This is the fourth part in a series of posts which deep dives into our latest survey results, with a focus on investor stress, which is rising further.
See the first part, where we describe our approach here: https://youtu.be/3oidJ_XKgAE
The second part on mortgage stress is here: https://youtu.be/6g6cb1mU2zQ
The third part on rental stress is here: https://youtu.be/ZZ0OyEFaplM
The full 2,000 post code series is available by subscription from our Patreon channel below.
If you want details of a particular post code, drop it in the comments below, and I will endeavour to add it to a later show.
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Go to the Walk The World Universe at https://walktheworld.com.au/
This is the first in a series of posts which deep dives into our latest survey results, with a focus on financial stress, which is rising further. This episode provides an overview, subsequent episodes will dive into the details of mortgage, rental, investor and financial stress.
If you want details of a particular post code, drop it in the comments below, and I will endeavour to add it to a later show.
This is our weekly market update. In this show we look across the market action, starting in the US, then Europe, Asia and Australia and also touch on commodities and crypto, not least because this helps me get my thoughts in order as to what’s really going on. Top line, this past week’s performance on the markets continues to fluctuate as new data emerges, and continues the mix signals we have been seeing all year as central banks remain data dependent.
MSCI’s global equities index staged an afternoon rebound on Friday as investors repositioned for month-end, while the dollar fell with Treasury yields as data showed a modest rise in U.S. inflation in April. After spending most of the session in the red, the MSCI All Country World Price Index turned positive ahead of a rebalance of the index. When Wall Street trading ended, the global index was up 0.57% falling earlier. For the week, the MSCI index was showing its second consecutive decline but a monthly gain.
In the end, on Friday, US stocks were mostly higher late, having reversed a morning swoon, helped by traders truing up on the final day of trading in May, though the tech leaders fluctuated after rallying strongly for most of the last five weeks.
Over the last five days, the Dow Jones Industrial Average continued to show weakness, having at one point slumped by -3.99% to 38,111, a level was last seen at the end of January and at the beginning of May, after which DJIA touched a new all-time high of 40k in mid-May. But on Friday the Dow surged off its early losses to finish 1.51 per cent higher to 38,686.32, its biggest daily percentage gain since November 2023 as month-end repositioning drove a late sharp rally. The S&P 500 gained 0.80%, to 5,277.51 its highly monthly close, and the Nasdaq Composite lost 0.01%, to 16,735.02 having been lower until the final minute of the session. The VIX tumbled 10.71 per cent to 12.92. For the month, the S&P 500 rose about 4.8%, the Nasdaq jumped 6.9% and the Dow climbed 2.4%.
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Yesterday the ABS released the latest data on dwellings approved and they fell 0.3 per cent in April, after a 2.7 per cent rise in March, according to the seasonally adjusted data after just 13,078 new homes were signed off for construction.
Looing at the mix, Approvals for private houses fell 1.6 per cent. While approvals for private sector dwellings excluding houses also fell 1.1 per cent in April in seasonally adjusted terms.
In the year to April, just 163,493 new dwelling permits were issued, a level which has been broadly consistent since December as surging home building costs and elevated interest rates batter construction activity. The annual result was vastly outpaced by population growth over the same period, which soared by 626,871 mostly due to surging net migration levels. From July 1, Labor is targeting the construction of 1.2 million well-located homes over five years, requiring a 12 month rolling average of 240,000 new homes.
Aprils figure is well short of the 20,000 homes that need to be constructed each month if the country is to hit the federal government’s target of building 1.2 million new homes in the space of five years, starting in July.
So the chronic housing supply issue will remain a problem and put upward pressure on home prices and rents, leading to higher inflation, and so higher interest rates for longer.
So unless things change, the gap between the supply of dwellings and meeting demand will continue to grow, driving home prices and rents higher, and pushing inflation higher which leads to higher interest rates and mortgage costs.
Step one should be to trim migration meaningfully back to bring the supply and demand back into better balance, remembering that on capita we are still currently building MORE dwellings than other western countries, as I discussed with Tarric Brooker recently. There is a strategic path to tackle the issues we face, but it seems to be politically impossible so more people will struggle to find a place to live – something which should be a basic human right, and a priority for Government.
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Today’s post is brought to you by Ribbon Property Consultants.
Australia is paying way too much for its home-grown gas, as the over-exporting of gas has driven East Coast gas prices 400% higher than historical average prices leading to higher inflation and a stalled energy transition. This is a huge impost on living standards via direct bill shocks and spills over to energy-intensive manufacturing, which includes building materials, making the housing crisis even worse.
Yet there’s more as The Australia Institute, an independent public policy think tank based in Canberra, just published a report titled Australia’s great gas giveaway – How Australia gives gas to multinational corporations for free.
In addition to exposing Australians to the full international price of gas (yes gas produced in Australia and shipped off shore by huge international companies) due to stupid Government policy, the Institute says that Australian governments charge no royalties on 56% of the gas that is exported from Australia. Over the last four years, multinational companies made $149 billion exporting gas they got for free.
If royalties had been charged on this gas, at least $13.3 billion in revenue could have been raised.
Australia exports LNG from 10 installations. Six of these projects—four of the five in Western Australia and both in the Northern Territory—pay no state or federal royalties. Australia exports 56% of its gas through these facilities.
Sure, the industry is subject to taxes – which are distinct from royalties – including income tax and the petroleum resource rent tax levied on profits. But Institute said the oil and gas companies should be paying royalties as well as taxes on profits and a failure to do so consistently meant Australians were missing out on a fair return on their resources.
ACT Senator David Pocock said the gas industry was taking part in “state-sanctioned daylight robbery”. “We are seeing a betrayal of Australians and our future by the major parties. We are seeing state capture by the gas industry,” he said. “They are absolute leeches on this country and this has to end.”
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The latest monthly data on inflation from the ABS which came out today reported Annual growth in the non-seasonally adjusted monthly CPI lifted from 3.5 per cent last month to 3.6 per cent, above market expectations, while seasonally adjusted CPI is even higher at 3.8 per cent, and annual trimmed mean inflation (which removes food, fuel and holiday travel) rose to 4.1 per cent, from a low of 3.8 per cent in January.
Consumers were hit with the biggest increase in health insurance premiums in several years, following the annual lift in health insurance premiums, bad weather caused fruit and vegetable costs to rise. The outcome was also driven by higher petrol prices, less household goods discounting, stamp price rises and rents. In fact, both goods and services inflation rose.
While the RBA still considers the quarterly CPI the best gauge of inflationary pressures, the new monthly indicator factors into the central bank’s interest rate decisions, particularly when it delivers an unexpected outcome.
Judo Bank chief economic advisor Warren Hogan said the latest CPI figures would test the RBA’s patience. “Inflation is not falling back to target with signs that inflation’s underlying ‘pulse’ might be picking up in 2024,” he said.
“The RBA was very close to hiking the rate earlier this month. This number could tip them over to raising rates at their next meeting on June 18.”
This is not the progress the Reserve Bank wants to see, especially given the weakness in consumer spending evident across the economy, whether in official retail sales data (which is going backwards in inflation-adjusted terms), or the big profit downgrades in the last week from the likes of listed car dealers Eagers Automotive and Peter Warren Automotive.
With inflation surprising to the upside and the Fair Work Commission to announce next week an increase in the minimum wage, UBS chief economist George Tharenou said there was a “lingering risk” the RBA could be forced to raise the cash rate in the coming months.
Households, already under pressure, continue to feel the pain, as the latest data from Roy Morgan on consumer confidence reported another fall, and the accumulating data from the DFA surveys for May will report a further distressing rise in financial stress: The first results will be reported in the Sunday show, with more detailed analysis to follow.
Markets reacted to the news, with the ASX 2000 down 1.3%, while the 2-year bond rate rose 0.84% to 4.183. The Aussie rose 0.13% against the USD to 66.56 cents. The ASX Rate tracker shows a slight rise to October, and cuts pushed well out into 2025.
So, higher for longer, again, and I would remind you that the RBA’s blunt instrument of interest rate rises is only indirectly hitting many of the sectors of the economy. More significantly, global shipping costs are rising again, with Drewry’s World Container Index up 16% to $4,072 per 40ft container this past week. All major routes are impacted.
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Another week, another Rant from our Property Insider Edwin Almeida, as we look at the disruption in the property market, the fall out in terms of human impact and the weak responses from Government.
Housing is in crisis in Australia, its too expensive and relative to population there is not enough of it. As I discuss with independent Journalist Tarric Brooker last week, though shockingly, we have built more homes per 100,000 people than Canada, The US and the UK. In other words, we have a greater proportion of our economy dedicated already to housing construction, with perhaps 1.35 million people working in the sector. And we also know completion times are blowing out now, thanks to poor supply chains, lack of available labour, and poor-quality construction. In NSW half of high-rise projects have severe defects.
But the Government wants to push the supply-side levers some more, as exemplified in their Attachment to the budget papers: Statement 4, Meeting Australia’s Housing Challenge from the Treasury.
It starts out “Australia has a housing shortage. There are not enough homes being built in the right areas to meet the needs of our communities. This statement focuses on the reasons for the current undersupply of housing, how it affects affordability, and the changes required to more quickly unlock supply to meet the housing needs of all Australians. It also sets out how the Government’s policy responds to these drivers of undersupply”.
This undersupply they say accounts for the increases in rents, mortgage repayments and house prices.
Talk of course is cheap, but will this translate into real actions? And what about the elephant in the room because of course, the focus should be to curtail migration from is very high current levels, and bring demand back closer to long term averages, and over the budget period both sides of politics have to a degree been talking about this, though, as I discussed in my recent show The Migration Question Amplified; But Not Tackled… By Anyone!, it’s a battle of announcables, with numbers being banded about.
But my take is that neither side of politics are really wanting to take this on seriously, despite the direct link to higher inflation. The net result will be higher inflation for longer, requiring higher interest rates than otherwise needed.
