by Alan Thornhill
A new report – by Westpac – confirms that consumer confidence has fallen sharply.
The Roy Morgan organisation published a similar result yesterday.
The bank said today that a study it conducts with the Melbourne Institute shows that their Index of Consumer Sentiment fell by 4.3 per cent in December from 110.3 points in November to 105.0 in December.
Westpac’s Chief Economist, Bill Evans, said: “This is the lowest level of the Index
since July this year.
“It is 4.3 per cent below the average print for the last 3 months which covered the post-election period and the time of most euphoria around house prices,” he added.
“It appears that the boost in Confidence partly associated with the election result and booming house prices has faded in December.
“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 5 years are both down by more than 10 per cent from their average reads over the last 3 months.
“The news is no better around the labour market,” Mr Evans said.
“More consumers expect unemployment to rise with the Westpac Melbourne Institute Unemployment Expectations Index increasing by 4.6 per cent from 144.7 points to 151.4.
“This measure provides an indication of how secure respondents feel in their jobs,” Mr Evans said.
The Index is 5.4 per cent above the average read of the last 3 months and remains 6.3 per cent above its level in October 2011 despite 225 basis points in rate cuts by the RBA.
by Alan Thornhill
New figures show that Australia’s building industry continued to strengthen in October.
The Bureau of Statistics reported today that the amount of money lent for to build new homes rose by 1 per cent, on seasonally adjusted figures, in that month.
The amount lent for all owner occupied homes also rose by 1 per cent during the month.
The amount lent for the purchases of new homes rose by 3.6 per cent in October.
And the amount lent to buy established homes rose by 0.8 per cent.
by Alan Thornhill
Australians are building more homes – and the building industry’s recovery is broadening.
High density housing is also becoming more popular.
However, a study identifying these trends, reports that it is still unclear whether the present shift to high density living will be sustained.
The study was undertaken by the Housing Industry Association and the results released today.
It showed that the trend improvement in building approvals, evident in the second half of this year, has strengthened.
The study notes, too, that there are now brighter prospects for builders outside New South Wales and Western Australia, the States which led the recovery, in its early stages.
It concludes, too, that: “Much of the aggregate growth has been driven by higher density approvals.”
However the report adds: ““Whether this will be sustained remains unclear.
“But recent growth in this category of approvals has been broad-based.”
However detached houses are still popular, with people who can afford them.
“Approvals for lower density dwellings continue to grind higher,” the report says.
by Alan Thornhill
The Reserve Bank board decided today to keep Australia’s interest rates on hold, even though it admitted that the nation’s economic growth is still “below average.”
The bank’s Governor, Glenn Stevens, also continued his jawboning of the Australian dollar, saying it is still at an “uncomfortably high” level.
In a statement after his board met, Mr Stevens said: “…the Board decided to leave the cash rate unchanged at 2.5 per cent.
“Recent information is consistent with global growth running a bit below average this year,” Mr Stevens added.
But he also said there are “reasonable prospects of a pick-up next year.”
The statement is reproduced in full below:-
Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Recent information is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year.
Commodity prices have declined from their peaks, but generally remain at high levels by historical standards. Inflation in most countries is well contained.
Overall, global financial conditions remain very accommodative. Volatility in financial markets has abated recently. Long-term interest rates remain very low and there is ample funding available for creditworthy borrowers.
In Australia, the economy has been growing a bit below trend over the past year and the unemployment rate has edged higher.
This is likely to persist in the near term, as the economy adjusts to lower levels of mining investment.
Further ahead, private demand outside the mining sector is expected to increase at a faster pace, though considerable uncertainty surrounds this outlook.
There has been an improvement in indicators of household and business sentiment recently, but it is still unclear how persistent this will be.
Public spending is forecast to be quite weak.
Recent data on prices and wages show inflation consistent with the medium-term target.
The Bank’s assessment is that this is likely to remain the case over the next one to two years.
The easing in monetary policy that has already occurred since late 2011 has supported interest-sensitive spending and asset values.
The full effects of these decisions are still coming through, and will be for a while yet. The pace of borrowing has remained relatively subdued overall to date, though recently there have been signs of increased demand for finance by households.
There is also continuing evidence of a shift in savers’ behaviour in response to declining returns on low-risk assets.
Housing and equity markets have strengthened further over recent months, trends which should in time be supportive of investment.
The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.
At today’s meeting, the Board judged that the setting of monetary policy remained appropriate.
The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target.
by Alan Thornhill
Building approvals fell by 1.8 per cent in October, on seasonally adjusted figures the Australian Bureau of Statistics released today.
But they were still 23.1 per cent higher than they were in October last year.
The Bureau also reported that approvals for private sector houses fell by 0.3 per cent in October, while approvals for multi-dwelling units fell by 2.7 per cent.
by Alan Thornhill
The resource rich State of Western Australia now has the nation’s strongest housing industry, according to a scorecard published by the Housing Industry Association.
The association says the card reflects performance on thirteen key indicators against long term averages in each state and territory.
“Conditions in Western Australia’s residential building industry are currently the strongest in the country,” its chief economist, Dr Harley Dale said.
“The Australian Capital Territory currently holds down second position, with Victoria in third,” Dr Dale added.
He said there had also been an encouraging resurgence of the industry in New South Wales, even though that state is still in fifth place.
Dr Dale said Tasmania is still in last place on the scorecard.
by Alan Thornhill
Do you sometimes fear that house prices are getting away from you?
As the old song suggests, that ain’t necessarily so.
New research shows that two thirds of the properties sold in Australia’s capital cities still go for less than $600,000.
Outside the capitals, nine out of every 10 properties sold also command prices below that level.
The research was conducted by Cameron Kusher and published by RP Data.
Mr Kusher concluded that as values increase, he expects to see a natural bracket creep in prices.
He also noted high levels of activity at the top end of the market.
“We are…seeing an increase in buyer demand at the more expensive end of the market, “ Mr Kusher said.
He said this was probably driven higher by the profits being made in the share market as well as more upgraders choosing now as a time to step up a notch on the property ladder.
“Over the most recent 12 months, sales in excess of $1 million accounted for 14.3 per cent of all sales in Sydney, 8.3 per cent in Melbourne, 3.6 per cent in Brisbane, 2.3 per cent in Adelaide and 7.6 per cent in Perth,” Mr Kusher said.
“The proportion of sales in excess of $1 million was at a record high across Sydney over the past year but below the peak elsewhere,” he added.
However he has some sympathy for young, first home buyers.
He said “…..the data highlights the challenge of purchasing relatively lower priced housing within major capital cities given that the majority of sales are occurring at prices above $400,000 across most capital cities.
“Clearly, buyers with a limited budget who are looking to purchase in the capital cities may need to change their search criteria and investigate more affordable markets outside of capital cities. The downside to this is that the challenge in many regional areas can be finding local employment or commuting back to the capital cities for work,” he added.
by Alan Thornhill
Australian leaders have welcomed an IMF report which says the nation is “performing favourably” but warns that a housing surge needs to be properly managed.
The Treasurer, Joe Hockey, says today’s report “re-affirmed Australia’s strong economic prospects.”
It also predicted that the Australian economy will return to trend growth of 3 per cent by 2016.
Mr Hockey noted though that the IMF had also said that a tight rein would have to be kept on spending and noted that the $A is overvalued.
The Shadow Treasurer, Chris Bowen, called a press conference in Canberra, to explain his response to the report.
He said the had re-affirmed its view that Australia is in a strong economic position.
Mr Bowen said that had been inherited by the Coalition Government.
“It’s worth repeating and clearly placing on the record, the opening statements of the IMF on Australia’s economic performance,” Mr Bowen said.
He said it had observed that:“Australia’s economy has performed favorably in recent years compared with other advanced economies.
It had also said Australia had a track record of sustained growth, inflation close to target, a resilient financial sector, and public debt still low relative to other advanced countries.
The IMF, though, did sound a caution on the housing market.
It said the recent surge in Australian property prices and rising investor expectations could cause values to “overshoot”.
But it said the Reserve Bank has the capacity to manage this risk.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Thursday December 12
Australia’s unemployment rate rises slightly to 5.8 per cent in November 2013 (seasonally adjusted):ABS
The Dow Jones index fell 129 points to 15,844
The High Court upholds a Commonwealth government challenge to an ACT law permitting same sex marriages. Some 30 couples will now find their marriages void.
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