Does The CPI Numberwang Show That Politics Wins?

Australia has been a global outlier in the current easing cycle as most developed world central banks, including the Federal Reserve, have already cut substantially. The Fed is due to announce the outcome of its meeting later today and is expected to stand pat. The RBA, in tackling inflation through 2022-23, opted for a lower peak rate than global counterparts. It worried about the capacity of heavily-geared households to cope with significantly higher mortgage repayments.

But we got a softer-than-expected annual underlying inflation figure of 3.2 per cent for the 3 months to December from the ABS today, and the journos are out in force saying a rate cut from the RBA is February is all but certain now, which of course would be welcomed by households who are mortgaged to the hilt, and music to the ears of politicians ahead of the election. Not so good for savers mind you.

The annual trimmed mean gauge of consumer prices, which shaves off volatile items, rose 3.2% in the three months through December, compared with an expected 3.3% gain and on a quarterly basis, core consumer prices rose 0.5% versus a forecast 0.6%.

Economists at Westpac, Royal Bank of Canada, TD Securities and AMP all brought forward their calls for the first Reserve Bank cut to February. Goldman Sachs which was already predicting February and May rate reductions, now sees an easing in April as well.

But not so fast, because whilst the number landed in a place to make next month’s Reserve Bank of Australia board meeting a cliffhanger, there is still a case to do nothing. And whilst the market has gone all with an 80 to 90 per cent chance of a cut, there is also a reasonable case to hold steady and await more information on the economy. So perhaps it’s more like 50-50.

But given the breadth and depth of government cost of living support, with energy bills credits, rent assistance, 50¢ public transport in Queensland and a revision to a previously mismeasured childcare subsidy even the trimmed mean has been distorted by the huge breadth of government subsidies in the December quarter.

Contrary to common perception, subsidies can affect underlying inflation and could accelerate the RBA cutting interest rates, even if the grounds for doing so may be dubious. Chalmers and Treasury may have outmanoeuvred the RBA. Hence, the lingering doubts about a rate cut relate to whether the RBA board feels confident enough about disinflation based on a sole quarterly number.

So, the key question is, will the politically driven handouts which have been spayed about the place liberally, and sufficient to mask inflation even in the trimmed numbers drive the RBA to cut, in which case politics ahead of the election will have won, at the expense of tax payers, who know the true inflation costs are still way higher than numerwanged. And then of course we have the impact of the lower exchange rate to content with ahead, which could also be inflationary. So a 50 50 call for February, but perhaps politics have won, for now.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

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Does The CPI Numberwang Show That Politics Wins?
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Does The CPI Numberwang Show That Politics Wins?

Australia has been a global outlier in the current easing cycle as most developed world central banks, including the Federal Reserve, have already cut substantially. The Fed is due to announce the outcome of its meeting later today and is expected to stand pat. The RBA, in tackling inflation through 2022-23, opted for a lower peak rate than global counterparts. It worried about the capacity of heavily-geared households to cope with significantly higher mortgage repayments.

But we got a softer-than-expected annual underlying inflation figure of 3.2 per cent for the 3 months to December from the ABS today, and the journos are out in force saying a rate cut from the RBA is February is all but certain now, which of course would be welcomed by households who are mortgaged to the hilt, and music to the ears of politicians ahead of the election. Not so good for savers mind you.

The annual trimmed mean gauge of consumer prices, which shaves off volatile items, rose 3.2% in the three months through December, compared with an expected 3.3% gain and on a quarterly basis, core consumer prices rose 0.5% versus a forecast 0.6%.

Economists at Westpac, Royal Bank of Canada, TD Securities and AMP all brought forward their calls for the first Reserve Bank cut to February. Goldman Sachs which was already predicting February and May rate reductions, now sees an easing in April as well.

But not so fast, because whilst the number landed in a place to make next month’s Reserve Bank of Australia board meeting a cliffhanger, there is still a case to do nothing. And whilst the market has gone all with an 80 to 90 per cent chance of a cut, there is also a reasonable case to hold steady and await more information on the economy. So perhaps it’s more like 50-50.

But given the breadth and depth of government cost of living support, with energy bills credits, rent assistance, 50¢ public transport in Queensland and a revision to a previously mismeasured childcare subsidy even the trimmed mean has been distorted by the huge breadth of government subsidies in the December quarter.

Contrary to common perception, subsidies can affect underlying inflation and could accelerate the RBA cutting interest rates, even if the grounds for doing so may be dubious. Chalmers and Treasury may have outmanoeuvred the RBA. Hence, the lingering doubts about a rate cut relate to whether the RBA board feels confident enough about disinflation based on a sole quarterly number.

So, the key question is, will the politically driven handouts which have been spayed about the place liberally, and sufficient to mask inflation even in the trimmed numbers drive the RBA to cut, in which case politics ahead of the election will have won, at the expense of tax payers, who know the true inflation costs are still way higher than numerwanged. And then of course we have the impact of the lower exchange rate to content with ahead, which could also be inflationary. So a 50-50 call for February, but perhaps politics have won, for now.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Housing Targets Missed By A Country Mile…

The ABS today released its building activity data for the September quarter 2024. This data provides estimates of the value of building work and number of dwellings commenced, completed and under construction across Australia and its states and territories.

They report that Australia commenced construction on just 43,250 new homes in the first quarter of the 2024/25 financial year seasonally adjusted and completed 44,884 new dwellings in the September quarter.

Remember that the Government has set a target of 1.2 million new homes over five years (July 2024 to June 2029). Based on the current trajectory, which of course has the potential to ramp up in later years at least in theory it looks like around only 173,000 homes will be commenced during the first year of the National Housing Accord period, which is 67,000 short of that necessary to meet the annual targets. And of those new homes completed, this was also well short of well short of the desired 60,000 per quarter.

Yet Albo was out spruiking 25,000 more homes across NSW. Saying And they’ll be connected to the transport, services and local parks that make communities great places to live. Because whether you live in the cities or the regions, everyone deserves the security of a roof over their head. Though Mat Barrie perhaps put his finger on it quite well, tweeting “and probably also connected to electorates who do not vote for the ALP 2PP.

That selfie, one of many from Albo in what I call the announcables category, created a social media storm reaction, including this “Albo posting every single day about how he “fixes” the housing crisis is beyond pathetic. No moral, no spine. Go away…

Actually, the current miss on housing targets is a symptom of a more general malaise. Trouble is neither side of politics wants to fess up ahead of the upcoming election!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

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Housing Targets Missed By A Country Mile…
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Housing Targets Missed By A Country Mile…

The ABS today released its building activity data for the September quarter 2024. This data provides estimates of the value of building work and number of dwellings commenced, completed and under construction across Australia and its states and territories.

They report that Australia commenced construction on just 43,250 new homes in the first quarter of the 2024/25 financial year seasonally adjusted and completed 44,884 new dwellings in the September quarter.

Remember that the Government has set a target of 1.2 million new homes over five years (July 2024 to June 2029). Based on the current trajectory, which of course has the potential to ramp up in later years at least in theory it looks like around only 173,000 homes will be commenced during the first year of the National Housing Accord period, which is 67,000 short of that necessary to meet the annual targets. And of those new homes completed, this was also well short of well short of the desired 60,000 per quarter.

Yet Albo was out spruiking 25,000 more homes across NSW. Saying And they’ll be connected to the transport, services and local parks that make communities great places to live. Because whether you live in the cities or the regions, everyone deserves the security of a roof over their head. Though Mat Barrie perhaps put his finger on it quite well, tweeting “and probably also connected to electorates who do not vote for the ALP 2PP.

That selfie, one of many from Albo in what I call the announcables category, created a social media storm reaction, including this “Albo posting every single day about how he “fixes” the housing crisis is beyond pathetic. No moral, no spine. Go away…

Actually, the current miss on housing targets is a symptom of a more general malaise. Trouble is neither side of politics wants to fess up ahead of the upcoming election!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

We Are Rolling In Jobs, Jobs, Jobs… But…!

Well, we got the December 2024 data on unemployment today, and overall Australia’s unemployment rate remained low in December as the economy extended a streak of hiring gains, underlining the labor market’s unusual resilience to elevated interest rates.

Employment jumped by 56,300 — driven entirely by part-time roles — versus a forecast 15,000 gain. The jobless rate rose to 4% rising by 0.1 percentage points in seasonally adjusted terms.

Now, we should say there were some variation between the outgoing and incoming rotation groups this month, sufficient I think to explain the slight shifts we are seeing. But the headline news is the jobs markets remains pretty strong.

Economists say there is no urgency for the Reserve Bank of Australia to deliver a pre-election cash rate cut in February after a bumper jobs report showed the labour market continued to defy expectations of a looming slowdown.

That would leave the central bank’s April meeting as the only point before an election due by May 17 for the RBA to deliver relief to struggling households, narrowing the chance of the Albanese government getting an electoral boost from lower rates.

Jim Chalmers wrote “We’ve shown you can make substantial & sustained progress on inflation without sacrificing jobs. 1.1 million jobs have been created under the Albanese Labor Govt including an extra 56,000 last month.

No talk there about the massive migration flows which are pumping the economy equivalent, on one calculation to one person arriving every 46 seconds. Or the fact that household disposable income in real terms is crashing, and well below the G7 Countries, the US, or even OECD countries.
“This is the soft landing that we are seeking, that we are delivering,” Dr Chalmers told reporters.

The real story is high migration, plus because of the financial pressure on many households, more are picking up two or more jobs, or side hustles with nearly a million Australians in this category.

When you peel back the onion, the bulk of recent employment gains have been in the so-called “non-market sector”, which includes the government-funded industries of education, healthcare and the public service. About half the increase in hours worked across the economy in the 12 months to December were in the non-market sector.

The tight labour market, along with weak productivity growth and elevated government spending, makes it tough for the Reserve Bank to achieve low and stable inflation!

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
We Are Rolling In Jobs, Jobs, Jobs... But...!
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We Are Rolling In Jobs, Jobs, Jobs… But…!

Well, we got the December 2024 data on unemployment today, and overall Australia’s unemployment rate remained low in December as the economy extended a streak of hiring gains, underlining the labor market’s unusual resilience to elevated interest rates.

Employment jumped by 56,300 — driven entirely by part-time roles — versus a forecast 15,000 gain. The jobless rate rose to 4% rising by 0.1 percentage points in seasonally adjusted terms.

Now, we should say there were some variation between the outgoing and incoming rotation groups this month, sufficient I think to explain the slight shifts we are seeing. But the headline news is the jobs markets remains pretty strong.

Economists say there is no urgency for the Reserve Bank of Australia to deliver a pre-election cash rate cut in February after a bumper jobs report showed the labour market continued to defy expectations of a looming slowdown.

That would leave the central bank’s April meeting as the only point before an election due by May 17 for the RBA to deliver relief to struggling households, narrowing the chance of the Albanese government getting an electoral boost from lower rates.

Jim Chalmers wrote “We’ve shown you can make substantial & sustained progress on inflation without sacrificing jobs. 1.1 million jobs have been created under the Albanese Labor Govt including an extra 56,000 last month.

No talk there about the massive migration flows which are pumping the economy equivalent, on one calculation to one person arriving every 46 seconds. Or the fact that household disposable income in real terms is crashing, and well below the G7 Countries, the US, or even OECD countries.
“This is the soft landing that we are seeking, that we are delivering,” Dr Chalmers told reporters.

The real story is high migration, plus because of the financial pressure on many households, more are picking up two or more jobs, or side hustles with nearly a million Australians in this category.

When you peel back the onion, the bulk of recent employment gains have been in the so-called “non-market sector”, which includes the government-funded industries of education, healthcare and the public service. About half the increase in hours worked across the economy in the 12 months to December were in the non-market sector.

The tight labour market, along with weak productivity growth and elevated government spending, makes it tough for the Reserve Bank to achieve low and stable inflation!

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Household Spendathon Still On (For Some)…

I have been highlighting the unequal position of households across Australia, with significant numbers in financial stress, whilst others are still spending big, and seeing real wages growing fast. This is having a weird effect on data with some signals showing significant consumer strength, and others extreme weakness. This makes it difficult at the aggregate level for the RBA to set the level of interest rates, especially with inflation as reported yesterday shifting under their feet.

One such signal is retail trade date, which by the way the ABS will stop producing later in the year. They just released data on Australian retail turnover which rose 0.8 per cent in November 2024, seasonally adjusted. This comes after growth of 0.5 per cent in October 2024 and 0.4 per cent in September 2024.

The ABS says “Black Friday sales events proved once again to be a big hit, with widespread discounting and higher spending across all retail industries. “The popularity of Black Friday sales continues to grow with promotional activity now stretching across the entire month of November, not just solely focused on the Black Friday weekend.”

IFM Economist Alex Joiner put it differently: “Retail sales rise again on a per capita basis, doesn’t scream that rate cuts are desperately needed for the aggregate household sector.”

A couple of important takeouts, clearly some households have significant capacity to keep spending, and are not really feeing the pinch. Others who are under pressure took the opportunity to grab bargains (real or imagined) though Black Friday. And the continued drift to online purchases potentially has a profound impact on bricks and mortar shops on the high street, with many areas being hollowed out.

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Is A Rate Cut Closer Now In Australia?

The latest monthly CPI data for November 2024 was released today, and while the headline rate rose, the important trimmed mean figure, which the RBA tracks, slipped in November despite being still able the top of the central bank’s target band.

The closely watched trimmed mean core measure, which smooths out volatile items and is the focus of the Reserve Bank’s attention, slowed to 3.2% from 3.5% in the prior month, according to data from the Australian Bureau of Statistics today.

Economists do expect the RBA’s next move would be to ease rates though they are divided on the timing given the somewhat sticky core inflation and an uncertain global backdrop. A complete suite of price data for the December quarter will be released later this month which will be an important input for the RBA’s Feb. 17-18 meeting.

So, perhaps the chances of the Albanese government getting a pre-election boost from a February rate cut have risen and Treasurer Jim Chalmers said inflation had been at the lower end of the RBA’s 2 to 3 per cent inflation target band for three months in a row, and unusually referred three times to bond market forecasts for a pre-election cash rate cut during a press conference, in a potential sign of the government’s growing expectations for mortgage relief.

And of course the weak Aussie and predicted larger Government deficits are barriers to rate cuts, as I discussed recently. So whilst there there might be a symbolic cut before May, those expecting significant cuts this year should bear in mind the latest FED vibe which is perhaps for only one cut in 2025 for US rates.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Is A Rate Cut Closer Now In Australia?

The latest monthly CPI data for November 2024 was released today, and while the headline rate rose, the important trimmed mean figure, which the RBA tracks, slipped in November despite being still able the top of the central bank’s target band.

The closely watched trimmed mean core measure, which smooths out volatile items and is the focus of the Reserve Bank’s attention, slowed to 3.2% from 3.5% in the prior month, according to data from the Australian Bureau of Statistics today.

Economists do expect the RBA’s next move would be to ease rates though they are divided on the timing given the somewhat sticky core inflation and an uncertain global backdrop. A complete suite of price data for the December quarter will be released later this month which will be an important input for the RBA’s Feb. 17-18 meeting.

So, perhaps the chances of the Albanese government getting a pre-election boost from a February rate cut have risen and Treasurer Jim Chalmers said inflation had been at the lower end of the RBA’s 2 to 3 per cent inflation target band for three months in a row, and unusually referred three times to bond market forecasts for a pre-election cash rate cut during a press conference, in a potential sign of the government’s growing expectations for mortgage relief.

And of course the weak Aussie and predicted larger Government deficits are barriers to rate cuts, as I discussed recently. So whilst there there might be a symbolic cut before May, those expecting significant cuts this year should bear in mind the latest FED vibe which is perhaps for only one cut in 2025 for US rates.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Is A Rate Cut Closer Now In Australia?
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Shop ‘Til You Drop; Or Not: This Christmas!

Boxing day highlighted the weird financial pressures lurking across Australia at the moment, as shoppers flooded stores to make the most of Boxing Day bargains. More and more shoppers were holding out for a bargain during the festive season as cost-of-living pressures continued to weigh households down. Perhaps It’s really because of cost-of-living challenges that we saw shoppers out in force today. Bargain hunting is a national sport, it seems.

However, while it was once the major shopping event of the year, Boxing Day sales are losing their position against an imported rival.

Consumer advocacy group Choice has warned those entering the Boxing Day fray to do their homework first.

Research from online e-commerce giant eBay predicts Australians could make almost $1 billion from selling unwanted gifts this festive season.

An ABC NEWS Verify investigation has uncovered dozens of online clothing stores pretending to be high-end Australian fashion boutiques. Customers are sometimes shipped cheap, low-quality goods made in Asia, and sometimes, nothing at all. Their investigation focused on stores that had an implied and or explicit physical presence in Australia — ranging from stores using Australian locations in their names to dropshipping stores creating digital images of fake physical shop fronts in Australian locations.

So all up, if you do spend, spend wisely, and be cautious. Bargains may not be bargains and in the online world what you see may not be true. More broadly, in the current financial environment, holding close to your wallet and spending carefully would be a goo new year resolution, even if others want us to spend, spend, spend.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Shop ‘Til You Drop; Or Not: This Christmas!
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