Pete Wargent blogspot


'Must-read, must-follow, one of the best analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Saturday, 25 June 2022

Will we get another 500k temporary visa holders?

Visas rebound

Every third person I speak to at the moment seems to be jet-setting off to Portugal, or Italy, or Turkey, at the moment.

I'm just planning a European trip myself, in fact.

Domestically, flight activity has also returned very close to pre-COVID levels.

So in the short term, at least, we should probably expect labour force tightness and capacity constraints to continue.

And on the plus side, this might mean some temporary respite from rental market pressures. 

But there are signs that things are starting to revert.

Australia saw its number of temporary visa holders crash by more than ¾ million through the pandemic, from 2.41 million at the end of 2019 to just 1.64 million in Q3 2021.

Plotting the latest available statistics, and we can see that the rebound is now well and truly on.

By May 2022 there had been a rebound in temporary entrant visa holders of more than ¼ million.

International student visa numbers have rebounded strongly, but to date visitor and working holiday visa holder numbers have not (click to expand the image below for the details by category):

Source: Australian Government

It's not quite clear how many temporary visa holders will come back, and how quickly they might do so, but the trend on the chart and the record high number of job vacancies implies anywhere up to an increase of another 600,000 might be on the cards. 

The warmer summer months tend to be a strong drawcard for both permanent migrants and temporary visitors alike.

Students tend to disappear overseas over the Xmas break, but these figures suggest that the traditionally busy January to March period could see immense pressure on hotels and short-stay accommodation, as well as the wider residential rental markets. 

For context the latest rental vacancy rate was a 16-year low of just 1 per cent in May, which equates to around 36,500 rental vacancies, according to SQM Research.

New arrivals into Australia are overwhelmingly renters initially, previous research has found.

Do what you do best, outsource the rest

Property Pod: Outsourcing

Is being 'busy' actually a good thing?

Consider outsourcing - this week on the Pod I discuss how to outsource with Cheryl Leong from the GrowthHub.

Tune in here (or click on the image below):

You can also tune in at Apple Podcasts, Spotify, and the usual places. 

And, of course, at Youtube:

Friday, 24 June 2022

Inflation expectations falling, falling...

Peak inflation

A huge subject which clearly deserves a far more detailed post and attention than it's going to get on a Friday arvo (especially when I'm heading to Brisvegas for the weekend). 

Supply disruptions tend to resolve themselves in time, and having previously soared, many commodity prices are now dropping (iron ore is down 20 per cent, wheat prices are well off the highs, crude oil is now almost in freefall, and so on), while shipping container and ocean freight rates are also now declining, albeit from sky-high levels. 

Meanwhile rising interest and mortgage rates are also dampening demand in the U.S. economy. 

Inflation hysteria is naturally running rampant in the media, but consumer price inflation is considered to be a lagging indicator, and markets are now looking ahead to the other side. 

Indeed, 5-year inflation expectations have declined to just 2.7 per cent in the U.S., which is already lower than where expectations were in the Autumnal months of last year. 

In Australia, a good deal of the consumer price inflation has yet to flow through to the official measures, particularly for household energy and power bills, and possibly for rents, which means that the headline rate of inflation won't peak until the last quarter of the year (and therefore won't be reported until early next year). 

Your guess is as good as mine, really, but this suggests to me that the cash rate will be heading higher for the remainder of this year, ostensibly to combat the rising official inflation figures, but then flattening out thereafter as consumer sentiment and demand plunges. 

In fact, it's implied that the US funds rate could be on its way back down next year, though a lot can change between now and then.

Have a great weekend!

Household wealth peaks at $15 trillion

As good as it gets

Household wealth rose by 1 per cent to a record $14.9 trillion in the March quarter.

Average net worth per capita in Australia has increased to $575,000, to be 31 per cent (or $136,000) higher than pre-COVID levels. 

Household wealth of $14.9 trillion divided by around 11 million households equates to an average household net worth of approximately $1.35 million.

Since the end of March, however, the ASX is well down, Sydney and Melbourne home values are down, super balances are down, and cryptocurrencies have crashed. 

So $15 trillion is about as good as it gets for now. 

Thursday, 23 June 2022

Bedpan boom

Healthcare employment soars

Employment increased by +114,000 over the 3 months to May, driven by a surge in professional, trade, and services roles.

Over the past year healthcare employment has soared +179,000 higher to 2.02 million, accounting for almost 15 per cent of jobs. 

There has also been strong growth in professional, scientific, and tech roles over recent years, with total employment rising from 1 million to 1.3 million over the past five years. 

Mining employment also increased +24,000 to 303,000, and is now higher than the peak of the resources investment boom years. 

On the other hand, manufacturing employment slumped -80,000 lower over the year, to a fresh multi-decade low of only 831,000 (down from 1.2 million in the late 1980s). 

Construction employment remains some way below its 2018 peak, but overall has held up a lot better than I expected at that time (in part thanks to the successful HomeBuilder and renovation stimulus packages).

There will be all the usual carping about 'the wrong type of jobs' but on the volume measures of under-employment and under-utilisation the labour market is as tight as we've seen it.

After an alarming spike around May 2020, the economy has come storming back!

As a result of this, one third of businesses are reportedly struggling to find staff, and wages and hourly rates of pay are now finally on the rise, after a decade of underwhelming pay increases. 

Wednesday, 22 June 2022

Land tax reform to drive tilt to medium-density living

Stamp duty phased out

The New South Wales budget announced the first stage of stamp duty reform. 

We discussed the key impacts here (or click on the image below):

Also see more thoughts on this gamechanger for first homebuyers from Chris Bates at LinkedIn

Job ads cresting

Job vacancies peaking

There's a job for everyone who wants one right now, with skilled job vacancies soaring to their highest level since records began in 2006 at 298,400 in May, according to the Australian's Government's National Skills Commission. 

All states and territories recorded a monthly increase, but the growth in advertisements was mainly driven by Western Australia (+1,300) and Tasmania (+430) this month.

Elsewhere it appears that the growth in job vacancies is finally running out of puff.

Particularly in New South Wales, Victoria, and Queensland, it seems likely that May could have been the peak for skilled vacancies. 

75 per cent of recruitment activity has remained focussed in the capital cities, despite a doubling of job vacancies in regional Australia since from their pre-COVID levels (capital city advertisements are also up by 67 per cent). 

The impacts of this are easy enough to see in regional Australia, sand there are still plenty of shortages in evidence, leading to shop closures, airline delays, and other capacity constraints in the economy. 

How do construction cost increases impact property?

Construction costs surge

I wrote a guest post on construction costs for Rich Harvey here (or click on the image below):