THE DISTILLERY: Mining boom deja vu

Boom, boom goes the punchline from a terrible joke. In Australia it's the call sign of economic nirvana, according to one report, used twice this morning in different papers after a speech yesterday by a senior Reserve Bank official. The reports covered the speech and suggestions the current boom could last for another 20 years, but what about the impact on interest rates, bank profits and Joe Hockey's outrage? QR National features again this morning, as does AXA APH and the AMP, and does retailing and hesitant customers. But first it's the global economy.

The Australian Financial Review says "The Organisation for Economic Co-operation and Development has reversed its projection for growth in high-income countries next year and is now forecasting a substantial slowdown in the pace of expansion." And the Herald Sun said: "The latest report card from the OECD in Paris painted an upbeat picture for Australia and said the only risks were international financial turbulence or an unexpected slowdown in China, reducing demand for our minerals. However, the OECD's Economic Outlook, released last night, said the global economy was "weak and uneven" with "fragile financial markets" causing global growth to become more hesitant. The OECD predicted Australia would post robust growth of 3.6 per cent in 2011 and 4 per cent in 2012. By comparison, the average for the OECD is 2.3 per cent and 2.8 per cent." Break out the Tarax, the good times are here, again.

And the Herald Sun also reported on its website under the byline, "staff writers": "The Reserve Bank is tipping the resources boom could last another two decades as the tally of resource projects with firm commitments soars to $133 billion. Fast-growing Asia, led by China and India, has pushed the Reserve Bank to upgrade its commodity price forecasts, a move that has been underlined in the past few weeks by leaps in the spot prices for the two key commodities, coal and iron ore. Addressing a business lunch in Perth yesterday, RBA deputy governor Ric Battellino said the strength of Asia represented "a very favourable global environment for the Australian economy", notwithstanding the weak state of the major advanced countries."

And David Uren in The Australian wrote this morning: "The Reserve Bank is tipping the resources boom could last another two decades as the tally of resource projects with firm commitments soars to $133 billion. Fast-growing Asia, led by China and India, has pushed the Reserve Bank to upgrade its commodity price forecasts, a move that has been underlined in the past few weeks by leaps in the spot prices for the two key commodities, coal and iron ore. Addressing a business lunch in Perth yesterday, RBA deputy governor Ric Battellino said the strength of Asia represented "a very favourable global environment for the Australian economy", notwithstanding the weak state of the major advanced countries." Well fancy that, a modern miracle of journalism. That's efficiency for you.

Ahead of the Santa season, Fairfax's Elizabeth Knight had some good questions about the non-performing department stores: "For the past year retailers have been blaming their poor comparative store sales numbers on the government stimulus packages that boosted last year's figures. But the quarterly sales figures released over the past week by both Myer and David Jones are the first batch that can no longer be excused by the stimulus comparison. The higher end department stores will now have to fess up over why shoppers are not spending in their shops. In the case of Myer, the October quarter sales went backwards, and after a boost in the period David Jones received from the opening of the new Melbourne city store, its sales numbers were also down. This begs the question of why these stores are struggling."

But John Durie in The Australian, took the retailers' side: "Retailers are united in attacking a hawkish Reserve Bank for all but halting sales growth just as consumers were starting to spend again. The Melbourne Cup day interest rate rise plus the political drama around the banks have had a sudden and dramatic impact on consumer spending. David Jones boss Paul Zahra played down the impact of interest rate rises yesterday, but the facts of the matter are that he reported negative comparative store sales of about 1 per cent, despite the relatively easy year-ago hurdle of 0.8 per cent sales growth."

Malcolm Maiden wrote this morning in the Fairfax broadsheets: "Craig Dunn says AMP is not home and hosed with its takeover of AXA Asia Pacific despite yesterday's news that AXA's six independent directors support the $14.6 billion bid AMP is making in league with AXA of France. And he's technically correct. It will probably be late March before due diligence is completed, the takeover is cleared by the Treasurer, Wayne Swan, (AMP already has regulatory clearance) and it is approved by AXA AP shareholders. But after 15 months of quiet campaigning, yesterday was probably the day when Dunn and his board began making practical plans for a marriage that must overcome the long history of the groups as fierce rivals, even enemies. AMP will tread carefully and be careful to avoid hubris."

Stephen Bartholomeusz wrote in Business Spectator: "Now that the hold-out among the AXA Asia Pacific independent directors has fallen into line it is probable, albeit not certain that AMP's bid for AXA APH and the sale of its Asian operations to AXA SA of France will go through. It is not yet certain because the offer and break-up still requires at least two sets of approvals, one from AXA APH shareholders and the other from Wayne Swan. There are murmurings of discontent among AXA APH's shareholders at the prospect of losing their exposure to Asia, despite the $10.4 billion price-tag the French have put on them. Given the threshold for approval of a scheme of arrangement is quite high – 50 per cent of the shareholders who vote and 75 per cent of the shares voted – and the number of small shareholders in AXA SA, the outcome of that meeting can't be taken for granted. AXA SA can't vote with its majority shareholding."

When it comes to rail access in the Pilbara and BHP Billiton, John Durie is immediately on his guard, as he was yesterday: "For 23 years, BHP Billiton has done everything possible to avoid having to comply with a Western Australian government contract to supply haulage facilities on its rail lines, in return for bring granted access to state land. All of a sudden, BHP has agreed to talk – with the emphasis on 'talk' – with Atlas Iron to supply haulage on its Goldsworthy line in the Pilbara. This was not such a big concession, given the line is hardly used and BHP has publicly abandoned it in the past, its aim being to keep people away from its treasured Mt Newman line. Still BHP is not known for acts of corporate generosity, so the search continues for reasons why it would suddenly agree to talks. One reason is the state government has told BHP it must honour the agreements and Goldsworthy talks are a painless way of doing so." And this morning, 'old BHP' was back with this report in The Australian: "BHP Billiton has declared war in its fight to protect key infrastructure in the rich Pilbara region by launching court action to stop a move by iron ore minnow FerrAus to gain access to its main rail line. The news came on the same day that BHP announced it would enter rail haulage talks with another junior miner, Atlas Iron, on another route."

And Fairfax's Insider, David Symons entered the debate this morning: "Frustration levels are running high at FerrAus as it struggles to drag a reluctant BHP Billiton to the negotiating table to discuss access to the Mount Newman rail line. A haulage contract would be the most efficient way for FerrAus to transport ore from the Robertson Range to Port Hedland. According to FerrAus, a 1987 agreement with the West Australian government imposes a clear-cut obligation for BHP Billiton to provide haulage services on commercial terms. The rights of junior miners to access the line were upheld by the West Australian Supreme Court in 2004."

The AFR also said this morning: "QR National is on track to price its $6 billion float at the bottom end of its forecast range after institutional investors submitted bids to buy stock at around $2.50 per share on the first day of its institutional book-build." And The Australian reported: "Strong buying interest in the QR National float from overseas specialist fund managers yesterday helped push up the bookbuild price. The $2.50 a share base price rose, with the $2.55 level now reportedly "well covered" by indicative bids from local and offshore institutions." This sounds like a rerun of a story on QR National from the start of last week.

And Chanticleer wrote in the AFR that covered bonds are "no silver bullet" as sources of new funding for the banks. "Joe Hockey's skills in boiling down complex issues to simple one-liners should be called upon by Australia's banks as they put the case to Treasury for changes to the Banking Act to allow the issuance of covered bonds."