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."

Wednesday, December 22, 2010

Blocker nails it on conservative consumer

As I have now said too many times to count, consumers aren't staying cautious unless they have continued incentives to do so. That means an increasingly high (risk-free) opportunity cost of consumption. Or, in Paul Bloxham's words in the context of yesterday's RBA minutes:

"Here is where the story gets really interesting. The Reserve Bank is telling us that the current restraint in household spending is required: and that if we did not have it, aggregate demand would be growing too quickly and inflation pressures building. Taken literally this suggests the saving rate needs to stay at its current very high level or more restraint will be required. So if you believe, as we do, that the saving rate won't stay at it current historically high level all on its own - and something will need to restrain it - then you also have in mind that interest rates will need to rise further. This narrative is not a new one, but it is bit more explicitly mapped out in these minutes than in previous statements.

Finally, it is also worth noting that since the December Board meeting (7 December) we have received an upside surprise on the labour market, some solid consumer sentiment data, and an improvement in the global story, although the business sentiment numbers have weakened a little."