THE DISTILLERY: Wrong rate wagers

Distillery Holdings today will issue a prospectus seeking to raise an unspecified amount of funds, but enough to repay and settle all outstanding wagers from going overboard yesterday on That Certain Race in Melbourne, so soon after Rate Rise Looms won the RBA Stakes. Macquarie Group, the needy souls have been appointed lead manager, Westpac, which reveals its 2010 earnings today, has been named sole underwriter, no, sorry, undertaker to the issuers' bank account. Westfield will manage the retail side, Leighton will warn on the profitability and the interest rate will be at a margin to the RBA's cash rate, which also seems to be the main area of interest for our jotters this morning. I wonder why.

The Age's Ian McIlwraith said this morning: "As it turned out, most punters were wrong about interest rates and the Melbourne Cup winner. The chief steward of monetary policy, Glenn Stevens, found a good reason to put additional weight on the economy at yesterday's meeting, adding another 0.25 percentage points to the saddlebags. A couple of weeks back Stevens was saying ''it might be safer for a central banker not to look forward at all'', but he has clearly ignored his own advice to predict that our coal- and iron ore-fired economy will be running hotter next year, and he would rather choke off any chance that the inflation rate will surge."

The Australian said this morning: "The Commonwealth Bank's shock decision to almost double the RBA's 25-basis-point rate rise has exposed the banking sector to a fresh round of regulation. Condemning the Commonwealth's move as a "cynical cash grab", Wayne Swan foreshadowed a reform package to foster competition and stop the big four banks from exploiting their market dominance." Government action, is that another way of saying, joke, Joyce?

Business Spectator's Stephen Bartholomeusz wrote yesterday: "The decision to move by 25 basis points today, of course, invites that same outcome of a rise in lending rates beyond the official increase. That suggests that either the RBA believes the banks will be cowed into passing on only the change in official rates by the relentless bashing they have had in recent weeks from Joe Hockey and others, or that it has come to the conclusion that it can't sit on its hands any longer regardless of what the banks do."

Fairfax's Elizabeth Knight said this morning: "The Commonwealth Bank of Australia has been hung out to dry. For a day, at least, it has been left on its own as the only bank to raise variable interest rates beyond the quarter of a percentage point announced by the Reserve Bank yesterday. At least two of its competitors, ANZ and Westpac, will probably follow in the slipstream and raise rates beyond the cash rate over the next couple of days – hoping that hiding behind the CBA will minimise their own public relations damage. There will be pressure on the National Australia Bank to follow." The CBA hung itself out to dry, no one left it there.

The Australian Financial Review said in an editorial: "In the end, stabilising house prices, soft manufacturing activity, the strong dollar, and even the threat of out of cycle mortgage rate rises by the four major banks were not enough to stay the Reserve Bank's hand." And its Chanticleer columnist wrote this morning "CBA's aggressive moves on mortgages and term deposit rates triggered the predictable response from the Treasurer and the sharemarket, which sees no threat to bank profit growth."

Michael Pascoe wrote on the SMH website: "Monetary policy isn't about the inflation rate over the last quarter or over the next – it's about what's likely to happen next year and beyond. That's why the Reserve Bank today followed through on all the warnings it has given us with another 25 basis point rate rise. Never mind what inflation has been doing, the RBA is firmly of the view that the Australian economy will strengthen next year as the commodities boom funnels money into our collective pockets and thus, in the words of Willie John McBride, the bank is getting in its retaliation first."

News Ltd's tabloidist, Terry McCrann wrote: "Three cheers for him and two cheers for Commonwealth Bank CEO Ralph Norris, who promptly added 20 points for his home loan borrowers to the 25 points from Stevens. Be grateful, be very grateful, that both decisions are made by central and commercial bankers respectively – and most certainly not by politicians, and nor for that matter business lobbyists, journalists and editors. Most of the latter would not have delivered the RBA rise; and almost without exception they would not have added the CBA extra. Indeed, sight unseen, I'm pretty confident that the CBA will get a lashing from the massed media today."

And The Australian's Michael Stutchbury wrote yesterday: "The RBA has begun deliberately leaning against the inflationary threat from Australia's once-in-a-century mining boom. In lifting interest rates today, the Reserve Bank of Australia has pre-emptively shifted monetary policy from 'neutral' to 'restrictive', to stop inflation rising above its 2-3 per cent target a year or more down the track. It can only be seen as a sign of the central bank's confidence in Australia's China-boom story and its determination to make sure this boom is properly managed. This will be controversial, firstly because it follows last week's soft September-quarter inflation number. But Reserve Bank governor Glenn Stevens now says the deceleration in inflation from 5 per cent to around the middle of the 2-3 per cent band is ending." And this morning Stutchbury wrote: "Someone is finally making a clear policy call and backing it with action, even if it's unpopular. Glenn Stevens is backing his judgment that Australia confronts a once-in-a-century mining boom that could blow up the economy unless reined in by higher interest rates. It's a Melbourne Cup-day policy bet that his renewed confidence in Australia's China boom demands a comparable degree of policy discipline. The Reserve Bank governor is now deliberately tightening monetary policy from "neutral" to "restrictive" to keep inflation in check a year or more from now, even though much of the economy is still soft."

And The Australian's Matthew Stevens asks us to feel sorry for Westpac's Gail Kelly: "After a week or two of intense focus on our national banking dilemma, courtesy of some whacking annual profit numbers delivered by her competitor pillars, the Reserve Bank goes and lifts rates on the eve of Westpac's profit announcement. Today Kelly will, very reluctantly I imagine, become the public face of banking and its rapacious ways. She will announce a headline profit of close to $6 billion on the back of a balance sheet of something near $600 billion." Got my tissues out now.

There were other stories about beyond the cup and rate rises. There's the leaked Westfield split and capital raising John Durie and Florence Chong reported in The Australian yesterday afternoon: "Westfield will tomorrow unveil a split of its Australian retail assets into a separate company to be called Westfield Retail. The spin-off will raise up to $3.5 billion through the issue of new shares and is expected to have $9 billion of assets. The deal is aimed at unleashing value for the company to give more flexibility for further expansion. The equity raising will be led by Morgan Stanley, Citigroup and Credit Suisse." Why didn't Westfield ask for a halt to trading from the start of business yesterday? This morning Durie wrote: "Since creating Westfield Group six years ago, the Lowy family has watched the stock underperform the market by a staggering 37.6 per cent. That in part explains why today it will once again try to unscramble the egg." Ah, the Lowy discount, so another "good idea" has been dreamed up to sell to credulous investors, who will be asked to pay for it, again.

There's the QR National float. Remember that? Fairfax's Insider, David Symons says: "Selling the QR National float within the proposed price range of $2.50 to $3 a share is looking increasingly unlikely, with a Deutsche Bank analyst valuing the coal haulage colossus at the low end of the mooted range. The Deutsche perspective will be influential for funds managers considering their strategy for next week's multibillion-dollar bookbuild as the broker is conflict-free, having failed to score a role as one of six lead managers to the deal."

And it was good to see the SMH's economics editor, Ross Gittins, return from leave with this effort where he showed up the rest of the credulous media by undermining a report last week claiming Australia had become a net food importer: "So how did the food and grocery council get exports of $21.5 billion and imports of $23.3 billion for 2009-10, giving that deficit of $1.8 billion? By using its own definition of ''food and groceries". We're not talking about farmers here but the people who take what the farmers produce and process it for presentation in supermarkets. So the council's figures exclude unprocessed food exports, including wheat (worth $4.8 billion in 2009), other grains and live animals. They include ''grocery manufacturing products'', such as medicines and pharmaceuticals, plastic bags and film, paper products and soap and other detergents. There's just one problem. This is all nonsense. Australia? A net importer of food? Yeah, sure. If you fell for it, your bulldust detector has seriously failed you in the media space."