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The Oxford Perspective - business news and views

9 June 2011

RBA HOLDS AT 4.75 PERCENT
The Board of the Reserve Bank of Australia (RBA) has announced the basic cash rate has been held at 4.75 percent.

INFLATION CREEPS UP TEMPORARILY
The latest figures show the annual inflation rate slowed in May as cheaper holiday travel, household appliances and slightly cheaper fuel outweighed the rise in fruit and vegetable prices. Since the latter factors should return to normal with the food supply chain being re-established, most analysts agree our national Consumer Price Index should be under less pressure by the end of this year, which should relieve pressure on interest rate increases.

WHICH WAY RETAIL?
The latest rebound in retail sales could not have come at a more welcome time following several months of slides and continued gloom. The 1.1 percent monthly growth is nearly three times more than the most optimistic forecast from the main retail chains. Meanwhile, the latest Retail Forecast report by the respected Deloitte Access Economics is being read very keenly. It says the softening economy will continue to keep retailers in a partial downturn and that trend is being worsened by the growing number of consumer preference to save what was previously discretionary spending. It insists this vital sector of the economy will stay that way for the remainder of 2011.

GDP BRIEF BLIP OFFSET BY GOOD CAPEX NUMBER
The last set of Gross Domestic Product (GDP) figures which were affected by weather-related events were quickly offset by the numbers for CAPEX (capital expenditure). These show spending rose a very healthy 3.4 percent in real terms, according to the Bureau of Statistics.

NOW IS THE WINTER OF OUR DISCOUNT TENT
The annual cold season discontent among house buyers has seen dwelling prices continue to slump. Predictably, the real estate industry blames the many lack-lustre economic factors and the latest sales figures show only Sydney prices to be holding up while most other state capitals continue to sink. Researcher, RP Data, says while the average drop across all major cities is around three percent in the past year, Sydney prices have put on nearly one percent compared to Melbourne's reduction of around 0.4 percent.

RBA SAYS MORTGAGE STRESS NOT A PROBLEM
RBA deputy Governor Ric Battellino insisted reports of widespread mortgage stress are not really as bad. He told a stockbroker conference that Australian households are not suffering extensive mortgage stress but the spike in borrowing since the mid-1990s had made households more sensitive to rate changes than in previous decades.

RBA DISMISSES COMMODITY BUBBLE TALK
Last week's release of a statement by the RBA which put down the recent talk of a commodity price bubble was welcomed by many economists. The Bank's Deputy Governor insisted the overall outlook for the world economy and especially Australia's large customers in Asia is extremely strong and will be that way for the foreseeable future.

TREASURY CHIEF TALKS UP ECONOMY
The head of the national Treasury, Martin Parkinson, has played down the significance of the last quarter's economic downturn, insisting Australia is about to enter a boom that should last decades. Speaking to Canberra Senators at the release of official statistics, he said the country is about to enter a "golden age propelled by high export prices, enhanced mining capacity and a once-in-a-lifetime global realignment." He played down recent pessimism about the effects of carbon pricing and reminded the gathering that mining is only eight percent of the gross domestic products, which highlights the strength of the remainder of the economy.