Here's my Top 10 links from around the Internet at 9.30 pm today in association with NZ Mint.
As always, we welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read today is #2 for those who want to understand what's really going on in China and what it means for us.
1. Not a good look - Yahoo reports ANZ CEO Mike Smith, who earns thousands of dollars a day, commented last week that Australians needed encouragement to work in the mines by cutting the dole...
Does he not have a sense of how this might look?
Australians are labouring under massive debts and banks are making record profits.
He and his fellow executives are making millions personally by borrowing money from offshore and lending it out to home owners. This is pushing up the value of the Australian dollar.
I sense some of the Australian bank CEOs are underestimating the grumpiness out there in the mortgage belts around Sydney and Melbourne.
Here's his comments.
"One of the issues you are going to have with the high dollar is global competitiveness," he said after speaking at _The West Australian's _Leadership Matters series. "How do you reduce that cost base? Surely one of the ways to do that is you put labour where it is needed, rather than fly-in, fly-out, or compromise as we do at the moment."
Mr Smith said talks with resource industry leaders had convinced him that welfare reform could deal with the two-speed nature of the economy.
"I think that is something we should consider," he said. "Instinctively, mobility in Australia feels low compared with, say, the US. In the US if you don't move, your house goes and you don't eat. So that is the difference. The welfare net (in Australia) is such that it doesn't provide an incentive for people to move."
2. Who gets hit if China lands hard - The Economist points out Australia gets hit, unless its currency falls....which is exactly what is not happening at the moment. HT Leith van Onselen at Macrobusiness
A hard landing would hobble South Korea and bring Taiwan’s growth to a shuddering halt. But growth in Brazil and Australia would hold up surprisingly well, perhaps because their currencies would fall, absorbing some of the shock.
3. But wait.... And Leith makes some interesting observations about a Chinese slowdown and Australia's long term growth prospects:
However, McKinsey warned that the income gains enjoyed from the mining boom were only temporary, and that Australia could experience little or no income growth over the next seven years if: 1) the terms-of-trade trended back towards its long-run average; 2) only two-thirds of advanced resource projects and one-third of planned projects come to fruition; and 3) there is no improvement in productivity growth.
Finally, let’s not forget that the sharp rise in commodity prices has also underpinned government budgets, which have reaped the benefit of rising personal and company taxes, as well as resource rent taxes. Some of this extra taxation revenue has been re-distributed to households via tax cuts and welfare payments, thereby further inflating disposable incomes. Should commodity prices continue to fall, households could face the prospect of rising taxes and lower benefits as cash-strapped governments attempt to plug fiscal holes, and pay the costs of an ageing population.
4. Get a move on - Reuters' Nick Edwards reports on the growing political pressures in China. The quote from Andy Xie is a cracker.
China's policy chiefs have about two weeks left to decide about giving the economy a proper stimulative prod, or risk parading a new Communist Party leadership to the world just as growth falls below target for the first time in nearly four years.
Factory activity is already at a nine-month low, according to the latest manufacturing sector survey from HSBC, signaling that the official August numbers for industrial production and trade published in a fortnight will foreshadow third quarter economic growth falling below the government's 7.5 percent goal. That is a deeply unappealing prospect for the Party's top brass as GDP data is likely to be unveiled at roughly the same time as the new leadership in a once-a-decade power transition.
"They are sending out the message that they want to stimulate the economy, but in reality that is not going to happen," influential independent China economist, Andy Xie, told Reuters. "About the only tool left to them now is propaganda."
5. Down (and up) on the farm - The Economist has an excellent chart here on farm prices. It's boom time in America and Uganda. Not so much down here....
Although interestingly we have the most expensive farmland in the world...
6. What happens when the central banks print and then the banks won't lend ? - This is the central problem of the current strategy being employed by central banks and governments in the Northern Hemisphere.
They are relying on the conventional credit channels to get their freshly minted money out into the economy.
But the banks won't lend, and more worringly, the people (particularly households) won't borrow because either they are already too indebted, or they have too much cash already (the rich, the old and corporates).
This is why the likes of Steve Keen and Antatole Kaletsky are saying the printed money should be given directly to households to reduce their debt.
The other option is for the government to spend (or lend) it directly. We'll get there eventually, but it won't be pretty in the meantime.
Here's the results of the latest British attempt to get the banks to lend -- 'Funding for Lending'.
The Guardian reports it's already not working.
This month, to much fanfare, the Bank of England and Treasury launched the £80bn Funding for Lending scheme, to "incentivise banks and building societies to boost their lending to UK households and non-financial companies". The sceptics wondered if it would better the earlier Project Merlin, seen as having failed to channel cash to businesses and households.
They were right to be sceptical. Funding for Lending lets the banks borrow billions at just 0.25% interest to prod them to loosen the purse strings, especially for first-time buyers who face huge hurdles when finding loans. Yet the reverse seems to be happening. Santander has stunned the mortgage industry by raising its standard variable rate from 4.24% to 4.74%.
7. Outblinkingrageous - Radio NZ reports oromoters of Public Private Partnerships (PPPs) in New Zealand are suggesting the government should pay bidders for small projects to bid, even if they're unsuccessful...
These PPPs need to be put to death quickly. They were a disaster in Australia and Britain and make no sense when the government can borrow at 3.5%.
Duncan Olde, of Macquarie Capital New Zealand, which is arranging finance for the $900 million new men's prison at Wiri, also being built as a PPP, says the roading announcements are a definite boost.
He says there's good interest, particularly with projects of that scale, but it's likely to be more challenging for smaller projects.
Mr Olde says paying unsuccessful bidders' professional fees could attract more interest in smaller projects. With more bidders, he says, the bids would probably be more competitively priced and thus promote better value for money for the taxpayer.
8. Vietnamese problems - The NY Times reports on fears of a meltdown in Vietnam.
In Vietnam’s major cities, a once-booming property market has come crashing down. Hundreds of abandoned construction sites are the most obvious signs of a sickly economy.
A senior Vietnamese Communist Party official, speaking in the ornate drawing room of a French colonial building, compared the country’s economic problems to the market crash 15 years ago that flattened many economies in Asia.
“I can say this is the same as the crisis in Thailand in 1997,” said Hua Ngoc Thuan, the vice chairman of the People’s Committee of Ho Chi Minh City, the city’s top executive body. “Property investors pushed the prices so high. They bought for speculation — not for use.”
9. Caterpillar cuts digger production - Bloomberg reports in depth on the slump in Chinese construction.
Caterpillar Inc. (CAT), which gets 25 percent of sales in Asia, Komatsu Ltd. (6301) and Sany have all slashed output in the world’s biggest construction-equipment market this year as a demand slump caused by slower economic growth spreads from building to mining. Sales of large excavators, mainly used by miners, last month plunged the most since at least January 2009, contributing to the 15th straight decline in the overall market.
“The market is just getting worse,” said Wang Shuangming, an analyst with consultant China Construction Machinery Business Online. “It doesn’t matter if you’re a foreign or domestic producer -- everybody is sitting in the same boat.”
Total excavator sales fell 24 percent from a year earlier in July to 5,827, according to China Construction Machinery Association data cited by Nomura Holdings Inc. Sales have dropped year-on-year every month since May 2011 after a government clampdown on real estate triggered a building slowdown. Construction of new railways was also cut following a July 2011 train crash.
10. Totally Just Go For It - The Onion reports on a new type of credit card that talks and encourages users to 'Just go for it.'
Financial services giant Visa held a press event Tuesday to introduce "Visa Voice," a new line of talking credit cards that urges shoppers to just go ahead and buy it if that's what they really want. "Whenever you're near an item you're hesitant to purchase, Visa Voice offers words of encouragement, such as 'Come on, just go for it!' and 'Trust me—you're not gonna regret this,'" Visa president John Partridge said of the groundbreaking new payment product, which allows users to select between a calm, supportive female voice and a morally authoritative male voice.
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