THE DISTILLERY: Dirty words

Mark yesterday down as the beginning of 'open-mouth operations' at the RBA and they must be thrilled at the response. The point that the RBA would rather talk down activity than excessively raise rates – as well as the currency – is lost on all commentators. Robert Guy, filling in at The Australian Financial Review's Chanticleer, simply takes RBA chief Stevens' comments at face value. Also at the Fairfax stable, Tim Colebatch in The Age breathlessly reports that financial markets are tipping "seven interest rate rises in a row”. This column's advice is to watch housing. If it finds a plateau, so will rates.

The media hysteria also misses another mitigating factor. This is not a regular business cycle recovery. Across the developed world it is a liquidity-driven cover-up of consumer and bank balance sheet ruin. This is also a point overlooked by Alan Kohler today in his coverage of Goldman Sachs' huge profit. In becoming a bank holding company Goldman now has access to Federal Reserve lender of last resort facilities and FDIC guaranteed debt, even as it makes huge bets through "principle trading”. In this column's view, for developed economies there is nothing yet sustainable in this recovery and when the penny drops so will stock markets, sentiment and pressure on rates.

In other stories today, Bryan Frith of The Australian exposes the minutiae of the GUD offer for Breville and, in so doing, the likely moves of the players involved. The piece is simply too good and tight to excerpt from. This column would like to tip its hat to one of Australia's hardest working columnists. Day after day, Bryan Frith of The Australian pumps out highly researched, detailed analyses of corporate wheeling and dealing. He has a clear niche, mastery of his subject, rich corporate memory and economy of delivery. The anodyne tricks of the modern commentator – inflated ego, throwaway lines, failed Seinfeldian trivia – are all absent. This column recommends that you read it.

In contrast, John Durie of The Australian is not delivering his full value. His addiction to vignettes is overly constraining. Durie's strength is an ability to see through corporate clap-trap. This courage needs fuller expression, through greater detail and investigative effort. Today again he opts for four pieces and leaves us short. The first is a look into succession at Leighton. Durie concludes that "this time” Wal King "is serious” about his departure: a terrific insight. He goes on to canvass several possible replacements. But that's where it ends. What about some history of King's strengths and weaknesses and how they have been crucial to Leighton's success? What should Leighton be looking for in its successor? Why does it not already have a succession plan?  The departure of a stellar success like King cannot be overstated in its importance to the firm. What does it mean? Durie's other three vignettes: on pay scraps at United, Downer and Qantas; Snowball's issues at Suncorp; and Rio-BHP's changes to the Pilbara JV are not worth your time.

Matthew Stevens of The Australian generally makes a better effort with his research. However, his arguments today leave much to be desired. In today's column about the BHP-Rio JV, he argues that: "The plan to create a jointly owned marketing company that would sell up to 15 per cent of the combination's Pilbara production has been culled. The inspiration for this quirk within an otherwise huge, but intellectually straightforward, deal was always somewhat obscure.” There is nothing opaque, obscure or in any way mysterious about the purpose of the joint marketing dimensions of the JV. It was simply a ham-fisted attempt to revive the monopoly pricing power lost with the end of the merger. A point clearly made by Stephen Bartholomeusz of Business Spectator yesterday.

Over at Fairfax, Malcolm Maiden of The Age also tackles the changes to the BHP-Rio JV but does so in a much larger and more important way. Maiden takes the opportunity to build on the recent scoops from John Garnaut that BHP is having undue influence over Canberra's decisions on commodity policy. Maiden asks, "Did BHP Billiton lobby hard against Chinalco's tie-in with Rio Tinto as it worked to do a deal with Rio instead? You bet. Does BHP's outgoing chairman, Don Argus, believe that foreign ownership of Australian resources projects should be limited, with China Inc proposals subjected to particularly tough rules? Absolutely...Have BHP and Argus effectively drafted the federal government's policy towards foreign investment in the resources sector? No. Does China fear that it has? Quite possibly – which is why the government must spell out its policy towards Chinese investment more clearly.” Amen to that.

But a connection that Maiden does not draw is that BHP used arguments against 'China Inc' in favour of its takeover of Rio before any move by Chinalco. This was reported at the time. If BHP had not sought monopoly pricing power, and stuck with the cosy iron-ore duopoly, it seems unlikely to this column that China would have responded so aggressively. By ignoring competition policy, the Australian government invited the current China mess.

In another story, Michael Stutchbury of The Australian today pens a story of the rising Australian dollar. Using various sources he reports the Aussie Battler is headed well north of parity with the US dollar.