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 of the world's most popular & widely-read financial publications.

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

Wednesday, 23 July 2014

Confidence recovers in full

As I noted here, all the hand-wringing about the Federal Budget crashing or shocking consumer confidence was always likely to be disproven in due course.

In any case what is recorded in a confidence survey does not necessarily go on to reflect consumer behaviour and retail sales.

In the event, the ANZ-Roy Morgan zipped back up by another 4.8 points in the last week to 113.5, settling the argument.

That's close to where it was before the budget and back in line with the long run average.

Inflation print today

A very important data set ahead today being the June quarter Consumer Price Index (CPI) print.

The headline inflation figure currently sits at 2.9% and the core measures 2.6% and 2.7% respectively.

It's entirely possible that Wednesday's data will get folk excited about inflationary risks if the headline figure prints high, but I believe that inflation is not likely to be a big risk over the coming year or two.

Here's the chart which helps to explain why.

Non-tradables and Tradables Inflation graph

There has been a notable pick-up in tradable inflation in recent quarters, thanks to the fall in the Aussie dollar, but these pass through effects should now be ending as the exchange rate appears to have stabilised, and thus tradables inflation should dampen in the period ahead.

Non-tradables inflation on the other hand is likely to be in a downtrend simply because wages growth has been so weak - the weakest on record since the data series began in Australia (click chart):

Annual wages growth of only +2.6% as recorded in the last two quarters (see blue line above) and slack in the labour market are not typically dynamics associated with strong inflation.

Whatever happens in today's inflation data, I believe that inflation pressures will ease back in the quarters ahead, thus paving the way for another interest rate cut to only 2.25%.

We're looking this morning for a reading of around 0.7% for June quarter core inflation, and thus 2.8% for the past year.

That would put the headline rate just above the target band, but partly for the reasons noted above and elsewhere on this blog, I still think interest rates may yet fall further.