b6c-11e9-81d2-f785092ab560’
5 ‘https://www.sbs.com.au/news/downfall-of-chinese-bank-rattles-australian-investors’
All content is © 2019 Agora Financial Australia Pty Ltd All Rights Reserved.
The Daily Reckoning Australia is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Agora Financial Australia delivering daily email issues and advertisements. All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.
To remove your name from The Daily Reckoning Australia subscription and associated external offers sent from The Daily Reckoning Australia, unsubscribe here.
Calculating your future returns: Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in this report are forecasts and may not be a reliable indicator of future results.
To cancel by email, write to us at: letters@dailyreckoning.com.au
Attn: The Daily Reckoning Australia
Agora Financial Australia
108 Bridport Street, Albert Park, VIC 3206
Tel: 1300 029 501 or 03 8657 3902 if calling international
Find all posts by this user
Quote this message in a reply
07-12-2019, 04:59 PM
Post: #3
RE: Consumer Confidence
Just when I was starting to feel better, you have to start this thread, Warri. Di's contribution tipped me over the edge. I'm looking for ....

[Image: RazorBlades.jpg?dl=0]

Seriously, when I read anything like the two preceding posts, I just try to forget them and go about my business. Reason: I can't do a thing about it and, if I did 'something', it might be the wrong thing to do.

PS: And ..... either or both stories could be well off the mark. Idea

At the core of liberalism is the spoiled child — miserable, as all spoiled children are, unsatisfied, demanding, ill-disciplined, despotic and useless. Liberalism is a philosophy of sniveling brats. - P J O'Rourke
Find all posts by this user
Quote this message in a reply
07-12-2019, 05:09 PM
Post: #4
RE: Consumer Confidence
Well, hubby and I will be out tomorrow searching for a car to replace our wrecked one.
That should pick up consumer confidence a bit when the news gets out.

We bought the old one in 2007 to help out the economy which is the real reason OZ never went into recession. Big Grin Big Grin Big Grin

"Laugh and the world laughs with you. Cry and your nose runs."
Find all posts by this user
Quote this message in a reply
07-12-2019, 05:29 PM
Post: #5
RE: Consumer Confidence
(07-12-2019 05:09 PM)Warri the Wombat Wrote:  Well, hubby and I will be out tomorrow searching for a car to replace our wrecked one.
That should pick up consumer confidence a bit when the news gets out.

We bought the old one in 2007 to help out the economy which is the real reason OZ never went into recession. Big Grin Big Grin Big Grin

I should get a medal then with seven since 2007 (a RAV, three Klugers, three Outbacks). There was a Ford Territory before the RAV. Maybe that was 2007? Heap of junk ... had it for six weeks.Angry

[Image: BabySmug2.jpg?dl=0]

Sh!t .... I've just done some mental arithmetic.

[Image: BabyOMG.jpg?dl=0]

At the core of liberalism is the spoiled child — miserable, as all spoiled children are, unsatisfied, demanding, ill-disciplined, despotic and useless. Liberalism is a philosophy of sniveling brats. - P J O'Rourke
Find all posts by this user
Quote this message in a reply
07-12-2019, 06:37 PM
Post: #6
RE: Consumer Confidence
baloney. voodoo economics.
it takes at least 6 months for interest rate cuts to work their magic.
Scomo has just met with the qld leader to discuss bringing forward projects.
the government is aware.
Plus there is going to be a bucketload of cash coming from tax refunds.
there is always a lag in the official figures, -they are 3- 6 months behind real time.
interest rates are low, unemployment is low, the exports are good, iron ore tax revenue good.
wot me worry??? nah. nope.never.
keep calm and pour some wild turkey.
Find all posts by this user
Quote this message in a reply
07-12-2019, 06:49 PM (This post was last modified: 07-12-2019 06:50 PM by Di Wundrin.)
Post: #7
RE: Consumer Confidence
The medals are in the mail Warri. Well done! I shudder to think of the mess we'd've been in if you hadn't bought that car!

I bought a house, but it didn't seem to do much good as the builder's franchise (G.J. Gardner) in Coff's went bankrupt soon after.
In fact I was informed that mine was the last house they completed!

There problem stemmed from doing too good a job and not taking enough shortcuts and rorts to ensure a big enough profit margin.
That house was beautifully built. Even the framing was a work of art. I couldn't get up there (Corindi) but Cuz used to drive up every couple of weeks and throw an eye over the progress. He was amazed at the standard of the framing and the 'cyclone cables' which were sturdier and more numerous than standards demanded. It was like a bomb shelter.

I had friends and relatives go over it to find faults and none were found. It had sliding doors throughout and they all worked at the touch of a finger, no sticking. The tiling was meticulous and nothing except a small flap of sarking in the roof rattled in a storm. "They just don't build houses that well these days."
I lived in it the least time of any but it's the one I get homesick for. Maybe because it held no bad memories, but mostly because it was just so 'perfect'. siiiiiigh.

I've been out spending to do my bit today, Cuz had to go the Coffs mall and I was turned loose through Big W and the Reject shop. It may take a few weeks for our contributions to show in the economics figures Warri but we may bask in the glow in the meantime.
Find all posts by this user
Quote this message in a reply
07-12-2019, 07:42 PM
Post: #8
RE: Consumer Confidence
conspiracy theory:
since ScoMo won the unwinnable election every pet shop galah is trying to talk the economy down.
the same pet shop galahs screaming at the government to knock housing over the head with a blunt instrument.
be careful what you wish for.
just sayin'.......
Find all posts by this user
Quote this message in a reply
07-12-2019, 10:54 PM
Post: #9
RE: Consumer Confidence
(07-12-2019 07:42 PM)maxhr54 Wrote:  conspiracy theory:
since ScoMo won the unwinnable election every pet shop galah is trying to talk the economy down.
the same pet shop galahs screaming at the government to knock housing over the head with a blunt instrument.
be careful what you wish for.
just sayin'.......

Josh has got Lowe on side by the looks of it.

Reserve Bank governor plays down economic warnings after meeting with Frydenberg

[Image: 4976.jpg?width=620&quality=85&am...5708451fd3]

At the core of liberalism is the spoiled child — miserable, as all spoiled children are, unsatisfied, demanding, ill-disciplined, despotic and useless. Liberalism is a philosophy of sniveling brats. - P J O'Rourke
Find all posts by this user
Quote this message in a reply
07-12-2019, 11:04 PM
Post: #10
RE: Consumer Confidence
Cuz reckons Jerry Harvey is giving Scomo orders to tell us to spend more. In his shops. He wants another bite at those tax refunds too. He's got more plasma TVs to shift. ... but so has Kogan and his are cheaper.

He moaned until he got GST applied to overseas online purchases now he wants more. He might make more if he didn't mark everything up so much. Who's going to pay 30 bucks for something in a local shop when the same thing is 10 bucks on eBay? ... and that's after the GST and shipping is added!
Find all posts by this user
Quote this message in a reply
Post Reply 


Forum Jump:


User(s) browsing this thread: 1 Guest(s)