A Long View Of The Australian Economy

Kudos to Stephen Long from the ABC for an accurate and thoughtful piece on the state of the economy “How a consumer go-slow and a pile of debt is killing the economy“.

I am not just saying this because I featured in the article and news segment on the ABC last night, but because he hits the nail on the head.

In the face of the undeniable weakness, Mr Frydenberg has not dropped the reference to a “strong” economy, instead describing it as “resilient”.

That’s a fair call; a world-record 28 years without a recession is evidence enough

Australia’s weathered the Asian financial crisis of the 1990s, the tech wreck of the 2000s, and the Global Financial Crisis a decade ago without succumbing. But that record has involved some sound management and a lot of luck.

At some stage, the luck will run out.

Alongside spluttering economic growth and households hunkering down at home, a series of risks lurk offshore — a bad Brexit, the US-China trade war, underlying problems in the Chinese economy blowing up among them.

“Any one of those could play us into a GFC 2.0,” says Mr North.

“And if that happens then essentially all bets are off.”

“We are going to see very high levels of unemployment, we’re going to see a lot of households defaulting on their mortgages and that would have a spillover effect on the economy. That would hit the banks and take us into a very dark corner, in my view.”

In recent times, it’s only been population growth that’s kept Australia out of recession. More people have created more demand but high immigration has also helped to suppress wages.

While the pie’s been growing larger, the slices have been getting smaller (leaving aside the distribution of the pie, which is skewed towards those at the top).

Per head, living standards have fallen — a phenomenon that’s been dubbed a “per capita recession”.

The government and the RBA will be banking on the tax cuts which commenced in July and interest rate cuts to lift the economy out of the doldrums. If we’re lucky, things may start to turn around.

But if the luck runs out, there could be far worse to come.

Risk On, Risk Off … The Property Imperative Weekly 7th September 2019

The latest edition of our weekly finance and property news digest with a distinctively Australian flavour.

Contents:

1:14 US
2:38 Powell In Switzerland
9:15 US Markets
14:00 Europe
16:49 China

18:32 Australia
19:09 Retail
19:55 DFA FCI
20:45 Trade
21:00 RBA Monetary Policy
22:08 GDP
25:00 DFA and the media
29:00 Property prices and auctions
32:00 Outlook
34:30 Market summary

Links:

Be Aware Of Australia’s Soviet Liberal Government!
Nuggets News: Monthly housing and market update
Peter Switzer:

Auction Results 07 Sep 2019

Domain released their preliminary results for today.

Same old story, lower volumes but higher percentages once again. Last week ended at 67.7%

Canberra listed 29, reported 25 with 17 sold, and 2 withdrawn giving a Domain clearance of 63%.

Brisbane listed 76, reported 42 and sold 20 with 3 withdrawn and 22 passed in (more than were sold!), giving a Domain clearance of 44%.

Adelaide listed 68, reported 37 and sold 25, with 7 withdrawn and 12 passed in giving a Domain clearance of 57%.

The Cash Ban Is Communism … For The Banks!

Robbie Barwick from the CEC and I discuss John Adam’s newly released critical cartoon aimed to raise awareness of the issues we face.

Original Poster to download: This is a high resolution version (24 mb)

https://www.change.org/p/scott-morrison-stop-scott-morrison-from-banning-cash-to-trap-australians-in-banks

ASIC sues Bendigo and Adelaide Bank for use of unfair contract terms

ASIC has commenced proceedings in the Federal Court of Australia against Bendigo and Adelaide Bank concerning unfair contract terms in small business contracts.

ASIC alleges that certain terms used by Bendigo and Adelaide Bank in contracts with small businesses are unfair. If the Court agrees with ASIC, the specific terms will be void and unenforceable by the Bendigo and Adelaide Bank in these contracts.

ASIC alleges that certain terms used by the Bendigo and Adelaide Bank and are unfair, as the terms:

  • cause a significant imbalance in the parties’ rights and obligations under the contract;
  • were not reasonably necessary to protect the Bendigo and Adelaide Bank’s legitimate interests; and
  • would cause detriment to the small businesses if the terms were relied on.

Some of the unfair terms pleaded by ASIC include clauses that give lenders, but not borrowers, broad discretion to vary the terms and conditions of the contract without the consent of the small business owner, along with clauses that allow the bank to call a default, even if the small business owner has met all of its financial obligations.

ASIC is also seeking a declaration from the Federal Court that the same terms in any other small business contract are also unfair.

Background

If the Federal Court finds that any of the terms of the standard form contracts are unfair, the unfair terms are void (it is as if the terms never existed in the contracts). ASIC is seeking that the terms are declared void from the outset – not from the time of the court’s declaration. The remainder of the contract will continue to bind parties if it can operate without the unfair terms.

Since 1 July 2010, ASIC has administered the law to deal with unfair terms in standard form consumer contracts for financial products and services, including loans.

With effect from 12 November 2016, the unfair contract terms provisions applying to consumers under the Australian Consumer Law and the ASIC Act were extended to cover standard form ‘small business’ contracts.

Small businesses, like consumers, are often offered contracts for financial products and services on a ‘take it or leave it’ basis, commonly entering into contracts where they have limited or no opportunity to negotiate the terms. These are known as ‘standard form’ contracts. Small businesses commonly enter into these ‘standard form’ contracts for financial products and services, including business loans, credit cards, and overdraft arrangements.

The unfair contracts law applies to standard form small business contracts entered into, or renewed, on or after 12 November 2016 where:

  • the contract is for the supply of financial goods or services (which includes a loan contract);
  • at least one of the parties is a ‘small business’ (under the ASIC Act, a business employing fewer than 20 people is a ‘small business’); and
  • the upfront price payable under the contract does not exceed $300,000, or $1 million if the contract is for more than 12 months.

In March 2018, ASIC released Report 565: Unfair contract terms and small business loans. The report:

  • Identifies the types of terms in loan contracts that raise concerns under the law;
  • Provides details about the specific changes that have been made by the ‘big four’ banks to ensure compliance with the law; and
  • Provides general guidance to lenders with small business borrowers to help them assess whether loan contracts meet the requirements under the UCT law