News

The latest ANZ-Roy Morgan consumer confidence index dropped 1.2%, to 112.1 points, in the week ended 7 June, below the four-week moving average for the first time since early-May. “It’s disappointing to see the boost that consumer confidence saw around the time of the budget start to be unwound,” Warren Hogan, ANZ’s chief economist said.

The ANZ job adverts were flat in May after a seasonally-adjusted 2.5% rise in April. In trend terms, job ads were up 0.4%. Internet job ads were up 0.1% and newspaper ads were down 4.3%.

Both business confidence and business conditions saw significant improvement according to the NAB monthly survey. Business confidence rose from 3 points to 7 points in May, largely because of the budget and RBA rate cut. “Confidence appears to have received a boost from interest rate cuts, better conditions and perhaps some relief over a more politically sell-able budget compared to last year,” NAB’s Alan Oster said. Business conditions were also up in May, 4 points to 7 points.

ASIC chair Greg Medcraft wants to see a mutual recognition arrangement between US and Australian retail debt markets implemented and said it would be a “win-win” for the countries involved. “For borrowers, it gives them access to funds, and for investors it gives them diversity in their portfolio,” he told the media. “And it strengthens further the ties between Australia and the US.”

Australia saw its strongest May jobs growth in eight years with 42,000 jobs added in the month and the jobless rate fell to 6.0% from a revised 6.1% in April, according to the ABS. The improvement was “driven by increases in part-time employment for females (up 29,800) and full-time employment for males (up 15,900)”. The participation rate remains at 64.7%, revised from an earlier 64.8%. Many economists questioned whether the data was accurate.  The ABS cautioned that it had uncovered anomalies in its data including an ‘unparalleled surge in May of 35,000 and pointed to the changing patterns in the way people responded to its monthly survey. “As the ABS is unable to remove this impact from the original estimates, care should be taken in comparing the original and seasonally adjusted estimates, particularly for Western Australia,” the ABS said.
AMP Capital’s Shane Oliver said, “It’s premature to conclude that the unemployment rate has peaked … Another rate cut at the August RBA meeting remains a 50/50 proposition.”
ANZ said, “The unemployment rate continues to move down against expectations of further increases through 2015. However, we believe that the strong gains experienced in recent months will not be sustained. Economic growth is still below trend, and is likely to remain so, while the likelihood of further job losses in the mining industry will also apply upward pressure to the unemployment rate.”
St George senior economist Janu Chan said, “A falling unemployment rate and healthy job growth is somewhat puzzling given that economic growth has been below trend.”
UBS economist George Tharenou said, “Today’s data was far better than expected … But interestingly, this contrasts Q1 GDP data which showed nominal household disposable income dropping to a 12-year low of 2.5% year on year. Overall, the improvement in the labour market is a welcome development, and will give the RBA some comfort to sit back and hold the cash rate ahead.”

Morgan Stanley economist Daniel Blake said, “We reiterate our concerns about data quality, given the standard deviation of ±23k over the past two years. We remain sceptical of the improved jobs and hours worked momentum, and expect unemployment to rise further, while the RBA should reconfirm its easing bias.”
RBC Capital Markets strategist Michael Turner said, “The data doesn’t gel with other measures like ANZ’s jobs ads. For the Reserve Bank, there is no implication in the near term.”
JPMorgan chief economist Stephen Walters said, “We weren’t forecasting any more moves from the Reserve Bank and when you get numbers like these it’s even less likely that the bank’s going to have to move again.”
CommSec economist Savanth Sebastian said, “What a sweet set of numbers! … The Reserve Bank can comfortably wait on the sidelines and let the economy evolve in the low inflation environment.”
Capital Economics economist Daniel Martin said, “The reading almost certainly exaggerates the strength of the labour market, while the sharp drop in corporate profits over the last year suggests that far weaker employment growth lies ahead. We still think the Reserve Bank’s view that the unemployment rate will peak at 6.5% is too optimistic, and we expect it to cut rates later in the year.”

New research from DEXX&R just published suggests that funds under management and advice held in retail and wholesale managed funds increased by 15.4% to $1.14tn over the 12 months to March 2015. This is an increase of $152bn on the March 2014 figure of $987bn. In the retail market the strongest growth in FUM was recorded in the retirement incomes segment, with a 19.6% increase in FUM and in the retail investment segment with a 15.8% increase in FUM. Of the top five retail and wholesale managers, Westpac’s funds under management increased by 15.4% to $18.7bn, up from $121.4bn to $140.1bnover the 12 months to March 2015. AMP recorded an increase of 15.3% to $144bn, Macquarie a 13.5% increase to $78bn and NAB a 13.1% increase to $155bn over the 12 months.

Henderson has bought two investment companies from IOOF Holdings, acquiring 100% of Perennial Fixed Interest Partners and Perennial Growth Management with combined assets under management of $10.7bn. YieldReport understands that Perennial Fixed Interest is managing at least six Australian fixed interest mandates for investors such as AustralianSuper ($856m), CareSuper ($235m), Statewide Superannuation Trust ($198m) and EnergySuper ($188m). Cash mandates also fall under Perennial Fixed Interest and include a $314m mandate managed on behalf of Statewide Super, $273m for Maritime Super and $216m for Legalsuper.

ME Bank has rebranded itself and now calls itself simply ME. ME brand and digital director, Ingrid Purcell is quoted as saying, “Our belief is that banking has been made too complicated and complex – customers want to get ahead and want a bank that helps them achieve this simply and easily in a digital world – that’s our aim.”

Singapore’s biggest bank, DBS has been given approval by the regulator to operate in Australia and will open in Sydney before the end of the financial year offering commercial banking services including corporate finance, trade finance, cash management and treasury services.

Moody’s says that Australian banks reported exceptionally low credit costs over the six months to 31 March 2015. The rating agency identifies some potential headwinds to asset quality, but expects that in 2015 they will continue be moderated by Australia’s record low interest rates. Looking further ahead, bank credit profiles will be supported by likely improvements in their capitalisation. “We expect some moderate pressure on asset quality due to the effects of economic transition from resources sector-led investments to other sources of growth,” says Moody’s.