House prices, Consumer and Business Sentiment, Retail, PMIs all up - causation or just correlation?; Also equities markets, construction activity, the Aussie dollar, and everything else seems to be recovering and heading up!
Tweet Topic Started: 10 Oct 2013, 01:10 AM (2,901 Views)
We have house prices, consumer sentiment, business sentiment, ASX, construction, retail and lots of other indicators pointing up.
It seems like another economic boom is coming when really this shouldn't be happening because the GFC is far from over and debt levels are still too high.
Is confidence up just because house prices are up?
Or is everything up because interest rates are at record lows? Change of government?
What's driving the market? And why is unemployment bucking the trend, is it always the last to recover?
We have house prices, consumer sentiment, business sentiment, ASX, construction, retail and lots of other indicators pointing up.
It seems like another economic boom is coming when really this shouldn't be happening because the GFC is far from over and debt levels are still too high.
Is confidence up just because house prices are up?
Or is everything up because interest rates are at record lows? Change of government?
What's driving the market? And why is unemployment bucking the trend, is it always the last to recover?
Friend, the answer is simple.
This is the reason why we are doing so damn good! Now it don't matter if your uncle did this, you are welcome to become an Australian if you open up them bank accounts!
Money is what is needed - it don't matter how or where you got it! And the investors in Australia - all them mothers, fathers and the Bogans too, will benefit.
They said they’d do it to make up for the mining capex decline and they have.
All their public utterances over these past months indicate they think they are right on target here.
There is nothing that is too extreme in regard to policy to keep the property bubble alive.
They are destroying savings in real terms.
They will come after even your nominal amounts in the end.
Your Super will go into this damned great black hole.
It is a total bail-in with no other possible outcome.
Interest rates down forever.
There is no other possible trend.
If Yellen is confirmed as head of the FED you can take it as an official declaration by those who REALLY rule us that this is now set in stone.
There will be an unlimited flow of USD forever.
There is no end to it.
This will all end with either very high inflation, or indeed hyper-inflation, as there is a final total loss of faith in our debt-laden fiat.
What happens to debt in those circumstances?
What is the sequence of events?
It depends on which corner of this house of cards falls first?
Pretty obviously, from a practical viewpoint, you take Marc Faber’s advice and only hold real assets.
Have no paper denominated savings.
Whether one ought load up on debt to buy real assets, in an environment where you can only fix rates for a 5 year term, might be moot.
However every and any sensible attempt to seriously track through the probable responses of Govt and CBs here suggests load up on debt and buy real assets.
Just be ready to step damned quickly at some point but that might be decades away.
As the accompanying graph shows, consumer sentiment among coalition voters has soared over the past two Westpac/Melbourne Institute surveys. After a 19 per cent jump on the eve of the federal election, coalition supporters’ sentiment gained another 8 per cent last week to stand at a strong 117.7. Aside from a fleeting spike when Australia realised it had dodged the Great Recession, coalition voters haven’t felt so positive about their prospects since Janet and John were in Kirribilli House.
As with the NAB business confidence survey, it’s a positive sign for the economy that consumers are feeling better about the outlook, but the test will be how long the honeymoon lasts and whether that sentiment turns into cash invested and spent. It could be helped along if the new treasurer stopped talking the outlook down.
I doubt anyone here has attempted to watch more than one of your videos. I assume they're all as indecipherable as the one I listened to (and gave up after 30 seconds).
(Yes yes I know... the fine folk in your Brisbane cafe have no difficulty understanding them)
Maz
10 Oct 2013, 01:10 AM
another economic boom is coming when really this shouldn't be happening because the GFC is far from over and debt levels are still too high
New home commencements have risen for the first time in three years, according to the Australian Bureau of Statistics (ABS).
New data released today indicate a gain over the 2012-13 period, heralding a growing confidence in the property market, Housing Industry Association chief economist Harley Dale says.
“Dwelling commencements (housing starts) increased by 11.2 per cent in 2012-13, an encouraging recovery following declines of 5.8 per cent and 11.1 per cent in 2010-11 and 2011-12 respectively,” Dale says.
The numbers have broken through an important barrier, he believes.
“A substantial upward revision to the March 2013 quarter contributed to housing starts surpassing the 160,000 mark in 2012/13, reaching a level of 161,043.
“That is a healthy figure by recent standards and certainly a promising first round recovery for new home building.”
The data shows strong gains across most states and territories, with the exceptions being New South Wales, Victoria and the Northern Territory.
Despite the improved national result, Dale says it wasn’t evenly spread throughout the 12 months, and a more consistent improvement would be welcome.
“What is less encouraging is that all the growth occurred in the first half of the year, following which housing starts declined in the March 2013 quarter and held steady in June.
“We now need to see an acceleration of growth in 2013/14 reflective of a broad-based recovery in housing starts.
“That outcome will require further upward momentum in New South Wales and Western Australia, together with a re-emergence of sustained growth in other markets.”
Improving confidence in the sector, combined with low interest rates, should bode well for a recovery but regulators need to play their part too, he believes.
“The current regulatory and taxation environment combined with ever-tightening credit conditions for residential development significantly dilutes the chances of securing this outcome.”
I doubt anyone here has attempted to watch more than one of your videos. I assume they're all as indecipherable as the one I listened to (and gave up after 30 seconds).
(Yes yes I know... the fine folk in your Brisbane cafe have no difficulty understanding them) This should be happening.
GFC is long gone.
Debt levels are not too high.
Personal debt has been on the downward trend for some years now as savings rates have increased. It's really only a matter of time until the pendulum swings back.
Saul Eslake posted this note today analysing the recent bounce in sentiment.....
Quote:
Confidence levels in the business and household sectors have become increasingly important in determining whether the economy has potentially reached a turning point. This is because a sustained upswing in confidence should be a precursor to improved employment outcomes and a recovery in non-mining investment. And therefore they have also become a key bellwether for the stance of monetary policy over coming months. However, despite sharp increases in recent data, at this stage we suggest that it is too soon to conclude whether the recovery in confidence will be sustained. If it does indeed wane over the coming months we expect that the RBA will have to ease monetary policy again early next year and likely leave rates lower for longer.
Business confidence spikes, but consumers pull back
Business confidence rose sharply in the wake of September’s Federal election. However underlying conditions have not improved markedly and the hiring intentions sub-index continues to point to increases in the unemployment rate. Consumer confidence failed to build on post-election gains easing marginally as household concerns around their finances weighed on sentiment.
Weak employment continues, but unemployment rate falls
Labour force data showed a relatively soft gain in employment in September. Especially in light of the boost that it likely received by temporary employment due to the Federal election. Nonetheless the unemployment rate fell to a four month low of 5.6% as participation fell yet again – to the lowest rate since November 2006. We again note that this fall in participation is cyclical and as such is weakening household income growth and spending.
Housing finance and RBA minutes next week
The RBA minutes will be little changed, if at all, from recent communications. It remains on a short term neutral footing to assess business and consumer confidence. Yet the broader medium term easing bias that RBA has will persist. We note that mining investment as a proportion of GDP is poised to decline and non-mining investment has shown few signs as yet of picking up. The rebalancing of growth has therefore not progressed to any significant extent and the RBA will need to stand ready to support this process if the A$ remains elevated and if business confidence wanes.
The better regarded NAB survey, (that does separate activity and confidence) did show a sharp increase in confidence in September. This was building on a rise seen in August as pre-election opinion polls pointed to a change in government.
This measure now currently sits at its highest level since March 2010. Further the difference between confidence and conditions reached its widest point since August 2001 during the period in which the economy was recovering from the negative impact of the bursting of the “Dot-com” bubble. Yet this difference rarely persists and historically a rise in confidence has been a precursor to improved conditions. However a higher degree of uncertainty around this relationship remains in the current economic and political environment. The perceived improvement in the political environment has done nothing as yet to improve conditions as no policy reforms have as yet been implemented. Further, policy- makers have little influence to bring down the elevated A$ that continues to be an impediment to growth and investment in non-mining sectors.
A possible quick win for the Coalition government would be the abolition of the carbon tax before the new senate is installed in mid-2014. This is especially true as it now seems certain the Coalition has the numbers to get this policy through the upper house. This would not only be a positive for energy intensive industries, but at the margin be a positive for retail spending as household compensation for the tax will continue. However such a move by the government would likely be blocked by the combined Labor-Greens vote and will have to wait until mid next year for no constructive purpose.
The rise in consumer sentiment may not last
The changes in policy that are likely to be delivered by the government are expected by the business sector to be a positive for them. However, they are not expected to be unambiguously positive for households. And perhaps this was reflected in the decline in consumer confidence in October following the spike that was prompted by the change in government.
Indeed despite interest rates being cut 225bp since 2011 sentiment towards current family finances remains below average. And households view of their finances over the next year, despite improving are also sitting at the long term average.
The change in government will a positive for some households but negative for others and therefore could weigh on sentiment. The paid parental leave scheme will be relatively generous when it begins in mid-2015. Yet shorter-term, the abolition of the carbon tax, which should result in lower electricity and gas prices, could free up income that otherwise would have been spent on non-discretionary utilities. Also, the government-provided compensation payments to households when the tax was first introduced will continue.
Yet the new government will also abolish the $820 per year received by eligible families via the School Kids Bonus scheme, reducing household income by around $1bn in 2013-14. Nonetheless the income tax cuts and increases in pension and other benefits (apart from the “School Kids’ Bonus”) which the previous government put in place will likely remain so. Therefore we expect that that the net effect of all the changes will be to provide a marginal boost to household incomes overall from the government. However,this is will not be enough to offset the decline in income growth caused by higher unemployment and slowing wages growth.
The government’s decision to delay the release of the MYEFO (Mid-Year Economic & Fiscal Outlook), its usual late in the year budget update, has added to speculation that it may have to keep a spending tight.This is supported by the expectation that that the fiscal position has deteriorated further since the pre-election update. This could be negative for both households and the business sector as any additional spending will be limited. And this is before the fiscal balance is actively brought back to surplus over subsequent years.
If household finances are not expected to improve then the recent increase in consumer sentiment that is based on the so far positive attitude towards the new government may retrace. As such we anticipate sentiment will be somewhat inconsistent over coming months, driven by domestic and foreign headlines,rather than building on recent gains.
Further economic conditions more broadly will also weigh on households. In particular the increase in the unemployment rate will keep confidence subdued. And this legitimate concern that households have is reflected by unemployment expectations remaining elevated (Chart 12). We expect that lack of job security and weaker household income growth will outweigh any utility houses may get from rising asset prices. Indeed for the approximately one third of households that rent, those that do so in the hope of entering the housing market are being adversely impacted by rising house prices as this side of the affordability equation continues to deteriorate for them.
There is nothing like an increase in asset price for the folk who own 70% of Australian homes. They will now get on with repairs updates etc etc they will work weekends adding further value to their homes and give GDP and retail a bit of a boost etc etc.
People move en masse we are all either in the pits of despair in self imposed austerity or we are all going gangbusters building selling and adding value for our homes.
It makes me laugh when people think the housing market goes up and down like a yoyo it just does not do this. It takes a time to turn down an overheated market and it takes time to turn a depressed market. Cycles are roughly 10yrs
The market has turned and will stay turned until over exuberance kicks in and then it will probably grow some more for a few years until people think we are in a new world of ever increasing real estate prices, then we will see a downturn again.
BTW most people don't really care about affordability, there are plenty of affordable properties in Australia. They care about potential capital gains. People will happily buy in outer woop woop if it is going up 10% a year. They just don't want to buy there when they think it wont be a good investment for them.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
I think I first became aware of the bubble in 2007.
I started reading about it, and it made sense that the bubble would burst. In 2008, the GFC came along and our bubble did start deflating, right on track.
But of course, the other “bears” and I had not taken into account the determination with which the government would show to not only reinflate the bubble, but to send it to new heights.
Now the bubble has been around for so long that we have this “new normality” and I see people taking on huge mortgages which is the only way they are going to get into a place of their own. Meanwhile, the baby boomers who bought for around a tenth of the price are buying up their fifth, tenth or whatever property and pricing would-be buyers out of a home. It is terribly unfair.
I am not a bleeding heart leftie but it is no longer a level playing field, when would-be homebuyers are outbid, not only by negatively geared investors but also by the massive influx of foreign buyers. I’m not saying there is no place for some foreign investors but when Australians can’t buy a home, surely this practice should be curtailed? Instead it has been loosened even further.
We often hear about the shortage of houses, and certainly there is a shortage of affordable homes in areas not too far from the city, so it does make me angry that a lot of these foreign-owned dwellings sit empty.
So yes, it is a combination of factors that have fuelled this bubble, a combination that I don’t think many would have predicted would cause prices to go as high as they have done.
Just look at the ridiculous prices, especially in Melbourne and Sydney for areas within a 15 km radius of the city. Anything under $1 million is considered cheap!
A housing bubble wreaks havoc on many other facets of lifestyles and society. I guess we won’t really see the full extent of this for many years. But in the meantime, it is frustrating and depressing to know that no matter who is in power, they will do whatever they can to prop up the housing Ponzi. They have absolutely no regard for the consequences of this. They live for today, and to get voted in tomorrow. And to dig their snouts into the trough as deeply as they can for as long as they can.
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