RBA sweating with iron ore entering a technical bear market - Rabobank

Michael Every, Head of FMR at Rabobank, explains that the RBA will be sweating with iron ore entering a technical bear market as speculators step back for now; and there’s a long way down from here if any further policy changes are seen in China.

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“That’s on top of the worries the Bank has over the housing bubble it’s allowed to blow, which removes much of its flexibility on rates - as the market is now discussing in an ever-louder voice. And let’s not forget the Aussie government is doing all it can to hurt by pressing ahead with plans to run a pointless fiscal surplus, as if it were their job to suck liquidity out of the economy. Combining the latter two threats, Australia’s biggest bricks supplier has just publicly warned the government about tinkering with the Holy Grail of negative gearing or capital gains taxes to try to deal with the current bubble and revenue issues, arguing it would trigger a “fast fall” in the market. That’s what bubbles do, of course; but then again, he just wants to sell bricks like Aussies just want to buy rugs.”