RBA outsmarts the smarties. The sound of egg being scraped from faces and laptops among the economic commentariat was deafening yesterday afternoon when the Reserve Bank of Australia announced it would not in fact be cutting rates for a second successive month.

The Financial Times in particular went very public yesterday on the rate cut timing. The Times’ fastFT news service, in a report on its Asian website yesterday morning, had the RBA chopping the cash rate under the headline “Why Australia’s central bank will cut rates”.

“The need for easing is so clear that in some circles the debate isn’t so much whether the RBA will cut rates — but how many times it will do so in the months ahead,” it said.

When the RBA didn’t oblige, fastFT — and a lot of other pundits — noted the decision first under the headline “Aussie interest rates left unchanged” and then, 15 minutes or so later, under the headline “RBA only delayed the inevitable”, producing the faint hint of a dummy spit at the Australian central bank for resisting the free advice from the globe’s premier financial rag:

“The Reserve Bank of Australia’s decision to do nothing today caught markets off guard, but analysts still assume an easing cycle has begun. RBA Governor Glenn Stevens held interest rates steady today but said further easing ‘may be appropriate’ in the months ahead — all the market needed to keep expecting looser policy next month. Why didn’t Mr Stevens comply with market forecasts, which had priced in a 62 per cent chance of a cut? It’s not terribly clear from the statement. He acknowledged ‘below-trend pace’ of growth, ‘quite weak’ domestic demand, ‘subdued’ labour costs and higher unemployment.”

Nothing in that to disagree with — there’s at least one more cut to come. But there’s also the strong suggestion that, after validating a confident forecast made by Herald Sun columnist Terry McCrann (who was the first and earliest forecaster of February’s rate cut, six days before the actual decision), and copping quite a bit of criticism for “briefing” McCrann to change market perceptions, the RBA has made sure it won’t be taken for granted a second time. Now watch for a note of caution in forecasts ahead of the April meeting. — Glenn Dyer

Morrison’s unwelcome departure gift: dud stats. Scott Morrison is busily recasting himself as Mr Nice Guy in the Department of Social Services. He’s been able to escape his old Misery Guts gig at Immigration and Border Protection, which has stuffed up the processing of the vital arrivals and departures cards at airports and other entry/departure points around the country. The stuff-up has been so bad that it will be months before the Australian Bureau of Statistics can issue accurate figures. It seems Scottie’s old department (when he was in charge) muffed the change of a processor of these important cards last year, and the ABS is all but blind. Firm data on overseas arrivals and departures, critical to the tourism industry in particular, has been delayed for months because of errors in processing the data from the cards that arriving and departing passengers fill out at airports and ports. The errors occurred after the Department of Immigration and Border Protection changed data processing providers in October. As a result, the ABS has been unable to give us detailed figures on just who’s coming to Australia and where Australians are travelling to overseas.

And we won’t know for months while the processing of the cards is sorted out. Fully accurate figures for the period October through May won’t be out until July. This is what the ABS said yesterday:

“A number of regular monthly releases of Overseas Arrivals and Departures, Australia (cat. no. 3401.0) have been delayed due to passenger card processing issues as announced by the Department of Immigration and Border Protection (DIBP). These preliminary estimates have therefore been modelled by the ABS using other traveller information data from DIBP. No seasonally adjusted or trend data are available in this preliminary release. With the resumed supply of Australian passenger card data to the ABS, the final, full set of monthly statistics for October, November and December 2014 will be released in May 2015. Preliminary estimates for January, February and March 2015 overseas arrivals and departures will be published on 2 June, with the final, full set of statistics being released for these months later in June. Normal monthly releases will resume with the May 2015 release on 7 July 2015.”

Nice one Scottie. Lift your game in Social Services, won’t you — there’s a lot of figures, processing and data there. — Glenn Dyer

Keep an eye on the Kiwis. While Sydney property prices are worrying analysts and economists, they might consider sneaking a peek at what’s happening in New Zealand. Australian property price data released on Monday showed a rise of 0.3% in February, for an 8.3% increase over the past year. The CoreLogic RP Data Home Value Index released also showed Sydney remains the hotspot this side of the Tasman, with a monthly rise of 1.3% and 13.7% for the year. Melbourne reported a rise of 0.3% in February and a far more modest 7.3% annual rate.

But the NZ property market, especially in Auckland, is looking as hot as Sydney. According to the Kiwi’s state-owned property valuer, Quotable Value, national prices rose 6.4% in the year to February, with Auckland the stand-out with a 13% rise, up from the 12% annual rate in January and the biggest annual increase in nine months. Auckland is the only property play across the “Dutch”, with a sluggish 0.9% annual rise in Wellington, 3.4% in earthquake-recovering Christchurch and 1.2% in Dunedin. So why is the NZ property market important to our banks? Well, the big four banks — CBA, NAB, Westpac and ANZ — also dominate the Kiwi banking sector, especially home lending. The RBNZ has attempted to limit property price inflation by introducing restrictions on loans with high loan-to-value ratios, so demand has moved to new home building and purchases (with high-LVR loans). Our big four are big home lenders across the Tasman, and even though their operations are ring-fenced and separately capitalised for the Kiwi market, problems in the Auckland home loan market at roughly the same time as in Sydney and Melbourne would create a big headache for regulators on both sides of the Tasman. — Glenn Dyer

Hailstorms Snowball out of control at Suncorp. Suncorp, Queensland’s biggest bank and insurance group, has had a miserable February. The joys of a higher profit from banking and life insurance were quickly offset by the discovery that the company could be up for $118 million in extra payments relating to a dispute over reinsurance cover for 2011’s trio of disasters — the Christchurch earthquake, Cyclone Yasi and the Brisbane floods. (Reinsurance is insurance for insurance companies.) Then late in the month Cyclone Marcia swooped through central Queensland causing hundreds of millions of dollars worth of damage, of which up to $150 million will be the cost for Suncorp’s general insurers (AAMI, GIO, Suncorp). The upshot is the company’s chances of earning a higher profit for 2014-15 have evaporated. These losses will be on top of the cost of the Brisbane storms last November that have left a bigger bill — around a quarter of a billion dollars — on Suncorp’s books. Falling official interest rates will make it harder as well to earn a turn on the float and other reserves in the bank and the insurance companies. In a statement on Tuesday, Suncorp CEO Patrick Snowball said the extra expenses of Marcia on top of the Brisbane hailstorm in November meant it was unlikely Suncorp could achieve its target for a return on equity of 10% in 2014-15. Suncorp had reaffirmed the 10% return target as recently as last month when releasing that interim profit announcement. Not good news for Snowball, who is due to leave Suncorp later this year and had been wanting a high profit to go out on. — Glenn Dyer

Pawn shop picks up flogged executives. Not content in grabbing former Bank of Queensland CEO Stuart Grimshaw as CEO, the Texas-based last-chance-saloon called EZCorp has snared Myer’s former chief financial officer Mark Ashby as CFO. Ashby’s departure was revealed at Monday’s Myer special sale of senior executives, which announced nine-year CEO Bernie Brookes’ departure. In a statement, EZCorp said: “Mr. Ashby will be responsible for EZCorp’s accounting, financial planning and analysis, internal audit, investor relations, tax and treasury functions.” In that statement from EZCorp, Ashby was quoted as saying: “I see tremendous potential in the organisation and I am looking forward to working with the team to turn that upside into reality.” EZCorp owns 32% of ASX-listed Cash Converters International, which is having trouble with bad debts here and in the UK, its other major market. Working Myer’s fading finances will put Ashby in good stead to oversee the money at a pawn shop/payday lender. — Glenn Dyer

Peter Fray

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