End-of-quarter scoreboard. What was the hottest market around the globe in the first quarter and in March? Oil? Gold? Try shares, and the hottest market there will surprise you. Germany’s Dax was up 22%, our market was up 9%, France’s market rose 20% as did the Italian market, and London’s rose 5%. Wall Street struggled higher — the key S&P 500 was up 0.4%. So the winner’s title goes to Europe, and the DAX? Well, no. Try Asia — Tokyo was up by around 9%, and Hong Kong a respectable 5.8%. But look to China and the Shanghai market, which leapt by just under 18% — so no rosette there, Germany is still ahead. But stay in China and look south to Shanghai’s neglected cousin and China’s other market in Shenzhen, which is home to the country’s start-up and new, less established stocks (Shanghai has all the big names, China Mobile, Sinopec, etc). Well, Shenzhen’s market leapt by around 38% in the March quarter. — Glenn Dyer

Economy bloody, but unbowed. The Aussie dollar fell 7.5% in the quarter (so oil and petrol prices should be lower here), 4.8% on a trade-weighted basis, so that was not enough to offset that slump in iron ore. No wonder there’s talk of a Reserve Bank rate cut next Tuesday. And the Abbott government keeps talking about curbing spending and new programs being financed by budget cuts. Fiscal policy is dying on its feet, and the federal government is fiddling — austerity by stealth by Treasury (which hasn’t been able to get anything right, so far as the budget is concerned, for four years). The slide in iron ore prices is transferring billions of dollars in Australian export revenue to Chinese steel mills. You don’t hear much from the whiners in the country’s steel industry these days about how the high prices for Australian ore are crippling the industry, do we? Does the Abbott government have any idea how to offset the slide in iron ore, coal, oil and gas, gold, copper and other commodities? That’s a huge terms-of-trade shock that the weaker dollar couldn’t offset in the March quarter, as the Reserve Bank had been hoping it would. But thanks mostly to residential construction, the economy isn’t dying on its feet. — Glenn Dyer

Things looking up. In fact, things continue to stir in the economy, with business lending hitting a six-year high, according to the Reserve Bank data yesterday. The bank said total private lending grew at the fastest pace since early 2009 in February, which was also double the rate of a year ago. The monthly lending figures also show that business lending is now accelerating, while the previous driver of bank loans, housing (for both owner-occupied dwellings and investors) has plateaued. And at the same time, new figures from the Housing industry Association show sales of new houses, especially home units and townhouses, rose to record levels in February. The Reserve Bank said private sector lending — which covers home, personal and business loans — rose 6.2% in the year to February (total credit grew 0.5% in February from January). January’s annual figure was revised downwards, from 6.2% to 6.1%. February’s figure was the highest since January 2009, when it grew at 6.4%. And while much of the rebound in lending growth has been down to strong lending for housing, especially to investors, there are definite signs business lending is accelerating. In fact, it rose 5.6% in the year to February, the fastest since April 2010, and almost three times the annual growth rate for the year to February 2014. — Glenn Dyer

UK reality. The head of Treasury, John Fraser (a former foreign gnome at Swiss bank UBS) is a fan of the economic policies of the UK Conservative government — its austerity spending and other cuts over the years brought warm words of praise from Fraser to a Senate estimates committee meeting in Canberra in February. No doubt Fraser has taken note of the 2.8% growth the UK had in 2014, up from the previously reported 2.6%, and he would have smiled at the news. That was faster than Australia’s 2.5% growth. Our growth will continue slowing, and the UK’s has probably plateaued for the moment. UK GDP per head rose 0.5% in the fourth quarter, but uncomfortably for Fraser, GDP per head is still 1.2% below pre-GFC levels in early 2008. (Australia’s is 15% above , so we must have done something right, despite Fraser’s reported misgivings about stimulus spending). And the UK’s productivity remains weak. Government figures show the average French worker is 20% more productive than the average UK employee, while Italian workers are 9% more productive. Yikes! No wonder the poms don’t like the EU anymore. The UK employment rate is now around 5.5% (much lower than ours), but most of the new gigs are low-pay service sector jobs. The low-cost jobs are depressing the UK’s productivity, as the comparisons with French and Italian workers show. Oh, there’s another important difference — the UK official interest rate is 0.5%, Australia’s, 2.25% and the Bank of England has spent close to A$800 billion in joining the quantitative easing club in boosting lending and the economy generally. Australia spent at most A$50 billion, which kept us out of recession. — Glenn Dyer

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW