Gaga Prices Show Inflation Eroding Debt Return: Australia Credit

Lady Gaga and Rolling Stones fans have no problem paying higher prices for Australian concert tickets. Bond investors are less comfortable as inflation in the nation accelerates.

Gaga is charging fans she dubs her “little monsters” A$1,499 ($1,385) to buy a “Meet & Greet” ticket package for her tour in August, about the same as an average Australian’s weekly wage. The priciest ticket for the Stones gig originally set for March 25 in Sydney was A$577.70, before the group postponed its shows following the death of L’Wren Scott, Mick Jagger’s girlfriend. When the Stones played in 2006, the price was A$399.50, representing a 45 percent increase in eight years.

Consumer price gains accelerated to a 2.7 percent annual pace in the fourth quarter, versus 1.1 percent in the U.S. in February, the latest government data show. Sydney home prices surged to the most ever this month and transportation costs were near a record. Australian bonds due in 10 years and more fell 1.1 percent in the first three weeks of March, the biggest loss of 144 debt indexes around the world compiled by Bloomberg and the European Federation of Financial Analysts Societies.

“Australian inflation is relatively high, not just for Rolling Stones tickets,” said Naruki Nakamura, the head of fixed income at BNP Paribas Investment Partners Japan Ltd. in Tokyo. Long-term bonds, those most vulnerable to inflation, are at risk according to Nakamura. “Our money is only in the short end” of Australia’s debt market. BNP Paribas Investment Partners manages $662 billion globally.

Real Yield

Australian 10-year bonds yielded 4.08 percent as of 3 p.m. in Sydney. That represents a real yield of 1.38 percent after subtracting the inflation rate. The real yield has shrunk from 2.23 percentage points in December.

The latest inflation rate was the highest in two years, the most recent government data showed Jan. 22.

The central bank last month boosted its forecast for core inflation, which reduces the weightings of the most volatile items, to 3 percent for the year ended June 30. It had previously predicted prices would climb by 2.5 percent.

“Measures of inflation expectations remain well anchored,” Reserve Bank of Australia Governor Glenn Stevens said in a speech in Hong Kong yesterday. “The outlook for inflation, while a little higher than before, is still consistent with our medium-term target.” The bank aims for price gains of 2 percent to 3 percent a year.

Encouraging Signs

The RBA chief said there are encouraging early signs of a handover from mining-led demand growth to domestic consumption and the nation’s economy may strengthen later this year.

Housing prices in Sydney, Australia’s most populous city, have risen for nine straight months based on the RP Data-Rismark Daily Home Value Index.

Transportation costs were 0.1 percent away from a record high at the end of last year, government data show.

When the Stones played in Australia in 2006, the Sydney Morning Herald said the cost was “rather exorbitant.” For this year’s tour, it called ticket prices “staggering.”

The Rolling Stones website says the group postponed concerts that were to take place in Australia in March and April and the band is working on a new schedule.

The cost of Lady Gaga’s “Meet & Greet” tickets are equal to the average weekly earnings of A$1,500 for a full-time adult worker in the nation, based on government data as of November.

Tokyo Tickets

Rising costs for concert tickets aren’t unique to Australia. The Stones played in Tokyo in late February and early March, with so-called golden circle seats in the Japanese capital costing 80,000 yen ($783), according to Tokyo Weekender magazine. The price was 38,000 yen during the 2006 tour, based on a fan-club website.

The difference is that broader inflation in Australia is outpacing cost of living increases in the biggest developed economies. Consumer prices will rise at a 2.8 percent pace in 2014, based on a Bloomberg News survey of economists. The comparable figure for nations using Group of 10 currencies is 1.6 percent.

Australia is adding jobs even as manufacturing in China, its biggest export destination, is slowing.

The number of people employed full time rose by 80,500 in February, the biggest increase since August 1991, according to the Bureau of Statistics. China’s manufacturing industry weakened for a fifth month in March, according to an industry report.

Living Costs

Hideo Shimomura, the chief fund investor in Tokyo at Mitsubishi UFJ Asset Management Co., said salary levels will help keep Australian inflation in check. The company has the equivalent of $80 billion in assets.

“I visited two weeks ago, and I thought the cost of living was relatively high,” Shimomura said. “However, wage growth is declining. Manufacturers are getting out of Australia, and pressure for cost cutting has started.”

Shimomura said he holds more Australian bonds than the percentage in the benchmark he uses to gauge performance and would like to add to the position if the yield on the 10-year government bond rises to 4.5 percent. He’s avoiding inflation-linked bonds because he doesn’t see a risk that costs will rise, he said.

Imported Stars

Wage costs in Australia rose at an annual rate of 2.6 percent in the fourth quarter, the smallest gain on record in data provided by the government since 1997.

Alcoa Inc., Toyota Motor Corp., Ford Motor Co. and General Motors Co. all have plans to end or reduce operations in the nation.

A 12 percent decline in the Aussie dollar over the past year makes it costlier to bring the Stones and other groups to Australia, said Peter Jolly, the Sydney-based head of research at National Australia Bank Ltd. The company is the nation’s largest lender as measured by assets. The currency bought 92.35 U.S. cents today.

“The fall in the exchange rate has made it more expensive for Australians to watch the Rolling Stones live,” Jolly said. “It costs more to buy an imported TV, an imported car. And it costs a bit more to buy imported rock stars.”

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