I watch quite a lot of Air Crash Investigation late at night and one thing I have learned is you don’t want to ignore ‘stall speed’ warnings.

Australian consumer confidence plummeting 5% in March must surely catch the attention of the Reserve Bank of Australia (RBA) board. As you well know, my view remains that the east coast of Australia is in a recession, with discretionary metropolitan retail the key sector seeing negative growth.

This week’s collapse in consumer confidence was just further confirmation of the negative data surprise trend in Australia. The question has to be asked, what more evidence does the RBA need for confirmation that the east coast economy has stalled? Clearly, economic growth is running below the RBA’s estimates and I maintain my view that it would be negligent for the Reserve Bank not to cut rates at its April and May meetings.

Rate cuts needed

While the ASX200 again flirted with resistance at 4,300 on Tuesday, I am simply of the view that unless the RBA comes to the party it will be very difficult for the Australian equity market to clear that hurdle. We will continue to underperform the world until the RBA gets with the program.

It’s blatantly obvious we need to get mortgage rates down sharply in this country, while we also need to start forcing cash hoarders out of cash and into risk-taking assets. We need the Australian dollar down. We need to follow the US Federal Reserve’s example if we want broader Australian gross domestic product (GDP) growth to return to trend.

While I am currently forecasting the RBA to cut by 25 basis points at each of the April and May board meetings, my gut feel is that won’t be enough to stop the east coast economic deterioration. If I was on the RBA Board, I’d be pushing for successive 50 basis point rate cuts, which would translate to around 75 basis points of mortgage relief to variable mortgage rate holders. I’d suspect savers would be hit with the full 100 basis point deposit rate cut.

After speaking to my real world, real-time private business contacts, and considering all the recent negative data surprise in Australia, I think the right policy response is not just to trim cash rates, but to slash them ASAP. This country desperately needs lower cash rates and a lower currency. The RBA is literally way behind the curve and they need to catch up very quickly before more east coast jobs are unnecessarily lost and GDP growth prints a negative for the first quarter of this year. They really should be looking ‘across the ditch’ to see the success the Reserve Bank of New Zealand is having with the NZ dollar and NZ economy.

Growth sectors

Until I see a clear change of policy stance from the RBA, I will continue to only recommend the few Australian stocks and sectors where I see structural tailwinds. As I’ve said before, the vast majority of those structural growth sectors either face China or provide services to those who do face China.

Compulsory superannuation is another clear ‘structural growth’ sector, with both sides of Australian politics supporting a change in the compulsory superannuation contribution rate to 12%. It’s pretty hard to find any other sector where regulatory risk is positive and through time inflows into the sector, where fees are charged over asset bases, will rise by 33% and then compound.

AMP has been arguably the worst performing demutualisation in history. However, history isn’t a guide to the future and we believe AMP offers compelling value at current depressed prices. Computershare is another market-linked earner we like.

We’ve upgraded our estimates for AMP’s earnings and valuation on the back of strong global market moves. From a trading perspective, AMP’s dividend reinvestment plan pricing period has ended, while concerns about a ‘capital hole’ are inaccurate in our view.

The stock is cheap, leveraged, growing (9% earnings per share growth) and yielding 7%. If you are looking for a big cap, non-bank, financial idea, AMP should be the first place you look.

AMP (AMP) – Buy

AMP is entering a year of consolidation. There is a lot to look out for in the business that will deliver momentum over the year ahead. These are:

1. A growing AMP Bank;
2. Favourable mark-to-market gains year-to-date;
3. Enhanced capital position, particularly following 15% sale of AMP Capital;
4. Fiscal 2012 to be the first meaningful year of cost synergies;
5. Emerging revenue synergies;
6. Robust planner numbers; and
7. Compelling multiples and market position.

We anticipate the above to provide earnings momentum and support in a volatile market. We have upgraded our price target to $5.80 from $5.60 following positive mark-to-market adjustments and higher AMP Bank earnings. We have raised our full-year 2012 earnings by 1.7% and 2013 by 3.1%. We believe AMP provides the best risk/reward in the sector, with a 7% yield, and 11-times fiscal 2012 price to earnings

• Latest close: $4.19
• 12 months target price: $5.80 (previously $5.60)

Computershare (CPU) – Buy

CPU has announced it has partnered with a mail service provider and a technology platform provider to launch Digital Post Australia. The company provides an online digital postbox that allows the user to store mail in one area online and provides reminders for bill payments. The company expects the service to reduce costs by between 50-70% per-piece for communications service providers. The launch is anticipated later in 2012, and requires a reasonable amount of buy-in from consumers to be successful. While market conditions for the second half of this year are likely to remain tough, we see the stock being supported by contributions from the BNY Mellon (Shareowner Services), Australian utilities services Group (SWG) and United States mortgage Specialised Loans Servicer (SLS) transactions. Continued transaction synergies, coupled with an improvement in markets, in our view will led to underlying US dollar earnings rising 22% next year.

• Previous close: $8.58
• 12-month target price: $9.30

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.