In this week’s market update I am going to focus on the path of interest rates, as over this past week midst the US election we got a swathe of Central Bank rate decisions. The RBA held the cash rate on Tuesday, but the Fed, the Bank of England, Sweden’s Riksbank and the Hong Kong Monetary Authority all cut.
While Donald Trump won’t return to the White House for another 10 weeks, he’s already casting a shadow over central banks and with Trump 2.0 expected to boost growth and risk returning inflation, and actually there was (reasonable) speculation that the Fed might not cut rates after all, or at least hint heavily that it would pause at next month’s meeting. Certainly, some economists now expect fewer rate cuts from the Fed next year as trade tariffs may boost US inflation. That could reshape the easing path for central banks around the world, and add currency pressure on emerging markets.
Australia’s economic output could fall between 0.8% and 1.5%, or $20 billion to $37 billion if Trump imposed a suite of his economic policies including slashing America’s 21 per cent corporate tax rate to 15% KPMG estimated.
So all up, the level of uncertainly ahead has been amplified by the Trump victory, and the consequences will spill over into other markets. But we can expect higher interest rates in the months ahead, which is not good for those holding on by the skin of their teeth. This is going to get messy.
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In our surveys we include a question on whether households trust the federal and state governments to do the right thing for them. And the answer is a resounding, no. The question of whether we do trust those elected officials who theoretically at least should be looking after our interests, seems to highlight that in many countries, from Australia, UK, Canada, New Zealand and America, Government is on the nose.
Perhaps this is one reason why there are attempts in train to close down free speech, as illustrated by the misinformation and disinformation bill currently on the books in the Australian parliament. See my earlier post about this MAD bill and why it must be resisted.
In our surveys we find many households struggling with rising costs and flat real incomes, an ability to get ahead, or find a place to live, and ever more pressure on family relationships as a result. In other words, many blame bad government policy for their own predicaments. They are right.
The recently released report on Government action during the COVID period cuts to the heart of the question of trust as the three-person inquiry panel slammed the approaches towards such issues as lockdowns, vaccine mandates, and school and border closures, saying they lacked transparency and compassion, and were often not evidence-based. Now let me say straight away the scope of this inquiry was deliberately hobbled to avoid key questions around vaccines, and other issues, which is in itself shameful, but even so, the COVID-19 inquiry found that heavy-handed, inconsistent and insensitive pandemic restrictions meant people were unlikely to accept such measures again.
Economic modelling presented to the inquiry found that inflation could have peaked at about 6 per cent, instead of 8 per cent in December 2022, if the federal government’s more than $300 billion of pandemic spending and Reserve Bank of Australia’s near-zero interest rate policies were less stimulatory.
So all up, we can draw three conclusions.
Too much tax payer money was thrown at the problem in a poorly targeted inflation stoking manner. This is why inflation loomed to the fore in the past few years.
Too much was through directly and indirectly at the housing market, stoking home prices and rents, and exacerbated the distortions which were already in the market. No wonder prices have accelerated relative to incomes. No wonder too the construction sector is all but wrecked, with many firms subsequently failing while construction costs rise.
And there is still a resistance to admit errors both from Government and the RBA. Those in positions of responsibility may have done their best, but it was simply not good enough.
We expect, and rightly demand more from our elected leaders. They collectively failed us and the fallout continues to this day.
The right critical observation is that trust will be hard to recover. Given recent behaviour, it may never be healed, which spells risks to democracy itself. Queue the MAD bill.
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This is a show about housing affordability and specifically lobbying from certain banks to reduce mortgage lending buffers in which we look at evidence provided to the Senate Economics Reference Committee inquiry into the Financial Regulatory Framework And Home Ownership which was chaired by NSW Senator Andrew Bragg, with Jess Walsh the ALP Senator for Victoria and Greens Senator for South Australia.Barbara Pocock.
We look at key evidence from Chris Taylor of the Australian Banking Association, Martin Green and Paul Deall from Westpac, Andy Kerr and Ben Nicholls from National Australia Bank and from the Commonwealth Bank Angus Sullivan and Kylie Rickson.
We also look at compelling evidence from Consumer Advocates including Nadia Harrison from Mortgage Stress Victoria, Erin Turner from The Consumer Policy Research Centre, Dr Domenique Meyrick from Financial Counselling Australia and Julia Davis from the Financial Rights Legal Centre.
David Locke, June Smith and Natilee Cameron from AFCA, the Ombudsman, and APRA (Therese McCarthy Hocky, Dr Sean Carmody, Chris Gower and Marian Kohler) made the case that credit is flowing and available.
The inquiry also heard from Kylie Davis Proptech Association of Australia and Lynda Coker, Frank Austin and Liz Rochaix Co-operty.
Alexander Hordern Insurance Council Australia and Pauline Blight -Johnston Helia discussed LMI
And finally, Professor John Quiglan, Saul Eslake and Ben Spics-Butcher each in their individual private capacity argued that decades of evidence in supply constrained environments shows people spend more on housing driving prices higher rather than expanding ownership rates (which is why using super for housing is a bad idea.
The Greens focused in on investor demand, while Ben argued the Government was really concerned about property price falls, as shown through the GFC. Tenure security, and a rise in public housing are most important, shared equity and housing future fund does not help.
All up, it revealed how complex the can of works is, and that simply increasing leaning of offering other incentives is counter productive!
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I am joined by Tarric Brooker, journalist and chartmeister as we look at the changing face of Australia, as shown by household formation, and demographics. It seems politicians are playing the spin game, whilst ignoring the realities for real people.
This is an edited version of a live discussion with Chief Economist at Nucleus Wealth, Leith van Onselen, who is also the co-founder of Macrobusiness. Given the raft of property related announceables from the politicians, will it make any difference, or are we set for a slow-down, or worse?
Original stream with live chat here: https://youtube.com/live/zRxdM8_o8JE
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https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for our One to One Service.
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Digital Finance Analytics (DFA) Blog
DFA Live Q&A HD Replay: Can Property “Save” The Australian Economy? With Leith van Onselen
Earlier this week in my live show I discussed the current Misinformation and Disinformation Bill which is subject to Senate review. https://youtu.be/yIS1vJxvo6E which around 15,000 submissions.
This show is an edit of last Fridays Senate hearing, during which significant issues were exposed, including that of censorship, the fact the bill could be applied to individual creators, and other matters.
Bottom line is simply this bill must be defeated!
Full hearing here: https://youtu.be/1Ri3IgZW6Rk
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More from our property insider as Edwin and I look at the high-rise push, and consider the consequences, touch on the stranded properties still on the market, and discussion the latest misdirection from the Government.
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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.
The unelected, neo-liberal biased International Monetary Fund, one among many technocrat groups which try to impose top-down advice based on their underlying philosophy, recently released their latest advice relating to Australia. Their concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country.
This time the IMF gave a mixed assessment of recent government budgets and whether Treasurer Jim Chalmers and his state counterparts were helping the RBA to tame Australia’s worst inflation outbreak in decades, because they warned the federal and state governments that any further unexpected rise in spending will force the Reserve Bank to keep interest rates high, and that future cost-of-living relief needs to be targeted.
We are certainly seeing some evidence of that in our household surveys, the findings of which I will discuss on Tuesday on my live show at 8pm Sydney time. Some are benefiting from the payments, despite having strong cash flow and savings, whereas for those under financial pressure, the rebates are hardly touching the sides, creating a more unequal story financially speaking. Indeed, One in four mortgage holders have had to skip paying for another expense to prioritise keeping a roof over their head, according to Finder.
This is an important point, because its Dr Chalmers and Finance Minister Katy Gallagher have hinted that they plan to announce another round of household subsidies before the next federal election, as Labor tries to placate voter anger over high inflation.
They also called for a complete overhaul of Australia’s tax system and suggested the government phase out $52 billion of superannuation tax concessions and the $19 billion capital gains tax discount to fund a reduction in personal income and company tax rates.
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The latest news from our Property Insider Edwin Almeida, as we look at the latest moves from Government (including erecting statues!!) news from China, and the latest data. Things continue to show a gap between strategy and reality, as negative gearing questions emerge again!
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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.
This is an edited version of a post John Adams and I made on In The Interests Of The People, doing a deep dive into the arguments around the proposed Combatting Misinformation and Disinformation) Bill 2024 which on the 19 September 2024, the Senate referred to the Environment and Communications Legislation Committee for report by 25 November 2024.
You have JUST ONE Day! as submissions close on the 30 September 2024.
This bill would severely curtain unfettered free speech by putting onerous responsibilities on social media platforms across issues as wide as electoral, health, social and economic. In practice the Government will define “truth” and will essential silence alternative voices.
You have a limited opportunity to make your views know before 1984 type conditions arrive!
About this inquiry: The bill proposes to amend the Broadcasting Services Act 1992 and would make consequential amendments to other Acts to establish a new framework to safeguard against serious harms caused by misinformation or disinformation.
The bill would provide the Australian Communications and Media Authority (ACMA) with new regulatory powers to require digital communications platform providers to take steps to manage the risk that misinformation and disinformation on digital communications platforms poses in Australia. These would include obligations on providers to assess and report on risks relating to misinformation and disinformation, to publish their policy in relation to managing misinformation and disinformation, and develop and publish a media literacy plan.
The bill would also provide ACMA with new information gathering, record keeping, code registration and standard making powers to oversee digital communications platform providers.
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