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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!
Topic Started: 10 Oct 2013, 01:10 AM (2,902 Views)
mel
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Yo Mama
14 Oct 2013, 09:56 PM
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!
there are 3 bedroom homes in melbourne less than 10kms from the cbd that are under half that price. I agree that the market is extremely imbalanced though
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skamy
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Yo Mama
14 Oct 2013, 09:56 PM
I think I first became aware of the bubble in 2007.

Hey Yo Mama

Methinks there was no bubble - that was just a silly story told by some internet doom and gloomers and attention seekers like Keen and his ilk. They got headlines during the GFC but their models were rubbish. Australian house prices were not overinflated, there was no problem with employment in Australia, our banks were rich and stable and our economy continued to prosper albeit slower as we stopped building homes and started to save like crazy.
The truth is there was no bubble, house prices fell or stagnated based on fear of a GFC crisis here for a few years now everyone wants to buy again and there is a supply shortage.
If you understand that there was no bubble the whole rising prices of today will make a lot more sense to you. These internet gloomers have cost folk a lot of money. I would dump that whole fairytale that they are trying to get you to believe ASAP if I were you.
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.
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Confidence soars among CFOs

Confidence among Australia's financial chiefs has soared to its highest point in more than two years, thanks to the change in government new signs of a sustained global economic recovery.

The net percentage of chief financial officers who felt more optimistic about their company's future financial prospects has surged to 41 per cent, up from 11 per cent three months ago, according to Deloitte's quarterly CFO survey.

The end of the minority federal government was among the biggest contributors to the new-found confidence, with 68 per cent of CFOs now stating that government policy is having a positive influence on optimism.

Deloitte chief operating officer Keith Skinner said confidence was "back in fashion" among Australian CFOs.

“We are currently enjoying the highest level of optimism since early 2011," Mr Skinner said. "Even more encouraging is the fact that 38 per cent of CFOs believe now is a good time to take more risk onto their balance sheets, the highest level in two years.

"This could be an early sign that the defensive strategies which have prevailed post the global financial crisis, could soon be replaced by more proactive growth strategies such as mergers and acquisitions.”

CFOs also called for tax reform, with 90 per cent of those surveyed labeling it an important or very important issue.

Sixty per cent of respondents said company tax should be reformed, with GST (42 per cent), superannuation (38 per cent), state and territory (17 per cent) and employment taxes (21 per cent) also highlighted.

Deloitte Access Economics partner Professor Ian Harper said the Abbott government was unlikely to cut the corporate tax rate during its first term, while the budget remains in deficit and during the transition from the construction phase of the mining boom to production.

"However, there may be some opportunities for the Government to reduce red tape, regulation and compliance burden on business, which could have a positive but less direct impact on their balance sheets,” Prof Harper said.

Read more: http://www.businessspectator.com.au/news/2013/10/15/industries/confidence-soars-among-cfos
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Basil
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Macquarie Bank are out today with this sobering look at the Aussie economy.....

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The recent profit reporting season reinforced the point that the Australian market is now beyond this cycle‟s earnings trough. Investors have now turned to the prospect of a cyclical EPSg upswing. In this research note we compare the magnitude of the earnings recovery seen to date & as forecast, with past upswings. Most critically we analyse the “anatomy” of these prior cycle upswings with the current and the implication that a “long grinding cycle up” might have on both EPSg and valuations, most particularly for cyclicals.

Impact

This cycle‟s profit recovery will in our view remain fundamentally different from the cycle recoveries of the last 20 years. A weaker recovery in sales will limit the quantum of the earnings upswing. In turn, this will keep pressure on costs, with further EBITDA margin expansion a critical and differentiating support for EPSg. If our analysis proves correct then this has critical implications for share price performance, particularly for cyclicals that are competitively weak.

Outlook

In a more muted recovery characterised by modest revenue growth, the prospect of cyclicals benefitting equally from any upswing, in our view, is unlikely. Given the share prices of many domestically focussed cyclicals are already pricing the early stages of an earnings recovery, it is critical to identify those offering the highest quality and most reliable growth into FY14 & FY15.

Our detailed EPSg decomposition analysis presented in this note suggests the market may already be pricing too much of an earnings recovery for some cyclicals… and yet the “best” cyclical earnings don‟t appear to have the highest valuations. Stocks notable here include JBH, SEK, PPT, FBU, MGR & to a lesser degree TOL, while expensive &/or lower “quality” cyclicals of note are HVN, QAN, BLD, BTT, DJS, & PMV.

In the current cycle we have consistently noted in our research for some time that the behaviour of households appear to have changed. Notably the lack of any major response of households to the current long and deep cycle of interest rate cuts. And yet over the long run household consumption has driven more than half of Australian GDPg. Since 1960, household expenditure has contributed on average nearly 60% of Australian GDPg, while housing construction has also played a role in supporting the upswing in growth.

It is critical therefore that we assess the outlook for Australian GDPg, particularly the role that consumption and housing construction will play in this next economic upswing. It is also critical to compare and contrast the expected contribution that both consumption and housing may make in any economic cycle upswing given the “LGC” (long, grinding, cycle) environment, with the GPDg upswings of the past. Isolating the contributions of these sectors to Australian‟s GDPg over the last nearly 30 years is set out in Figure 1 below. We particularly examine the role these sectors played as “drivers” of GDPg recovery over two distinct periods of upswing (2001 – 2002 & 2009 - 2010) vs the recent period of strong GDPg. Our analysis highlights that:

Housing construction has been notably absent as a positive contributor to Australian GPDg since 2007 compared to its role in previous economic growth upswings. During the economic recovery in 2001-2002 and indeed post the last period of recession in Australia (1992 – 1994), housing (dwelling investment) contributed nearly 15% to rising GPDg, thus playing a key role in supporting these two periods of economic upswing. Since 2007 however housing has made little to no contribution to Australia‟s economic growth, with just the last two quarters showing the first signs of any positive GDPg contribution from dwelling investment.

Consumption is ultimately key driver of economic upswing in Australia. Particularly as we expect below trend GDPg in the coming years, the role of consumption and housing construction will be exacerbated. The analysis presented in Fig1 highlights that consumption has been the earliest sector to turn and to contribute the most significantly to the recovery of GDPg in Australia over the last 30 years. As seen clearly in Fig 1 on average +1.6ppts of the GDPg recoveries seen in 1991–94, 2001–02 (+1.9ppts), and 2009 – 10 was directly attributable to consumption. We expect this to be more moderate in this cycle.

“Other sectors” (aka business investment) have been key to the recent upswing in GDPg. Indeed business investment‟s contribution to Australia‟s GDPg in the last three years has been both large and dominant, accounting for more than half of Australia‟s overall GDPg, a direct impact of the strong and unprecedented current mining investment boom. As mining investment swings from the recent period of large and positive contribution to GDPg, to a sustained period of modest to negative contribution going forward, however, it begs THE question confronting policy makers: which part of the economy can and will pick up the slack in growth?
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Consumer Confidence jumps to highest level since January 2011

October 15 2013

This weekly Roy Morgan Consumer Confidence Rating is based on 1,016 face-to-face interviews conducted Australia-wide with men and women aged 14 and over last weekend October 12/13, 2013.

The weekly Roy Morgan Consumer Confidence Rating has risen to 124.2 (up 4.4pts in a week since October 5/6, 2013) to the highest level since January 8/9, 2011. The jump was caused by an increase in confidence about all components of the survey.

Now 42% (up 5%) of Australians expect the Australian economy to have ‘good times’ over the next five years compared to 17% (down 2%) that expect ‘bad times’ for the Australian economy.

Also 37% (up 3%) of Australians expect ‘good times’ economically over the next twelve months compared to 24% (unchanged) that expect ‘bad times’ for the Australian economy.

Australians are more confident about their personal finances compared to this time last year with 33% (up 1%) saying they are ‘better off’ financially than this time last year and 22% (down 2%) saying they are ‘worse off’ financially (the lowest for nearly six years since December 2007).

Also 45% (up 5%) of Australians expect to be ‘better off’ financially this time next year compared to just 12% (unchanged) that expect their family to be ‘worse off’ financially.

An increased majority of Australians (55%, up 4%) say now is a ‘good time to buy’ major household items while just 16% (unchanged) of Australians say now is a ‘bad time to buy’.

Gary Morgan says:

“Consumer Confidence has jumped 4.4pts to 124.2 this week – the highest Consumer Confidence has been since January 2011 following Prime Minister Tony Abbott’s overseas trip during which he was well received in Indonesia, Malaysia and by the Chinese leadership. However, Consumer Confidence is just 0.1pts higher than three weeks ago after the new Abbott Government was sworn in.

“Although the US Government shut-down continues, it appears today that a deal is imminent to raise the US debt ceiling and avoid a first ever US Government default that could throw the world financial system into a renewed bout of chaos.

“A successful resolution to the political stalemate in the US should provide a further boost to confidence in Australia as we head towards the important Christmas retailing season. A clear majority of Australians (55%, up 4%) say now is a ‘good time to buy’ major household items.”

This weekly Roy Morgan Consumer Confidence Rating is based on 1,016 face-to-face interviews conducted Australia-wide with men and women aged 14 and over last weekend October 12/13, 2013.

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Economic growth loses momentum

October 16, 2013 - 11:26AM

Australia’s economy has suffered a significant loss of momentum since the start of the year as its transition away from mining investment-led growth gets bumpy.

The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 3.2 per cent in August, down from 4 per cent in July but marginally above its long term trend of 2.9 per cent.

The coincident index, which gives an indication of current economic conditions, was 2.4 per cent above its long term trend of 2.9 per cent.

‘‘Although the growth rate in the leading index remains slightly above trend, it has slowed abruptly over the last six months,’’ Westpac chief economist Bill Evans said.

‘‘Some months ago the index was pointing to significantly above trend growth in 2013 but this current slowdown is more consistent with Westpac’s growth forecasts,’’ he said.

Mr Evans said Westpac is not expecting the Reserve Bank of Australia to cut the cash rate at its November 5 board meeting after reducing it to a new record low of 2.5 per cent in August.

Read more: http://www.smh.com.au/business/the-economy/economic-growth-loses-momentum-20131016-2vlw3.html
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Sharp rise in property confidence: survey

Posted on Thursday, October 17 2013 at 11:32 AM

Queensland has recorded the highest shift in sentiment of any state or territory with confidence among Queensland property professionals improving sharply, according to a recent survey.

The Property Council/ANZ Property Industry Confidence Survey found sentiment in Queensland had risen 25 points to 142 on the index for the December quarter.

A number of factors triggered the surge in confidence since September, according to Kathy Mac Dermott, Queensland executive director of the Property Council of Australia.

“Primarily, the research highlights the first signs of a residential revival, with a significant spike in house price growth expectations over the next 12 months,” Mac Dermott says.

She says the state will only be able to capitalise on the improved confidence by ensuring availability of land, equitable infrastructure charges and efficient development assessment processes.

Mac Dermott also cited a positive response to the Federal Election result as a contributing factor to the escalation in confidence.

Across the country all states except Western Australia experienced an increase in sentiment.

Read more: http://www.apimagazine.com.au/api-online/news/2013/10/sharp-rise-in-property-confidence-survey
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Property sector among economy’s most confident

Finance and the property industry are at the forefront when it comes to Australian business conditions and confidence, according to NAB’s monthly business survey for September, 2013.

The major lender says ‘animal spirits’ have lifted again and overall business confidence has surged to its highest level in 3.5 years.

While conditions remain ‘subdued’, NAB reports that the finance, business and property/construction industries showed the biggest gains.

“Business conditions were moderately up in September but, at -4 points, remained relatively low… but finance/ business/ property and recreation/personal services were the best performing sectors in the month,” reads the report.

“The lift in conditions was largely driven by improvements in finance/ business/ property and construction, which appear to have benefited from better sentiment in the housing market – especially accelerating house price increases.”

Housing demand and a generally positive outlook for the property market appears to be having an impact on other sectors as well, with related sectors like residential construction also experiencing improvements.

Aside from recreation/personal services, all other industries reported negative activity readings in September, with conditions remaining especially weak in mining, manufacturing, transport/utilities, retail and wholesale.

Read more: http://www.yourinvestmentpropertymag.com.au/article/property-sector-among-economys-most-confident-180308.aspx
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Housing boom lifts consumer confidence

November 13, 2013 - 10:46AM

A measure of consumer sentiment has rebounded as rising home prices made people feel better about their finances, while making them more confident about splashing out on big ticket items.

The survey of 1,200 people by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment rose 1.9 per cent in November, following a 2.1 per cent dip in October and a jump of 4.7 per cent in September.

That left the index up 5.8 per cent on November last year.

"After a modest fall last month the index has returned to be back near its previous peaks in 2013 registered in March and September. These are the highest reads since the July-December period in 2010," said Westpac chief economist Bill Evans.

That confidence may in part have reflected rising home prices and their boost to household wealth. The index of house price expectations rose by 3.1 per cent, to be 23 per cent up on the year.

There was also a rise in the "Time to Buy a Dwelling" index of 4.2 per cent including a very strong increase in New South Wales.

Read more: http://www.smh.com.au/business/the-economy/housing-boom-lifts-consumer-confidence-20131113-2xfg5.html
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Consumer confidence takes a dive

December 11, 2013 - 10:47AM
Glenda Kwek

Consumer confidence has lost its post-election glow, falling almost five per cent this month, to its lowest level since July.

The Westpac Melbourne Institute Index of Consumer Sentiment fell from 110.3 points in November to 105.0 in December.

"It appears that the boost in confidence partly associated with the election result and booming house prices has faded in December," Westpac's chief economist Bill Evans said, adding that uncertainty about unemployment also weighed on sentiment.

"In particular, confidence around the economic outlook has faltered. The components of the index measuring consumer views on the economic outlook over the next 12 months and five years are both down by over 10 per cent from their average reads over the last three months."

The Australian dollar slipped slightly. It was trading at 91.45 US cents just before the survey was released, and eased to 91.40 US cents.

Last month, consumer confidence rose to its second-highest level in almost three years, boosted by the boom in the housing market, the survey showed.

But jobs remained a key concern, with the unemployment expectations sub-index rising for the month.

Read more: http://www.smh.com.au/business/the-economy/consumer-confidence-takes-a-dive-20131211-2z506.html
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