CBA’s record profit. The Commonwealth Bank reported a record cash profit of $9.1 billion for 2014-15 this morning, a record annual dividend of $4.20 a share and the second-highest rights issue on record of around $5 billion (which was also far more generous to shareholders with a pro rata entitlement of 1 for 23 shares held at a 10% discount, unlike the mean-spirited ANZ, which stiffed its small shareholders). But how about showing the same level of generosity to the tens of thousands of people shafted by the bank’s dud financial planners?
A feature of this morning’s announcement from the CBA was the almost unbridled optimism about the Aussie economy. Last year, CommBank CEO Ian Narev was “cautiously positive” about the economy. This year he said, “the Australian economy has some good foundations” and “in the longer term, we have a positive view of the Australian economy”. He also said, “businesses and all sides of politics must work together towards a goal of a more diverse and productive economy. We need particular focus on a more efficient and fair tax system, building of high-quality and well-prioritised infrastructure, and trade and foreign investment settings”. That’s almost enough to get me to go and ask for a home loan to buy an investment property… except, oh, you can’t because they have lent too much to investors and the regulators are worried about a home loan bust that they want the bank (and its peers) to hold more capital … — Glenn Dyer
China is slowing, the cars have the story. China shocked global markets yesterday by devaluing the yuan by close to 2%, a move that sent markets around the world sliding (especially oil and most other commodities) and knocked the price of Apple shares 5.2% lower on Wall Street (now that’s a big deal!). The Chinese government argues that it was a move designed to make the currency’s movements each day more responsive to market moves, which it does seem to do. But it also followed months of weak or falling exports as the government has held the currency basically steady, thereby allowing a sharp revaluation against the Japanese yen, the Korean won and other currencies. So critics also saw the cut as a response to the weak trade performance, which is quite an old-fashioned way of handling a balance-of-payments crisis (which China clearly doesn’t have with the trade surplus running well ahead of last year).
Later today we will get the monthly data from China on production, investment (especially in housing) and retail sales (which should be a touch higher because of a jump in pork prices), but ignore those, we already have the most telling indicator of the pace of the slide in Chinese economic activity — car sales. Land Rover and BMW have both confirmed sharp falls in sales in the past month or so, and other major foreign makers say Chinese buyers are resisting price cuts on even the most expensive vehicles. That left car sales for the first seven months of 2015 up just 0.39% at 13.3 million units and production up 0.8% at 13.6 million units. Cars, of course, use a lot of steel, copper, aluminium, etc … — Glenn Dyer
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Productivity denial — Australia beats the US. Readers of speeches from the great and good of economic policymaking (the Reserve Bank, Federal Treasury and endless galahs in the economic pet shop) tell us that we have to improve our productivity (many ignore the fact that that is what has been happening the past few years). But most of the commentary concentrates on Australia, leading many of us confused, especially when we occasionally hear from the likes of RBA governor Glenn Stevens or his deputy, Phil Lowe, that weak productivity growth is a worldwide conundrum at the moment. The urgers say look to Asia (Singapore et al) for lessons (not very good in fact), while others say use the US as a lead. Well, that’s pretty useless and shows those urging us to follow America’s lead don’t know their stuff.
According to America’s latest quarterly and historical productivity data, released overnight, the average annual rate of labour productivity growth from 2007 to 2014 in the US was revised down to 1.3% per year from the prior estimate of 1.4%, well below the long-term rate of 2.2% per year from 1947 to 2014. So the country of all those wonderful innovations (Apple, Google, etc), low union membership, flexible labour markets (brutal some say), scant holidays, isn’t and hasn’t been as productive as its supporters claim it to be. In fact, Australia is doing better. Labour productivity in this country (for the 65% of the economy that can be measured) rose 2.5% from 2007 to 2014, according to the Productivity Commission. In other words, the Australian workforce is far more productive than the US, with all its supposed advantages. Now you don’t see comparisons like that from very many people do you, including from the Productivity Commission, or the right-wing commentariat in the Oz or the AFR? And that’s also during the time of Fair Work Australia, which is a prime target for all the productivity denialists. — Glenn Dyer