Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go Hmmm...one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Tuesday, 18 March 2014

NO further interest rate cuts?

Easing cycle

From 1 November 2011 to 6 August 2013, the official cash rate was dropped in stages from 4.75% all the way down to a new low of just 2.50%, where it has remained ever since.

A handful of economists continue to believe that the next move is still down, but notably this week Bill Evans of Westpac - a widely respected voice after he called previous cycles more accurately than the majority - switched his view to the easing cycle having now finished.

Although Evans still sees a few challenges ahead for the labour market, the consumer and business investment, he doesn't see anything to shake the RBA out of its comfort zone for the next 12 months.

The consensus view of the market now appears to be that rates will on hold for some time (perhaps 6-12 months or even longer) before the next move being up. 


Source: ASX

The case for further cuts is centred around falling mining capital investment in Australia, slowing industrial production in China and a further weakening in the terms of trade.

Of course, interest rate rises can often come more quickly and be sharper than consensus expects.

On the positive side of the ledger, exports of commodities are booming, and a raft of other data of late has been strong, including:

-retail trade growing at near double digit pace
-services index
-booming house prices
-shares close to 6 year highs
-house building approvals approaching record highs
-improved business conditions

...and so on. Inflation may also be looming in the wings.

The missing piece of the puzzle has been the labour market figures.

This month the ABS dartboard threw out a truly extraordinary number, showing the economy adding an unbelievable 80,500 full-time jobs, although the unemployment rate remained flat at 6.0%.

In fact, the figure was literally unbelievable.

It would be amazing were it true, but I don't believe for a minute that the economy really added that many jobs in a month. 

In fact, nor does the ABS: it's a quirk of sampling and history shows that next month's figures will probably claw much of the gains back.

In summary, if we see a few consecutive employment prints then we should get set for a hike, but probably not before then.

As always, it only really matters that the Reserve Bank thinks, and today the Board summarised its position quite clearly - low rates should do the job, in their best estimates, but they'll need a bit more time to do so yet:

"At recent meetings, the Board had judged that it was prudent to leave the cash rate unchanged, while noting that the cash rate could remain at its current level for some time if the economy was to evolve broadly as expected. 

Developments since the previous meeting had supported that assessment. There were further signs that low interest rates were providing support to activity, with improved economic conditions evident across a range of household and business indicators. 

While the labour market was expected to remain subdued for a while and wage growth had declined, the Board observed that this was consistent with conditions in the labour market usually lagging changes in economic activity. "