RBA Says Enough Is Enough

The Reserve Bank of Australia published the minutes of its July 3rd Monetary Policy Meeting (at which they left the overnight rate unchanged at 3.50% - which was market consensus at the time). After presenting various reasons that the economy is slowing but not catastrophically so, that inflation is contained and will probably continue to be for awhile, the RBA concludes that the previous cuts that have lowered the rate from 4.25 to 3.50 in the space of half a year should be enough to stimulate the economy in the near term.

Given all the uncertainties about China's response to their slowdown, the future path of the European crisis and the recent slowdown in the US, it does make sense to not shoot all of their bullets at once. 

Australia Should Learn from Brazil in Fighting the Resource Curse

Australia continues to suffer from the "Dutch disease" with export revenues from the resource extraction industries pushing up the value of the local currency and thereby making manufacturing and the services (such as tourism) uncompetitive. This is a theme we have discussed before - see for example Australia's Two Speed Economy. The situation continues worsening, with an anticipated return to trade surplus failing to materialise in the Feb trade data released today (deficit of AUD -480mm, relative to consensus for a surplus of  AUD 1.1bn).

It should be quite clear that the strong currency is hurting many non-resource sectors of the economy. Yet other than including in their Monetary Policy press release a boilerplate statement to the effect

Beijing's Iron Grip Fails to Fine-Tune China's Economy

The Chinese economic super-bubble is currently all about real estate which is vehemently refusing to follow the direction set by the omnipotent hand of the central government. WhatIf surmised in an earlier post that such attempts are likely to fail. And true enough, the situation appears quite dire as Xinhua reported yesterday that

Commercial property sales in China's booming Zhejiang province fell sharply in 2011 following tough government curbs. The total floor space sold slumped 20.5 percent year-on-year

This slump has also had a devastating impact on the highly leveraged smaller developers, as the article goes