December 2014

Cycles in Non-mining Business Investment

Australian Economy
Stephen Elias and Craig Evans

Growth in private non-mining business investment has been quite subdued over the past few years relative to the cyclical upswings seen in the 1980s and 1990s. Part of this weakness can be explained by cyclical factors that affect investment – such as a more moderate pace of growth in the output of, and demand for, non-mining goods and services. Further, the increasing importance of sectors of the economy that require less physical capital is likely to have weighed on non-mining investment in recent years. Nonetheless, non-mining investment is expected to pick up over time, supported by a gradual increase in the growth of domestic demand and accommodative monetary conditions.

business, investment

Labour Movements during the Resources Boom

Australian Economy
Mary-Alice Doyle

Resource construction employment grew rapidly during the investment phase of the resources boom. However, both investment and employment in the resources sector peaked in 2013 and are expected to decline over coming years. A range of sources suggest that the earlier increase in resource construction employment largely drew on workers with experience in other types of construction, and that demand for their skills from other sectors is expected to be relatively strong in coming years. As a consequence, resource construction workers are generally expected to be able to find employment outside of the resources sector.

business, investment, labour market, resources sector

The Effect of the Mining Boom on the Australian Economy

Australian Economy
Peter Tulip

This article presents estimates of the effects of the mining boom using a macroeconometric model of the Australian economy. The mining boom is estimated to have boosted real per capita household disposable income by 13 per cent over the decade to 2013. The boom contributed to a large appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture.

exchange rate, households, mining, modelling

Chinese Rebalancing and Australian Exports

Global Economy
Gerard Kelly

The Chinese authorities plan to gradually rebalance the composition of Chinese economic growth from investment towards household consumption. This article uses the World Input-Output Database (WIOD) to give a general sense of how this rebalancing might affect Australian exports and economic activity. Dollar for dollar, Chinese investment appears to absorb more than twice as much Australian value-added output as Chinese household consumption. This largely reflects the significant role of resource commodities in Australia's exports to China, which are used more intensively in investment than consumption. Simple analysis using the WIOD suggests that a shift from investment to consumption in China is likely to weigh on the growth of demand for Australia's mineral resources, although a rise in demand by Chinese households for food products and services could provide some offset.

china, export, households, investment

The Equity Securities Lending Market

Jonathan Carroll and Ashwin Clarke

An equity securities loan is an arrangement in which one party (the lender) agrees to transfer an equity security to another party (the borrower) temporarily, usually in exchange for collateral and a fee. The market for securities loans is an important component of Australia's equity market and contributes to its efficiency and smooth functioning. Regulatory developments since the global financial crisis are contributing to significant changes to the equity securities lending market globally, including in Australia. This article discusses some of these changes and how participants in the market could respond.

credit, lending standards, risk and uncertainty, securities

Fast Retail Payment Systems

Stephanie Bolt, David Emery and Paul Harrigan

In December 2014, a group of Australian financial institutions announced that funding had been secured for the next phase of the New Payments Platform (NPP), which will provide the capability for Australian consumers and businesses to make and receive payments in near to real time. The NPP is one example of a fast retail payment system, a number of which have been implemented in other countries in recent years. This article provides an overview of some of the features of fast payment systems and discusses the approach taken in the design of the NPP.

payments, retail

The Offshore Renminbi Market and Australia

Global Economy
Eden Hatzvi, William Nixon and Michelle Wright

The Chinese authorities have continued to make progress in internationalising China's currency, the renminbi (RMB). In particular, the use of RMB for cross-border trade and investment transactions has increased noticeably over recent years and the market for RMB in a number of jurisdictions outside of mainland China – known as ‘offshore centres’ – has developed further. As part of this broader trend, the use of RMB by Australian entities has also increased somewhat, although there remains considerable scope for further growth. In order to facilitate this, a number of policy initiatives designed to allow the local RMB market to develop have recently been agreed with the Chinese authorities. Most notably, these include the establishment of an official RMB clearing bank in Australia and a quota that will allow Australian-based entities to invest in mainland China's financial markets as part of the RMB Qualified Foreign Institutional Investor (RQFII) program.

finance, funding, global economy

Identifying Global Systemically Important Financial Institutions

Global Economy
Mustafa Yuksel

A key element of the G20 response to the global financial crisis has been to develop policies to address the ‘too-big-to-fail’ problem posed by systemically important financial institutions (SIFIs). The first step is to identify such entities. To that end, there has been extensive work undertaken in recent years, especially at the global level in view of the cross-country impact of large international financial institutions should they fail or become distressed. This article examines the methodologies developed by standard-setting bodies for identifying global SIFIs among banks, insurers and non-banks, drawing out common elements as well as important differences among them. Policy work addressing the ‘too-big-to-fail’ problem is ongoing. At the recent G20 Summit in Brisbane, leaders built on these reforms by endorsing two further proposals to improve the ability to resolve failing or distressed global systemically important banks.

central clearing, financial markets, financial stability, global financial crisis

Sovereign Debt Restructuring: Recent Issues and Reforms

Global Economy
Tapas Strickland

Over the past decade, 14 countries have undertaken a total of 18 debt restructurings. Concerns surrounding some of these restructurings have led policymakers and capital market participants to review their policies and practices on restructuring sovereign debt. In particular, court rulings as a result of litigation against Argentina have raised fears that a small minority of creditors could block or frustrate a restructuring deal even when it has been agreed to by a supermajority of creditors. This article outlines the case for strengthening the current approach to debt restructuring and assesses recent proposals put forward by the International Monetary Fund (IMF), sovereign governments and capital market participants.

capital, debt, finance

The graphs in the Bulletin were generated using Mathematica.

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