Australia & NZ Archives - Page 64 of 95

March 28, 2013

Forex: Euro correction while Aussie retraces

The euro is headed for a test of primary support at $1.26 on the monthly chart. Respect would confirm the primary up-trend, while failure would signal a down-swing to $1.20.
Aussie Dollar/USD

* Target calculation: 1.35 + ( 1.35 – 1.20 ) = 1.50

Pound sterling is testing the new medium-term resistance level at $1.53 against the dollar. Respect would confirm the primary down-trend, with a target of $1.43*. Declining 63-day Twiggs Momentum, below its 2011 lows, strengthens the signal.
Aussie Dollar/USD

* Target calculation: 1.53 – ( 1.63 – 1.53 ) = 1.43

The Aussie Dollar retraced this week to test short-term support at $1.04, but the up-trend is intact and we should expect a test of resistance at $1.06. Failure of support at $1.03 is unlikely, but would warn that primary support at $1.015 is again under threat. Narrow fluctuation of 63-day Twiggs Momentum around zero suggests a ranging market.

Aussie Dollar/USD

Canada’s Loonie rallied off medium-term support at $0.97 against the greenback. Expect some resistance at $0.99, but the CAD is just as likely to test the descending trendline at parity. The primary trend remains down and a test of primary support at $0.96 remains on the cards in the next quarter.
Aussie Dollar/USD

The US dollar is encountering increased resistance as it approaches ¥100 against the Japanese Yen. The 30-year down-trend is over. The advance is extended and a correction likely, but breakout above ¥100 would test the 2007 high above ¥120*.
Aussie Dollar/USD

* Target calculation: 100 – ( 100 – 80 ) = 120

March 25, 2013

RBNZ steps closer to macroprudential | MacroBusiness

Houses & Holes at Macrobusiness reports on macroprudential steps being considered by the RBNZ. Macroprudential regulation are measures aimed to mitigate the risk of the financial system as a whole, or systemic risk, as opposed to the risk to individual participants.

The [Reserve Bank of New Zealand] says it wants to increase the amount of capital the country’s big four banks must set aside to cover potential losses from high loan to valuation ratio (LVR) home loans. Such a move would, in theory at least, make such lending more expensive for the banks.

March 25, 2013

ASX 200: Resistance at 5000

The ASX 200 rallied above 5000 at Monday’s opening but gradually retreated to close at 4990. While failure to hold above the short-term support level is disappointing, an early break above 5000 on Tuesday would suggest a rally to 5150.
ASX 200 Index
The weekly chart shows the importance of medium-term support at 4950. Failure would signal a correction to test the rising trendline around 4700. Slight bearish divergence on 13-week Twiggs Money Flow warns of mild medium-term selling pressure. The index remains in a strong primary up-trend and only a breach of the rising trendline would threaten this.
ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4500 ) = 5500

March 22, 2013

Exploding Australia’s nuclear delusion | Business Spectator

Geoff Russell writes:

France has been producing most of its electricity using nuclear power stations for an average carbon dioxide intensity of about 80 grams of CO2 per kilowatt hour (gm-CO2/kWh) for two decades. In that time, Australia’s electricity has just gotten dirtier, rising from 817 in 1990 to 841 gm-CO2/kWh in 2010.

….Switzerland and Sweden have been using a mix of hydro and nuclear to achieve even lower carbon dioxide intensity than France.

March 21, 2013

ALP has spread Europe’s disease | The Australian

Greg Sheridan writes:

Europe’s present distress is our future. Everyone knows that part of Europe’s problem is excessive welfare. As Germany’s Chancellor Angela Merkel has remarked, Europe has 7 per cent of the world’s population, 25 per cent of global gross domestic product and 50 per cent of the world’s welfare payments.

March 19, 2013

Reform universities by cutting their bureaucracies

Insight into the growth of bureaucracy in universities from The Conversation:

In earlier times, Oxford dons received all tuition revenue from their students and it’s been suggested that they paid between 15% and 20% for their rooms and administration. Subsequent central collection of tuition fees removed incentives for teachers to teach and led to the rise of the university bureaucracy.

Today, the bureaucracy is very large in Australian universities and only one third of university spending is allocated to academic salaries.

Across all the universities in Australia, the average proportion of full-time non-academic staff is 55%……….Australia is not alone as data for the United Kingdom shows a similar staffing profile with 48% classed as academics.

This is a fine example of Parkinson’s Law, first proposed by Cyril Northcote Parkinson in a light-hearted essay in The Economist in 1955:

Work expands so as to fill the time available for its completion.

Parkinson cited the British Colonial Office as an example: the number of staff continued to grow even when Britain had divested itself of most of its colonies. He explained the growth as due to two factors in a bureaucracy:

An official wants to multiply subordinates, not rivals; and

Officials make work for each other.

He noted that bureaucracies tended to grow by between 5% and 7% a year “irrespective of any variation in the amount of work (if any) to be done” — even if the amount of work is declining.

March 19, 2013

ASX 200: Testing support at 5000

The ASX 200 weakened towards the close and is testing medium-term support at 5000. Breakout below 4980 would warn of a correction. Declining 21-day Twiggs Money Flow, indicating medium-term selling pressure, makes this likely. The index is in a strong primary up-trend and a 5 or 10 percent correction would not alter this. It is merely a case of one step back then two steps forward.
ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4500 ) = 5500

March 18, 2013

ASIC: High-frequency trading taskforce—Key findings

Findings of the recent ASIC investigation into dark liquidity and high-frequency trading.

The high-frequency trading taskforce found that:

(a) some of the commonly held negative perceptions about high-frequency trading are not supported by our analysis of Australian markets—for example:

(i) that high-frequency traders exhibit unacceptably high order-to-trade ratios. Increases in order-to-trade ratios in Australia have been moderate compared with overseas markets, and other algorithmic traders operate at similar levels; and
(ii) that high-frequency traders’ holding times are often a matter of seconds and therefore that they make no contribution to deep, liquid markets. Our analysis shows that only 1.2% of high-frequency traders held positions for an average of two minutes or less, 18% for less than 10 minutes and 51% for less than 30 minutes; and

(b) there is some basis in fact for other perceptions (e.g. about high-frequency trading creating excessive noise and exhibiting predatory or ‘gaming’ behaviours), but other traders are also contributing to the problem.

Both [the HFT and Dark Pools] taskforces have found evidence of potential breaches of ASIC Market Integrity Rules and the Corporations Act 2001 (Corporations Act), and some matters have been referred to our Enforcement teams for investigation. We have also seen a change in behaviour as a result of our inquiries. For example:

(a) fundamental investors are asking more questions about where and how their orders are executed;
(b) there have been improvements to automated trading risk management controls; and
(c) at least one high-frequency trader has ceased trading in Australia.

The main problem with HFT is investor perceptions that they are paying more for stocks than they should be. HFT trading profits can only come out of investors pockets. While the ASX receives massive fees from HFT traders, the erosion of investor trust in fair pricing is too serious to ignore. Failure to address this could see investors migrate to other exchanges or platforms, especially if there is a transparent auction process where HFT traders are unable to intercede.

March 18, 2013

Local government: the Lakewood model

In his report for the Urban Taskforce Australia, Professor Percy Allan recommends that local government adopt the Lakewood model of contracting in services. Lakewood was a sleepy California town threatened with being engulfed by urban sprawl — until they found a novel way of managing costs and improving services.

Lakewood of the early 1950s was David fighting the Goliath of Long Beach, a city intent on gobbling up its unincorporated neighbour parcel by parcel. The legal turf battles were exhausting Lakewood’s defenders, most of whom were transplants drawn to the promise of this sleepy village-turned-post-war boomtown. Then along came John Sanford Todd, a struggling attorney and proud Lakewood resident, who dreamed up a way to preserve his community’s independence without it going broke: It would become a new kind of city, one that contracted out for police protection, trash collection, fire fighting – just about every service a city provides.

That practice is commonplace in the USA today, but it was a revelation a half century ago. Todd’s vision, dubbed “the Lakewood Plan,” became a model of local government that informed incorporation drives throughout Southern California and beyond. Suburbia took shape in a rash of “contract cities,” including the neighbouring Dairy Valley (now Cerritos), La Puente, Bellflower, Duarte, Irwindale, Norwalk and Santa Fe Springs, which sprang up in such rapid succession that some observers began proclaiming the end of big cities.

There may even be opportunities to extend this model to metropolitan or state level, where states contract in and share the costs of centralized services provided by specialist corporations. This could apply to areas as diverse as road transport, police services and payroll functions.

March 18, 2013

Australia: Sydney is reaching a liveability crisis

Professor Percy Allan kindly sent me a copy a report, to which he contributed, on living conditions in Sydney — prepared by the Urban Taskforce. Here are some interesting excerpts:

Over the next 20 years Sydney will need at least 600,000 new homes located in infill sites and in greenfield sites on the fringes of the metropolitan area. But Sydney has not built sufficient homes over recent years with its current production only half that of Victoria on a per capita basis. Already the average house cost in Sydney is one of the highest in the world and this is impacting on affordability for many families. The Sydney median house is $100,000 more expensive than the equivalent in Melbourne. The average weekly earnings of a first homebuyer can afford a mortgage of $331,000 while the average house price in Sydney is $563,300. The lack of housing supply has led to an increase in rents by 40% over the last 5 years…….

Conclusion

Local government has aggravated Sydney’s housing crisis by:
• Not rezoning sufficient land for affordable multiple dwellings,
• Not adopting clear consistent plans and regulations to guide permissible development,
• Not ensuring individual development assessments are independent of political and vested interests,
• Not spending enough on capital works thereby creating a large backlog of unsatisfactory community infrastructure,
• Using depreciation provisions and reserves for non-capital purposes,
• Under-borrowing for infrastructure enhancements thereby forcing new homebuyers to contribute disproportionately towards this end,
• Not sharing the cost of greenfield infrastructure with existing communities that inherited free public assets from previous generations, and
• Not sharing or outsourcing activities that would benefit from economies of scale and scope nor focusing on specific place management to better respond to community needs at a street level.