In today’s show I want to delve into three important issues, which I do not think the mainstream media gave sufficient weight and consideration to.
The first relates to the market interest rate assumptions which drives the RBA models, the second concerns the use of cash and the impending upending of current arrangements in July, and the third, the question of the fate of Australia’s Gold, and what is happening to physical Gold more broadly. For each I will add my own analysis.
So as always, as questions are asked and answered, actually more questions are raised. But to me these three questions, the link between Bank modelling and market assumptions on interest rates, the use and availability of cash, and the physical gold market, are all ones to watch.
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Digital Finance Analytics (DFA) Blog
Big Questions About Gold, Cash And Interest Rates!
In today’s show I want to delve into three important issues, which I do not think the mainstream media gave sufficient weight and consideration to.
The first relates to the market interest rate assumptions which drives the RBA models, the second concerns the use of cash and the impending upending of current arrangements in July, and the third, the question of the fate of Australia’s Gold, and what is happening to physical Gold more broadly. For each I will add my own analysis.
So as always, as questions are asked and answered, actually more questions are raised. But to me these three questions, the link between Bank modelling and market assumptions on interest rates, the use and availability of cash, and the physical gold market, are all ones to watch.
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/
We look at the weird two-facing issues of credit growth, which is rising faster than inflation, and real disposable income which is still under pressure, and lower than some years ago. It is not expected to recover any time soon.
Latest data reinforces the pressure on wages, which means more households are leveraging up, despite aggregate data which according to the RBA is pointing somewhere different. So today we explore this conundrum.
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Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/
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The less meaningful monthly CPI was released today by the ABS. The headline was that the reported annual CPI was unchanged, while the underlying rose just a tad. But remember this monthly series is only partial, being goods heavy while the services sector is the problem child at the moment, which is why the RBA prefers to look at the quarterly numbers, which are a couple of months away.
Annual trimmed mean inflation excluding volatile items and holiday travel was 2.8 per cent in January, up slightly from 2.7 per cent in December.
Nothing here to move the dial.
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Would you prefer to be living in New Zealand or Australia? The New Zealand story on monetary policy and home prices is a million miles away from the RBA’s approach of keeping rates lower, to protect jobs even if inflation remains above target.
Across the ditch the Reserve Bank’s approach of “no regrets”, took interest rates much higher, lifted unemployment and pulled home prices lower, and because of the more aggressive action appears to have left the land of the long white cloud better placed in the months ahead.
The New Zealand Monetary Policy Committee this week agreed to lower the Official Cash Rate by 50 basis points to 3.75 percent.
The RBNZ have been cutting for a while and and house prices haven’t been rising. The 40% run up in prices over the pandemic has been followed by the sharpest price crash in generations. Even so, price-to-income ratios remain elevated relative to historical experience, especially given the current interest rate settings. Whilst median home price to median household disposable income are coming down, we are still around 10 times in Auckland, and over 8 times nationally.
So standing back, the different path between the Central Banks of Australia and New Zealand really stand out. Which begs the question, is a shorter sharper shock, or a slow grind with no clear way out the better path? And should stronger controls on mortgage lending be imposed to keep home prices under control? Oh, yes and the elephant in the room, should migration be dialled back – as in New Zealand, where Stats NZ reported that 72,000 citizens left the country while just 24,900 arrived, and the overall net loss of citizens in 2024 is the largest in a calendar year – or should migration still be pushed hard, despite the rhetoric as in Australia? Frankly to me on so many fronts New Zealand seems in better if imperfect hands than Australia!
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
Kiwis Get Another Mega Rate Cut, As Inflation Sits In Band!
Would you prefer to be living in New Zealand or Australia? The New Zealand story on monetary policy and home prices is a million miles away from the RBA’s approach of keeping rates lower, to protect jobs even if inflation remains above target.
Across the ditch the Reserve Bank’s approach of “no regrets”, took interest rates much higher, lifted unemployment and pulled home prices lower, and because of the more aggressive action appears to have left the land of the long white cloud better placed in the months ahead.
The New Zealand Monetary Policy Committee this week agreed to lower the Official Cash Rate by 50 basis points to 3.75 percent.
The RBNZ have been cutting for a while and and house prices haven’t been rising. The 40% run up in prices over the pandemic has been followed by the sharpest price crash in generations. Even so, price-to-income ratios remain elevated relative to historical experience, especially given the current interest rate settings. Whilst median home price to median household disposable income are coming down, we are still around 10 times in Auckland, and over 8 times nationally.
So standing back, the different path between the Central Banks of Australia and New Zealand really stand out. Which begs the question, is a shorter sharper shock, or a slow grind with no clear way out the better path? And should stronger controls on mortgage lending be imposed to keep home prices under control? Oh, yes and the elephant in the room, should migration be dialled back – as in New Zealand, where Stats NZ reported that 72,000 citizens left the country while just 24,900 arrived, and the overall net loss of citizens in 2024 is the largest in a calendar year – or should migration still be pushed hard, despite the rhetoric as in Australia? Frankly to me on so many fronts New Zealand seems in better if imperfect hands than Australia!
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/
The RBA adjusted down their expectation of the level of unemployment across Australia to 4.2% this week, a level which they expect to remain unchanged for at least two years. Then today we got the latest from the ABS on this frankly fuzzy series of data which showed that the seasonally adjusted unemployment rate rose by 0.1 percentage point to 4.1 per cent in January. 44,000 people found work last month while the number of unemployed increasing by 23,000 people. In short, the jobs market remained “incredibly strong”. That said, some of the increase in unemployment reflected more people than usual with jobs in January who were waiting to start or return to work.
Indeed, the ABS hinted the rise in the unemployment rate in January could reverse in February, saying there were more people than usual with jobs who were waiting to start work last month, but who were technically counted as unemployed.
The employment picture is more complex than might first appear. Given the still high migration levels into Australia, there are more people looking for work, and this is putting the squeeze on some older, perhaps more experienced and therefore expensive locals.
Second, the continued growth of the non-market sector, funded by Governments at federal and state levels means a continued expansion of jobs in specific sectors, like the care sector, but which are not necessarily improving the poor levels of productivity in the economy.
Third as the ABS hints at, the numbers are a bit wobbly given changes to seasonal factors, and also the swapping the sample groups.as well as their strict definition of who is classed as unemployment. Roy Morgan’s alternative method gives a different picture.
Finally, the significant gap between Victoria with unemployment rates of around 4.7%, and other states, suggests that state policy is also important, and on that measure, Victoria is failing again.
Bottom line, overall the jobs market will continue to hold the RBA back from cutting rates again, even if under the hood things are far from rosy. To that extent, words and figures do differ.
http://www.martinnorth.com/
Digital Finance Analytics (DFA) Blog
Australian Jobs Up, Unemployment Up, But What’s Under The Hood?
The RBA adjusted down their expectation of the level of unemployment across Australia to 4.2% this week, a level which they expect to remain unchanged for at least two years. Then today we got the latest from the ABS on this frankly fuzzy series of data which showed that the seasonally adjusted unemployment rate rose by 0.1 percentage point to 4.1 per cent in January. 44,000 people found work last month while the number of unemployed increasing by 23,000 people. In short, the jobs market remained “incredibly strong”. That said, some of the increase in unemployment reflected more people than usual with jobs in January who were waiting to start or return to work.
Indeed, the ABS hinted the rise in the unemployment rate in January could reverse in February, saying there were more people than usual with jobs who were waiting to start work last month, but who were technically counted as unemployed.
The employment picture is more complex than might first appear. Given the still high migration levels into Australia, there are more people looking for work, and this is putting the squeeze on some older, perhaps more experienced and therefore expensive locals.
Second, the continued growth of the non-market sector, funded by Governments at federal and state levels means a continued expansion of jobs in specific sectors, like the care sector, but which are not necessarily improving the poor levels of productivity in the economy.
Third as the ABS hints at, the numbers are a bit wobbly given changes to seasonal factors, and also the swapping the sample groups.as well as their strict definition of who is classed as unemployment. Roy Morgan’s alternative method gives a different picture.
Finally, the significant gap between Victoria with unemployment rates of around 4.7%, and other states, suggests that state policy is also important, and on that measure, Victoria is failing again.
Bottom line, overall the jobs market will continue to hold the RBA back from cutting rates again, even if under the hood things are far from rosy. To that extent, words and figures do differ.
Yesterday we got the first RBA rate cut in four years rate of a quarter-percentage point to 4.1% as inflation has eased from more than 6% to 3.2% underlying, but the bank also stressed it won’t ease as aggressively as the markets anticipate and also flagged significant but as yet unquantifiable geopolitical and policy uncertainties globally.
The media seemed almost over jubilant at the cut, talking of massive relief for households with the much-recited data from Canstar showing that a million dollar mortgage would be $154 dollars a month cheaper in interest payments. Remember most Australian mortgages fluctuate with the RBA rate.
Then today we got the latest wage growth data from the ABS which showed that Australia’s wage growth slowed further in the final three months of last year, up an annual 3.2% in the fourth quarter of 2024, compared with an upwardly revised 3.6% in the prior period and matching economists’ estimate, the biggest wages slowdown for any full year since 2009.
Politicians are quick to see any opportunity to spruik, and in a press conference in Canberra Treasurer Jim Chalmers said that the rate cut was “the soft landing that we have been planning for” and offers a “relief that Australians need and deserve.” Bullock distanced herself and the board from politics, but I suspect they are all too aware of the political currents. The recent JWS opinion poll shows and cost-of-living and housing have been among the top concerns for the electorate.
Like the RBA, the treasurer didn’t declare victory in the fight against inflation, sharing the central bank’s concerns about the uncertain economic outlook going forward.
Forget the media hype, there is a long slow road for households mortgaged up to the hilt, and little here to reignite the fuse on the housing market; at least for now.
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.
Yesterday we got the first RBA rate cut in four years rate of a quarter-percentage point to 4.1% as inflation has eased from more than 6% to 3.2% underlying, but the bank also stressed it won’t ease as aggressively as the markets anticipate and also flagged significant but as yet unquantifiable geopolitical and policy uncertainties globally.
The media seemed almost over jubilant at the cut, talking of massive relief for households with the much-recited data from Canstar showing that a million dollar mortgage would be $154 dollars a month cheaper in interest payments. Remember most Australian mortgages fluctuate with the RBA rate.
Then today we got the latest wage growth data from the ABS which showed that Australia’s wage growth slowed further in the final three months of last year, up an annual 3.2% in the fourth quarter of 2024, compared with an upwardly revised 3.6% in the prior period and matching economists’ estimate, the biggest wages slowdown for any full year since 2009.
Politicians are quick to see any opportunity to spruik, and in a press conference in Canberra Treasurer Jim Chalmers said that the rate cut was “the soft landing that we have been planning for” and offers a “relief that Australians need and deserve.” Bullock distanced herself and the board from politics, but I suspect they are all too aware of the political currents. The recent JWS opinion poll shows and cost-of-living and housing have been among the top concerns for the electorate.
Like the RBA, the treasurer didn’t declare victory in the fight against inflation, sharing the central bank’s concerns about the uncertain economic outlook going forward.
Forget the media hype, there is a long slow road for households mortgaged up to the hilt, and little here to reignite the fuse on the housing market; at least for now.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
