"Intelligent Insight"
The latest edition of our weekly finance and property news digest with a distinctively Australian flavour.
Contents
00:20 Introduction 01:10 World Growth at Risk 03:00 Fed Responds 04:50 Markets Correct 05:20 US Markets 08:45 Interest Rates 11:00 Euro and UK 13:00 Asia and China 15:00 Australian Segment 15:00 Markets 16:00 Property Market 17:00 Credit 17:45 Cash Ban 18:00 ASIC and Derivatives
Domain released their preliminary results for today.
The volumes remain quite strong (though still well down on a couple of years ago).
Canberra listed 65 auctions, reported 48 and sold 33 with 15 passed in to give a Domain clearance of 69%.
Brisbane listed 82 auctions, reported 41 and sold 29 with 1 withdrawn and 12 passed in to give a Domain clearance of 69%
Adelaide listed 64 auctions, reported 24 and sold 18 with 2 withdrawn and 6 passed in to give a Domain clearance of 69%
Note I find it surprising all three have the same 69% result.
Jerome Powell just issued this “don’t panic” message.
The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.
The calls from the markets for central bank intervention and fiscal stimulus are rising fast. However, this could well be finger in the dyke stuff….
Salvatore Babones, Adjunct Scholar at the Centre for Independent Studies, and Associate Professor University of Sydney joins me to discuss the latest indicators relating to China, as the current crisis plays out.
His latest observations were featured in the prestigious American The Center for the National Interest
Robbie Barwick from the CItizen’s Party and I discuss the report which landed late today.
https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/CurrencyCashBill2019/Report
Last week we ran our latest live event, and discussed a range of potential scenarios relating to the virus. If the virus is localised and of short duration, there was still a path to higher prices, but as its severity and reach grows, prices would turn negative. This is a simple (actually complex) set of relationships between economics, human behavior and property.
Here is a summary of the various scenarios from our modelling. We weighted the greatest probability at 30-45% fall in the months ahead, assuming global disruption, financials market falls and reinfection. All of which is coming true.
Begs the question, how soon will prices turn south unequivocally?
You can watch our live event here:
The latest data from the RBA, the credit aggregates to end January 2020 were released today. Total credit grew by 0.3% last month, compared with 0.2% in December. This gives an annual rate of 2.5%, compared to 4.2% in January 2019.
The annual series shows that owner occupied housing rose 5.1%, investment housing lending is down 0.3% and overall housing at 3.1%, up from a low of 3% in November, so hardly stellar.
Business credit rose by 0.5% in January, compared with 0.2% in December, giving an annual rise of 2.8% compared with 5% a year ago. That was the biggest mover.
The monthly series are always noisy, and the RBA seasonally adjusts the results without explanation, so we have to take their word for the results.
The 3 month rolling series shows a small uptick in investment lending to zero percent, while owner occupied lending was up to 1.4%, so weak growth only. Business was a little stronger, and personal credit fell at a slower rate of minus 1.5%.
The broader credit and money supply metrics showed that over the past year total credit rose at 2.5%, slightly higher than last month, while broad money fell a little to 4.2%
Overall the credit weakness continues to bite. We will see what the new loan data tells us when its released in a couple of weeks, as the net weak numbers could be masked by larger repayments from households seeking to deleverage in these uncertain times.
Finally the RBA notes:
All growth rates for the financial aggregates are seasonally adjusted, and adjusted for the effects of breaks in the series as recorded in the notes to the tables listed below. Data for the levels of financial aggregates are not adjusted for series breaks, and growth rates should not be calculated from data on the levels of credit. Historical levels and growth rates for the financial aggregates have been revised owing to the resubmission of data by some financial intermediaries, the re-estimation of seasonal factors and the incorporation of securitisation data. The RBA credit aggregates measure credit provided by financial institutions operating domestically. They do not capture cross-border or non-intermediated lending.
Since the July 2019 release, the financial aggregates have incorporated an improved conceptual framework and a new data collection. This is referred to as the Economic and Financial Statistics (EFS) collection. For more information, see Updates to Australia’s Financial Aggregates and the July 2019 Financial Aggregates.
APRA released their monthly stats showing total reported balances for each bank to the end of January 2020.
Total balances grew by 0.26%, to $1.75 trillion dollars, with loans for owner occupation up 0.38%, to $1.1 trillion dollars and investment loans up 0.04% to $0.64 trillion dollars. Investment loans made up 36.9% of the portfolio.
These are net balances, after repayments and new loans, and refinancing between banks.
The individual movements between banks shows that CBA and Macquarie Bank are leading the growth, while NAB, and Westpac dropped investment loan balances, ANZ dropped both types, while Suncorp accelerated their investment lending. Macquarie still leads in investment lending however.
This suggests ongoing weakness in credit growth – and we will examine the RBA data shortly, also out today. But clearly individual lenders are executing different strategies, and the portfolio changes highlight the net impact.
I finally caught up with property expert Edwin Almeida to get his latest views on the property market, listing volumes and price trends.
And Edwin came fully prepared for anything…
https://www.ribbonproperty.com.au/
You may suddenly be getting a security error on our site. This is caused by a hosting SSL failure. They are working on the issue, which is impacting many sites being hosted, not just DFA.
Update: Now solved.