RBA warns on house prices

The Reserve Bank is worried about factors that are causing Australia’s house prices to rise.

And it could raise interest rates to curb those rises.

The head of the bank’s economic analysis branch, Tony Richards, explained why, when he addressed a housing forum in Sydney yesterday.

“…as a nation, we are not really any richer when the price of housing rises,” Mr Richards said.

“but the more vulnerable tend to get hurt.”

“We all need to consume some level of housing services,” Mr Richards said.

And if house prices rose,  low income families would have less to spend on other things they need,” he added.

“Lower income households are less likely to own housing,…than higher income ones.

“So when the price of housing rises, higher income households tend to benefit at the expense of lower income households,”

Mr Richardson said housing supply had not been keeping pace with the demand for new houses, arising from population growth and other factors.

“…there is a wide range of evidence that the supply side has not been all that responsive in recent years,” Mr Richardson said.

He cited problems in land zoning and approval processes, as well as finance issues, due to the global economic crisis.

Federal budget surprises

The Federal government’s accounts are in better shape than it expected, when the Treasurer, Wayne Swan, delivered his budget in May.

Mr Swan said the final underlying cash deficit, of $27.1 billion, is $5 billion better than he had expected at budget time.

He said cash receipts had been $2.8 billion higher than expected while government spending had been $2.2 billion lower.

Company tax receipts had been $3.6 billion higher than expected, but that had been offset by a $500 million shortfall in personal income tax revenue.

Mr Swan said the government’s net debt, at the end of June this year, had been $16.1 billion, a level $11.5 billion lower than the budget forecast.

The Treasurer said Australia’s net debt – at 1.3 per cent of gross domestic product – is “dramatically better” than those of other advanced countries.

Their net debt, collectively, stood at 59 per cent of GDP, Mr Swan said.

But he said the Rudd government is still committed to returning the Federal budget to surplus as the economy recovers.

ASX gets a tick, but…

Can a sudden bear market overwhelm a stock exchanges front line surveillance?

Investors, still shaken by the events of last September might well believe that they already know the answer to that question.

But the Australian Securities and Investment Commission thinks it is worth further study.

In a report just released, ASIC says surveillance “plays a critical part in identifying matters warranting further investigation.”(see www.asic.gov.au)

And it has urged the Australian Stock Exchange to investigate this matter further.

The report said, though, that this and three other recommendations ASIC made, while important, did not cause the Commission to qualify its conclusion that ASX licensees have met their statutory obligations over the past troubled year.

ASIC said, too, that there would be value in the exchanges “undertaking further consideration” of the way they “administer trading halts and suspensions.”

It noted that both algorithmic trading and direct market access are taking an increasing roles in ASX activities.

ASIC said it had identified incidents in which these developments had highlighted a potential for these activities to threaten the orderliness of ASX markets.

It urged the ASX to investigate these matters, too.

Be confident, Reserve Bank chief urges

Australians should not lose confidence in the nation’s economy, the Reserve Bank Governor says.

Glenn Stevens, delivered that message, when he addressed the Senate Economics Committee, in Sydney today.

However Mr Stevens also reminded Australians that they can expect the nation’s interest rates to rise, as the recovery takes hold.

“I have maintained throughout (the crisis) that Australia’s medium term prospects remain good,” the governor said.

“And that we should not lose confidence.”

Mr Stevens said both business and personal confidence levels had shown a “very substantial” pickup from the low points the nation had seen earlier this year.

Share prices had risen by almost half in that time.

However, he said both fiscal and monetary support, that had been delivered in the crisis, would have to be unwound as private demand increases.

“In the case of monetary policy, the bank has already signalled that that interest rates can be expected, at some point, to move off their current unusually low levels, as recovery proceeds,” Mr Stevens said.

Is coal dust blinding us?

Do Australians have coal dust into their eyes?

The question is worth asking, as the nation’s hopes for recovery rest heavily on hopes for increased coal sales to China.

But lower coal prices are already leaving a big hole in the nation’s export earnings.

The Treasurer, Wayne Swan, admitted that at the weekend, saying the value of Australia’s energy exports is expected to fall by 36.2 per cent this financial year.

The Federal government is making no secret of the fact that it is now looking to China to boost Australia’s growth  in the months ahead.

But things are already changing rapidly in China.

That country is already planning to generate 10 per cent of its energy from renewable resources, including solar power, by next year.

It expects, also, to lift that proportion to 15 per cent by 2020.

The Prime Minister, Kevin Rudd, has warned repeatedly that Australia could miss out on manby job opportunities, arising from technoligical change, if it hangs back on moves to combat global warming, in misguided efforts to protect the nation’s coal industry.

China’s move towards renewable energy will be swift, but not abrupt.

It will continue to import Australian coal for some years yet.

It’s move to renewables, though, has strong support, at the highest levels of the Chinese Communist party.

The country’s chief legislator, Wu Bangguo, made that plain, earlier this month, when he witnessed the signing of a deal that will set up the world’s biggest solar power station, in Ordos City, Inner Mongolia.

There was a lesson in that event, which the Senate would  be wise to accept.

It is due to debate the Federal government’s proposals for an emissions trading scheme very soon.

And, on present indications, the government’s legislation could well be defeated there.

Overworked? You are not alone

Frazzled?

Too much work?

Not enough time for the kids?

Well, at least you are not alone.

The Statistician recognises your lifestyle.  If you can call it that.

In a report just released, the Australian Bureau of Statistics concedes that extra hours, multiple jobs and weekend work are all “cutting into” our family lives.

That comment is contained in the latest issue of the Bureau’s publication Social Trends.  (see www.abs.gov.au).

This observation is remarkable, as the Bureau has also noted that many Australian employers have responded to the global economic crisis by putting workers on short time arrangements, to save money.

Some workers, apparently, have responded by taking second jobs.

The Bureau said most of Australia’s more than 1.5 million families with children – and most of them have two parents working.

It noted, too, that 80 per cent of these families had at least one parent who said they were often – or always – pressed for time.

That happened – mainly – because those working parents struggled to find a balance between their work and family lives.

The Bureau said, too, that;”Over half – 58 per cent – of all working couples had at least one parent who usually worked extra hours.”

It said, also, that a similar proportion regularly worked in the evenings,

Recovery? The forgotten factor

Weak income growth is threatening Australia’s recovery.

You have Ken Henry’s word for that.

The Treasury Secretary made himself absolutely clear on that point, in a speech he gave to business leaders in Brisbane yesterday.

“A key risk to the timing and speed of a recovery in private demand is the near term weakness in income growth,” Mr Henry said.

He warned that this is often overlooked.

It is, he said, “something that is not often given the same degree of attention as real economy developments.”

Mr Henry, though, was not suggesting that the business people present go back to their factories and offices and give their employees  big pay rises.

The problem, as he sees it, is more basic.

“Income growth is expected to be very weak in 2009-10,” Mr Henry said.

He said corporate profits would decline and family income growth would be subdued.

Why?

“This largely reflects significant price falls for Australia’s non-rural commodity exports,” Mr Henry said.

That, in turn, had driven a decline of more than 15 per cent in Australia’s terms of trade.

Mr Henry said Australia’s recovery would also depend on the pace of global recovery.

And he warned against the premature withdrawal of government stimulus measures, either in Australia or overseas.

Stimulus package boosts construction jobs

The Federal government’s stimulus package is expected to save up to 50,000 jobs in Australia’s non residential building sector.

That estimate comes from a new survey, just published by the Master Builders’ Association.

The Association says the global economic crisis hasn’t yet caused a collapse in the nation’s construction industry.

But it warns that disturbing trends are starting to appear.

The Association says two factors prevented an outright collapse.

The industry already had a backlog of  work when the crisis struck last September.

The stimulus package had also helped.

However tighter criteria for bank lending had led to a massive fall in both residential and non-residential building approvals.

The Association said its latest survey confirmed a continued rebound in builder sentiment, during the March quarter.

It said that was encouraging.

However, it said,  most builders still believe conditions in the industry are poor.

“Builders are expecting slow improvement in the residential sector over the next six months,” the association said.

However it warned, also, that investor activity in the sector is still “sluggish.”