IRISH HOUSE PRICES 7% BELOW LONG-TERM AVERAGE, SAYS IMF - The world must act to contain the risk of another devastating housing crash, the International Monetary Fund warned yesterday, as it published new data showing house prices are well above their historical average in many countries. It notes that Irish house prices are still 7% below their long-run average in relation to incomes, but 10% above their long-run average in relation to rents, says the Irish Times. The warning from the IMF shows how an acceleration in global house prices from already high levels has emerged as one of the major threats to economic stability, with countries making limited progress in keeping them under control. Min Zhu, the IMF's deputy managing director, said the tools for containing housing booms were "still being developed" but "this should not be an excuse for inaction". House prices "remain well above the historical averages for a majority of countries" in relation to incomes and rents, Mr Zhu said in a speech to the Bundesbank last week, only released yesterday because it clashed with a European Central Bank announcement. "This is true for instance for Australia, Belgium, Canada, Norway and Sweden," he said. In the wake of the recession, central bankers have cut interest rates to record lows, pushing house prices to a level the IMF regards as a significant risk to economies as diverse as Hong Kong and Israel. In Canada house prices are 33% above their long-run average in relation to incomes and 87% above their long-run average compared with rents.The figures for the UK are 27% relative to incomes and 38% rents.
STATE SHOULD PLAN FOR €2 BILLION BUDGET: ESRI - The Government should plan for a €2 billion budget in October, although the planned water charges and carryover savings from the Haddington Road Agreement should be enough to reduce the fiscal deficit below 3% next year, according to the ESRI’s John FitzGerald. Under the terms of the bailout programme agreed with the troika, the Government is scheduled to introduce one last austerity budget in order to meet the 3% deficit target next year, says the Irish Examiner. According to the latest Country Specific Recommendations released by the European Commission last week, it urged the Government to proceed with this €2 billion figure. The two contenders for the Labour leadership contest, Joan Burton and Alex White, have both pledged to ease up on austerity. Mr FitzGerald, speaking at a conference organised by the ESRI, ‘Budget perspectives for 2015’, said if the Government introduced consolidation measures that only included water charges plus the savings from the Haddington Road agreement and retained the pension levy, then on current growth projections that would be enough to reduce the deficit to 2.8%. But there will be very little room for tax cuts. "If the full €2 billion was introduced that would probably reduce the deficit to 2.3%", said Mr FitzGerald. "However, I would not recommend that the government reduces the deficit too far below 3% unless the politicians wanted to do a giveaway budget the following year before the election".
ARMY SIGNS €4.4m DEAL WITH SAAB TO UPGRADE MISSILES - The Army has signed a deal with defence company Saab for a €4.4m upgrade to the country's anti-aircraft missile system. The surface-to-air missiles are deployed during high-profile State visits - including historic visits by Britain's Queen Elizabeth and US President Barack Obama in 2011 - but have never been fired in the country, writes the Irish Independent. The Defence Forces first acquired the RBS 70s in the 1980s and they have been upgraded several times. Defence and security company Saab - which manufactured the missiles - has signed a contract to upgrade Ireland's arsenal of RBS 70s. The deal includes deliveries of improved firing units, new simulators, night-vision equipment and associated weapons support. "This order is very important because it demonstrates the reliability of the RBS 70 system," said Rickard Svensson, of Swedish-based Saab. "It is a modern and reliable system which also has a long lifespan. For the customers it is a great advantage that the system can be upgraded for future use."
RENMINBI BOOST FOR LONDON'S FOREX TRADE - Britain’s bid to become the leading centre for offshore trading in the renminbi is set to receive a boost with the designation of China Construction Bank , the country’s second-largest lender, as a clearing bank in London for the Chinese currency. The move - filling a gap in the UK’s infrastructure for trading the currency - will embellish London’s credentials as a global centre for foreign exchange trading, as financial capitals around the world vie for a slice of the fast-growing offshore renminbi trade. The decision is expected to be announced at around the time of a trip to London next week by Li Keqiang, China’s premier, writes the Financial Times. People close to the decision said that CCB had been selected as the first UK renminbi clearing bank, despite earlier expectations that it was likely to be its local rival Bank of China. “This was a decision taken in Beijing - not in London,” said one source. “It’s kind of a matter of sharing things around.” The UK is keen to defend its role as the main offshore renminbi trading centre outside Asia, but faces competition from Frankfurt and Luxembourg. The change will allow investors to cut the risk from making overseas payments in renminbi, and should make trading the currency more efficient and liquid. It may also attract Chinese companies keen to invest in Europe, as well as making it easier for investors to gain access to China’s onshore capital markets.