September 2013

Indicators of Labour Demand

Australian Economy
Kim Edwards and Linus Gustafsson

There are several indicators of labour demand that can be used to assess labour market conditions and as inputs into forecasts of employment growth. These include measures of job vacancies, job advertisements and business surveys of employment intentions. Over the past year, there have been pronounced declines in a number of these indicators and employment growth has been somewhat subdued. This article suggests that as well as being a source of information on current labour market conditions, these indicators provide some leading information on employment growth, although the forecasting performance of models including these indicators is only slightly better than that of a simple benchmark model.

business, forecasting, labour market

The Relationship between Bulk Commodity and Chinese Steel Prices

Global Economy
Mark Caputo, Tim Robinson and Hao Wang

Iron ore and coking coal are complementary inputs for steelmaking and therefore their prices are closely related to steel prices. Historically, trade in iron ore and coking coal was based on long-term contracts, but in recent years there has been a shift towards shorter-term pricing, including on the spot market, and consequently prices reflect market developments more quickly. This article analyses the relationship between the spot prices for iron ore, coking coal and Chinese steel products, and finds that in the short run the spot price for iron ore has tended to overshoot its long-run equilibrium following an unexpected change in Chinese steel prices.

china, commodities, export, modelling

The Performance of Resource-exporting Economies

Global Economy
Ellis Connolly, Jarkko Jääskelä and Michelle van der Merwe

The surge in demand for resources over the past decade led to sharp increases in the terms of trade not just for Australia, but also for other economies with comparable resource exports such as Brazil, Canada, Chile, Russia and South Africa. Each of these economies experienced an increase in investment, although the surge in resources investment in Australia has been particularly large. The real exchange rates in these economies appreciated, weighing on other trade-exposed industries, while parts of the non-traded sector benefited from the boost to income and activity from the resources boom. In general, the resource-exporting economies experienced relatively strong growth in economic activity and inflation remained well contained, particularly compared with previous booms in resource prices.

export, international, resources sector, terms of trade

Partial Mortgage Prepayments and Housing Credit Growth

Australian Economy
Marc-Oliver Thurner and Alexandra Dwyer

Changes in lending rates have an important influence on the pace at which households prepay their mortgages. This has implications for housing credit growth. The effect of the fall in lending rates since October 2011 on prepayments is by itself estimated to have led to a ½ to ¾ percentage point reduction in year-ended housing credit growth as of June 2013.

banking, credit, debt, households, housing

The Use of Trade Credit by Businesses

Financial Stability
Amy Fitzpatrick and Bobby Lien

Trade credit is an important source of funding for some businesses, particularly those in the unlisted business sector. Nonetheless, little is known about the use of trade credit owing to the paucity of data. This article explores the use of trade credit, as well as the terms and conditions of trade credit contracts. It also examines the relationship between trade and bank credit. Understanding the nature of this relationship provides useful insights into how changes in financial conditions will affect the overall funding of businesses.

business, credit, trade

Infrastructure Developments in the Market for Commonwealth Government Securities

Chris Becker, Jonathan Lees and Andrew Zurawski

The market for Commonwealth Government securities (CGS) is a key financial market in Australia because, among other things, it provides a risk-free benchmark for the pricing of a wide range of fixed income securities. This article discusses aspects of the infrastructure that underpins the market, including: the issuance and ownership of securities; the registry and settlement of these securities; and efforts to promote improved access to the market for retail investors. Several infrastructure changes that have been implemented recently, or are soon to apply, are also discussed. These changes will result in some amendments to statistics published by the Reserve Bank on the CGS market.

bonds, financial markets, international, liquidity

East Asian Corporate Bond Markets

Global Economy
Mark Hack and Cathie Close

East Asian corporate bond markets have grown significantly over the past decade. The expansion of these markets has been underpinned by strong economic growth and regulatory initiatives that have helped to improve market infrastructure and encourage participation. These developments have helped corporations to diversify their funding and are likely to have played a part in supporting the economies in the region during the global financial crisis.

bonds, financial markets

Financing Infrastructure: A Spectrum of Country Approaches

Global Economy
Sophia Chong and Emily Poole

Over recent decades, there has been a shift away from public infrastructure financing towards private infrastructure financing, particularly in advanced economies. In this article, infrastructure financing in four countries – China, India, Australia and the United Kingdom – is examined to illustrate the different approaches taken by governments to finance infrastructure and encourage private financing. In all four countries, public financing of infrastructure remains significant, ranging from one-third in the United Kingdom to almost all financing in China.

capital, china, finance, funding, investment

G20 Financial Regulatory Reforms and Australia

Financial Stability
Carl Schwartz

The global financial crisis prompted a comprehensive international regulatory response, directed through the Group of Twenty (G20). The Reserve Bank and other Council of Financial Regulators (CFR) agencies have been heavily involved in the reform process, including engaging with international bodies on policy development, and implementing agreed reforms domestically. While the reforms have achieved a great deal, the Bank and other CFR agencies are mindful that the pace and volume of change are challenging for the financial system and regulators, and raise the potential for unintended consequences. Five years after the peak of the crisis, and with substantial policy development completed, there is an opportunity to focus the financial regulatory agenda on implementing reforms already agreed, with a close eye on their effectiveness.

credit, finance, funding, trade

The graphs in the Bulletin were generated using Mathematica.

ISSN 0725–0320 (Print)
ISSN 1837-7211 (Online)