This is an edited version of a live discussion, as we looked at the latest data on mortgage and rental stress, and many other metrics from our models, which gives us a view of how households are really travelling in this higher for longer rate environment, and in the light of the RBA’s rate decision.
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Digital Finance Analytics (DFA) Blog
DFA Live Q&A Replay: Latest On Household And Post Code Financial Pressure
Another outing with our property insider Edwin Almeida, as we kick around the latest news and data across the Australian Property market.
Can you believe the theoretical housing announcables? Where is demand for property really coming from? What is the story of overseas purchasers?
Plus, we look at the latest numbers, and Edwin was a tip for the week!
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Guess what, Bankers are looking at ways to ease lending standards to pump the market some more, as bank margins are under pressure at a time when lending growth is already strong, and more households are already in financial difficulty.
The value of new housing loans have risen by 17.9% since March 2023, to $27.6 billion dollars and were up 3.1% in March, according to the ABS.
The ABS also released their latest estimates of real living costs for households, they said Employee households recorded the largest annual rise in living costs of all household types with a rise of 6.5 per cent,
No surprise then that the DFA surveys for April showed a further rise in mortgage stress, to more than half of mortgaged borrowers, with many first-time borrowers and young growing families most exposed. In addition, rental stress remains very high, underscoring the pressures created by bad policy over many years, making housing unaffordable. On my live show coming up on Tuesday, we will look at this is more detail, and do a further post code deep dive.
AMP chief economist Shane Oliver says there might be scope to reduce buffers for people refinancing — the banks already have some room to do that — but cautions against significant changes to lending laws.
“We’ve gone through a very difficult time in the economy in terms of the massive rise in interest rates, and we’ve come through — so far anyway — at a relatively low level of arrears,” he notes.
“That partly reflects the responsible lending that the banks have been undertaking over the last few years. If we had to take a dramatic easing in lending standards, and the rules around that, the risk is that the next cycle could be far worse.”
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Digital Finance Analytics (DFA) Blog
As More Households Are Crushed, Bankers Talk Their Own Book On Easing Mortgage Lending Rules!
Another wild week on the markets, driven by conflicting data, and a reactive FED, who has effectively given up on forward guidance, and who does not know where rates will go. But despite Powell’s protests to the contrary, some are suggesting Central Bankers are being swayed by political considerations from driving rates higher to quash inflation.
Apart from more strong big tech results this week, two events shaped the week. It started with fears of higher rates and inflation, driven by hot economic data, but turned after the FED held rates, and ruled out rate hikes, waiting for more data. Stubbornly high readings on inflation this year pushed Federal Reserve Chair Jerome Powell to say on Wednesday that it will likely take “longer than previously expected” to get enough confidence about inflation to cut interest rates.
But then in a “bad news is good news” swing, the Friday jobs report came is softer than expected in April, a sign that persistently high interest rates may be starting to take a bigger toll on the world’s largest economy.
In Australia the benchmark S&P/ASX 200 rose 0.55 per cent, to 7629 points to finish the week 0.7 per cent higher. The central bank on Tuesday is widely expected to keep the cash rate at a 12-year high of 4.35 per cent, but it may also reintroduce a soft tightening bias following last week’s hotter-than-expected inflation report.
But at the end of another volatile and rudderless week, markets remain on edge, waiting for the next big shiny bit of news – of course big players benefit from these changes in sentiment, but ordinary investors will be perhaps rightly more cautious. Expect more rapid changes in trajectory in the weeks ahead, as data will continue to confuse. Meantime, the credibility of Central Bankers continues in my eyes to diminish, even as more ordinary households are being crushed. And more on that subject in my live stream on Tuesday.
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Contrary to the bankers claiming digital payments are replacing cash, yet more evidence is showing that use of cash is on the RISE! We look at data from New Zealand based on a recent survey as the Reserve Bank there announces pilots to make access to cash easier.
The trend of rising cash use was in fact confirmed recently by the RBA too, though their surveys are just not up to the New Zealand standard, and of course using cash more is also rising in the UK.
Not only is the ongoing use of cash a human right, a protection of freedom, and cheaper than other payment means, but it is also proving to assist households with their budgetting. Do not believe the bankers’ BS…
RBNZ Short: Why Access To Cash Is Essential For Social Cohesion Short: https://youtube.com/shorts/d32BqMmfwUc
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Digital Finance Analytics (DFA) Blog
Don’t Believe The Bankers: More People Are Using Cash!
We had important releases from Stats NZ and The New Zealand Central Bank, which combined highlights a weird and unsettling cognitive dissonance. It was perhaps a matter of perspective, because the focus was on the financial system, not individual households, but given the economy is so strongly connected to what households and businesses do, the stability report appeared unanchored from reality, especially given the prospects of higher rates for longer.
And many of the themes we look at here, are relevant to other economies, including Australia too.
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Digital Finance Analytics (DFA) Blog
Kiwi’s Cracking Under The Pressure, But RBNZ Says Nothing To See Here!
On Wednesday we got the FOMC decision, and Federal Reserve Chair Jerome Powell’s roughly 50 minutes press conference, but it was hardly worth the watch as he said price growth will likely resume cooling this year, but avoided offering a timeline for rate cuts. It seems, the burst of inflation seen in the first quarter has reduced policymakers’ confidence that price pressures are ebbing.
The central bank’s preferred gauge, the personal consumption expenditures index, rose 2.7% in March from a year earlier. That compared to a 2.5% advance in January. Policymakers explicitly acknowledged that data by adding a line to their post-meeting policy statement noting the “lack of further progress” toward their inflation goal in recent months.
Powell’s remarks reflected a broader shift in thinking at the Fed toward holding borrowing costs at a two-decade high for longer.
Three points to make on all this.
First Central Bankers are still not admitting they caused the inflation breakout due to their dramatic rate cuts, and QE programmes, done in tandem with Governments providing massive financial support through COVID. This is the root cause of the problem, yet of course the US Treasury continues to run a larger deficit, which is costing more because of the higher rates.
Second Powel was explicit of not be influenced by the political context, US election and all, arguing the FED was independent. We know some politicians have a different perspective on this issue.
Third, being totally reactive to data means the FED is looking back not forward. This may well mean events will catch them out. They have yet to acknowledge that the so called R star or neutral rate is significantly higher than they think it is, so the road is wide open to potential policy failure. Meantime, many Americans have run down their savings, are putting more or credit, and housing affordability continues to deteriorate for many.
Which sort of begs the question: who is the FED really working for? Is it all Americans as he suggests?
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Digital Finance Analytics (DFA) Blog
What The FED? Higher For Longer As They Wait For More Data…Still…
Once upon a time, in a land down under, there was a Government who promised to build 1.2 million homes, over five years, or 240,000 per year or 60,000 homes per quarter. And he huffed and he puffed, but despite everything, the best he could manage, at least in the year to March 2024 was 162,600, homes approved, around 77,000 fewer than the Albanese government’s target and the lowest level since March 2013.
Dwelling construction has collapsed to at least decade-lows at the same time as population growth has surged by a record 660,000.
The only way to solve Australia’s housing shortage is to reduce net overseas migration to historical levels of less than 120,000 per year. Net overseas migration must be lowered below the nation’s ability to build housing and infrastructure.
If we did that, we could move from Albo’s fairy tales, to something more realistic, despite the reality that new construction will continue to grind lower, while existing projects are taking ever longer to complete.
It is truly a fine mess, created by at least 20 years of bad policy, but Albo is chief fairy on top of the tree. Time for mass policy change. Otherwise, population demand will forever exceed supply. And many ordinary Australians will be left out in the cold.
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This is an edited version of a live discussion, with Robbie Barwick from the Australian Citizens Party as we look at the latest in the war on cash, and the current claims we are in a “pre-war” environment more generally. What, or who is driving the narrative and what does this say about our economic and social freedoms, and the way politics is played?
In this weeks rumble, we deep dive into property auctions, which will make agents cry, and also look at the smoke and mirrors in the media. Plus Dusty and Evan wreck Edwin’s studio, as well as discussing some eating advice!
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Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
