Australians denied insurance

When I saw this headline:

Australians refused insurance because of poor genes

And this headline (ht Marginal Revolution):

Australians denied insurance for genetic reasons

I immediately thought that they were talking about all of Australia.  Then I read the article and realised how ridiculous this thought was 🙂

Supposedly some insurers are not allowing insurance because of newly testable genetic risk.  Now how do you guys view this, I see two ways:

  1. It is good.  It gets rid of the asymmetric information problem to some degree, so that we can have the “optimal” level of insurance.  People that are low risk will now be able to insure themselves more cheaply afterall.
  2. It is bad.  There is an endowment issue – some people are endowed with bad genes, and we want to redistribute to these people to make up for it.

Personally, I think even if we believe the second issue it would be better to have an efficient insurance industry and then redistribute ex-post …

Surprise fall in Aussie GDP: What happened

One piece of information managed to shake me out of my flu induced daze for long enough to write a post – Australian GDP had a surprising fall over the December quarter, falling 0.5% (seasonally adjusted) on September.

Appears that inventory accumulation was knocked down sharply – that is very interesting.  Usually during a recession inventories are a positive contributor – as spending slows more quickly than production.  This implies to me that the fall in GDP may not be sustainable – as inventory accumulation will need to build back up.

As a result, even with a 0.5% fall this quarter, I’m not sure if we are going to see an Aussie recession (two quarters of negative growth) quite yet …

Of course – the steep fall in their terms of trade is concerning – but that is a story for when I’m actually able to think 🙂

February RBA: Rates unchanged

The Reserve Bank of Australia has left their rates unchanged at 3.25% (statement here). We suggested that this was a possibility earlier in the day – and it is the closest thing to a correct rate call that I’ve have made for the last 18 months 😛

Relatively robust domestic demand, combined with commodity prices that just won’t fall sharply, has convinced the RBA that there is now enough stimulus.

They haven’t given up on future rate cuts. “The Board will consider the position again at its next meeting” indicates to me that there is room for cuts if Australian output starts to decline or if commodity prices from their end are really starting to sag.

This will definitely dent expected rate cuts in New Zealand. Before this I would have bagged a 75 cut – now a 50 cut is looking a lot more likely (than it was). I’ll keep an eye on iPredicit to see what is going to happen.

February Australian commodity prices

In all this negative news there is one plus that keeps on going:  Australian commodity prices:

aucommodSource(RBA)

In Australian dollar terms export prices are virtually unchanged.  I prefer looking at world prices though, as it gives you some idea of relative prices without having to look at the terms of trade (a sketchy idea).  In this sense prices are down 12% on their September 2008 peak.  However, to put this in perspective, this is 20% higher than February 2008!

I am very surprised with how strongly Australian commodity prices have held up.  Late last year people told me it was because the RBA measure was a “lagging indicator.  However, its February now and the index still looks very strong – why?  With this sort of information I can understand why the RBA might not cut rates today.

Query (or Bleg): Singapore refined petrol data

So, where do I get figures on Singapore refined petrol prices?

Crude oil has been falling, the exchange rate has stayed stable, but rising refining costs have driven up the retail price of petrol.  If anyone knows where I can find the figures it would be much appreciated 😉

Where the RBA and RBNZ don’t agree

Following yesterday’s 100 basis point rate cut by the Reserve Bank of Australia, a statement was released that appeared to indicated that this could be the END of cuts by the RBA.

This surprised me, given that the RBNZ has stated that it is looking at cutting rates. At 3.5% our cash rate is only 25 basis points higher than the Aussie rate – implying that we might cut BELOW our neighbours, which would be very unusual. Why?

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