Social Trends – Page 157 – Digital Finance Analytics (DFA) Blog

‘Fake news’ – why people believe it and what can be done to counter it

Barack Obama believes “fake news” is a threat to democracy. The outgoing US president said he was worried about the way that “so much active misinformation” can be “packaged very well” and presented as fact on people’s social media feeds. He told a recent conference in Germany:

If we are not serious about facts and what’s true and what’s not, if we can’t discriminate between serious arguments and propaganda, then we have problems.

But how do we distinguish between facts, legitimate debate and propaganda? Since the Brexit vote and the Donald Trump victory a huge amount of journalists’ ink has been used up discussing the impact of social media and the spread of “fake news” on political discourse, the functioning of democracy and on journalism. Detailed social science research is yet to emerge, though a lot can be learnt from existing studies of online and offline behaviour.

Matter of trust

Let’s start with a broad definition of “fake news” as information distributed via a medium – often for the benefit of specific social actors – that then proves unverifiable or materially incorrect. As has been noted, “fake news” used to be called propaganda. And there is an extensive social science literature on propaganda, its history, function and links to the state – both democratic and dictatorial.
British poster from World War I attacking German atrocities in Belgium.
In fact, as the investigations in the US and Italy show, one of the major sources of fake news is Russia. Full Fact, a site in the UK, is dedicated to rooting out media stories that play fast and loose with the truth – and there is no shortage.

An argument could be made that as the “mainstream” media have become seen as less trustworthy (rightly or wrongly) in the eyes of their audiences, it makes it hard to distinguish between those who have supposedly got a vested interest in telling the truth and those that don’t necessarily share the same ethical foundation. How does mainstream journalism that is also clearly politically biased – on all sides – claim the moral high ground? This problem certainly predates digital technology.

Bubbles and echo chambers

This leaves us with the question of whether social media makes it worse? Almost as much ink has been used up talking about social media “bubbles” – how we all tend to talk with people who share our outlook – something, again, which is not necessarily unique to the digital age. This operates in two distinct ways.

Bubbles are a product of class and cultural position. A recent UK study on social class pointed this out. An important subtlety here is that though those with higher “social status” may congregate, they are also likely to have more socially diverse acquaintance networks than those in lower income and status groups. They are also likely to have a greater diversity of media, especially internet usage patterns. Not all bubbles are the same size nor as monochromatic and our social media bubbles reflect our everyday “offline” bubbles.

In fact social media bubbles may be very pertinent to journalist-politician interactions as one of the best-defined Twitter bubbles is the one that surrounds politicians and journalists.

This brings back into focus older models of media effects such as the two-step flow model where key “opinion leaders” – influential nodes in our social networks – have an impact on our consumption of media. Analyses of a “fake news story” appears to point – not to social media per se – but to how stories moving through social media can be picked up by leading sites and actors with many followers and become amplified.

The false assumption in a tweet from an individual becomes a “fake news” story on an ideologically-driven news site or becomes a tweet from the president-elect and becomes a “fact” for many. And we panic more about this as social media make both the message and how it moves very visible.

Outing fake news

What fuels this and can we address it? First, the economics of social media favour gossip, novelty, speed and “shareability”. They mistake sociability for social value. There is evidence that “fake news” that plays to existing prejudice is more likely to be “liked” and so generate more revenue for the creators. This is no different than “celebrity” magazines. Well researched and documented news is far less likely to be widely shared.

The other key point here is that – as Obama noted – it becomes hard to distinguish fake from fact, and there is evidence that many struggle to do this. As my colleagues and I argued nearly 20 years ago, digital media make it harder to distinguish the veracity of content simply by the physical format it comes in (broadsheet newspaper, high-quality news broadcast, textbook or tabloid story). Online news is harder to distinguish.

The next problem is that retracting “fake news” on social media is currently poorly supported by the technology. Though posts can be deleted, this is a passive act, less impactful than even the single-paragraph retractions in newspapers. In order to have an impact, it would be necessary not simply to delete posts but to highlight and require users to see and acknowledge items removed as “fake news”.

So whether or not fake news is a manifestation of the digital and social media age, it seems likely that social media is able to amplify the spread of misinformation. Their economics favour shareability over veracity and distribution over retraction. These are not technology “requirements” but choices – by the systems’ designers and their regulators (where there are any). And mainstream media may have tarnished their own reputation through “fake” and visibly ideological news coverage, opening the door to other news sources.

Understanding this complex mix of factors is the job of the social sciences. But maybe the real message here is that we as societies and individuals have questions to answer about educating people to read the news, about our choice not to regulate social media (as we do TV and print) and in our own behaviour – ask yourself, how often do you fact-check a story before reposting it?

Author: Simeon Yates, Director Institute of Cultural Capital, University of Liverpool

Affordable housing is an increasing worry for age pensioners

From The Conversation.

The average housing costs of older (65-plus) outright homeowners in lone-person households were A$38 a week in 2013-14, the Australian Bureau of Statistics calculated, compared to $103 for older social housing tenants and $232 for older private renters.

Fortunately, over the last several decades almost all Australians who depend on the age pension for their income have been outright homeowners, and their housing costs have thus usually represented a small proportion of their pension. However, this situation is changing and the significance of this is profound.

As a result, many older households are hitting a brick wall… the numbers of vulnerable older people are rising.

Drawing on 125 in-depth interviews conducted in Sydney and regional New South Wales (discussed in detail in my book, The Australian Dream: Housing Experiences of Older Australians), it is evident that these substantial differences in housing costs combined with differing levels of tenure security have a fundamental impact on the capacity of Australians dependent solely or primarily on the age pension to lead a decent life.

The interviews I conducted with the older homeowners, particularly with couple households, indicated that provided they did not have extraordinary expenses (high medical bills, excessive smoking and or drinking, having to look after a child etc), they managed reasonably well on the age pension. They could run a car, engage in modest leisure activities, travel and even save.

Margaret, who lived by herself, was content:

Well I can [and] I do participate. I don’t go to the opera because that’s too expensive … I don’t go to live shows because they’re too expensive, but that’s okay. I do other things. I’m a very busy person.

Although the housing costs of older social housing tenants are high relative to homeowners, the fact that their rent is pegged at 25% of their income means they have a fair amount of disposable income after paying for their accommodation.

Betty, a social housing tenant, summed up their situation:

In public housing you see, even if they’ve only got the old age pension, nothing else, because their rent is only a quarter [of their income], they manage, most of them quite well. People who don’t manage are the ones who drink, smoke a lot … or who have an illness that requires heavy expenditure on medication.

In addition, historically, older social housing tenants have had guaranteed security of tenure. John spoke of the enormous benefits of this security:

When you know your accommodation is right, this is especially when you’re older, you can pursue other interests. You’re more relaxed and I do feel, I really feel you’re in for a longer life you know … I’m quite content and I think it’s just wonderful that the government does supply these houses.

Private renters live with insecurity
Many older private renters live in a state of perpetual insecurity as they can be told to leave at any time. Lopolo from www.shutterstock.com
The third group, older private renters dependent on the age pension for their income, are in a completely different position. A large proportion of them are having to use a large proportion of their income to pay for their rent.

Also, once their lease ends they can be asked to leave at any time – no grounds have to be given. The resulting perpetual insecurity combined with the cost of their housing is the basis for enormous anxiety and distress.

Maggie, a private renter in Sydney, said:

It [the age pension] is unrealistic. I mean I thank God for it because I’d never make ends meet otherwise. I really thank God for it, but it’s unrealistic. You cannot live on that. I mean what would you live on? It’s a joke. I was lucky that I had the income from working on the side … I couldn’t have lived like that without working a bit …

Helen painted a bleak picture. Even though she was drawing the couple pension she was clearly suffering enormous psychological distress:

Sometimes I think I’m too old for this. Maybe I’ll be dead in a year’s time and we wouldn’t have to worry about it. All the stress … I said to my doctor, ‘Why keep us alive when there’s nothing there for us?’ I said, ‘There’s no help for us,’ and she agreed with me … I told her we couldn’t get into a retirement village or even buy a caravan, or mobile home. We couldn’t even buy that. So we have a little bit of money but we can’t do anything with it. It’s not enough to help us.

When I asked Janet, who had been a private renter for a long time, how she responded when she heard that she had been accepted for social housing, she said:

I was absolutely, well, I sat down and cried. I literally sat down and cried because I felt like, well, at least I had the protection of the Department of Housing whereas before of course I didn’t have any of that. I had no protection whatsoever … My children were having children so they couldn’t [take care of me]. They’re just working-class people and so they couldn’t care for me … So consequently I couldn’t see any future at all until I got the word from Housing that I have got somewhere.

Numbers of vulnerable older people are rising

The power of affordable and secure housing to create a foundation for a decent life for people dependent on the age pension is clear.

However, there is no doubt that an increasing proportion of older Australians on the age pension will be dependent on the private rental sector in coming decades. This is because of the housing affordability crisis and increasing divorce in later life, combined with the virtual stagnation of the social housing sector.

In 2013-14, 4.8% of couples aged 65-plus and 9.5% of people living by themselves were private renters. Among 55-to-64-year-olds, these proportions were almost double: 8.4% of couples and 20.7% of lone-person households in this age cohort were private renters. Almost all of these households will still be private renters when they become dependent on the age pension, so the prospects for this group are grim.

Author: Alan Morris, Chair Professor, University of Technology Sydney

Australian mortgage arrears up 25%: S&P

From InvestorDaily.

S&P Global Ratings has found prime home loan arrears for the third quarter of 2016 were 25 per cent higher than the same quarter last year, owing to lower wage growth, higher indebtedness and underemployment.

According to the ratings agency, 1.14 per cent of mortgages underlying Australia’s prime residential mortgage-backed securities (RMBS) transactions were more than 30 days in arrears in Q3 2016, compared to the same period in 2015 and 2014.

The ratings agency found that lower wage growth and higher household indebtedness were “undoubtedly contributing to mortgage stress for some borrowers, in addition to declining growth in full-time employment pushing some borrowers into part-time employment” (known as ‘underemployment’).

The mining downturn was also found to be a large contributing factor to the rise, with arrears most evident in Western Australia and Queensland.

For example, arrears fell in all states and territories during Q3 except in WA, where arrears breached the 2 per cent threshold to a national high of 2.03 per cent.

South Australia also had high arrears, at 1.55 per cent, followed by the Northern Territory (1.48 per cent).

Despite this, seven of Australia’s 10 worst-performing postcodes in the third quarter were in Queensland, up from Q2, when five of the state’s postcodes were in the top 10.

This was partly attributed to the “spill-over effect” from the downturn in mining investment in areas with a greater exposure to the resources sector.

While mortgage arrears in Q3 were higher this year, the ratings agency noted that they remain below their peak of 1.69 per cent and decade-long average of 1.25 per cent.

Further, comparing the figures quarter-on-quarter, the agency revealed that the percentage of home loans more than 30 days in arrears had declined from the second quarter of 2016 (when arrears were around 1.19 per cent), as expected.

S&P added that, while unemployment levels are relatively stable and interest rates low, the agency expects that “most of the borrowers whose loans underlie RMBS transactions [would] stay on top of their mortgage repayments”.

“We expect arrears to decline during Q3 before rising again … as Christmas approaches,” it added.

Measuring the weighted-average arrears more than 30 days past due on residential mortgage loans in both publicly and privately rated Australian RMBS transactions, S&P found the total value of loans (including non-capital market issuance) to be $134.28 billion in Q3.

The 2016 Property Market In Review

Today we start a short series which will review the property market in 2016, and then look forward to 2017. We will start by looking at demand for property, then look at property and funding supply, before examining the risk elements in the market for both property owners, lenders and the broader economy.

Remember that there is more than six trillion dollars invested in residential property in Australia, three times as much as in the whole superannuation system, and close to a third of households rely on income from property, either directly or indirectly, (from rents, or jobs in the sector across construction, maintenance and management), to say nothing of the capital two thirds of Australians are sitting on thanks to strong recent price rises. So what happens to property really matters.

Property Demand

We start with demand for property. The latest data from our household surveys shows that demand for property is very strong. Two thirds of households have interests in property, and about half of these have a mortgage. Owner occupied home owners are a little more sanguine now, but property investors, after a wobble earlier in the year, are still strongly in the market. In addition, there is still demand from overseas investors, and migrants. Overall demand is now stronger than at the start of the year. This is reflected in continued high auction clearance rates, especially down the east coast.

First time buyers are finding it difficult to compete with cashed up investors, and with incomes static and tighter underwriting standards, it is harder than ever for them to enter the market. Down traders – people looking to sell and release capital – are active, and are in the market for smaller homes, and investment property. Households seeking to trade up are also active, driven by the expectation of ongoing capital gains. Investors are attracted by the generous tax breaks, including negative gearing and capital gains. This despite rental incomes falling again, and the fact that about half of investors are underwater on a cash-flow basis, though bolstered by continued capital gains.

So overall demand is strong, and it has not yet been impacted by the rising mortgage interest rate bias that we have seen in the past couple of months.

Property Supply

Turning to property supply, there have been a significant surge in new building, mainly in and close to the central business districts in Melbourne, Brisbane and to some extend in Sydney, though here new building is more widely spread. Well over two hundred thousand new properties are coming on stream and more than half of these will be high-rise apartments. That said forward approvals are slipping now, so we may have passed “peak build” in the current cycle.

We are also seeing significant subdivision of existing residential land, and a rise in new house construction as well. The average plot size continues to fall, but we still place larger buildings on these smaller plots.

In Sydney and Melbourne, the amount of housing on the market is not meeting demand, though this is not true in some other markets – for example in areas of Western Australia and Queensland, especially in the mining belts. The Reserve Bank is concerned about the impact of potential oversupply in apartments in the main centres.

Finance Supply

Turning to finance supply, Households can still get mortgage finance, but in recent times there has been a significant tightening of underwriting standards. Interest rate buffers are now higher than they were, income flows are being examined more critically, and lenders who are making interest only loans, which account for about one third of transactions, are looking for greater precision as to how the capital will be repaid later. Foreign investors are finding it harder to get a loan from the major lenders, although a number of smaller banks, and other non-traditional lenders are more than willing to do a deal. In addition, foreign income is now under greater scrutiny, following a number of recent frauds.

Overall credit growth is a little slower than a year ago, but at above 6% is still well above inflation and income growth. Within the mix, recently, investment mortgages have been growing faster than owner occupied loans. Household debt has reached an all-time high, thanks mortgage growth, with the ratio at 186 percent of debts to disposable incomes, one of the highest ratios in the world. Low interest rates mean that currently the servicing burden is not currently too bad, but this would change quickly if rates were to rise, thanks to excessive leverage. Household savings ratios are falling.

Whilst unemployment rates remain controlled, at 5.6%, the main issue for many households is that real incomes are just not rising, and as a result, some are finding it harder to make their mortgage repayments on time. At the moment mortgage delinquency is rising, just a little, but faster in areas of WA and QLD.

Recently the Trump Effect has led to a rise in US bond yields, and this has had a knock-on effect in the capital markets, lifting the rates banks must pay for capital. As a result, we have seen the yield curve move up, and banks have been lifting their mortgage rates – somewhat selectively so far – with investors taking the brunt, but the trend is widening. The recent RBA cash rate cuts are being offset by these rises, and we think it unlikely the RBA will lower rates again, so mortgage rates will continue to rise. We will discuss the possible impact in 2017 later.

Summary

So we can say that 2016 has been a positive year for those in the market, with sizable capital gains for many, significant transaction momentum and construction, and in line with the RBA’s intention part of the re-balancing of the economy away from mining construction. The cost has been, first higher home prices, as well as larger pools of debt and more households excluded from the market. Banks have 62% of their assets in residential property, a high, and are more exposed to the sector than ever, despite holding more capital than they did. We believe regulators should be doing more, but only reluctantly, and lately, are they coming to the party.

Next time we will look at prospects for 2017.

Why Productivity Growth is Faltering in Aging Europe and Japan

From The IMF Blog.

Many countries are experiencing a combination of declining birth rates and increasing longevity. In other words, their populations are aging. And graying populations pose serious issues for people, policymakers, and society.

Health care costs rise, mainly because older people need more of it. Pension payments—whether from public or private plans—also increase at the same time there are relatively fewer younger workers paying into the pension systems. And there are also fewer people producing goods and services relative to the total population. The old-age dependency ratio—the number of people over 65 divided by the number of people between 15 and 64—rises. In other words, there are economic strains and many countries that haven’t faced them yet will soon.

One way to alleviate those strains would be to increase the amount of goods and services each worker produces—that is to boost productivity. Productivity is a major driver of economic growth. When it is rising, more goods and services are produced from the same amount of input—giving society more output to divvy up. When productivity is falling, GDP growth is retarded.

How aging affects productivity

But two recent papers by IMF economists suggest that there are limited prospects for productivity to come to the rescue. That’s because not only is the overall population aging, so are those still in the workforce. And the aging workforce is holding down productivity growth in both Europe and Japan.

The decline in productivity in Japan and Europe manifested itself in what economists call Total Factor Productivity, which is the portion of economic growth that is not the result of changes in inputs (such as capital and labor). Total factor productivity measures how efficiently capital and labor are used in the production process and is affected by such things as innovation, institutions and the quality of the workforce.

Productivity generally increases until workers are in their 40s, then tails off until they stop working. In Japan, for example, workers in the 40 to 49 age group were the most productive, with productivity declining after that. Authors Yihan Liu and Niklas Westelius calculated that the aging workforce could have reduced Japan’s annual total factor productivity growth by as much as 0.7–0.9 percentage points between 1990 and 2005. The decline was largely due to the reduction in the 40 to 49 age group. Starting in 2010, the 40 to 49 group increased a bit, but after 2025 shifts in the working age population age will again reduce total factor productivity growth.

The story is similar for 28 countries in Europe. Authors Shekhar Aiyar, Christian Ebeke, and Xiabo Shao found that the growing number of workers aged 55 and older on average “lowered total factor productivity growth by about 0.1 percentage points each year over the past two decades.” But that varied across countries. In Latvia, Lithuania, Finland, the Netherlands, and Germany, workforce aging shaved about 0.2 percentage points off annual total factor productivity growth.

Future could be worse

Under current demographic projections, the future will be worse. From 2014 to 2045 workforce aging will intensify in Europe and could reduce annual total factor productivity growth by 0.2 percentage points. But in countries where aging will be most pronounced—Greece, Hungary, Ireland, Italy, Portugal, Slovakia, Slovenia, and Spain—annual total factor productivity growth could be reduced by as much as 0.6 percentage points.

Aiyar, Ebeke, and Shao write that some of the effects of total factor productivity erosion from workforce aging might be offset in Europe by such policies as:

Broadening access to medical services to improve the overall population health;

Improving workforce training;

Reforming labor markets to make it easier for older workers to change jobs; and

Promoting technological innovation to improve overall productivity—among other things, through increased spending on research and development. To the extent that such changes (for example, devices that reduce physical labor associated with manufacturing) disproportionately benefit senior workers, they could mitigate the adverse effects of an aging workforce on total factor productivity growth.

New Banking Model For Latrobe Valley

Nab says Latrobe Valley residents will for the first time have access to a unique model of financial services – with plans for Victoria’s fourth Good Money store to open in Morwell next year.

A partnership between the Victorian Government, Good Shepherd Microfinance and the National Australia Bank (NAB), Good Money stores offer responsible financial products and services including no interest and low interest loans, financial counselling and affordable insurance.

The Minister for Families and Children, the Honourable Jenny Mikakos MP, said that the Latrobe Valley Good Money store would also be the first to offer in-house financial counselling services.

“We’re working to make sure that local people have improved access to appropriate and affordable financial services and products now and into the future,” said Minister Mikakos.

“Importantly, this will be the first Good Money store in regional Victoria and it will have a financial counsellor on site providing free support, information and advocacy for people who are experiencing financial difficulty,” she said.

The Victorian Government is investing $2.9 million to establish and operate the store over four years. Good Money will initially provide services from the Latrobe Valley Authority site in Morwell until the store opens in May 2017.

Chief Executive Officer of Good Shepherd Microfinance, Adam Mooney, said that the Victorian Government investment in the new Good Money store was an important step in helping to secure the economic future of the Latrobe Valley.

“Over the coming years, Good Money will enable people in the Latrobe Valley to keep their cars on the road, meet the costs associated with education and retraining, and afford the things that keep families running like washing machines and fridges,” said Mr Mooney.

“There is high demand for safe, fair and affordable finance options in many parts of regional Victoria and we’re delighted to open a Good Money store here in Morwell. This store will provide valuable services to individuals and families who are excluded from mainstream finance in the Latrobe Valley region,” said Mr Mooney.

NAB General Manager of Retail (Victoria), Mary Scoutas, said the announcement is part of NAB and Good Shepherd Microfinance’s joint commitment to provide more than one million people on low incomes with access to fair and affordable finance by 2018.

“We know there is a real need for initiatives such as this within the community to help build resilience and reduce the risk of falling into a situation of long-term financial hardship,” said Ms Scoutas.

“The Latrobe Valley Good Money store meets the evolving needs of the local community, extends the Good Money franchise to regional Victoria for the first time and builds on our growing network of stores, with three in Melbourne, one in South Australia and another two set to open in Queensland next year.”

The products and services offered through Good Money include:

No Interest Loan Scheme (NILS) – Loans of between $300 and $1,200 for essential goods and services, including educations costs and equipment needed for training.

StepUP Loan – Loans of between $800 and $3,000, typically used for car related expenses, that keep people on the road and enable them to get to work, get the kids to school and stay engaged with their community.

Affordable insurance – simple car and contents insurance with flexible payment options.

Financial counselling – free, confidential and independent debt management and budgeting advice.

The partnership between Good Shepherd Microfinance and NAB has reached almost half a million people in Australia with no and low interest loans since 2005.

Background

The Victorian Government provides operational funding for three Good Money community finance stores in Collingwood, Dandenong and Geelong, with microfinance loan capital provided by NAB. In 2015 Good Money expanded to South Australia and, in 2017, two stores will open in the Queensland. Good Money is a three-way partnership between Good Shepherd Microfinance, NAB and state governments.

Is Australia’s Property Market One of the Worst Speculative Manias in Human History?

From The NewDaily.

Former bank boss David Murray has warned of disastrous property crash.

Australia’s property market now mirrors one of the worst speculative manias in human history, according to a former Commonwealth Bank CEO.

In a televised interview that drew little media attention, David Murray warned that the entire economy is “vulnerable” because of overvalued house prices in Sydney and Melbourne.

“All the signs of a bubble are there. Many of the signs are the same as the Dutch tulips,” Mr Murray told Sky News on December 1.

Starting in 1634, the Dutch bid up the price of tulip bulbs to extraordinarily high levels. Then, in 1637, the price collapsed, turning the craze into a byword for speculative insanity.

Since 2009, Sydney dwelling prices have risen by 95 per cent and Melbourne by 85 per cent, according to CoreLogic, a prominent property analysis firm.

Mr Murray, who chaired a recent inquiry into the health of Australia’s financial sector, said we may yet avoid a Dutch-style price plunge. It is a risk, not a certainty.

“If the economy tracks along okay, it might turn out that this thing sorts itself out. But when those risks are there, something needs to be done about it in a regulatory sense, and the Reserve Bank and APRA need to stay on it.”

Australia’s central bank (the Reserve Bank) and its prudential regulator (APRA) share the task of protecting the financial sector.

In recent years, APRA has imposed tougher lending policies on the big banks, including forcing them to hold more capital as a buffer against mortgage defaults. This was a recommendation made by Mr Murray during his financial sector review.

The former bank boss has been warning of a property bubble since at least last year. The fact that prices in Melbourne and Sydney have not corrected already is a further cause for concern, he said in his latest interview.

“When we get a momentum in a market like this, when you get these self-amplifying price spirals, the fact they keep going on and on longer than expected is another sign that it’s not very healthy.”

The crash, if it eventuates, would be triggered by a large number of landlords being forced to sell their investment properties all at once, thereby driving down prices, Mr Murray said.

“We have more investors in the market than we’ve had historically and those investors typically, even people on lower incomes, own multiple properties and those properties are often collateralised in the system. So they’re the people who become forced sellers, and that’s the risk to the system.”

Unlike those who predict a property crash with glee, Mr Murray gloomily delivered his warning. A crash might make it easier for first home buyers to enter the market, but it would have terrible consequences overall, he said.

“If home prices fall significantly, there’s a wealth effect on the economy and a constraint on consumption and that doesn’t help everybody, it doesn’t help jobs, so we don’t want that.”

Mr Murray was CBA chief executive between 1992 and 2005. Two years after leaving the bank, he was awarded an Order of Australia for his service to the finance sector.

In 2014, at the request of the Abbott government, he chaired the financial system inquiry, which recommended a slew of reforms to increase the sector’s resilience to crisis, including an increase in bank capital levels.

Also in the Sky News interview, Mr Murray said he had faith in the ability of Australian banks to protect themselves from the risks of mortgage defaults.

“They are basically well-managed institutions,” he said.

He also said Australia’s federal government should invest more in productive public infrastructure in order to boost jobs and growth.

“Infrastructure – great public goods in transport, energy, whichever area – are very valuable to the economy and can lift productivity, subject to proper cost-benefit analysis and correct choice of project.

“So if there are ways that some government funds can be used and public-private partnerships can be used wisely, that is a good way of getting productivity and growth in the economy.”

Household Finance Confidence Higher Again

The latest data from the Digital Finance Analytics Household Finance Confidence Index shows a further improvement, with the November score now just above the 100 neutral position at 100.02. This is up from 98.2 in October, and the first time since 2014 we have been above the neutral setting.

The full effect of recent rate changes and the availability of low-rate fixed mortgages, together with climbing home values in most states, combined, have driven both home owners, and property investors confidence higher. In fact, for the first time in more than a year, property investors are more confident than owner occupiers. On the other hand, the one-third of households excluded from the property market drifted lower, thanks to higher costs of living and static or falling incomes.

Looking across the states, households in NSW are much more confident, with VIC slightly behind. Households in WA reported a fall in confidence, thanks to poorer employment prospects and falling home prices.

On average households were a little less comfortable with the amount of debt they hold, thanks to expectations that interest rates have passed their low point, and will rise. 27.6% of households were less comfortable, up 3.9% from last month.

We also see a continued fall in real incomes, thanks to rising costs and flat or falling pay. 47.5% said their incomes had fallen, in real terms, in the past year, up 2.3% last month.

Households reported improved investment incomes from stocks and term deposits. However, appetite for investment property, especially down the east coast remains strong.

On average, younger households were less confident compared with those aged above 50 years.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.