Superficially, Australia’s economy maintained its momentum in the three months through June, with the expansion underpinned by exports and sectors less impacted by the Reserve Bank’s 12 interest-rate increases.
That said, key themes from the accounts are: ongoing weakness in consumer spending; slowing growth in employee compensation; rapid deterioration in productivity; offset by boosts from business investment and services exports, but which is a fudge.
The ABS reported that Gross domestic product advanced 0.4%, the same pace as the prior quarter and in line with economists’ estimates. From a year earlier, the economy grew 2.1% from an upwardly revised 2.4%.
However, while the economy grew by 0.4% in aggregate terms, it shrank by 0.3% for the second consecutive quarter in per capita terms, a more realistic measure, than gross GDP which is inflated by high migration and hence population growth. Per capita GDP also declined by 0.3% over the 2022-23 financial year.
It is clear that the main driver of Australia’s GDP growth is the Albanese Government’s unprecedented immigration program, which delivered a record net 502,000 visa holders (excluding tourists) into Australia in the year to July, with student visas accounting for 297,000 of these arrivals.
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I caught up with Peter Marshall from Mozo to talk about the current trajectory of interest rates for mortgages, savings and cards, following the RBA’s decision to hold the cash rate at 4.1% on Tuesday.
The point is, more than ever before perhaps, its important to shop around for the best available rates, as banks are seeking to fatten their margins in the current difficult market.
Rate comparison portals such a Mozo https://mozo.com.au/ can help to find the best deals.
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Digital Finance Analytics (DFA) Blog
Interest Rates And How They Are Impacting Households: With Peter Marshall
This is an edit of my live discussion with Damien Klassen, Head of Investing at Walk The World Funds And Nucleus Wealth. September is often a bad month in the markets. How have events in China been impacting the current dynamics, will interest rates and bond rates go higher still, and has AI still further to go in terms of market growth, or distortions? And how does all this impact investment strategy?
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DFA Live Q&A HD Replay: Investing Now: With Damien Klassen
My latest chat with our property insider Edwin Almeida, as we look at the latest in the rental crisis, more demand from certain groups for property which can be subdivided, and more horror pictures of property gone wrong.
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New Zealand’s house price slump has given first-time homebuyers a welcomed leg up in their quest to purchase a property, but it may be a short-lived opportunity.
For a certain segment of the nation’s would-be homeowners — those armed with sizable deposits and solid incomes — 2023 has been a heartening year, with first-time buyers grabbing a record 26% share of the market in the third quarter, according to CoreLogic New Zealand. While an 18% fall in house prices between November 2021 and May this year made homeownership more obtainable, also working in their favor has been strong wage growth, a possible peak in interest rates, an easing of lending rules and government policy changes.
“This is a window of opportunity,” said independent New Zealand economist Tony Alexander. “This is good as it gets.” But Alexander has further words of caution for those looking to get on the housing ladder: The clock is ticking.
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Kiwi First Time Buyers Getting A [Brief?] Look-In?
Central Bankers have been at pains to say they are being data dependant in setting monetary policy. But the problem now is markets are chasing every new scrap of news, and then trying to react, ahead of the Central Bankers, creating an uncertainty monster.
So an awful August gives way to an uncertain September, investors hope data this month will confirm that the seemingly relentless rise in interest rates will end soon, meaning respite for both stocks and bonds.
But there are a few snags. This September is chock-full of risk events, including central bank meetings, a G20 summit and make-or-break data, not to mention that it tends to be the worst month of the year for the mighty S&P 500.
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The Problem With Being Data Dependant, Is Being Data Dependant!
The Bank of England, like other Central Banks, is a weird entity, in that it can, if it wants create money. We saw that through the QE programmes, through which it acquired large portfolios of Government Bonds – known as guilts.
The program ran from 2009 to 2022 and was designed to improve financing conditions for companies hit by the 2008 financial crisis. It saw the BOE accrue £895 billion worth of bond holdings while interest rates were historically low.
However, the pace at which the central bank has had to tighten monetary policy in a bid to tame inflation means the costs have risen more sharply than anticipated. Higher rates have driven down the value of the purchased government bonds — known as gilts — just as the BOE began selling them at a loss because bond yields have changed significantly, rising fast as prices fall (as yields and prices work in opposite directions).
The central bank began unwinding that position late last year, initially through halting reinvestments of maturing assets and then by actively selling the bonds at a projected pace of £80 billion per year from October 2022. Both the Treasury and the BOE knew when the APF was implemented that its early profits (£123.8 billion as of September last year) would become losses as interest rates rose.
Now according to Deutsche Bank, the Bank of England’s losses on bonds bought to shore up the U.K. economy after the financial crisis will be “materially higher than projected until the middle of the decade,”
So should we worry? Well, the Bank of England has a pretty special arrangement with the UK government. Since 2009 it has promised the central bank that it would make good any losses it might suffer from QE, especially after it started sweeping any QE profits back to the Treasury in 2012.
Digital Finance Analytics (DFA) Blog
Is The Bank Of England Broke - And Does It Matter?
Almost one in three Australians are struggling to make ends meet, as cost-of-living pressures push more people to renegotiate bills, cut back on groceries and access their superannuation early. And one in five hit up friends or family as times tighten.
About 30 per cent of Australian adults find it difficult or very difficult to get by on their current income, according to a quarterly poll by the Australian National University.
Borrowers have been hit with 12 interest rate rises since May 2022 as the RBA tries to get on top of the most acute inflation outbreak in decades.
Financial stress is on the rise, with two-fifths of renters finding it difficult or very difficult to get by on present income amid a nationwide surge in rents.
But the biggest increase in stress over the past year was among people with a mortgage, who have borne the brunt of the fastest interest rate tightening cycle in a generation. About three in 10 borrowers are finding it tough.
None of this should be a surprise to followers of this channel, as I have been reporting the steady rise in cash flow stress in recent times, to new highs. My latest data to end August will be out in the next few days, and the trends continue to deteriorate.
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The monthly CPI indicator rose 4.9% in the twelve months to July compared with 5.4% last month. The CPI excluding volatile items was at 5.8% compared with 6.1% last month and the annual trimmed mean was 5.6% compared with 6% last month.
So Annual price rises continue to ease from the peak of 8.4 per cent in December 2022. The most significant contributors to the July annual increase were Housing (+7.3 per cent) and Food and non-alcoholic beverages (+5.6 per cent). Reducing the July increase were price falls for Automotive fuel (-7.6 per cent) and Fruit and vegetables (-5.4 per cent).
But there are a number of data changes which have messed with the data, the numberwangers are at it again!
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