Australian Economic Performance

Australian Economic Performance

Yesterday one of the Big 4 banks, I’ll let you guess which one, released a report into the economic performance of each State in Australia.

Predictably the report highlighted the fact that the mining boom has finished. They also argued that the States that were not part of the mining boom have taken the lead and are “powering ahead”.

By powering ahead, there has been a slight increase in housing activity in NSW and Victoria.

The report also argues that personal spending is rising, however they probably didn’t look at the spending increase being based on people maxing out their credit cards even further.

Credit Rating

Credit Rating

There has been a lot written about the decision by the ratings agencies to lower the credit rating outlook of Australian Government debt. This is actually significant for the market although the negative outlook means that the actual rating may not change for another 18 months.

Apparently the ability of the government to continue fiscal reform and to get the budget through the Senate is all that is required to maintain the Triple A rating. A quick look at the composition of the Senate tells me that the outlook may be reduced faster than thought.

A little reported event that occurred at the same time the government got their rating cut was that the Big 4 banks also had their outlook reduced to negative as well. It makes sense that this would happen as the market believes that the banks are given an automatic lifeline if the credit markets seize up.

Hedge Funds Target Australian Banks

Australian Banks under fire by the Hedge Funds again

Rising bad loans and falling earnings are the trigger

It seems that the mainly international hedge funds have set their sights on the Australian banks yet again. Current data shows that the funds have ‘borrowed’ A$9bn worth of stock to sell short against the Big 4 banks in Australia. The trigger for this increase to record short selling against the banks started with the ANZ’s most recent result, which saw the bank cut its dividend and increase their bad and doubtful debt book for the first time since 2008.