Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
Tarric is back for another Friday discussion, charts and all. What’s happening to the Australian economy, and what does it mean for households?
Tarric’s slides are here: https://avidcom.substack.com/p/dfa-chart-pack-24th-november-2023
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
This is an edited version of a live discussion with Leith van Onselen, Chief Economist at Nucleus Wealth, and co-founder of Macrobusiness. Leith has been leading the charge in highlighting how high migration is killing the property market. Tonight we look at the latest economic trends, and also will compare New Zealand with Australia.
Go to the Walk The World Universe at https://walktheworld.com.au/
UK inflation tumbled to the lowest level in two years, prompting investors to firm up bets that the Bank of England will be able to cut rates as early as the Spring of next year.
Consumer prices rose 4.6% from a year earlier in October, down sharply from 6.7% in September and the slowest pace since 2021, the Office for National Statistics said Wednesday. The figures allowed Prime Minister Rishi Sunak to declare victory in his goal of cutting inflation in half in 2023.
“While it is welcome news that prices are no longer rising as quickly, we know many people are continuing to struggle,” Sunak said in a statement. “We must stay the course to continue to get inflation all the way back down to 2%.”
The drop was even sharper than the 4.7% reading economists had anticipated. It will strengthen expectations that the Bank of England is finished raising interest rates and refocus attention on a sharp slowdown in the economy.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
UK inflation tumbled to the lowest level in two years, prompting investors to firm up bets that the Bank of England will be able to cut rates as early as the Spring of next year.
Consumer prices rose 4.6% from a year earlier in October, down sharply from 6.7% in September and the slowest pace since 2021, the Office for National Statistics said Wednesday. The figures allowed Prime Minister Rishi Sunak to declare victory in his goal of cutting inflation in half in 2023.
“While it is welcome news that prices are no longer rising as quickly, we know many people are continuing to struggle,” Sunak said in a statement. “We must stay the course to continue to get inflation all the way back down to 2%.”
The drop was even sharper than the 4.7% reading economists had anticipated. It will strengthen expectations that the Bank of England is finished raising interest rates and refocus attention on a sharp slowdown in the economy.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Australian wages accelerated at the fastest pace in over 14 years in the three months through September and reached the Reserve Bank’s forecast peak, while still remaining well below the inflation rate. So in real terms average Australian wages continue to go backwards, against inflation at 5.4%. And productivity improvements are nowhere to be seen, as migration continues at a record pace and unit labour costs rise.
The ABS says the Wage Price Index rose 4% in the third quarter from a year earlier, above economists’ expectations of 3.9% and matching the RBA’s forecast for year’s end, On a quarterly basis, wages grew 1.3%, the highest in the 26-year history of the index.
Annually, seasonally adjusted private sector wages growth was higher than the public sector (4.2% compared to 3.5%). This was the highest annual growth for the private sector since December quarter 2008 and for the public sector since June 2011.
One of the reasons that economists expect Australia will avoid the sort of wage-price spiral that has erupted in some other developed countries is surging immigration that is boosting labor supply and likely reducing the bargaining power of employees.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Optus’ network failures have again highlighted the risks to the community when technology breaks. There were structural reasons why the failures happened, but the fallout was significant.
This brings the need to ensure access to cash is enshrined in law in Australia into sharp contrast again. This has already happened in a number of other countries.
The Change.org petition https://www.change.org/p/an-australian-cash-and-banking-guarantee has more than 130,000 signatures, and I encourage my followers to sign up.
We cannot be held hostage to a digital future which is intrinsically unreliable.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today we walk through the latest and troubling results from our surveys and analysis. Unfortunately, we see a further rise in cash flow stress (something confirmed by other analysts using different methods).
Next week we will be running a live show on the analysis, but today’s show walks through the main highlights.
Given the latest RBA rate hike, we expect more households to get caught out as rate grind higher.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Contrary to the MSM reporting, home prices are falling fast in some locations. Of course there is lots of spin about relating to this, but are we highlighted in our shows last year, falls were, and are occurring. Once again need to go granular.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Australia’s CPI inflation came in stronger than expected in the September quarter, with headline inflation rising 1.2% over the quarter versus 1.1% expected and 5.4 per cent annually, according to the latest data from the Australian Bureau of Statistics (ABS).
As noted by Justin Fabo from Macquarie group, “trimmed mean inflation in Q3 was MUCH stronger than the RBA’s August forecast…about 0.4ppts stronger on a year-ended basis”:
And as he notes. “Measures of the BREADTH of quarterly inflation ticked higher and broadly supports the signal from the trimmed mean.
It is also broad based, with“43% of the CPI basket by number rose at an annualised rate of at least 5% in Q3”,
This is going to put more pressure on the RBA to hike rates, potentially on Melbourne Cub day. This is especially because Annual inflation remains elevated, for a range of services such as vets, restaurant meals and hairdressers.
Annual inflation continues to rise for some service categories including rents, dental services and insurance, while inflation for holiday travel has more than halved in the past two quarters. Again, inflation is broad based, you cannot just blame, oil prices for example.
Now, in a speech today RBA Governor Michelle Bullock said “Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing. It is possible that this can be done with the cash rate at its current level but there are risks that could see inflation return to target more slowly than currently forecast. The Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. At the same time, the Board is mindful that growth in demand and the rate of inflation have been moderating, and that there are long lags in the transmission of monetary policy. The Board will receive several pieces of information before its next meeting that will be important for this assessment. This includes a full update of the staff’s forecasts”.
We should also note that the CPI weights are typically updated each year in the December quarter to ensure the weights used in the CPI basket reflect current household spending patterns. But the ABS said that with the continued increase in Australians holidaying overseas, a partial update of the CPI weights has been implemented in the September 2023 quarter. This partial update increases the weight for international holiday travel, with the weight for the other components in the basket adjusted to offset the increase in travel weights. International holiday travel and accommodation was down 3.4%. Convenient, when travel costs dropped, whilst others rose. Just saying.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
With bond yields surging back to levels not seen since 2016 in recent months, there has been no shortage of comparisons between the current state of markets and that on the eve of the global financial crisis. In fact, the parallels drawn between conditions now and in 2007 appear pretty strong when you take a look.
Simultaneous falls in bonds and equities could hit parity trades. The sort of asset mismatches we saw in the collapse of Silicon Valley Bank could return. With mortgage rates in the US at 8 per cent, both sides (sell and buy) of the real estate market could completely freeze.
Pockets of the economy that have less transparency could be in trouble, such as private equity and particularly private credit provided by hedge funds, which has become increasingly important given the banks have backed away from commercial lending.
As in the GFC, “trust between banks could suddenly evaporate”, while a move up in the US dollar could sap global liquidity at the wrong time.
Perhaps ASX investors should think about the bigger picture. Despite all that’s happened in the past 15 years – the GFC and recovery, the pandemic and recovery – they don’t have a lot to show for it.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
