As in the US, the focus in Australia will be partly on interest rates and partly on the health of the markets.
The markets will be conditioned by what’s happening in the US: it’s a knock on effect here and all about changes to sentiment and momentum generated by the events of the US.
Fixing up the Lehman Bros problem will be the primary focus, then (as detailed above) the Fed and a slew of important figures.
Here it’s interest rates and the economy with the release of the minutes from the Reserve Bank’s August Board meeting tomorrow, followed a day later on Wednesday by a speech from RBA Governor, Glenn Stevens on the economy.
Both will elaborate on the statement issued after the rate cut at the start of the month of 0.25%, and then Mr Stevens’ comments to the House of Representatives Economic Committee during his appearance a week ago.
But what will be of interest in the minutes is whether there was any debate about a rate cut of 0.50%, which some commentators had claimed could happen in the lead up to the meeting.
Figures on retail sales for July and employment for August last week, plus some signs of consumer and business confidence stabilising, were better than expected.
JP Morgan Australia’s economist, Stephen Walters told ABC TV’s Inside Business yesterday that last week’s figures on the economy might change thinking on rate cuts to come:
"I think it makes the October speculation of a rate cut in October off the mark, we’ve been saying the Reserve Bank is in no rush here and not only the labour numbers this week but remember both business and consumer confidence improved this week, we had a stabilisation for home loans after very steep declines, and we had a very significant increase in retail spending.
"So all of the data this week has been much stronger than market expectations and that just confirms that the economy is after all on its knees, and it doesn’t need any urgent resuscitation, it needs a bit of support from interest rates going down but I don’t think the Reserve Bank needs to be in any mad rush here."
What is clear from the figures though is that NSW is stuck in a rut and moribund, enjoying an unhealthy burst of stagflation all on its own while the other states are enjoying modest to strong growth.
Despite all the job losses so far announced, and a marked slowing in the growth of the labour market, the economy isn’t in recession and won’t contract unless there is a very sharp and sustained fall in Asia, especially China.
The slumping Australian dollar might have some inflationary impact, if the recent fall is sustained, but it will also benefit exporters.
It’s already forcing up the price of currency exposed stocks like Aristocrat and Fosters to name two recent companies whose shares have underperformed partly because of the impact of the higher Australian dollar on foreign-sourced earnings.
Apart from the two RBA items, there’s not much else here. Federal Parliament resumes for two weeks and the circus surrounding the leadership of the Federal Parliamentary Liberal Party will dominate.
The Bank of Japan will meet to consider interest rates, but is likely to leave them on hold, especially after figures on Friday showed that the contraction in the economy in the second quarter was a bit sharper than expected:
Japanese Gross domestic product (GDP) shrank by 0.7% in the June quarter, compared to the first estimate of 0.6%. The market had expected close to 1% contraction.
MONDAY:
Australian Bureau of Statistics figures for June’s housing starts for June.
TUESDAY:
RBA releases minutes of the September board meeting.
WEDNESDAY:
RBA Governor, Glenn Stevens speaks at a Sydney business lunch; the ABS releases international imports for August; the Westpac/Melbourne Institute leading index of economic activity for July.
THURSDAY:
RBA monthly bulletin; ACCI/Westpac survey of industrial trends for August.
FRIDAY:
Melbourne Institute of economic trends; Nylex Ltd EGM in Melbourne.
