THE DISTILLERY: Back to the future

It was yesterday all over again for the columnists this morning, with sex, inflation, interest rates, takeovers and the election campaign on the agenda. The Reserve Bank's widely expected decision to sit on interest rates attracted some comment, although strangely little from The Australian, apart from the usual news story. They should have read the RBA statement a bit more closely and then looked at the detail of the June retail sales release.

Others did, starting with The Age's Peter Martin: "Retail figures released as the board met in Sydney showed inflation close to non-existent in malls and supermarkets with the quarterly increase a mere 0.1 per cent and the increase in the year to June just 0.4 per cent. Prices fell in seven of the 15 categories monitored by the Bureau of Statistics. The biggest fall was in clothes and shoe prices, down 1.6 per cent in the quarter, offsetting a 1.2 per cent rise in the price of food and liquor. Spending climbed just 0.2 per cent in June and 0.8 per cent over the quarter." The deflation in some areas of retailing was startling."

Fairfax Online's Michael Pascoe spotted another forecast in Glenn Stevens' post board meeting statement, the second from the Reserve Bank on inflation in successive statements: "'Through to mid 2011, underlying inflation is likely to be in the top half of the target zone, while CPI inflation will probably be just above 3 per cent for a few quarters due to the impact of the tax changes and increases in utilities prices,' (Governor) Glenn Stevens said.... What follows from the RBA's prediction is interesting – an Australian economy that is growing but not booming, lifted by the terms of trade thanks to Asian growth, but with animal spirits restrained by the North Atlantic gloom."

And Terry McCrann's forecast in the Herald Sun of no rate rise before November was captured in the prognostications on rates this morning: "They (the RBA) certainly won't lift rates before Melbourne Cup Day at the earliest. That's when they'll have the next lot of inflation numbers. So, absolutely no chance of a rise in either September or October." At one stage several years ago, David Penberthy, then editor of the Sydney Daily Telegraph, and now running the Punch website, labelled Glenn Stevens "Australia's most useless man". So what about now?

The David Jones sexual harassment case continued to draw comment. Business Spectator's Alan Kohler: "Every corporate middle manager should read Kristy Fraser-Kirk's statement of claim against David Jones as a guide to how not to react when you're caught between your boss's rampant libido and a staff member. In some ways the shocking punitive damages claimed by Fraser-Kirk and her lawyer, Harmer's, for 5 per cent of DJ's profits while Mark McInnes was CEO ($35 million) and another 5 per cent of McInnes' salary ($2 million) are a distraction from the substance of this case. That substance is not only about the behaviour of McInnes, but also that of the managers standing between him and his target."

But taking a very contrary view in the Sydney Morning Herald, Elizabeth Knight, who seems not to like Ms Fraser-Kirk had this to say: "My problem is that I am not convinced that Fraser-Kirk is the poster girl needed to get this issue properly recognised by companies and the public. Until a couple of days ago it looked like she was. But after her lawyers filed a claim in the Federal Court this week, it is eyebrows rather than awareness that have been raised. In seeking $37 million in punitive damages from David Jones and McInnes, Fraser-Kirk's claim took on something of a theatrical feel. ... It pains me to say it, but the size of the damages claim appears to be more about getting sufficient publicity to pressure David Jones into offering a better settlement." Ms Knight is not alone in holding that sentiment. The AFR reported on the front page this morning that the "David Jones chairman, Bob Savage, has extended an olive branch to the sexual harassment victim suing the company for $37 million".

Elsewhere in the business pages The Australian's Richard Gluyas seems to be stirring in the NAB bid for AXA Asia Pacific: "The National Australia Bank has tweaked its proposal, incorporating a sale of Axa's North Wealth.net investment platform to IOOF and is understood to have sent it to the Australian Competition & Consumer Commission in the past week. It is now up to the commission to determine whether the revised proposal is sufficiently compelling to proceed to another round of market soundings." The AFR also reported on this deal this morning.

The Australian's John Durie examines the powers of our new market regulator, ASIC (or is that our new old regulator?): "Just as the landmark sexual harassment case against David Jones is justifiably testing the boundaries, so should the corporate cops. But the reality is both the ACCC and ASIC are too timid, fearing failure in a court case. The danger here is more regulation, when more case law -- established by a regulator who actually regulates and litigates -- would negate the need for more change. The Opposition doesn't appear to have a policy on corporate issues outside handouts to small business. ASIC's track record on actually bringing perpetrators to court is mixed, to say the least."

And the election campaign drew this interesting commentary from The Sydney Morning Herald's economics editor, Ross Gittins, who thinks it's a good thing we are at last talking about a sustainable population and whether we want high levels of immigration: "Gillard and Abbott have attracted criticism from commentators wedded to the old way of doing things, but the end of the conspiracy of silence is a good thing. Whatever the public's reasons for frowning on immigration, it does have disadvantages as well as advantages and the two ought to be weighed and debated openly."

Fairfax's Malcolm Maiden wonders what the Federal Opposition is doing for a telecommunications plan: "Time is ticking away and nothing has been sighted. The Liberals have been promising to axe Labor's National Broadband Network fibre-to-the-home project without explaining what they will do instead, but a policy deadline is approaching. A statement is due before Tony Abbott's campaign launch on Sunday probably, and certainly by next Tuesday, when the Opposition's communications spokesman, Tony Smith, debates the Communications Minister, Stephen Conroy. The announcement of a repeat of the Howard Government's untried Opel plan for a government-subsidised, private sector-built wireless and satellite network in the bush will not be enough."

Fortescue Metal's Twiggy Forrest was all gloomy in The Australian on iron ore prices, saying they could fall 25 per cent in the third quarter because of falling Chinese demand. But from India came this report on Reuters this morning of a developing row in the major iron ore producing state of Karnataka which threatens to spark a price surge. "Iron ore exporters in a key Indian state may declare force majeure by the end of this week if a ban continues, the head of a trade body said, a move that could hit supplies to the $88-billion world market. Karnataka state in southern India, the country's second-largest iron ore producer, had banned exports of the steelmaking ingredient from 10 of its ports last week, citing a drive against illegal mining. It also stopped issuing transport permits for carrying the export ore to other states." India is the world's third biggest exporter of ore and most of it goes to China. The row has already reversed some of the recent fall in prices, with the world price now being quoted around $US150 a tonne, up $US10 a tonne since last Thursday, according to Reuters.

And with another round of indifferent economic data (falling home sales, static personal income, rising savings) released overnight in the US, a new blog worth looking at is at The Financial Times. "So the markets appear to be taking the view that other countries are able to withstand the slowdown in the US, and if all else fails, then the Chinese Government and the Federal Reserve will come to the rescue. Surely they are not just whistling in the dark -- are they?" asks Gavyn Davies.