Aussies subsidise Kiwi wine. Believe it or not but Australian taxpayers are subsidising Kiwi winemakers to flood us with those rivers of sav blanc, to the tune of up to $25 million a year via what’s called the wine equalisation tax rebate. According to a New Zealand media report this morning, “more than 200 New Zealand wine companies have been claiming rebates of up to A$500,000 each (NZ$815,620), equating to about A$23 million in 2013 and up to A$25m a year in previous years”. But the scheme is up for grabs in the Abbott government’s tax review, and there’s suggestions Australian wine companies want the Kiwis punted. Kiwi winemakers managed to get their hands on the loot via the Closer Economic Relations agreement between Australia and NZ, which extended the deal across the Tasman. Now smaller Kiwi winemakers are moaning that they will be hurt if they lose their access to the Australian rebate because they would become less competitive (by losing their Australian subsidy). — Glenn Dyer
The Sage sells. Warren Buffett and his fund managers have been quick to heed the message from the collapse in oil prices. According to a US Securities and Exchange Commission filing this morning, his company, Berkshire Hathaway, sold its entire stake in Exxon Mobil, the world’s biggest oil company in the three months to December, and quit its stake in the smaller US oil group ConocoPhillips as well. Berkshire had held 41.1 million Exxon shares — worth nearly US$3.9 billion — and 471,994 shares in Conoco (worth US$35 million) around at the end of September. But he hasn’t gone completely bearish on energy — Berkshire still owns shares in Suncor Energy and National Oilwell Varco at the end of December. Berkshire topped its stake in struggling IBM by more than 6 million shares in the quarter and surprised by picking up shares in 21st Century Fox — Buffett is a believer in the magic of Rupert Murdoch, a fellow octogenarian. Berkshire bought a total of 4.2 million A-class shares (the non-voters) worth more than US$143 million last night. But Buffett is more a believer in John Malone’s Liberty Media (he’s only in his 70s) with a series of holdings totalling more than 12 million securities with a value of more than US$400 million. — Glenn Dyer
Inflation, deflation, it’s all downhill to me. Falling oil prices continue to drive inflation lower in economies around the world. In the UK, consumer price inflation dropped to the more-than-60-year-low of 0.3% in January. That’s down from the previous 60-year-low of 0.5% in December. (The last time it was this low was March 1960, according to UK reports. That’s pre-Beatles). Core inflation was stronger — 1.4% instead of 1.3% — but the more accurate retail price index fell to 1.1% last month, the lowest for five years.
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In Sweden, inflation fell to -1.1% (annual) in January — core inflation was 0.6% up from 0.5%. That doesn’t matter. The Swedish central bank last week cut its key interest rate to -0.1% and announced it would start its own version of quantitative easing to try to drag the economy out of its 16 months of either disinflation or outright deflation. But in Greece, the annual rate of deflation last month was 2.8%, now that out-deflates Japan. Interest rates are negative in a number of European countries (starting with Switzerland and Denmark), but in the US, despite falling inflation (disinflation, not deflation, at the moment), the US bonds market continues to sell off, fulfilling quite a few forecasts (unlike last year’s failed forecasts). The 10-year bond yield was 2.14% last night — last month it touched 1.64% — ouch, there are some wounded bulls around the place. — Glenn Dyer
So what will happen to oil? Well, BP reckons there will be a few more years of pain for the industry and price volatility before America becomes self-sufficient in the 2030s, despite the shale-oil boom slowing. In its latest long-term energy outlook, BP forecast continuing rapid growth of so-called “tight” oil supplies, particularly in the US, until the end of this decade. But as that slows, Middle Eastern production will return to the fore — OPEC’s revenge. But that won’t necessarily mean higher prices because, as the US increases production towards self sufficiency, it will become a net oil exporter adding to the amount of oil traded on global markets. BP sees the current uncertainty continuing in oil for some time to come: “The current weakness in the oil market, which stems in large part from strong growth in tight oil production in the US, is likely to take several years to work through,” the group’s report said. Interestingly, BP dismisses forecasts the shale revolution could spread to other countries such as Britain, Russia, China and Argentina. Opposition from residents (as we are seeing in the UK, Australia and parts of Europe), population density (in Europe and the UK) and a lack of government support will limit the spread of so-called fracking of tight shale-rock formations. As for future demand for oil, BP says the continued economic expansion of Asia, and China and India especially, will be the big drivers for the next 20 years. And the importance of coal, while it shrinks a little, won’t go away, especially in Asia. — Glenn Dyer
Yes, house prices do fall — in China. Amid the house price booms in Sydney and Melbourne, a timely reminder from China that they do turn down — and keep going. Average new home prices in China’s 70 major cities fell a record 5.1% in January from January 2014, the fifth consecutive month showing an annual fall. That was faster than the previous record annual fall of 4.3% fall in December from a year earlier. Excluding public housing, private-sector home prices fell in 69 of the 70 cities in January from a year earlier, compared the 68 cities that posted declines in December. Home prices fell in 64 of the 70 cities last month on a monthly basis, down from December’s 66. Prices in January fell 0.43% from December (when they were down 0.40%), according to figures from the country’s statistics bureau. Prices in Beijing fell 3.2% year-on-year while those in Shanghai were down 4.2%. The Chinese stats bureau slipped that release out as the country prepared to drop out for the next week for the Lunar New Year/Spring Festival celebrations. — Glenn Dyer