The ABS released their latest data on the labour market today, and it was not quite what was expected by the markets. In fact the seasonally adjusted unemployment rate rose to 3.5 per cent in August 2022, according to the ABS. The key reason for the rise in unemployment was the 0.2% lift in the labour force participation rate to 66.6%. The participation rate now sits just below the record high 66.8% recorded in June. 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.
An important discussion about the games banks are playing in relation to the setting of deposit interest rates, in the context of the RBA rate hikes. Steve Mickenbecker from Canstar and I explore the elements which are driving returns lower than they should be, and what we can do about it. Another case of the apathy tax at work!
Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.
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Digital Finance Analytics (DFA) Blog
The Deposit Rate Plot Thickens: With Steve Mickenbecker [Podcast]
Queensland has been a state where property investors have traditionally made better returns on a net and gross basis, from investment property in the state, compared with those in New South Wales and Victoria.
To recap, gross investment returns is the ratio of current property market value compared with the current rental paid, assuming the property is fully let. The Net Investment return is a more real-world measure, which takes account of actual vacancy rates, cost of mortgage, maintenance, and management of the property. In our surveys, many property investors have no feel for their true net returns, clinging to the prospect of eternal capital gains.
Those in Victoria are worst placed, which explains the very strong interstate investment in Queensland, one reason why prices and rents had shot up in the past couple of years.
But there is something afoot in Queensland, which could change this picture, possibly significantly. Indeed, those following the AFR will have noted its fever pitch campaign against an Australian-first move whereby landholders will have to voluntarily disclose their interstate holdings in other states before being taxed for their Queensland holdings. These land tax changes were first announced in the 2021-22 budget update on 16 December 2021. Queensland Treasury has said the tax change will raise only $20 million a year from 2023-24 and impact about 10,000 landholders, most of whom who live interstate.
Investors are irate with the changes, saying they will drive investors out of Queensland as well as push up rents and that they felt like they were being taxed twice in two different states. A spokesman for Mr Dick acknowledged this week the tax change would affect some Queensland investors.
So now Queensland owners are now working out how they will be stung by the tax.
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Digital Finance Analytics (DFA) Blog
A Taxing Time For Queensland Investors... [Podcast]
We had a series of important events this week which really underscored for me some of the central questions about inflation, inflation targeting and Central Bank policy. So today I want to explore this in more detail, as the ECB lifted rates by 75 basis points and the Dow closed higher on Thursday after struggling for direction as Federal Reserve officials including chairman Jerome Powell vowed to continue the fight against inflation.
The broader market was choppy and struggled for direction, swinging between gains losses as Treasury yields climbed on hawkish remarks from Powell vowing to persist with rate hikes. Over in Europe the European Central Bank hiked interest rates by a historic amount and President Christine Lagarde hinted it could do the same again as part of “several” future moves to escalate officials’ attack against rampant inflation.
So, the common theme from Central Bankers is inflation must be contained. Indeed, Philip Lowe yesterday reemphasised this imperative, despite the impact in the short run, because of the longer-term consequences in a speech he gave.
But the deeper question is whether Central Bankers know what they are doing. And Mervyn King at one time the Governor at the Bank of England, was very critical of the assumptions underlying the attempt to control the current inflation cycle.
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My latest chat with Edwin as we discuss politicians and their property portfolios, as first time buyers feel the pressure, and mortgage prisoners are a things. We also discuss some of the strategies to make sure agents are working for you.
https://www.ribbonproperty.com.au/
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I caught up with Cameron as he republishes his book from 2017 Game of Mates: How favours bleed the nation as Rigged “How Networks Of Powerful Mates Rip Off Everyday Australians”.
This book will open your eyes to how Australia really works. It’s not good news, but you need to know it.’ – Ross Gittins
‘You’ll be shocked at how far the Mates have their hand in your pocket.’ – Nicholas Gruen
Australia has become one of the most unequal societies in the Western world, when just a generation ago it was one of the most equal. This is the story of how networks of Mates have come to dominate business and government, robbing ordinary Australians. Every hour you work, thirty minutes of it goes to line the Mates’ pockets rather than your own. Mates in big corporations, industry groups, government departments, the halls of parliament and the media skew the system to suit each other. Corporations dodge taxes, so you pay more. You pay more for your house and higher interest rates on your mortgage, more for your medicines and transport, and more for your children’s education and insurance, because the Mates take a cut.
Rigged uncovers the pattern of political favours, grey gifts and information-sharing that has been allowed to build up over two decades. Drawing on extensive economic research, it exposes the Game of Mates as nothing less than cronyism on a grand scale across Australia and how we have fallen behind other countries in combating it.
We also discuss the recent Canberra event and housing policy in general.
Dr Cameron K. Murray is a Research Fellow in the Henry Halloran Trust at the University of Sydney and an economist specialising in property and urban development, environmental economics, rent-seeking and corruption. Professor Paul Frijters teaches at the London School of Economics and was previously Professor of Health Economics at the University of Queensland.
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Inside The Tent: How Power Really Works... With Cameron Murray [Podcast]
This past week has seen a significant shift in market sentiment, driven off the back of hawkish tones from Jackson Hole, as Central Bankers underscored that squashing inflation was their main task, whatever the cost. Markets had been betting on a Fed Pivot soon (recalling the last cycle where markets had their way and the Fed turned), hence the bear market run-up in the past couple of months, but that for now is in tatters.
Further falls into a typically wobbly September can be expected. Mind you, the FED has not explained why their forecasts were so off, so it does beg the question as to whether we should believe them now.
And consider the wider fallout globally, as higher rates and a strong dollar will put many markets and countries under pressure. Note the swing between the USD and Yuan, and the Yen. Perhaps this is not accidental. Plus, the markets are worried about “China slowing, euro zone recession and a hawkish Fed”.
Equity funds recorded the fourth largest weekly outflow of 2022, while bond funds saw investors pull out money for a second straight week.
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Bye-Bye Pivot: Market Update 3rd September 2022 [Podcast]
Our latest Friday afternoon chat, picking over the latest charts, which are telling a confusing story, as Central Banks continue to hike into a head wind. How will this play out?
You can get Tarric’s charts here: https://avidcom.substack.com/p/charts-that-matter-2nd-september and follow him on Twitter @Avidcommentator
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Blowing The House Down: With Tarric Brooker [Podcast]
In today’s market review we are going to focus on Fed Chair Jerome Powell speech at Jackson Hole, just 9 minutes in length but enough to move the markets down significantly.
For the Fed’s monetary policies to have any effect, markets must transmit them via the financial conditions to the actual economy. And the Fed needs to make sure this happens. And today was an effort by Powell to get this job done.
Speech: https://youtu.be/vhMRynjm3CI
The speech was one of the strongest ever by the Fed chief, reflecting the onerous burden borne by the central bank in curbing inflation retreating ever so slowly from four-decade highs.
First Powell said inflation needed to be controlled. That was their main mandate.
Next he signalled there will be more rate hikes in the months ahead, taking the cash rate well above the neutral rate – meaning that they intend to deliberately slow the economy.
And he acknowledged this will hurt households and businesses.
And acknowledge that the current labour market was out of wack.
So, this message cut directly across the ranks of those saying the FED will pivot – arguing the FED has really been signalling that it would soon “pause” the rate hikes or “pivot” to rate cuts, even though the Fed had raised its policy rates four times this year, including twice by 75 basis points, the biggest rate hikes in years.
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The UK just announced an 80% hike in average energy bill to households, with a further rise expected in January. This is putting millions of people under financial pressure, and unable to eat and heat themselves through the winter.
Worth reflecting on the cause – the hike in gas prices, and the fact that we in Australia are exposed on those same rises in international gas prices. So prepare for more and significant rises here too.
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