Hardly ideal

Delivered on By Justin Pyvis

Good morning! Reserve Bank of Australia (RBA) governor Philip Lowe delivered a long (~3,500 word) speech to the National Press Club yesterday, where he restated his claim that the RBA is in no hurry to raise rates:

“We are in the position where we can take some time to obtain greater clarity on these various issues. Countries with higher rates of inflation have less scope here.”

Lowe singled out New Zealand as one of the countries where rising inflation forced their central bank to end quantitative easing, and then follow it up with “an increase in the policy rate”.

According to Lowe, although quantitative easing will soon end in Australia, the RBA doesn’t “need to move in lock step with others”, due to its “lower rate of inflation and low wages growth”.

Indeed, Lowe said that no decision on raising the cash rate will be made “until inflation is sustainably within the 2 to 3 per cent range”.

Just as a refresher, consumer prices in Australia increased 1.3% in the December quarter from the previous three months, which equates to an annualised rate of 5.3%. In New Zealand, consumer prices increased 1.4%, or 5.7% annualised.

Conveniently, “sustainably” is never defined by the RBA. But one more strong inflation reading (the next data release isn’t until 27 April) and Lowe will find it very difficult to sustain his current line of argument.

Reading the tea leaves

Daily % change







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Brent (bbl)



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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries. The S&P500 is a snapshot 30 minutes before close.

At the time of writing the US S&P500 was up 0.90% thanks to an 8.1% gain to Google’s parent Alphabet, which reported better-than-expected fourth quarter financial results with revenue up 33% from a year ago and growth in calendar 2021 the fastest since 2007. The company will also undertake a 20-for-1 stock split, reducing the price of its shares to make them more accessible to small retail investors.

Locally, the ASX200 gained 1.17% on the back of strong gains to energy (+2.8%) and materials (+2.0%), with the price of Brent crude holding up around the $US90/barrel mark ahead of Wednesday’s OPEC+ meeting. In terms of the meeting itself, the group elected to raise production by another 400,000 barrels a day in March, which was in-line with the existing plan to gradually restore output to pre-pandemic levels.

Food for thought

Kiwi wages have not come close to keeping up with inflation.
Kiwi wages have not come close to keeping up with inflation. Source

Unemployment in New Zealand hit an all-time low of 3.2% in the December quarter (records began in 1986). The result beat expectations and will heap pressure on the Reserve Bank of New Zealand to tighten monetary policy at its next meeting, which isn’t until 23 February – a full 91 days after the last meeting – because… central bankers need a nice long summer holiday? 🤷‍♂️

However, it wasn’t all sunshine and rainbows. Employment growth rose just 0.1% from the previous three months, while private sector wages increased just 0.7%, or half the 1.4% increase in consumer prices over the same period of time.

That means Kiwis are only keeping up with rising prices by working more – average weekly earnings jumped 1.8% from the previous three months because the average number of weekly paid hours worked was also up 1.4%.

In other words, work 1.4% more hours every week, get just 0.4% more stuff (before tax) – hardly ideal!

Bits and bytes

🔥 “A slap in the face for the ECB.” Inflation in the eurozone hit a fresh record 5.1% in January. Analysts in a Reuters poll had been expecting it to ease to 4.4% and the ECB is forecasting an average of 4.1% in the March quarter…

🏫 Three days into the new school year and the WA government has closed one school and is investigating two others with confirmed COVID-19 cases. So far a total of 231 students and 55 staff, plus their families, have been forced into 14 days of self-quarantine.

📱 According to Deputy PM Barnaby Joyce, the leaker of the text message allegedly showing Gladys Berejiklian describing ScoMo as a “horrible, horrible person” is a sitting cabinet minister who should “out” themselves before someone else does.

👷‍♀️ In full election mode, ScoMo tried to shift the conversation away from his handling of the pandemic yesterday, saying “We build stuff here in Australia”, and “That’s how you get unemployment with a three in front of it in the middle of a global pandemic” (it’s currently 4.2%).

😷 Pleeeeease no one show this to Mark McGowan. Called the “kosk”, a South Korean company has released a new mask that covers only the nose and can be used while eating or drinking.

💩 Fewer than 30% of eligible West Aussies have installed the government’s “complex” ServiceWA app, which launched three weeks ago at a cost of $2.1 million.

✈️ Phew, close call! “A British Airways jet has nearly toppled onto its side during a horror landing attempt at Heathrow Airport in London.”

💉 Djokovic’s biographer Daniel Muksch claimed Nadal’s triumph at the Australian Open has prompted ‘Novax’ Djokovic to get vaccinated against COVID-19.

💸 US national debt topped $US30 trillion for the first time, arriving “years earlier than previously projected as a result of trillions in federal spending that the United States has deployed to combat the pandemic”.

🔌 Tesla is recalling nearly 54,000 vehicles because the onboard “Full Self-Driving” software can’t distinguish between give way and stop signs.

🦠 A “South African woman with untreated HIV was infected with Sars-CoV-2 for nine months, during which the respiratory virus accumulated more than 20 additional mutations”.

📈 “The stock of global debt has gone from $83trn in 2000 to around $295trn in 2021—a rate nearly double the pace of world GDP growth.” And now the interest bill is coming due.

🏈 Brian Flores, the former head coach of the Miami Dolphins, is suing his former team for racial discrimination along with the New York Giants, the Denver Broncos and the NFL itself, which he described as being “managed much like a plantation”.

⛑️ They’ve definitely missed a trick here: The Washington Football Team has renamed itself the Washington Commanders.

🏊 Effective immediately, USA Swimming will use a three-person medical panel to determine whether “prior physical development of the athlete as a male” gives transgender swimmers an unfair advantage. It will also conduct testosterone tests for 36 months before competitions.

🏝️ Tonga entered a lockdown yesterday after two port workers tested positive for COVID-19, likely contracting it from one of the many relief workers from Australia, New Zealand, Japan, Britain and China.

🏄‍♂️ With 3 seconds left on the clock, Kelly Slater – who turns 50 next week – executed a near-perfect barrel at Pipeline to scrape into the quarter-final against Japan’s Kanoa Igarashi.

🕊️ “Denmark will end virus restrictions next week and reclassify COVID-19 as a disease that no longer poses a threat to society, even as infections hit a record high.”