ReadWrite-grogsgamut

My Drum piece this week has a look at the idiocy of chasing a good credit rating, even if it puts your economic growth at risk. We’re seeing Queensland right in the midst of such a play at the moment, when given the low bond yields (record lows) worrying about what a credit rating agency thinks at the moment is pretty low on the list of things governments should worry about.

That S&P is putting WA on a negative watch says all you need to know about their worth. To recap – here was the employment growth in WA over the past 12 months:

I also had a look at UK growth versus Australia’s growth this century, to show just how horrific things are over there – and why going for austerity might not be the most wise policy of David Campbell right now:

Here’s also a look at Australia versus European Union’s GDP growth:

And the USA:

Or to give it real context, let’s look at growth since the start of the GFC:

(The reason Australia's graph is shortest is because we entered the GFC later than both USA and UK).

Also interesting is that since reaching the bottom of the GFC, Australia and USA recovered at about the same pace – but the USA has been recently falling behind.

The UK on the other hand was only able to keep pace with the recovery for about a year and then flattened out. The UK has only grown 3.4% in the whole 13 quarters – over 4 years) since it began “recovering” from the GFC. To give that context, in the 4 quarters from June 2011 to July 2012 Australia grew by 3.7%

Pretty much as soon as the Academy Awards hands out the Best Picture award, the talk turns to the next and which film might win the big one. Heck this year, so bored was I with the nominees that even before the ceremony that awarded the Best Picture to… (yeah like me you have probably already forgotten*) I was writing about next year’s race.

And if you are someone who likes talk of the Oscars the best place to find yourself on the interwebs is GoldDerby.com. They have narrowed the race down to the top 31 most likely Best Picture films, and a similar number in all other categories. These guys take their Oscar tipping very seriously.

The past few years has seen the Oscars decline greatly in importance, mostly because the films that have won the big prize have been small – either in budget or in scope. This doesn’t mean they’re bad – No Country for Old Men is excellent, but it’s not “big”. It’s not what you think when you think of Hollywood aiming for a Best Picture.

But this year does not seem to be the year of the little independent film that took on Hollywood and won it all. This year looks like being one for Hollywood to win by doing what no other place can do (or afford to do).

Today I saw the first of the films likely to be in the running (Argo), and given we’ve now reached the point where the favourites are beginning to be released, in anticipation of what I think is going to be a couple magic movie months, here’s a run down of the top picks.

ARGO

It is a historical pictures (well 1979-1980), and concerns the Iranian Hostage crisis – specifically what has become known the “Canadian Caper” involving six embassy staff who escaped before being taken hostage.

It’s directed by Ben Affleck and it is very very good.

There’s a bit of a “controversy” because the film downplays the work of the Canadian Government and embassy staff and instead overplays (perhaps0 the work of the CIA). I don’t get too worked up about films that are “based on a true story” not being 100% true. That’s the difference between a film and a documentary. Heck The Great Escape makes up or distorts just about everything (especially that involving the Americans) and that is still one of my all-time favourite film. Of recent time, The King’s Speech got a lot wrong, so too did The Social Network (probably more wrong) and it didn’t hurt their chances come Oscar time.

Argo is not only very dramatic, it also has a lot of humour in it.

Currently  Gold Derby has it as the front runner, but I think mostly that is because of the top 5 favourites, it’s the only one to have been released.

A guarantee to be nominated. Lock in Affleck for a director’s nominees as well – and maybe even Best Actor – though less likely.

LES MISERABLES

I have loved this musical since I first heard the soundtrack in 1989 – which was before I saw it on the stage. I’ve read the book (and geez, it is a long read – Victor Hugo likes to go off on tangents) – bawled my eyes out when Eponine died in the book, even though I knew it was coming. I mean here’s how it happens:

She let her head fall back upon Marius' knees; her lids fluttered, and then she was motionless. He thought that the sad soul had left her. But then , when he thought it was all over, she slowly opened her eyes that were now deep with the shadow of death, and said to him in a voice so sweet that it seemed already to come from another world:

“And then, do you know, Monsieur Marius, I believe I was a little in love with you."

She tired to smile, and died.

I love the music – know it off by heart. And so when I heard that it was being made into a film my thoughts echoed that which was left in a comment on a webpage below some early gossip about the cast: “Please be good”.

The decision by the director Tom Hooper (of The King’s Speech) to film the songs live and not have the actors mime is a great one. It means I suspect the soundtrack won’t sound at all like a Broadway cast recording, but I think the effect on screen will be much the better for it.

If it IS good – it is a dead cert for nominees aplenty. A new song has even been written so that it can be eligible for Best Song (none of the “old songs” are eligible – they did the same when they turned Evita into a film and that song – “You Must Love Me” won Best Song).

If it IS good Tom Hooper will be getting a nominee as well, so too Anne Hathaway (GoldDerby already has her paying odds of 23/10 to win Best Supporting Actress for playing Fantine). Hugh Jackman is likely to also get his first nomination because the lead role of Jean Valjean is so crucial that if he isn’t up to it then the whole film will crumble. Russell Crowe as Javert has probably had most fans of the musical worried (mostly because I doubt many of them are also fans of his singing with his band 30 Odd Foot of Grunt). But whatever you say about Crowe, the bloke can act, and I think the role fits him well. Philip Seymour Hoffman though is the short priced favourite for the Best Supporting Actor award for his work in The Master.

All you need to know about the film is in the trailer. If you like it, then you’ll be lining up to see it come Boxing Day; if not, not. (For myself I’ve probably watched it about 20 times)

LINCOLN

Here’s Steven Spielberg's list of films since he made Saving Private Ryan in 1997:

1. A.I. Artificial Intelligence (2001)
2. Minority Report (2002)
3. Catch Me If You Can (2002)
4. The Terminal (2004)
5. War of the Worlds (2005)
6. Munich (2005)
7. Indiana Jones and the Kingdom of the Crystal Skull (2008)
8. The Adventures of Tintin (2011)
9. War Horse (2011)

Now it’s a nice enough list. Some nice work, a couple stinkers, no smash hits, no big time awards winners. Certainly nothing that would make you think THIS GUY is the THE GUY. He’s no longer the Spielberg of the 1980s and 1990s, where every film was an event. Sure War Horse got nominated for Best Picture last year, but no one gave it any chance of winning – and more to the point Spielberg wasn’t nominated for Best Director. So when it was announced that he was directing a movie based on Doris Kearns Goodwin’s “Team of Rivals” it at least made you think he was aiming high – something he hasn’t done for a long time.

But what really got the excitement buzzing was when it was announced that Daniel Day-Lewis would be playing Lincoln.

And pretty much from that moment Day-Lewis has been the favourite to win Best Actor. The first “teaser trailer” didn’t really grab me. Having Day-Lewis recite the Gettysburg Address over a bit of war footage had me feeling like Spielberg might be going too much onto the mawkish side of his films. But the second trailer hits all the right buttons, and certainly has you thinking Day-Lewis best get his acceptance speech prepared (if he bothers to turn up).

The early word is also for Tommy Lee Jones to be in the running for Supporting Actor for his role as Thaddeus Stevens. Jones can chew scenery like the best of them so it will be interesting to see if his performance is a showcase of him being acting, or actually a good acting performance.

Given the topic, if this is any good, lock it in for a feast of awards. My only worry remains to see if Spielberg is willing to show darkness to Lincoln’s character. If it’s a hagiography it’ll be a waste:

SILVER LININGS PLAYBOOK

GoldDerby currently has this film sitting third in favouritism for Best Picture. Australians won’t get to see it till January 31, so we’ll be judging it only on the basis of its trailer.

To me it strikes me as the type of film that often sneaks into the running – is likely to pick up a win or nominee at the Golden Globes – probably in the comedy section at which point everyone wonders why it was considered a comedy.

Because Robert de Niro isn’t playing a parody of Robert de Niro he is apparently up for Oscar talk as well for Best Supporting Actor (which could be a really hot field).

It seems to me a bit like The Descendants or The Kids are Alright or Up in the Air. It’s a film that’ll make the running but won’t win – and certainly not given the big hitters in play this year. I think this year is a year for big subjects and big films. The wonderful movie about a guy dealing with a breakdown and lots of quirky love will come up short, instead look for it to get a few acting nominations and possibly an award for screenplay:

ZERO DARK THIRTY

Speaking of big subject, here’s Kathryn Bigelow’s follow up to surprise winner The Hurt Locker, dealing with the capture of Osama bin Laden.

Green lit and written in double quick time. It’s another one, which given its subject matter, only needs to be very good to get a nomination. But given The Hurt Locker won only 3 years ago it’ll need to be amazing for it to win. It has Joel Edgerton in it, so the Aussie connection will help it do good business here (whenever it does get released – imdb doesn’t have a date listed for us yet):

LIFE OF PI

This and “Cloud Atlas” take this year’s prize for filming the “unfilmable novel”. The novel is one of the most loved of recent times, so if director Ang Lee stuff this up the reaction will be ugly. Based on the trailer, no one is thinking he has stuffed it up.

Hard to think it will win. It seems a bit for “fantasy/arty” for that. It would need amazing reviews. Cloud Atlas for example has been met with very middling reviews, so it can forget any Oscar glory, whereas the early review for The Life of Pi are pretty glowing (currently sitting on 94% on the Rotten Tomatoes Index).

In Australia of course, we’ll have to wait – it opens here on New Years Day:

THE MASTER

Already released. The hopes for the latest Paul Thomas Anderson film, loosely, sort-of-based-on L Ron Hubbard and the start of Scientology, were high. And as usual with his films reviews are mostly positive, but also with a few “Yeah, no, not for me thanks” reviews. The expectation is for acting awards rather than the big one. But given lead actor Joaquin Phoenix just called the Oscar race “total bullshit”, he’s probably not helping his chances to beat Day-Lewis (who probably thinks it’s all bullshit as well).

DJANGO UNCHAINED, MOONRISE KINGDOM

Quentin Tarantino’s latest, Django Unchained, looks like it’s trying to do for slavery what Inglorious Basterds did for the Jews of WWII.

Here’s Tarantino’s films since Pulp Fiction became the unofficial “Greatest Move of All-time for Generation X”:

1. Four Rooms (1995) (segment "The Man From Hollywood")
2. Jackie Brown (1997)
3. Kill Bill: Vol. 1 (2003)
4. Kill Bill: Vol. 2 (2004)
5. Grindhouse (2007) (segment "Death Proof")
6. Inglourious Basterds (2009)

I’m gonna say it – a waste of nearly 2 decades. Sure he does violence as good as anyone. But they’re all throwaway films. I loved Kill Bill: Vol1 (Vol 2 I found a bit meh), but nothing here suggests the promise of Reservoir Dogs or Pulp Fiction. Paul Thomas Anderson, Christopher Nolan and David Fincher might have come on the scene after him, but they’ve all gone well past him. I can’t see this getting much Oscar love, and given only one film of his since Pulp Fiction – Inglorious Basterds – has earned over $100m in the USA, I doubt it’ll even be much of a hit. The trailer looks to be almost derivative of a Coen Brothers film. He has his fans, and his genre, but personally I’d like to see him tackle the real (and present) world to see if he has anything to say.

Wes Anderson also has his niche and his audience (and his actors). Moonrise Kingdom looks very much like the same as his previous films – all with the quirky Wes Anderson metre and rhyme and production. The trailer lets you know all you need to know. If you loved The Royal Tenenbaums you’ll be up for this one. Ed Norton stars in this. 12 or 13 years ago you would have expected Norton to have at least one if not a couple Oscars under his belt. Instead he remains the most over-rated actor in Hollywood. A bloke who hasn’t done anything worth remembering this century. Back in 1999 after doing Fight Club and American History X I would have thought he’d find himself in something like Lincoln instead he’s in a Wes Anderson movie – movies that are great for actors because they don’t have to act – they play, they ham, and they over-act.

Like Django Unchained it might get nominated for Best Picture if no other “little film” comes out of the blue to knock this out.

THE HOBBIT

Seriously Peter Jackson – you need three movies to tell this little tale? That’s just lazy and greedy.

There are other films in the running – Flight, Anna Karenina, Beast of the Southern Wild, Hitchcock, Amour – some even suggest Skyfall, given The Dark Knight Rises hasn’t received the type of reviews that saw The Dark Knight considered an Oscar chance, but it looks very much like the race baring any surprise hits to be between the top 7 here.

The latest Matt Damon film, Promised Land, which is directed by Gus Van Sant is about fracking and has an Oscar date limited release of late December (before going wide in early January) so clearly they’re hoping for the Oscars. If it is any good, it is a topic that might just get some attention. Some “smaller films” that might sneak in include “A Late Quartet” – the trailer certainly has “serious Oscar worthy film” vibe about it, and it has a great cast:

Speaking of great casts, there’s also Dustin Hoffmann’s first time effort as a director “Quartet”, which had it been released in any of the recent years might have a bit more of a chance – it looks quite charming, but again I think too light in a year that I suspect is going to value capital D Drama:

 

There’s also “The Impossible” about a family caught in the Indonesian tsunami. It;s abased on a true story for added emotional heft. It stars Ewan McGregor and Naomi Watts, and the trailer is pretty impressive. It doesn’t scream Oscar for me, but it’s another I’ll be eagerly lining up to see (24th January here):

But with over a dozen or so “Oscar wannabe” movies to be released in the next couple months it at least looks like a good one for those who love it when Hollywood does what Hollywood does well.

* The 2011 Best Picture winner was The Artist.

And so the first lot of inflation figures since the introduction of the carbon price came out today, showing in the September quarter inflation had gone up 1.4%, for an annual rise of 2.0%. In seasonally adjusted terms it was even better – a 1.2% quarterly rise, with the same 2.0% annual rise.

Now normally figures showing a mere 2.0% annual inflation would have people laughing in the streets about the wonderful low price rising country we live in, but because of the carbon price these figures have caused many to scratch their chins and mutter “hmmm…”

First off let’s get some perspective:

Sure it’s 63 year’s worth of perspective, but I just want to reassure you all that we’re not exactly in hyperinflation territory. In fact we’re still at 2.0% right at the bottom of the RBA’s target of 2-3%. THE BOTTOM

So maybe we need a bit of a grip when we read thing like this from the Liberal Party:

These figures clearly show the impact the Carbon Tax is having on everyone across Australia.  The  things people need most like electricity, gas, education, rent, childcare and water are rising hitting the hip pockets of families, businesses, seniors and pensioners.

Now the Liberal Party is right (in part) when it talks about the rise in electricity prices (I’ll get to those later), but when it starts talking about “things people need”, well it’s not really being specific because the CPI covers the whole gamut (if you will) of things we need. And that whole gamut says annual inflation rose 2.0% over the past year – that’s a figure worth celebrating.

Let’s look closer – first the annual rate of the CPI over the past 7 years:

And now the quarterly changes over the same period (seasonally adjusted):

So annually things are fine but yep a big jump in the last quarter. And of course the carbon price is to blame. Treasury had predicted a hit of 0.7% due to the carbon price. Take that out and we’re back at either 0.7% non adjusted or 0.5% seasonally adjusted – or once again in very low inflation territory.

The big jump was in electricity (15.3%), gas and other household fuels (14.2%). Clearly these jumps were going to happen due to the impact of the carbon price. But how much? If you’re Joe Hockey, you’ll lay it all on the carbon price:

The ABS has found the largest price increases since the last CPI figures were released were electricity prices which have seen a 15.3% rise with household gas and miscellaneous fuels seeing a 14.2% rise.

Well yes that is true:

You would almost think that in the past quarter it was as if the government introduced something that meant gas and electricity suppliers were being charged for something that they had until then never been charged for… gee wonder what that is…

But first we need to realise that this was not a shock – in fact in June it was announced that NSW electricity prices would increase by around 18%, and gas prices would go up by between 9% and 15%. So there’s no surprise to any of this.

And remember as well that when those increases were announced only around 49% of that 18% rise was attributed to the carbon tax.

Some commentators have made a big deal about the rise for electricity being 15.3% when the Treasury (beware big pdf file) had suggested the one off hit from the carbon price would only be 10% for electricity and 9% for gas. But given 49% of 15.3% is around 7.5%, you could suggest that Treasury was overly cautious.

But one thing about the ABS data on sub groups such as these is that it is not seasonally adjusted – and the September quarter is often the biggest quarterly jump in price of the year (and the June one usually the smallest). Possum noted on Twitter that one way to look through the massive ups and downs of the original unadjusted data was to compare the increase in electricity prices in previous September quarter to gauge what we would normally expect such rises to be:

	Gas and other household fuels	Electricity
Sep-2007	2.4	4.3
Sep-2008	4.7	4.5
Sep-2009	2.8	11.3
Sep-2010	2.2	6.1
Sep-2011	3.8	7.7
5 September Average	3.2	6.8
Sep-2012	14.2	15.3
Difference from Average	11.0	8.5

So – assuming the difference in the increases are due only to the carbon price – it looks like the Treasury estimates were under for gas by 2% and over for electricity by 1.5%. But again remember not all of those price increases are due to the carbon price. Even if we suggest 50% of the rise is due to the carbon price (ie more than was the case in NSW) then the September quarterly jump is just 7.65% and is only a mere 0.85 percentage points above the 5 years average September quarter price jump for electricity.

Bear in mind this is a very unscientific way to examine the impact of the carbon price – and we’ll need to look at the next couple quarters to get a fuller picture, but it gives at least some sense of the picture. I wouldn’t bother doing it for all areas – eg fruit and vegetable where there are so many other variables at play – namely the weather.

But let’s get down to what everyone really care about inflation – the impact on interest rates.

And in annual terms:

or for a close look – the past 2 years only:

Given these are the measures the RBA focuses on, there’s not a lot here to suggest we need to panic about inflation.

The only aspect I think that might get the RBA to pause and not cut rates on Cup Day is that given the past 6 months has seen a combined 1.5% increase in the weighted median and a 1.3% rise in the trimmed mean the RBA might think that annualizes out to around the 3.0% – ie a the top on the band and thus decide it is best to wait and see what the December quarter holds before cutting the rates. But the market doesn’t seem to think that is likely – the expectation is still for a cut

On a broader look, the old Misery Index of the Unemployment Rate and Inflation rate added together shows we’re still in very good territory historically (I use the trimmed mean for inflation)

The level at the moment is 7.8, and as you can see, being under 8 is pretty much an anomaly. We are experiencing odd low unemployment and low inflation at the same time. With unemployment expected to tick up slightly, right now I’m still betting the RBA will drop rates in November. 

But then I rarely get things right on Cup Day…

The monthly Labour Force data come out today and the ABS estimates that the seasonally adjusted unemployment rate increased from 5.1% to 5.4%

To be more accurate, the ABS estimates with 95% confidence that the unemployment rate increased anywhere from 0.1% to 0.5%. (but let’s not get tied up in statistics!)

The trend rate stayed steady at 5.3% only because the ABS revised the August trend rate from 5.2% to 5.3%

A focus on just the past year shows the ups and downs have been increasing in size, but the trend since April has been a noticeably upwards:

An increase of 0.3 percentage point is quite a jump and suggests the economy is not in great shape. Oddly however the number of jobs increased in September:

So why did the unemployment rate go up? Because the participation rate increased from 65% to 65.2% – due to an extra 53,000 entering the labour force:

Now an increase in people entering the labour force is good – but clearly employment growth is not enough to keep up with the demand for jobs – ie employment grew by 0.126% but the labour force grew by 0.439%.

One positive aspect is that full-time jobs increased, and even the full-time job trend growth is positive (if still anaemic) :

One interesting this is to compare the total unemployment rate with the unemployment rate for those looking for full-time work:

As you can see – when the economy is heading to the toilet (or already there), the rate of those looking for FT exceeds the overall rate.

At the moment the Unemployment Rate for those looking for FT work is 5.6% – slightly above the total rate – but a comparison of the past 2 years shows the total rate has of late being playing catch up. In April both were at 5.0%, in June both were around 5.3, but then for two months the total rate fell while the FT Unemployment rate increased significantly:

As can be expected when the full-time unemployment rate is increasing, a comparison of men and women shows that women have been gaining work, but men have been the losers in the past 4 months:

Hours worked also displays the difference with just looking at the unemployment rate – in seasonally adjusted terms hours worked rose in September:

But as the seasonally adjusted rate jumps around a bit I always find the trend graph good at given a picture of how things are going – but as with all trend data you have to realise it in essence is backwards looking and subject to variance – and indeed in August the trend picture was looking much more pessimistic:

What seemed to have been a deep hole, now looks to be on the improve.

One aspect of the increase in participation rate but not an equal increase in employment is that there was rather a big spike in the unemployed numbers last month

So the upshot of all of this in terms of my favourite graph of employment to population ratio?

No change at all – steady at 61.7:

But as you can see, it is starting to take us a long time to get back to where we were prior to the GFC – and we’re actually getting into 1981-82 recession territory:

Why is this happening? Most likely because the pre-GFC ratio of 62.8% (trend) of the population employed is likely to be the high water mark for all-time. Our population is ageing. Each month more baby-boomers are retiring who aren’t being replaced by the same number of 15-19 year olds. In the 1980s we saw an unprecedented surge in the number of women entering the labour force. That surge won’t happen this time.

For 30 years – since the 1981-2 recession economic growth has seen (and to an extent been due to) increases in the percentage of the population working. That’s not going to happen again. Policy makers need to come up with some new ideas this time round.

OK. Let’s look at the states:

Gee Campbell Newman, how are things going up there?

OK let’s look at the annual growth:

So much for the 2 speed economy being WA, QLD and the rest, QLD you’re back in the pack. Now it would be easy to lay all of the blame at Newman’s door, but QLD more than WA is affected by the high dollar (due mostly to international tourists).

And where does this all leave us come Melbourne Cup Day and interest rates? Well the market is currently pricing in a 78% chance of another cut – down to 3.0%.

I think that’s a good bet.

It is rare that a political party would so obviously reveal the fruits of its internal polling and focus group work as the Liberal Party did today with the full court press of coverage provided via its friendly media publishers, News.ltd.

In an “exclusive” advertisement for the Liberal Party interview with Gemma Jones (she of the bullshit beat ups about asylum seekers, articles about people struggling to pay the carbon tax even before it had started, and big scoops on the soles of Julia Gillard’s shoes) Tony Abbott’s wife, Margie, was out to say how great he was. Despite the story essentially being as newsworthy as “Wife loves Husband”, News.ltd ran big with it:

  

God I do love a diverse media.

Just think how bad the internal polling and focus group are that it has reached this stage.

Obviously as well the reason for the stories coming out today is that this weekend is a Newspoll weekend.

Subtle.

And here’s the lines that are meant to persuade us:

"Just to give you an idea of how it happens in the Abbott household, I'll be grabbing the remote control saying `Can I watch the footy, please?' he will be saying `Oh, but I would really like to watch Downton Abbey,"' Mrs Abbott said.

I mean wow. It’s really that bad that they needed to evoke one of the highest rating TV shows? Really? Geez, those focus groups must have been hideous – talk about aiming for the very middle of the middle ground. I’m surprised she didn’t mention that he often walks around the house singing Adele’s “Someone Like You”.

Aside from the fact the footy and Downton Abbey are never on at the same time (so perhaps Tony is downloading season 3 on Bit Torrent and wants to watch it while the footy is on) who gives a shit?  If we’ve reached the point where talking about someone’s favourite TV shows is meant to give insight into their inner self and is deserving of being treated as news, then we might as well give up the whole thing as a joke. Sure put this in the Weekender Inside section, or Women's Weekly, but this is now Front Page News?

Even The Oz which didn’t have the story on its front page, chipped in with Dennis Shanahan in an amazing coincidence writing an article on (I kid you not):

What about the Prime Minister's problem with men?

• BY:DENNIS SHANAHAN, POLITICAL EDITOR
• From:The Australian
• October 05, 2012 12:00AM

Subtle Dennis, very subtle.

And next up in the advertorial is Margie Abbott appearing on Chris Kenny’s Sky News show this Saturday. That in itself shows not only how desperate the Liberal Party is given they have reached a point where they think that Kenny’s show would actually attract an audience worth getting her to appear on (yeah it’s the must-watch show for undecided voters), but also that they have had to pick out the most clearly Liberal Party friendly “journalist” to tell Margie’s story.

But the real upshot in all of this is that Abbott has revealed he  is worried and that he is as weak-kneed when it comes to bad polls as was the ALP under Rudd.

Abbott has shown everyone that he has been badly wounded by the ALP’s attacks. How depressing must it be for back bench Liberal Party MPs to realise that their leader is so worried about Newspoll that a year away from an election he has to get his wife to do some repair work for him? Kimberly Ramplin on Twitter nicely pointed out that back in 2003 the ALP paid for an insert in the Women’s Weekly featuring Bob Carr and his wife, but that was:

a) A paid advertisement (here, News.ltd did the advertising gratis)

b) In the same month as the election. – Wives always become more prominent in elections or when a new leader takes office.

This is purely a case of a leader shitting himself about the polls. A leader whose party is leading easily in the polls.

That should scare the hell out of Liberal Party members when they think of what a Tony Abbott government would be like..  

It is also all a bit odd given that the last Newspoll which was 50-50 seemed a out of whack with the other polls, so was likely to go back to 53-47 or 52-48, which is where most of the other polls are sitting, without the Liberal Party doing anything.

Clearly Abbott’s more worried about his personal standing than his party’s. It means as well that if the poll does go back to where everyone expects it to go, it’ll be because he had to "break glass in case of emergency”. If the poll inexplicably doesn’t shift much, then it looks like he is terminally on the nose with voters. It also means people will now really start to focus on his negative personal numbers – every poll will need greater mention of his personal standing, and reference to his strategy to “woo women voters”

Clearly, Abbott has been rattled by Julia Gillard’s numbers going up (and as Possum pointing up, increasing the ALP’s 2PP with it). The bad news for Tony Abbott is that Possum also notes that the standing of the Opposition Leader has absolutely nothing to do with the the party’s 2 party preferred polling number. That means to keep the 2PP numbers high, the Liberal Party has to keep focus on Julia Gillard, which essentially means Tony Abbott attacking her, which obviously the Liberals have found doesn’t go down well in the electorate, and leads to Abbott looking like a bully.

Which brings us back to where Mr Abbott finds himself today.

The other aspect is this “Women don’t like Tony” narrative is old hat. Why on earth he feels the need to go big on it now is beyond me. Gillard’s numbers have improved a bit, and Abbott’s have gone down a bit. But is this really panic stations?

Abbott’s big “women-friendly” policy was his “fair dinkum paid parental leave”. The problem is his own party hates it, and it treats rich women and more worthy of Government money than those on lower income which really is at odds with how women view coping with birth and bringing up babies – ie the issues and problems are the same for everyone regardless of wealth.

But instead of treating women as intelligent beings and developing more policies over the next 12 months that will actually affect them, he wants women to know he really is a nice guy.

Geez, he must think women are stupid.

I can’t see any aspect of this coverage today being about beating the ALP. The Liberals think the election is in the bag. This is all about Tony surviving till the election. That he has had to do it by getting his wife to tell us all how great he is shows just how bad he thinks things are for him, and how out of ideas he is.

Perhaps the headlines are right, perhaps we are seeing “The Real Tony”. 

My Drum piece today had a look at the most recent new car sales data and paints a bit of a picture about how the economy is going. I think it’s clear we’re not in dire straits, but despite our good employment, inflation and growth figures we’re all a bit worried about things. Perhaps we are too worried, but I think the new car sales data shows that while we probably are lagging behind where we thought the economy would be before the GFC invited us to go 12 rounds.

The trade figures out today show another reason why we are perhaps a bit worried:

The high Dollar and declining commodity prices are a big factor here, and the RBA will like that the dollar and Trade Weighted Index has declined a bit since it dropped the cash rate yesterday:

And now to the graphs from today’s Drum piece:

In seasonally adjusted terms August was the best ever month for car sales, and only the 3rd since January 2008 to beat that months’ totals. The GFC really hit the car industry hard:

The trend from 2000 to 2008 shows just how much the GFC hit the industry:

And if you look at our GDP growth over the same time you see something similar, though not as stark

Recessions take time to recover from – and it is not just about recovering the lost growth of that one or two quarters of decline, it is catching back up to where things could have been. In the 1990s that took a long time – 1 year of negative growth, took 7 years to repair:

Back in the car industry the one segment doing ok is the SUV's which is a bit odd given they have a significant amount of which are considered “luxury”. It perhaps reinforces the view that some are doing better than others in the “recovery”:

This graph, using Jan 2008 as a base shows just how much better the SUV market has been going compared to the rest. The sales of SUVs in August was over 40% above what it was in Jan 2008; sales of passenger cars however were more than 10% below.

You can see how passenger vehicles have declined in importance, and also why you now see a lot more SUVs than you used to:

Not surprisingly sales of new cars mimic the 2 speed economy – with WA and QLD doing better than the rest, and poor old Tasmania, struggling along at the back of the pack:

And perhaps also not surprisingly, total sales of new cars has finally reached pre-GFC levels at the same time that the share of total factor income going to the compensation of employees has also returned to pre-GFC levels.

Today the RBA cut the cash rate by 25 basis points taking it to 3.25% a mere 25 basis points above the break glass in case of emergency level of 3.0% that was reached during the Global Financial Crisis.

This brings is to a level of 209 basis points below the 20 year average rate of 5.34%, 182 points below the 10 year average of 5.07% and even 148 points below the 5 year average of 4.73% (an average that goes back to just 3 months before the 2007 election).

Of course the key is what will the banks do. The Bank of Queensland dropped its rate first by just 20 basis points. SO if we are conservative and assume the major ones will do the same, that will lead to a standard variable mortgage rate of 6.65%, below the 20 year average of 7.74%, the 10 years average of 7.36% and the five year average of 7.49%

Small business of course isn’t enjoying such wonderful below average rates. Last time the RBA dropped the cash rate by 25 basis points, rather nicely the average small overdraft rate was also dropped by the same amount. But even if banks do the same this time, the small overdraft rate will be 10.05% above the 20 year average of 9.84% but below the 10 year average of 10.14% and the 5 year average of 10.76

The disconnect between the well below average levels of the cash rate with the actual rates being offered home and small business owners is seen in the growing spread between the cash rate and the mortgage and business rates:

So while the cash rate is a mere 25 basis points above the emergency levels of the middle of 2009, the mortgage rate is now 85 basis points above the 5.80% rate being offered households back then.

Thus the low rate now is unlikely to have the stimulatory effect it had back then, and could even go lower. The Cash Rate going below 3% is a distinct possibility.

So why did the RBA drop rates? Well the statement by the Governor gives us the main idea right up front:

The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside. Economic activity in Europe is contracting, while growth in the United States remains modest. Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago. Around Asia generally, growth is being dampened by the more moderate Chinese expansion and the weakness in Europe.

So blame the Northern Hemisphere (or thank them fi you like that lower mortgage rate).

The bank also gave a rathe nice slap to all those who have been banging on and on about the Government “crowding out” commercial lenders – such as Joe Hockey who in April said in speech:

Every dollar borrowed in the markets by the Government is potentially a dollar that is not available to the private sector. This crowding out by the Government drives up the cost of funding, and can stifle private sector investment and spending.

The RBA today noted:

Low appetite for risk has seen long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Nonetheless, capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis.

Ahh well, it was a nice line, Joe. 

Closer to home the impact of the Northern Hemisphere was observed with commodity prices:

Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks.

The RBA also today released its index of commodity prices, which noted:

Preliminary estimates for September indicate that the index fell by 1.3 per cent (on a monthly average basis) in SDR terms, after falling by 2.8 per cent in August (revised). The largest contributors to the fall in September were declines in the prices of iron ore, coal and oil, which were partly offset by increases in the prices of gold and aluminium. The prices of rural commodities also declined. In Australian dollar terms, the index rose by 0.9 per cent in September.

A look at the Index of Commodity prices in $A and $US terms shows the Aussie dollar remain massively over valued:

One aspect the RBA will be hoping will occur as a result of this decision is for the Australian dollar to depreciate, as it noted:

… exchange rate has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook.

The dollar did drop around a cent and half today to $US1.0305 so it might do the trick….

 

Of course if the dollar does depreciate that will have an inflationary aspect. But I get the feeling at the moment, the RBA is not too worried about inflation.

The Bank's assessment remains, at this point, that inflation will be consistent with the target over the next one to two years.

The RBA also noted in its rates decision the domestic economic conditions. They certainly are not panic stations:

In Australia, most indicators available for this meeting suggest that growth has been running close to trend, led by very large increases in capital spending in the resources sector.

So “close to trend” (this aspect is why some rates “hawks” are wondering why the RBA is cutting rates). It goes on:

Consumption growth was quite firm in the first half of 2012, though some of that strength was temporary. Investment in dwellings has remained subdued, though there have been some tentative signs of improvement, while non-residential building investment has also remained weak. Looking ahead, the peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected. As this peak approaches it will be important that the forecast strengthening in some other components of demand starts to occur.

The RBA here is signalling a peak in the mining boom. That doesn’t mean the boom will be over – investment won’t just end, and hopefully the decline will be long and slow.

It then gives perhaps the key domestic reason why it cut rates:

Labour market data have shown moderate employment growth and the rate of unemployment has thus far remained low. The Bank's assessment, though, is that the labour market has generally softened somewhat in recent months.

This is no shock – in fact I said as much last month when the August employment data came out:

The statement ends:

At today's meeting, the Board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target. The Board therefore decided that it was appropriate for the stance of monetary policy to be a little more accommodative.

To me that “a little more” suggests they’re not likely to cut rates again in November (on Melbourne Cup Day). It suggests at the moment they’re tweaking more than diving straight in and performing major surgery.

ABC journalist Michael Janda noted that for the first time this year the RBA didn’t mention housing prices. In the past it usually says something like this (as it did last month):

As a result of the sequence of earlier decisions, interest rates for borrowers are a little below their medium-term averages. The impact of those changes is still working its way through the economy, but dwelling prices have firmed a little and business credit has picked up this year. The exchange rate has declined over the past month or two, though it has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook.

This time it merely stated:

Interest rates for borrowers have for some months been a little below their medium-term averages. There are tentative signs of this starting to have some of the expected effects, though the impact of monetary policy changes takes some time to work through the economy. However, credit growth has softened of late and the exchange rate has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook.

Given housing prices have continued to firm in the past month the absence of mention suggests the RBA is more worried about business credit and the exchange rate than it is housing prices.

An interesting development…