THE DISTILLERY: Beaten bulls

That quiet sobbing we can hear in the background is from the fans of Rate Rise Looms, who are left to face the economy alone, without their friend and convenient headline after the RBA struck a dovish tone. So the jottery went what I call 'The Full Dove' in their commentary on yesterday's post board meeting statement from RBA governor Glenn Stevens. That is, the commentary this morning was of Rate Rise Pause, although one of the pack did point out there's the June quarter inflation data to be considered at next month's meeting.

Fairfax's Peter Martin wrote this morning: "The Reserve Bank no longer expects to raise interest rates this year. The new position follows an upgraded assessment of the risk of a new global financial crisis and a decision to abandon its Australian economic growth forecasts for 2010-11 and 2011. For the first time, the statement released after yesterday's board meeting acknowledged the possibility that the global economy might not grow as strongly as expected, saying if it did not, Australia's medium-term growth prospects would be in doubt. The bank revised down its short-term growth forecasts. It had forecast growth of 2.5 per cent in the year to June 2011 and 4.25 per cent in the year to December. It now says neither forecast will be met, primarily because of a slower-than-expected return to production in Queensland's flood-hit coalmines."

While News Ltd's Terry McCrann wrote: "In the immediate future the Reserve Bank now needs a reason to lift interest rates. This is a complete turnaround from the position of two to three months ago when it clearly expected to have to hike; it was only a case of picking the month. Perhaps fortuitously – for it and for us – it never got round to picking that month. Now it has moved on, along with the economy so to speak. And there is one and only one place it is going to find that reason to hike – the quarterly CPI inflation data."

At The Australian, Michael Stutchbury said: "For the second month in a row, the Reserve Bank has become a bit more dovish about lifting interest rates. This time, it's a slowdown in the world economy due to the hit to global supply chains from the Japanese tsunami, consumer caution as petrol prices rise and the renewed risk from the Greek sovereign debt crisis. Last month, it was softer readings on the local economy, including the squeeze on slow-lane sectors from the strong dollar and the slower-than-expected recovery from the Queensland floods."

Malcolm Maiden wrote on the Fairfax websites yesterday that the Reserve Bank was in a holding pattern: "It still seems determined to ensure that this massive resources boom does not ignite an inflationary outbreak, and still seems prepared to let the rest of the economy feel the pain as it moves to suppress it, saying today only that it will "continue to assess carefully the evolving outlook for growth and inflation." Rates are likely to rise again at least once: but on the strength of this statement, we have several months' grace before it happens."

The Australian Financial Review reported this morning: "The RBA has downgraded its growth forecasts for the economy amid lengthy delays in restoring Queensland's coal export trade and heightened concerns about the global outlook". And the paper's Chanticleer columnist wrote: "Long-term investors reading the monetary statement by Reserve Bank of Australia governor Glenn Stevens should remain optimistic."

And Michael Pascoe wrote on smh.com.au: "The RBA governor's jawboning over promised/threatened rate rises has functioned equally well, effectively doing the job of tighter monetary policy, helping to scare people into saving more and spending less. It is a curious, double-edged success story of economic fear and political loathing removing for some months the threat of an interest rate rise that was itself a key element of the fear. For those who are heavily indebted, the prospect of unchanged monetary policy will be a relief. Those who had most to gain from an economy growing more quickly – the retailers and others beyond the resources boom's immediate impact – will be left to wonder whether they have gained or not from the reasons behind steady interest rates."

Reports in the morning papers on June car sales highlighted the slide from last year, such as this effort in The Australian: "Car showrooms had their slowest end-of-financial-year sales in almost a decade as the double-blow of consumers in retreat and out-of-stock Japanese brands crushed June demand. Just 96,157 vehicles left dealers in the month, 500 fewer for every selling day than June last year and the lowest total since 2003 in what is usually a bonanza period." And that's all true, but what the reports didn't say was that the June figure was the highest this year and more than 24 per cent above the depressed May and April figures. Car sales are coming back strongly.

The Sydney Morning Herald's economics editor, Ross Gittins, wouldn't be surprised that there's another survey showing business doing it tough. This time Adele Ferguson writes: "If there was any doubt that a big chunk of the Australian economy outside of mining is flirting with recession then the latest Dun & Bradstreet survey on business expectations for the September quarter confirms it. In a statement released today, the findings from Dun & Bradstreet's latest Business Expectations Survey, warn that business expectations are at levels seen just before the worst of the GFC. It comes at a time when business is grappling with the introduction of new imposts, including a carbon tax and in the case of iron ore and coal companies, a new resources rent tax." More moaning?

The Australian's business columnist, John Durie wrote this morning: "ASIC is investigating 32 potential market manipulations in end-of-financial-year trading last week. The corporate plod had previously warned market participants against end-of-year stock price ramps, with the threat of $1 million fines for any breach. Last week, ASIC issued 73 window-dressing alerts and from that it is making inquiries on 32 matters. As outlined in this column last week, Paperlinx's stock price soared some 90 per cent last week ahead of a trading halt and news this week of further writedowns. A range of other stocks saw big price increases on the last day of the financial year, including BlueScope, Mt Gibson, Seven Group, Karoon Gas and Mirabela Energy." Good move.

This morning Gittins looked at another way to assess success: "How important is money to enjoying a high quality of life? It's an eternal question - mainly because there's no simple answer. But we can use the new ''better life index'' compiled by the Organisation for Economic Co-operation and Development to shed more light on the topic. The short answer is that once a country reaches a reasonable level of affluence, it's not how much money it has so much as how well it uses what it's got. For the individual, the key is understanding money's limitations. In an effort to get away from using gross domestic product as a de facto measure of wellbeing, the organisation has developed a better life index for each of its 34 member countries (which include, along with its 23 original rich countries, six former communist countries plus Mexico, Chile, Turkey, Israel and South Korea)." Good column as well.

The AFR reports that: "Stockbrokers and investment banks face a potential ban on accepting fees from companies in return for helping them raise capital, an unintended consequence of moves to stamp out financial planning commissions." Poor dears.

The Australian reports a whine from a leading banker: "Commonwealth Bank of Australia chief executive Ralph Norris has questioned whether the high cost of the current round of banking regulation is cost-effective for bank customers. Norris told a Brisbane business lunch yesterday that the federal government's banking reforms were costing his bank $100 million a year, and the cost to the whole banking industry would be more than $500m. He said that although Australia's regulators had been fair and most regulation was "sensible", the current round of regulation had added more costs to banks, which would affect customers."

Foster's remains in the news. This morning Malcolm Maiden looked at the bid once again: "The $11.2 billion takeover proposal by SABMiller for Foster's is proceeding according to the first chapters of the takeover playbook. According to the playbook, all that means that the critical takeover milestone is the Foster's June-year profit result: early guidance on it, possibly, or the result itself, on August 23. Once it is out, SABMiller will have a clearer picture and its thinking about a bid bump will get serious."

And Business Spectator's Stephen Bartholomeusz wrote that: "The market has pushed Foster's price up to around $5.15 which, given that it would probably take at least six months for any takeover to be completed and acceptances paid for, signals a market expectation of an offer around $5.50 a share, if not higher. Foster's own view of its value, comparing it with the multiples paid for other beverage transactions in this market and elsewhere, is probably closer to $6 a share than $5. Given the relative paucity of synergies, the reality that the Australian beer market is at best low-growth and the potential that an acquisition of Foster's might see it lose some of its very lucrative licences to distribute other brewers' products in this market, that might prove too rich for SABMiller, which would know that if it comes back with a higher number that would only be the starting point for any serious negotiation with Foster's. In effect, as a consequence of Foster's tactic of ignoring the initial approach, SABMiller would know that to acquire its target (and assuming no other bidder emerges) it would have to be prepared to bid against itself not once, but at least twice."

The Australian's Bryan Frith reports on a continuing takeover saga: "Dissident shareholders of the automotive parts and electrical products group CMI don't give up easily. Fresh from a defeat on a shareholder vote to voluntarily wind up the company, the dissidents are now poised to requisition another meeting, this time seeking to remove two directors, Colin Ryan and Danny Herceg, who they regard as too cosy with the company's major shareholder, Ray Catelan."

The Australian's Nabila Ahmed finds a brawl in drugs that's caught her eye: "Ever the gentlemen, Mark Hooper and Stephen Roche would never want to be seen to be butting heads. But that is the distinct impression investors have been left with after Roche's Australian Pharmaceutical Industries effectively asked Hooper's Sigma Pharmaceuticals to step outside the pharmacy play pen and slug it out over about 400 pharmacies under the Pharmacy Alliance and Independent Pharmacists of Australia Group worth about $400 million in annual revenues. This fight has been brewing ever since API, which had been supplying those pharmacies for a decade, decided it didn't want to compete for the business when the work was put out to tender earlier this year. Last week, Sigma, which had been servicing the clients on an interim basis while the tender process was completed, signalled it was hopeful of signing 250 of those pharmacies. On Monday, API said it had already struck "preferred wholesaler agreements" with 150 pharmacies and was supplying another 50."

Fellow writer at The Australian John Durie also revealed this morning: "Woolworths plans to finally release more financial details of its Masters joint-venture hardware project when it unveils its 2011 year financial results next month, including a preparedness to absorb losses for several years. It is also planning to release more details about its latest productivity program, Project Quantum, as new boss Grant O'Brien prepares to take the reins on October 1."

And The Australian's Tim Boreham wrote this morning: "From the "spooky coincidence" file emerges these two biotechs, which both entered animal-health deals yesterday. Both stocks are backed by big names: fast-food king Jack Cowin and squillionaire Boris Liberman in the case of Bioniche, and property tycoon Lang Walker in the case of Medical Australia."

Finally, Fairfax's Insider, Ian McIlwraith has found a new coal stock: "A chance remark at lunch by the long-term specialist fund manager Stephen Sedgman has turned into a $125 million deal to backdoor list a coal explorer in the shell of Strategic Pooled Development. Brisbane-based mineral explorer Gordon Saul, who fittingly has ''Shackleton'' as one of his family names, is reputed to have kicked rocks all over the globe for leading companies but now wants to put a collection of coal tenements in Australia and Canada on to the ASX."