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, 5 May 2015

Trend ANZ jobs ads rise for 18th month

Job ads rebound

ANZ released its job advertisement series yesterday, and it showed a healthy rebound in job ads in April.

This takes the series to its strongest level in two-and-a-half years.

The trend estimate figures has now been rising for 18 months consecutively, which is great to see and commensurate with the recent moderate improvement in the Labour Force data.

There appears to be a prevailing view that cutting interest rates "doesn't work" because, well...just because.

No actual evidence required, evidently.

Low interest rates and stimulatory monetary policy do work eventually as recently evidenced by sharply declining unemployment rates in the US and in the United Kingdom.

However, these factors can take time and a level of confidence to work their magic.

Wealth effect

Lower interest rates can boost the prices of asset, such as stock market valuations and house prices.

Higher dwelling prices enable existing home owners to extend their mortgages in order to finance higher consumption. 

Higher share prices raise households’ wealth and can in turn increase their willingness to spend.

Take the example of an individual who purchased a home in Sydney in 2008, when standard variable mortgage rates were close to 10 per cent.

Today the lucky homeowner has a standard variable mortgage rate which is likely to be well below 6 per cent.

Low interest rates have made mortgage repayments exceptionally cheap for existing homeowners, accounting for the remarkably low levels of household financial stress at the present time.

Meanwhile the value of the home has probably increased broadly from $600,000 to $900,000, a significant boost to net worth.

To date the wealth effect may have been to some extent dampened by subdued confidence.

In aggregate household wealth is at all-time highs

However, cash and deposits are also at all all-time high of $903 billion representing some 22.8 per cent of financial assets, which is now well above the decade average of 20 per cent.

Homeowners have also taken the opportunity to build up record mortgage buffers in recent years.

Given that dwelling prices have increased materially over time in Sydney and Melbourne, if confidence can return - which it will in time - the wealth effect on consumption could be mightily forceful.