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The Oxford Perspective - business news and views

19 July 2011

THE UPS & DOWNS OF RATES PREDICTIONS
Most economists now agree there's no general agreement in the industry on which way rates will go and when. While many are confident there are no more lifts likely in the next few months, the latest wave which is still getting media play is for those who say rates could even fall, ­and by Christmas. But seasoned Reserve Bank of Australia (RBA) watchers stick with the much-quoted position of the RBA Governor who has never backed down from his belief that around five percent is an appropriate rate in Australia (The rate has remained at 4.75 percent since last November).

CARBON TAX AND RATE INCREASES
As many companies last week rushed into the media to say they would be passing on the effect of the proposed Carbon Tax, so analysts have started doing the figures on the total effect and how it could impact interest rates. Many are saying with our current inflation rate so close to the upper limit of the RBA's stated comfort zone, any further price pressures across the economy could make a lift in inflation force another increase in the bank rate.

NEW HOME LENDING FINALLY PICKS UP
After being in a slump for most of this year, the Australian Bureau of Statistics (ABS) says new home lending has begun to improve. The last monthly data shows a healthy six percent increase in approvals.

THERE'S NO OTHER STORY LIKE DAVID JONES
As the RBA continues to insist the economy is strong and the consumer confidence surveys indicate why many people are turning away from spending, the retail industry is clearly running at a dual speed. While retail sales figures show most of the industry is holding its own, the top end is suffering and the once-glamorous department stores like DJs is being hit hardest. DJ says it sees no immediate end to the slowdown at the top of the retail market and it is forced to resort to any number of marketing devices to move stock. A case of going from glamour to clamour as the share price languishes.

RENT GROWTH STALLS
The huge dilemma of rising house prices but sluggish rental prices continues with the news that the rent figures for the first half of 2011 remain low. This is the third year that the growth in housing rental prices have fallen well below the rate of house price increases. (To illustrate the numbers, Sydney still has the most expensive house rentals of all the capital cities with the median at $460 weekly, Perth is next at $400 and the others are around $380.)

BUSINESS PROFIT EXPECTATIONS AT TWO-YEAR LOW
As the reporting season gets closer, the latest Dun & Bradstreet survey on business expectations for the September quarter show much gloom among corporate executives. Overall, they have slumped to where they were  just before the worst of the GFC, with most citing the reduction in consumer spending as the biggest single problem.

CHINA WATCHERS INSIST "WE TOLD YOU SO"
China's economic inflation is now accelerating fast with the news that our biggest trading partner reached 6.4 percent last month, as Beijing analysts say this was to be expected. Additionally they say the massive economy will continue to suffer from an increasing rate of inflation, but at this stage it is not likely to impact our trading relationship.

View past editions:

• 5 July 2011
• 21 June 2011
• 9 June 2011
• 17 May 2011