Distillery: Indonesian impediment

Jotters see a thorny asylum seeker issue in the way of Abbott's Indonesian trade plans, while one pops the housing bubble buzz ahead of today's RBA rates decision.

Housing bubbles, today’s rates decision, business ties with Indonesia and a surging sharemarket (yesterday aside) have the commentariat going in several different directions this morning. The Indonesia story aside, the one constant is there’s reason for a lift in confidence.

First to property, and the chatter around a housing bubble refuses to die down – though most business scribes are convinced there's no such thing. Make your own mind up as to whether that’s a good sign or not.

Regardless, the latest to query the bubble talk is the Australian Financial Review’s Jennifer Hewett, who notes the run up in prices is worthy of attention, if hardly earth shattering.

“When is a boom not a boom? Suddenly, we seem to be back to enjoying Australia’s traditional dinner party conversation. Housing prices. Auction clearance rates. Who’s buying what, where, when? ... Even so, a lot of hot air about property doesn’t make for a bubble. Not yet, anyway. Prices are up by about 8 per cent over the past year in both Sydney and Perth. But that still only puts them just over their previous highs of a few years ago. In Melbourne and Brisbane, the increases over the year are much less and still below their previous highs.”

Fairfax’s Michael Pascoe echoes a similar viewpoint of bubble concerns being “inflated” while looking forward to the Reserve Bank’s rate decision today. Don’t expect any shocks from the board given so little has changed in the past month.

“The only negative over the past four weeks has been the Australian dollar's rise on the Federal Reserve delaying the start of tapering – but that's about them, not about us, and it is only a delay. Thus Tuesday's should be one of the easier board meetings, with the main interest for members being just what seeds have been sown for a rate rise sometime next year.”

Offshore, a dispute with Indonesia over asylum seekers won’t derail business ties between the two countries, The Australian’s John Durie says, with the real question being why cross-border investment is so low. Perhaps a delegation including the prime minister and 20 prominent business leaders can change that.

“Melbourne University professor Tim Lindsay notes Australian investment in New Zealand is bigger than in Indonesia, which on any grounds other than cultural makes zero sense. Despite the media prominence of the asylum seeker issue, while important on its own terms as a deal breaker to the trade relationship between the two countries, it looks to be a side issue.”

The AFR’s Phillip Coorey agrees that a better investment relationship between the two nations is worth chasing, but he’s not so sure the asylum seeker issue won’t prove a thorn.

“Monday’s newspapers in Jakarta ranged from indifferent to hostile to Abbott’s visit ... The Jakarta Globe dedicated its entire front page to a giant picture of Abbott and devoted two news pages to negative coverage – all about boats. Its editorial contained a similar warning to that issued by Alexander Downer as Abbott departed: if you want to further trade and investment, deal with the asylum seeker issue.”

Back home, and investors in the stockmarket have had it pretty good in recent times, with the last quarter the best in four years. Given there’s no sign of a dark chapter in the recovery story, the AFR’s Philip Baker contends that sharemarket conditions will continue to improve, albeit slowly.

And finally, AFR Chanticleer columnist Michael Smith discusses infrastructure with the Australian Competition and Consumer Commission’s Rod Sims and finds the head of the competition watchdog has several logical ideas – but they aren’t likely to be popular.

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