Welcome Guest [Log In] [Register]


Reply
Australia's miracle economy, a quick update on how we're tracking
Topic Started: 25 Sep 2013, 08:24 AM (455 Views)
Admin
Member Avatar
Administrator

Quote:
 
Australia's miracle economy, a quick update on how we're tracking: Pete Wargent

By Pete Wargent
Friday, 20 September 2013

Since we came out of Keating's famous "recession we had to have" and slow growth returned to Australia in September 1991, our economy has posted an amazing 22 consecutive years of growth. Although we experienced a slowdown around the turn of the century as the tech stock bubble burst, and again during the financial crisis, on both occasions interest rates were dropped and monetary policy helped Australia to avoid recession.

GDP Growth graph

The most recent National Accounts from the Australian Bureau of Statistics showed the Australian economy growing at 0.6% quarter on quarter and 2.6% year on year, which is some way below the long-term trend as you can see in the chart above. The official cash rate has again been dropped, this time to a new low of just 2.50%. The full effect of interest rate cuts can take up to two years to flow through in full.

Australian Cash Rate graph

As inflation remains benign and comfortably within the Reserve Bank's 2-3% target range, it appears likely that interest rates will remain relatively low for the near-term future.

Underlying Inflation graph

Inflation is forecast to remain fairly benign, largely thanks to a soft labour market.

Graph 6.4: Trimmed Mean Inflation Forecast

Consequently, there is not yet an expectation of higher interest rates in the coming six months.

Graph 4.1: Cash Rate Expectations

Low interest rates have impacted net savers and some pensioners adversely. Bank accounts and fixed-interest products are yielding very low returns.

Some residential property market prices have benefited from the lower rates, particularly those in Sydney, Perth and Melbourne. There was a lot of market commentary suggesting that the response to low interest rates by the property market would be weak. As recently as June, there was talk of falling prices in spite of multiple indications to the contrary.

This has been shown to be incorrect. The response has in fact been strong and is strengthening by the month, causing a rapid about-face in commentary. If this trend continues as implied by recent housing finance data from the ABS then it may cause a stop lever to be applied in 2014.

Graph 3.6: Housing Market

Is the property recovery being led by real estate investors or owner-occupiers? Actually, it's both.

Graph 4.14: Value of Housing Loan Approvals

Vacancy rates have remained now for some years, and rents continue to rise.

Graph 3.7: Rental Market

Are new dwellings attracting buyers? Yes, with a steady increase over the last three years.

Graph 3.8: Indicators of Dwelling Investment

Both dwelling approvals and dwelling construction are trending steadily upwards in response to monetary policy.

Graph 3.9: Residential Building Approvals

After the stock market crash, investors have also returned to share markets seeking yields and prospects for capital growth, pushing up stock valuations and price-earnings ratios.

Australian Share Price Indices graph

With asset prices increasing, we're getting wealthier again after the financial crisis destroyed much of the value of superannuation funds through 2008-9.
Graph 3.3: Household Wealth and Liabilities

It's notable, however, that share market gains have been found largely in the non-resources sectors: the industrials and financials. Resources companies have performed less favourably as commodity prices have tailed off.

RBA Index of Commodity Prices graph

Iron ore export spot prices have not remained dramatically lower as feared (although it's likely that we'll see a seasonal dip in the coming months), but it's been a rough ride for other bulk commodity prices.

Bulk Commodity Prices graph

The brighter news is that recent data out of China suggests that it can achieve and perhaps subsequently maintain its growth target of 7.5%.
Graph 1.3: China – GDP Growth

Resources export volumes from Australia continue to ramp up and the major players forecast this to continue through 2014.
Graph 3.17: Export Volumes

However, from a risk perspective, keep a close eye on what happens to China's overheating property markets.
Graph 1.6: China – Residential Property Market

The red line signifies a weakening Aussie dollar against the USD, which is welcome news for exporters.
Graph 2.22: Australian Dollar

Unemployment continues to increase steadily in Australia as the mining investment boom is set to decline over coming quarters. The participation rate is also sliding.
Graph 3.18: Unemployment and Participation Rates

Wages growth has also fallen away.

Graph 5.5: Wage Price Index Growth

Note below the disparity in employment growth between states as the population booms. The major states are cumulatively employing tens of thousands more heads. Tasmania, South Australia and the territories, however, are not.

Graph 3.20: Employment by State

Labour sentiment indicators point to an ongoing weakness.

Graph 3.21: Labour Market Indicators

There has been a notable pick-up in consumer sentiment of late, and we're certainly buying a lot of cars, but any such confidence has yet to be translated into stronger retail sales.

Graph 3.4: Consumption Indicators

Summary

All in all, the RBA's Statement of Monetary Policy and Economic Outlook shows that the economy has slowed, and with the labour market remaining soft, we can expect this to continue for some time.

There is a significant community of voices which is hoping that the economy sinks into recession, in the misguided hope or belief that will somehow make things better. And indeed the labour market remains weak and the mining construction phase will begin to unwind in the coming years.

Does this mean that Australia is headed for recession? In a word, the RBA's team of economists says: no. The Reserve Bank maintains confidence that stimulatory monetary policy will work and stronger growth will return.

Read more: http://www.propertyobserver.com.au/economy/australia-s-miracle-economy-a-quick-update-on-how-we-re-tracking-pete-wargent/2013091965052
Follow OzPropertyForum on Twitter | Like APF on Facebook | Circle APF on Google+
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
ZetaBoards - Free Forum Hosting
Create your own social network with a free forum.
Learn More · Register for Free
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy