Household Financial Confidence Moves Weakly Higher

We have released the latest update to our Financial Confidence index, with data to 20th October 2020, later than usual, because we wanted to see if there was a post-budget bounce (as trumpeted by one index provider last week!).

We discussed the findings in our most recent live show:

There was a slight recovery, but nothing which takes our index out of the “gloom” zone. The latest reading is 78.07 still well below the neutral setting.

By our affluence segmentation, those mortgage free, and holding market investments improved as markets improved, while those with mortgages and those renting saw little change.

Across the age groups, younger households were least confident, reflecting fragmented jobs and incomes, and high leverage. Older households, especially those mortgage free were more positive, but older groups, reliant on bank savings also remain in gloom territory.

Across the states, Victoria showed a further slide (this may change if the lock-down is relaxed as anticipated), whereas WA continues to move higher, as the local economy recovers.

Across the property segments, property investors continue to languish, thanks to lower rental returns, higher vacancy rates and limited capital growth. Owner occupied households benefited from lower rates, and refinance, while those renting benefited from higher availability and lower rents (though some are confronting risks of being forced to leave due to investors wanting to sell, or to give notice).

Across the components of the index, job security remains a significant issue with more than 60% of households less secure than a year ago. Many are working less hours, while structural unemployment continues to rise. Many SMEs are also cutting.

Incomes remain under pressure, thanks to less hours worked, and lower pay rates. Reductions to JobKeeper and JobSeeker are also hitting some now.

Costs pressures are still clearly in play, with most households seeing costs across multiple categories continuing to rise. Everyday costs at the supermarket appear to be rising faster than the official cpi.

Those households with debt (not all are borrowing) are more concerned, especially those who were on principal and interest repayment holidays which are now ending. We continue to see expansion of credit (and Buy-Now-Pay-Later facilities) to those already in significant debt.

Savings are under pressure, especially with the continued crushing of deposit rates (thanks RBA…!). Those with savings in the banks have see rates drive towards zero in recent times. As a result more households are having to dip into capital, or moving to higher-risk investments. This largely silent group is drowned out by the clamour from the mortgaged sector and property bulls.

Finally, net worth has improved for those with market investments, for now, though 65% of households are still sitting on lower net worth than a year ago.

Given the current and expected monetary policy settings, we expect to see continued weakness in the index, until such time as employment and income growth accelerates. This is some way away yet.

FINAL REMINDER: DFA Live Q&A 20:00 Sydney Tonight – Latest Confidence Readings And More…

Join us tonight for our live stream event, where we will be examining the latest results from our surveys, and discussing the broader economic backcloth to today’s RBA minutes. You can ask a question live via the YouTube chat, and we will also have our post data on line.

It’s Edwin’s Monday Evening Property Rant #8

The latest from our property insider. https://www.ribbonproperty.com.au/

Link to the radio item we discuss:

Auction Results 17 Oct 2020

Domain released their preliminary results for today. They note that “from Thursday July 9 the Victorian government placed a ban on public real estate auctions as part of social distancing measures to slow the spread of COVID-19. The number of auctions withdrawn in the immediate weeks following the ban are likely to be higher than normal”.

Canberra listed 66 auctions, reported 58 with 47 sold, 2 withdrawn and 2 passed in to give a Domain clearance of 81%.

Brisbane listed 67 auctions, reported 35 with 18 sold, 2 withdrawn and 15 passed in to give a Domain clearance of 51%.

Adelaide listed 39 auctions, reported 28 with 22 sold, 1 withdrawn and 5 passed in to give a Domain clearance of 79%.

The Budget Was “Fire, Ready, Aim”!

Finally some of the commentators are seeing though the Government spin to the underlying ideology, and are highlighting the weaknesses and risks in the massive proposed spending. And it’s not so much the quantum, as the direction of fire…

https://www.smh.com.au/business/the-economy/no-bang-for-buck-budget-is-big-on-political-correctness-weak-on-job-creation-20201015-p565kc.html

It’s Close To The Edge – With Harry Dent

I caught up with Harry Dent, economist and author, to check in on the markets and his view of a crash coming soon. He explores the latest data indicating a significant reset is due, and discusses the preparations to be made ahead of this event, when it occurs.

He also highlights his upcoming online seminar on the 16th October 2020 where he will explore this further, ahead of the launch of his Dent Sector Fund.

https://gokogroup.com/dent-sector-fund-launch-2/

“All my research shows that the greatest boom and bubble in the history of the world cannot last. The current pandemic I believe is a key trigger to the correction, one of a magnitude the global economy does not often see. Governments printing trillions of dollars and giving it away is an unsustainable recipe for disaster, keeping Zombie businesses alive past their time, supporting consumption patterns that cannot last. It is the future we must look to. I hope you might join me in the journey!”

Note: DFA has no commercial relationship with Harry Dent, or the fund promoters.

FINAL Reminder: DFA Live Q&A – Is Digital The Answer To Money Printing? [20:00 Sydney]

Join us for a live Q&A tonight as I discuss the critical question of whether digital currencies like Bitcoin offer protection in a world of fiat currency money printing with Alex Saunders from Nuggets News https://nuggetsnews.com.au/.