The Last Gasp is a wry take on the week’s news, every week.
It was an interesting week for, well… interest. First the Reserve Bank surprised economists by clipping the official cash rate to a record 2.75 per cent, the first time the central bank has gone below 3 per cent since it began its current monetary policy-setting practice in 1990.
Even more startling than this historic development was the response of the big four banks, which traditionally look scornfully at a rate cut for a week or two before passing on just a portion to their customers. But there was obviously something in the air (namely a combination of deposit wars and post-earnings season publicity sensitivity) because they were falling over each other to pass on the savings to variable interest loan holders. National Australia Bank, Westpac and Commonwealth Bank all passed on the entire 25 basis points – and on the day of the decision! (PR teams were no doubt at full speed to get their media release out first – we can’t remember who did, but we’re proud of ‘em). Poor old ANZ, which has a policy of making the post-rates call on the second Friday of the month, had to wait. But in this environment of deposit wars it wasn’t going to miss out on a good headline too, and it knocked off more (sic) than the Reserve Bank did – and not just one basis point more, but two (sic)! It’ll be a wild weekend in the mortgage belt.
Meanwhile, no one really seems to know why the central bank cut rates, the economy is going well (on Thursday the Australian Bureau of Statistics announced unemployment had fallen in April) and growth is a bit below trend but hardly historically below. Despite a dip on late in the week, it’s yet to be seen whether such a mild, albeit symbolically notable, reduction will have a lasting effect on the stratospheric Australian dollar with monetary stances abroad so ridiculously loose – the Brits on Friday again left their rate at 0.5 per cent. So, the mining investment peak is due later this year and now the Reserve will have less ammunition to deploy when that realisation starts affecting confidence.
Anyway, let’s move onto some less depressing news. The federal budget is next week. Kidding, let’s move on again.
Tony Abbott released his industrial relations policy on Thursday. Actually, let’s move on again.
There were some laughs in hedge fudge fund world this week when one high-flying analyst was ‘outed’ as a supporter of the nascent 23 Million political movement – Australia’s answer to the 99 per cent of Occupy Wall Street. The Deutsche Bank head of wealth management, Chris Selby, copped some flack from his employers after breaking the sacred analyst commitment to an apolitical life (and here we were thinking it was amoral). The irony is the commie sympathiser – our tongue in cheek words, not his – was outed in MX newspaper, Melbourne’s free public transport daily. The chances of a hedge fund boss’s Lexus/Lamborghini/chauffeur breaking down and he/she actually taking a train to work on the one day your face is in the transit paper for some political hanky-panky? About one in 23 million.
Finally, there was some good news and bad for retail investors. On one hand this week finally saw approved the sale of Commonwealth bonds to retail investors via the ASX, paving the way for a retail corporate bond market based on the price of the aforementioned government securities, which would enable individuals to diversify their portfolios in this strange post-GFC investing world, aka the New Normal. Giddy up. But, on the other hand, Rio Tinto followed in the footsteps of BHP Billiton by declaring at its annual general meeting that it was not going to be a dividend chump, and hinted it would instead focus on longer term returns via savvy capital investment. The message went down like a lead balloon with tin-eared shareholders with aluminium on their minds.
Anyway, check back here next week for the most complete round-up of budget night… fashions. Au revoir.