Another week, another Rant from our Property Insider Edwin Almeida, as we look at the disruption in the property market, the fall out in terms of human impact and the weak responses from Government.
Over the 13 hearings held across Australia and in more than 600 written submissions the only defence of the banks’ actions came from the banks themselves, but when their executives appeared to give evidence, all they managed to do was convince the senators of just how out of touch they were with their customer heartland.
This arrogance was perfectly summed up by expert witness Andy Schmulow, Associate Professor of Law from the University of Wollongong.
“When it comes to closing branches, Australia is a free for all in which banks are entirely unconstrained: there is no degree to which they are held to account in discharging their obligations to communities which have supported them for generations. This, it is respectfully submitted, is disgraceful and indefensible,” Dr Schmulow said.
The senators agreed. On Friday they handed down an historic report with eight bold recommendations.
But now lets see the actions to protect regional communities and access to cash. I want to see real action now, not just political games, so I will be watching closely.
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Digital Finance Analytics (DFA) Blog
Bankers Lose Over Bank Branch Closures: But Now The Political Games Begin!
Housing is in crisis in Australia, its too expensive and relative to population there is not enough of it. As I discuss with independent Journalist Tarric Brooker last week, though shockingly, we have built more homes per 100,000 people than Canada, The US and the UK. In other words, we have a greater proportion of our economy dedicated already to housing construction, with perhaps 1.35 million people working in the sector. And we also know completion times are blowing out now, thanks to poor supply chains, lack of available labour, and poor-quality construction. In NSW half of high-rise projects have severe defects.
But the Government wants to push the supply-side levers some more, as exemplified in their Attachment to the budget papers: Statement 4, Meeting Australia’s Housing Challenge from the Treasury.
It starts out “Australia has a housing shortage. There are not enough homes being built in the right areas to meet the needs of our communities. This statement focuses on the reasons for the current undersupply of housing, how it affects affordability, and the changes required to more quickly unlock supply to meet the housing needs of all Australians. It also sets out how the Government’s policy responds to these drivers of undersupply”.
This undersupply they say accounts for the increases in rents, mortgage repayments and house prices.
Talk of course is cheap, but will this translate into real actions? And what about the elephant in the room because of course, the focus should be to curtail migration from is very high current levels, and bring demand back closer to long term averages, and over the budget period both sides of politics have to a degree been talking about this, though, as I discussed in my recent show The Migration Question Amplified; But Not Tackled… By Anyone!, it’s a battle of announcables, with numbers being banded about.
But my take is that neither side of politics are really wanting to take this on seriously, despite the direct link to higher inflation. The net result will be higher inflation for longer, requiring higher interest rates than otherwise needed.
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Another Friday chat with Tarric Brooker, as we look at the latest finance and property news, and the political context, as housing becomes more unaffordable, even as inflation remains untamed. What’s going on and is the Lucky Country running out of runway?
Tarric’s slides are here: https://avidcom.substack.com/p/dfa-chart-pack-24th-may-2024
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Digital Finance Analytics (DFA) Blog
Plenty Of Snakes: Not Many Ladders: With Tarric Brooker...
There is a three-way split across the country as inequality rises with mortgage holders and renters bearing the brunt of poor policy decisions for years, while older property-owning cohorts are doing just fine.
I have been highlighting the growing gulf between households and now the Australian Productivity Commission has released their research paper “A Snapshot of Inequality in Australia” which explores how the distribution of wealth and incomes changed over the COVID-19 period, to assess the state of economic inequality in Australia.
They show that Australian wealth is overwhelmingly tied up in residential property, followed by superannuation. Property (owner-occupier and other) comprises the majority of wealth for middle- and higher-income Australians, i.e., the top 60% of households. They also show that households in the two oldest age groups—55-64 and 65-plus—hold the most wealth and wealth has grown strongest for older Australians aged 65-plus.
Other signals of inequality can see seen in spending patterns. Data from CommBank iQ shows that the cost-of-living crisis and high interest rates are having a disproportionate impact on Australians’ spending habits based on their generation.
Many of these older cohorts are not impacted by rising mortgage rates or rents, because they own their homes outright. And many of these households are also benefitting from increased investment returns. The accounts for about one in three households.
There is a second cohort the rents who are experiencing massive rent rises, one reason why we seen rental stress going through the roof in our surveys, with three quarters of renters in cash flow stress.
The remaining third of households are those burdened with mortgages, where stress is also registering as strongly as I have ever seen it.
Beyond perceptions of inequality, which matter, the overall wellbeing of society can suffer when inequality is high. This is because inequality can lead to uneven access to social opportunities and services such as health and education, waste human capital potential, and increase vulnerabilities to economic shocks and the resources needed to recover from these.
It also can reduce social justice and adversely perpetuate narrowly focused institutional arrangements and decision-making processes.
There are direct economic consequences for the economy, as reports show that higher income inequality is correlated with lower economic growth, at least at current levels of inequality (OECD 2014). The gap between low-income households and the rest of the population appears to be particularly detrimental to growth. Recent analysis also suggests that lower inequality is correlated with faster and more durable growth.
A possible consequence of increasing inequality is that it could harm social cohesion. This could happen when different economic interests lead to social and political conflict. Although this aspect is subjective and hard to quantify, some research suggests that countries with more inequality also have more corruption and political instability.
Economic inequality also determines the opportunities of the next generation – that is, the more unequal a society is, the more likely that children will have the same economic situation as their parents. Intergenerational inequality and mobility are linked.
These are important and uncomfortable concepts, which boil down to a question, what type of society do we want? I for one do not think the current setting are right, and social cohesion is coming unglued. Bad policy leads to bad society, as we are seeing.
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Digital Finance Analytics (DFA) Blog
Inequality Rules (Great For Some; Horrid For Most)!
This is an edited version of a live discussion, with our property insider Edwin Almeida as we explored how to plan and prepare a property for sale in the current climate.
This past week, while we were distracted with the budget, our controlled digital future came one step nearer, as the Australian Federal Governments Digital ID Bill sailed through Parliament last week with the support of the crossbench, having been previously passed in the Senate.
The passing into law of this bill may at a superficial level sound sensible, given that as more Australians are increasingly transacting online, our identities are vulnerable in new ways. So the Digital ID is to provide “secure” access system for other services that we can have confidence and trust in; the Government says.
But as I discussed in my previous show from the 29th March, Digital Tyranny Is One Step Closer! https://youtu.be/kVVmG_7ddWg I am reminded of the parable of the frog, who slowly gets cooked to death, in a pot as the temperature rises – the same in true for Australians, as civil liberties such as the use of cash, are removed, even as the digital architecture for future control gets put in place. You can see parallels elsewhere round the world and aligned with the agenda of several high profile non-elected bodies like the World Economic Forum – of “you will own nothing and be happy” fame.
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Digital Finance Analytics (DFA) Blog
Digital Tyranny Another Step Closer As Digital ID Bill Is Passed!
Last week Michele Bullock the RBA Governor was asked a good question about how high migration might impact inflation. But her answer was well, weird, as she tried to trade off pressure on the housing market from higher demand driven rent rises against supplying more workers to meet business demand (and implicitly increasing economic activity).
Treasurer Jim Chalmers, Speaking at the National Press Club on Wednesday explained that Tuesdays Budget forecast of headline CPI inflation falling to 2.75% by the end of Financial Year 2024-25 (not I January as I noted some reporting claimed), was predicated on at least in part the government cutting net overseas migration.
“We’re seeing a substantial moderation in inflation in the forecasts and in the last couple of years as well, and that is largely because of how we’re managing the budget but it will also be increasingly about how we’re managing the population as well”, Chalmers said.
Right, so it must also be true that if lower migration will ease inflation, then high migration will drive inflation higher.
Then we got Opposition Leader Peter Dutton’s policy as part of his budget response. He promised that a Coalition government would drastically slash migration as its main way of freeing up more than 100,000 homes over five years. A Dutton government would reduce Australia’s permanent migration program by a quarter – from 185,000 to 140,000 for the first two years “in recognition of the urgency of this crisis”, Dutton said.
Treasurer Jim Chalmers has described the opposition leader’s budget reply proposing migration cuts as an “unhinged and risky rant”.
But again, it’s a battle of announcables, with numbers being banded about. But my take is that neither side of politics are really wanting to take this on seriously, despite the direct link to higher inflation.
In both cases, this is more of policy announcements to try and win an election than nation building policy reform, which is needed for both migration and the gas market.
The net result will be higher inflation for longer, requiring higher interest rates than otherwise needed.
Digital Finance Analytics (DFA) Blog
The Migration Question Amplified; But Not Tackled… By Anyone!
Fickle investors are no longer pricing the possibility of another cash rate rise from the RBA after data released overnight showed US inflation cooled to 3.4 per cent in April, putting an end to a three-month streak of hotter-than-expected US CPI data; and the Australian Employment numbers from the ABS peak up to an unemployment rate of 4.1%, from a revised 3.9% last month.
This bad news is good news drove the ASX 1.65 per cent higher today, and the US markets already went into record territory, again on the falling inflation read.
Now I have been highlighting that the unemployment series from the ABS has been unreliable, with significant swings month on month. This time the Australian Bureau of Statistics reported an unusually large jump in the number of unemployed people who were waiting to start a new job, amid broader signs the jobs market remains strong and is easily absorbing a surge in migrant workers on one hand, but we know from other data the number of job opening are falling. About 7.1 per cent of unemployed people last month had a job they were waiting to start, which was a record compared to previous April periods, the ABS said.
Nothing really new here – recall that the in January, unemployment increased to 4.1 per cent due to a surge in the number of jobless people waiting to start work, it fell back to 3.7 per cent the following month when they officially became employed.
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Digital Finance Analytics (DFA) Blog
The Employment Numberwang Confuses The Markets Upwards!
In our latest rant Edwin and I tease apart the news surrounding the budget “announcables” relating to housing, discuss the rise of the “distressed sale” and examine how the WeChat Chatters are calling out Victoria as a place to exit.
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Today’s post is brought to you by Ribbon Property Consultants.
