Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & 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's 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 & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & '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, 21 April 2015

Another rate cut is on the table

Rates could fall further

Interest rates could be dropped to just 2 per cent as soon as May 5.

Reserve Bank Governor Glenn Stevens dropped the hint in an address to the American Australian Association in New York. 

Given the uninspiring macroeconomic outlook and an ongoing correction to Australia's terms of trade, Stevens noted that monetary policy should be accommodative and "the question of whether they should be reduced further has to be on the table".

Due concern was raised over trends in escalating household debt, although Stevens did also note that popular commentary has been "too focused" on Sydney while too little attention has been paid to the "more disparate trends" across the other 80 per cent of Australia.

Thus the Reserve Bank will look to offer support to demand, consistent with its mandate as expressed by the medium term 2 to 3 per cent inflation target.

Stevens pointed out that inflation is expected to remain consistent with the 2 to 3 per cent target range by latest forecasts.

A non-too-subtle reference was made in the address to the need for leading figures in government and business to step up, with "any help" from policies which might stimulate growth deemed to be welcome.

Headline inflation soft

The March or Q1 2015 inflation figures are due to be released tomorrow.

As discussed here previously, the "All Groups CPI" series has recently declined, tracking at just 1.7 per cent and below the bottom of the target range.

Moreover, market forecasts for the first quarter range from soft (0.5 per cent) to very soft (-0.1 per cent).

Westpac forecasts a "meek" 0.1 per cent print tomorrow, which would take the annual All Groups CPI figure down to a remarkably low 1.2 per cent, adding considerable weight to the case for further easing of monetary policy.

Underlying inflation

It should be recognised, however, that the expected soft inflation is largely to be driven by a collapse in petrol prices in the early part of this calendar year, as well as an element of post-Xmas discounting.

As noted here previously, the preferred and less volatile trimmed mean and weighted median inflation measures have been tracking within the target 2 to 3 per cent range, albeit towards the lower end thereof.

The Reserve Bank's own analysis has implied little inflationary pressure from either tradables or non-tradables, while the prospects of inflation from a wages breakout seem appear muted to say the least.

The wrap

To date both the rhetoric and the actions of the Reserve Bank have remained conservative, indicating little willingness to be rushed into decisions.

The latest employment figures have offered signs of encouragement, but Stevens noted in his address that unemployment levels remain well above most estimates of "natural rates" or "NAIRUs", while output is below conventional estimates of potential.

If you want to see a further rate cut, hope for a soft inflation result tomorrow.