THE DISTILLERY: RBA secrets

Each day, Distillery selects the three or four best ideas that have been put forward by the nation's leading business and economic commentators (and lists other items they have covered). Readers are invited to comment on the Distillery selections in The Conversation.

Last night central banks from around the world sought to supply the market with what it needs most – confidence. The co-ordinated slash to the cost of obtaining US dollars, shoring up liquidity, was a stunning reminder that the world's central banks have a formidable capacity to move in unison in an effort to restore confidence. It's terrible timing for revelations from The Age's Michael West that our own Reserve Bank has apparently caved in to the big four banks to hide what should be publicly available and easily accessible details about the funding guarantee, while the Treasury is offering an embarrassing explanation about it. Meanwhile, as the Australian Competition and Consumer Commission's Federal Court appeal goes down in flames, one commentator highlights the key areas where the consumer watchdog went wrong and what that means for future battles.

We start with The Age's Michael West, who has unearthed some embarrassing behaviour given the government's "commitment to transparency and accountability,” with the Reserve Bank removing crucial documents about the funding guarantee from its website. Two explanations the RBA provided in response to West's claims were varied, technical and uninspiring, while the Treasury's decision to hide behind the word "confidential” was outright laughable.

"We can only surmise that both the government and the banks are trying to pretend there was never any corporate welfare in the first place. For the banks' part, it is harder to justify $10 million executive salaries for running a taxpayer-guaranteed institution. And for the government's part, the censorship can only be put down to an obsequious back-pedalling on previous public commitments in order to appease the powerful banks.”

Secondly, The Sydney Morning Herald's Elizabeth Knight takes readers through the precise points where the consumer watchdog went wrong trying to appeal against Metcash's purchase of Franklins. Knight explains that the ACCC came up short on two accounts: firstly, it failed to demonstrate there was a "market” for wholesale groceries; and secondly, it failed to convince the court there was a real chance of a rival bid for Franklins (and that such hypotheticals are questionable in the first place).

"This creates a real problem for the ACCC and its role as an assessor of future competition outcomes. But, just as problematic for the ACCC, were the questions the court raised over the broader economic theory used in the commission's assumptions – such as monopolies lead to an abuse of market power, that higher than ‘normal' profits are uncompetitive because they illustrate an abuse of market power, or the possibility a profit higher than ‘normal' might be made is sufficient proof of an absence of desirable levels of competition. The judgment contended these might be useful as economic models but these assumptions should not be a substitute for fact finding. The ACCC was unwilling to comment yesterday on where to from here.”

Meanwhile, The Sydney Morning Herald's Michael Pascoe has shown a passion for undermining accepted wisdom recently. After looking at the latest capex figures from the ABS, he argues the notion that the Australian dollar is killing manufacturing would seem at odds with the hundreds of millions flowing into the sector.

"The outcome of increased capex in an industry can mean lower employment – and there's no denying employment in the manufacturing sector is falling. The flip side is that it should also mean a rise in productivity – the remaining workers being able to achieve more with the bosses' new buildings and technology. And improved productivity is something that everyone from the pet shop parrot to the RBA keeps demanding. The more detailed breakdown in the ABS numbers of course shows some industries doing much better than others while some do much worse… Overall though, the actual capex spending and the intentions indicate a country that is not suffering a bad case of Dutch Disease. The restructuring to make room for the resources boom requires some to fail, but it's a long way short of being a pandemic.”

And while we're on the capex figures, it's always worth watching the Herald Sun's Terry McCrann when he gets talking about interest rates – as the veteran RBA watcher is thought to have an insight into their thinking that's as good as any. In a brief analysis, McCrann says the strong capex number could put big rate cut bets in trouble if the retail numbers come in strong as well.

"It's the non-resources side of the economy and consumer spending in particular that's the 'swing factor.' A good retail number would rule out a rate cut, absent a Europe meltdown. A bad number would throw it into the pot. It would then turn on 'how bad?'”

Staying with capex to finish off this morning's business commentaries, and The Sydney Morning Herald's Ian Verrender takes the figures in a completely different direction. He argues that infrastructure spending is being left predominantly to miners, for trains to carry commodities, rather than governments, for trains to carry people.

Turning back to Metcash, The Australian's Bryan Frith weighs in on the ACCC's position, as does McCrann, who revisits his ongoing assault against former consumer watchdog boss Graeme Samuel.

The Age's Garimpeiro columnist Barry Fitzgerald says BHP Billiton's diamond assets – that are no longer required by the mining giant – could be worth more than $US3 billion, while The Australian's Matthew Stevens has a great background story on the operations. Meanwhile, Fairfax's Insider columnist Ian McIlwraith chuckles at a strategic error from Robert Millner.

Moving to banking, The Australian's John Durie sits down with retiring Westpac chairman Ted Evans for a wide-ranging interview that's well worth a read. The Australian Financial Review's Chanticleer columnist Tony Boyd also reflects on Evans' career. By the looks of it, Westpac is destined for a ratings downgrade – along with the other big banks – as Standard & Poor's tweaks its criteria three years after Lehman Brothers collapsed. The Australian's Richard Gluyas says it shouldn't be the cause for significant alarm for Australia's banks, but The Age's Adele Ferguson reminds readers that the big four shouldn't be seen in a vacuum.

Finally, in the world of trading, The Australian's Asia-Pacific editor Rowan Callick addresses evolving trade practices in the region. While the same newspaper's Commodity Watch columnist Robin Bromby has a pretty blunt message for investors – get on gold.