We’re stepping up a gear: The Australian economy seems to have started moving up a gear, according to a strong business survey for March from the National Australia Bank.   “While 2010 appears to have started somewhat slower than late 2009, the pace of activity appears to have accelerated sharply in recent months,” the NAB commented, with the bank estimating growth running at a very strong annual rate of 4.5% in the past six months.   It reconfirmed its interest rate upgrade of late last month, forecasting another rate rise by the Reserve Bank next month, and a cash rate of 5.25% by the end of this year, when the bank sees the unemployment rate hitting 4.5% (and 4% by the end of 2011) from the current 5.3%.   It sees dwelling investment rising 8% this year and by 12% in 2011 and there was no sign in the survey of any impact of the recent slump in building approvals and housing finance that will soon bring the recent surge in house prices to an end.

Just what China ordered: In late January China’s banking and financial regulators told China’s myriad banks to cut their lending, in fact some were ordered to stop lending completely for 10 days. In February, the banks were told to cut lending to real estate with a series of new restrictions. Lending started falling. In March further restrictions on property loans were ordered as official concerns at a 10.7% rise in house prices in the year to February emerged. Overnight saw a more dramatic result of the directives with new lending in March falling to 510.7 billion yuan ($US74.8 billion) from February’s 700.1 billion yuan. Figures from the country’s central bank showed that as a result, new yuan-denominated lending in the first quarter dropped 43% to 2.6 trillion yuan, or 1.98 trillion yuan lower than in the first quarter of 2009. The joys of living in a centrally run economy!

More good news for China: China’s President Hu Jintao met President Barack Obama overnight in Washington to discuss a few niggles, such as the value of the yuan. He took with him the welcome news that growth in the country’s foreign exchange reserves has slowed. They hit a new new high of $US2.4471 trillion by the end of March, up $US47.9 billion from the fourth quarter of 2009 when they jumped $US126.5 billion. But the smaller rise couldn’t hide a 25.25% surge from the first quarter in 2009; that’s a rise of more than $US440 billion in the 12 months. The trade surplus fell 76.7% in the latest quarter to just $14.49 billion, so the reserves were boosted by another $US30 billion or more in other income in the quarter, possibly so-called hot money slipping into China illegally.

Good news/bad news: Meanwhile in the red ink economy, there was a lot more of the stuff overnight. The US Treasury said the budget deficit in March was $US65.4 billion, down from $US191.6 billion in the same month of 2009. That left the deficit for the first six months of the current American financial year at $US717 billion, 8% better than for the first half of last financial year. March’s dip into the red was the 18th consecutive monthly deficit. The Treasury is forecasting that the deficit will hit $US1.56 trillion this year, up from the record US$1.4 trillion last year.

Grim reality: Now that Greece has explicit financial backing from the eurozone (€30 billion) and International Monetary Fund (about €10 billion), it probably thinks there’s time to relax. No more chops in spending, time to kick back, chuck a plate, grab an ouzo and fiddle the taxes, again. Europe also thinks the problem has been fixed, but it’s far from over, just postponed to another day. Now that the IMF is involved in the Greece bailout, the future is going to be much grimmer than Greece thinks. Reuters reported that IMF managing director Dominique Strauss-Kahn said in an interview that deflation is the only way Greece can effectively tackle its debt problems. “The only effective remedy that remains is deflation,” Strauss-Kahn told Austrian magazine profil. “And this is exactly what the European Commission has correctly recommended.” Somehow I don’t think Greece has reached the same conclusion yet. Take a look at today’s Foreign Correspondent on the ABC at 8pm and check that out.

When will it end? The timing of US recessions is determined by the country’s National Bureau of Economic Research; it set the start of the slump at December, 2009, and revealed overnight that it was still too early to say when the recession ended. Many economists saw it probably ended around the third quarter of 2009, but the bureau said in a statement: “Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature.  “Many indicators are quite preliminary at this time and will be revised in coming months,” the group said. The NBER said its business cycle dating committee, a group of economists that pinpoints when recessions begin and end, had met on April 8 to consider whether it had enough data to call the end of the latest slump. The NBER defines a recession as a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” That ruling produced a strong opposing decision from a committee member.

Creative spinning: Perhaps it’s the smell of red ink in the morning, or dealing with too many w-nkers in banking, but the US Treasury seems to entered the realms of creative accounting if this story from the Wall Street Journal is any guide. According to the paper, the Treasury now reckons the government bailout of the financial system is expected to cost just $US89 billion, which is much lower than earlier projections. The paper cited unknown Treasury officials. In April 2009 when everyone was much gloomier, congressional budget analysts had estimated the net cost to taxpayers for the rescue program to be $US356 billion. The $US89 billion estimate is also 42% less than the savings-and-loan crisis of the 1990s. Where it gets creative is here; the figure doesn’t include losses at Fannie Mae and Freddie Mac, which the Journal said are projected to be $US370 billion through 2020. The two mortgage groups had far more responsibility for the credit crunch and subsequent recession than the failure of Lehman Brothers, in the opinion of many commentators. The cost of cleaning them up should be lumped in with the $US89 billion, which would make the total about $US460 billion, a far more realistic amount..

Not on planet Earth: Liberal Senator Julian McGauran yesterday went to another world when he asked a senior Reserve Bank official whether the RBA looked at the “real economy”, which he said included retail, rural, manufacturing, tourism, when assessing monetary policy. That room in Sydney asked themselves; is he here or in another world? According to the Senator’s thinking, the real economy doesn’t include banks (which was part of the Senate inquiry on which Senator McGuran was sitting yesterday), resources including mining (which won’t make Wilson Tuckey happy), home building, construction, property, education and the transport sectors (among many). His obtuse comments are at the end of the 41-minute file of the appearance at the committee of RBA deputy governor Guy Debelle.

Vote of no confidence: The current board and management of agricultural chemicals firm Nufarm has received an unwelcome vote of no confidence from shareholders: the holders of more than 80% of the issued capital want to be owned by someone else. Nufarm yesterday said  that a tender offer for Nufarm shares from Japan’s Sumitomo Chemical had received acceptances totalling 81.45%, for the 20% of Nufarm’s capital that the Japanese company wants to buy at $14 a share. Of the total acceptances, 61.45% will be scaled back. Nufarm shares closed at $7.86 yesterday, down 41 cents.