Kiwi rates up: New Zealand this morning joined the push to tighten monetary policy when its Reserve Bank lifted its key interest rate 0.25% to 2.75%, the first rise in three years. The move was expected, with most NZ market economists forecasting the move. Governor Alan Bollard said in a statement: “Underlying inflationary pressures are expected to increase. Given the current low level of the cash rate, it is therefore appropriate to gradually remove policy stimulus.” The bank forecasts inflation will peak at 5.3% next year because of tax changes in the Budget, especially an increase in the GST.
Good news: according to the World Bank, global economic growth will be 2.9%-3.3% this year and next, more than enough to reverse the 2.1% contraction in 2009, but no thanks to the developed world, which will continue to under-perform. Developing economies are expected to grow 5.7%-6.2% each year from 2010 to 2012, the World Bank’s latest Global Economic Prospects forecast said. China is forecast to grow by 9.5% this year and 8.5% in 2012, but the US economy will grow by 3.3% this year and 2.9% in 2011. Nowhere enough to put a dent in American unemployment. But as a whole, the developed economies will be dragged down by floundering Europe and will grow by 2.1%-2.3% this year. That will not be enough to reverse the 3.3% contraction in 2009. Developed world growth is forecast to slow to 2.4% in 2011. And don’t rule out a slump back into recession.
China leaks: why did markets turn up yesterday afternoon? Well, according to media reports, it was well-timed leaks of China’s May export figures that sent the Chinese market up 3%, pulled Australia out of the red and set up Asia and Europe for gains. The US opened strongly, but then fell as the rally ran out of puff. The leaks said exports jumped by about 50% in May, better than the 32% market forecast and the 30.5% rise in April. And the same reports said May’s CPI, possibly the most eagerly awaited figure, was 3.1%, up from 2.8% in April and just above the tipped 3%. And to complete the leak (fairly comprehensive) new loans in May fell to 630 billion yuan, from 774 billion yuan in April. Now I wonder if anyone will join Stern Hu in the slammer in Shanghai for “leaking” these “state secrets”?
Scam watch. Australian investment manager Bronte Capital reports that Nigerian scammers have quickly gotten into the BP oil spill story, with one claiming to be the private solicitor the oil group’s CEO Tony Hayward, and claiming that for £20 million, the scammer can obtain £80 million of Hayward’s private money. “I am reaching out to you as it has become clear that Mr Hayward’s holdings must be liquidated and held in trust for the benefit of himself and his family beyond USA or UK legal jurisdiction,” the scammer claimed. And “I sincerely trust that you will search your memory and recollect that we met in Sydney in 2002 and recollect the nature of our agreement. Please contact me at my firm’s Nigerian subsidiary’s offices at the address below such that we can act with the speed required of us.” No shame.
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Bolshie billionaire: they are revolting in the west. Andrew “Twiggy” Forrest and Gina Reinhart, the big two of WA’s dirt diggers, yesterday led a “protest” against the resources tax in Perth. Twiggy is, of course, from old WA stock, Rinehart is the daughter of the biggest hole digger of all, Lang Hancock, who wanted to use atomic bombs to make holes in the WA dirt. The rally was apparently organised by the Association Of Mining and Exploration Companies, which sounds a bit like a last-minute name for a bunch of malcontents determined to upset Perth traffic and disturb the city’s rampant hedonism. Twiggy called Kevvie Rudd a communist . If Kevvie’s a com, Twiggy is Lady Di in an Akubra.
Political billionaires: California has snubbed the Tea Party Republicans, the mob who think Sarah Palin is wonderful and Barack Obama is an alien. Two powerful Silicon Valley businesswomen won Republican nominations for California governor and the US Senate. Both were considered not to be right-wing enough to be supported by the Tea Party. Meg Whitman, the former CEO of eBay, will face the elderly former former Democratic governor Jerry Brown to succeed Arnold Schwarzenegger in November’s election, and Carly Fiorina, former chief executive of computer maker Hewlett-Packard, won the Republican nomination for US Senate in California, where she takes on the left-wing Barbara Boxster, a Democrat. Brown is widely blamed for many of California’s problems after his term running the state in 1975 before term limits were introduced. Whitman spent $US80 million on her nomination campaign and donated $91 million to herself to finance it. When she stepped down from eBay she was worth a reputed billion dollars. Californian voters also approved a huge change in voting rules that will turn party primary elections in future in the state into an open first-round election that chooses two finalists — who could be from the same party — to face off in the general election. That could change American politics
Is this Greece? According to the US Treasury, the country’s total debt will top $US13.6 trillion this year and climb to an estimated $19.6 trillion by 2015. Treasury department reported to Congress that the ratio of debt to GDP would rise to 102% by 2015 from 93% this year. Total debt includes obligations to the social security retirement program and other government trust funds. The amount of debt held by investors, which include China and other countries as well as individuals and pension funds, will rise to an estimated $US9.1 trillion this year from $US7.5 trillion last year. Treasury said that by 2015, America’s net public debt will be about $US14 trillion, or 73% of GDP. How do you spell Athens again, W-a-s-h-i-n-g-t-o-n?
US mortgage watch: according to the US Fed chairman Ben Bernanke, the country’s economy is still weighed down by the depressed housing sector, which seems to have worsened since the tax credit ended in April. There is in fact no sign there’s enough demand in the market to lift house buying and building. The US Mortgage Bankers Association overnight said that mortgage applications sank to their fourth successive 13-year low last week, while 72% of mortgages granted being made to people refinancing their existing homes and not buying a new place of residence. Demand for mortgages fell 5.7% last week to their lowest level since 1997 (and even adjusting for the holiday shortened week. The association said applications have plunged 35% in a month. That’s another black hole developing in US property.