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, July 15, 2011

Key inflexion point in Aussie rates debate...

Westpac's Bill Evans has come out with an incredibly brave--albeit in-line-with-traders' short-term sentiments view--on Aussie rates, shifting from a base-case of hikes to one of 100 basis points worth of cuts with the first to come this year. This is all based on the Euro sovereign woes and the long-held Westpac and Macquarie view that the economy is much weaker than the RBA and Treasury would have us believe. Evans' call helped bond prices rally a fair bit further and shunted the Aussie dollar down a bit. These really are interesting times, and the CPI in a couple of weeks could make life for the RBA even more difficult. In the interim, here are Evans' fighting words for the RBA:

"Overall we would argue that for the interest sensitive parts of the economy – households and housing in particular – interest rates are now too high. The Reserve Bank has indicated that the ‘neutral’ cash rate is thought to be around 4.5%, with current rates seen as “mildly restrictive”. However, you only really know where neutral is when you are there. Our assessment of the impact of rates on confidence, housing activity, credit growth, and (non mining) investment spending plans is that we are most definitely not at neutral and that the real neutral rate is likely to be significantly further below the 4.5% suggested by the Bank. A cumulative cut of 100bps will only move rates marginally into the stimulatory zone."

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