The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, October 8, 2010

Blocko canvasses fewer hikes if AUD keeps rising

HSBC's chief economist, Paul Bloxham, has today canvassed the possibility of fewer rate hikes if the AUD keeps appreciating. Referencing RBA research, Bloxham suggests that every circa 5% TWI increase in the AUD, which is what we have had thus far, takes less "than 0.1pp per annum off GDP growth over the next two years and 0.2pp per annum off the CPI over three years." The impact on CPI is nontrivial. So here's hoping for a longer and stronger run on the AUD. Interestingly, the "Blocko", as he has quickly become known in financial markets, also offers another insightful observation on the RBA's exchange rate activities:

"Unlike many other countries, in our view the RBA is highly unlikely to intervene with intent to stem the appreciation or target an exchange rate level. And while the RBA does trade in Aussie dollars, it is typically to smooth out rowdy trading days and manage reserves."