Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 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 better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent 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'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Sunday, 8 November 2015

Meaty boost to export values

Lower dollar supporting growth

A non-vegan friendly post today I'm afraid, with the value of meat and live animal exports from Australia absolutely soaring over the past year. 

In this week's November Statement on Monetary Policy the Reserve Bank of Australia (RBA) noted that the lower dollar is supporting economic growth across a range of indicators, from employment growth to job vacancies, business conditions surveys, and international trade (follow the links for my analysis of each).

I looked at the latest International Trade in Goods & Services figures last week here, which implied a welcome boost to GDP growth in Q3, albeit from an underwhelming trade deficit in the preceding quarter.

Where is the dollar helping?

One area in which the lower dollar is supporting exports is in the services sector, with trend monthly services exports rising by close to 5 per cent over the past year to $5.4 billion.


It should be acknowledged, though, that the rolling annual total value of services exports is comfortably dwarfed by the value and therefore importance of Australia's major export commodities: iron ore, coal, LNG and gold.

In the bulk commodities sector in particular, while resources export volumes have been undeniably strong, this ramp up has served to put tremendous downward pressure on commodity prices, as I looked at in more detail here.

Importantly, note that rising export revenues for resources companies do not necessarily generate healthy free cash flows or translate into acceptable net profit margins in the face of falling prices.


Merchandise export values steady

The detailed data series shows that the lower dollar has been helping the export values of other merchandise line items - to the extent that after 16 months in the wilderness, total year-on-year merchandise export values are at last back into positive territory, after promising gains through the last 6 months.


Looking at the the year-on-year percentage growth in the dollar value of merchandise exports in the chart below, we can see what a rollercoaster ride the past decade has been, with declines through the financial crisis met with stimulatory measures which arrested the downtrend.


Asia 'dining boom'

Moving away from the bulk commodities (iron ore, coal), LNG and gold, the chart below shows that one of Australia's greatest growth sectors over the past year has been the export of meat, offal and live animals, the sector undergoing an enormous year-on-year surge to account for well over $15 billion of export FOB values.

The declining dollar has been one factor here, but so too has a dry spell in the United States which has disrupted American production volumes.

Another driver of this trend going forward - the threat of drought notwithstanding - will be the shift in Chinese diets towards favouring chicken, beef, pig and dairy produce. 

While remaining a relatively small industry when compared to the meat, offal and live animals bonanza. Australia's wine export industry has also had a corker of a year, recording impressive double digit growth over the 12 months to September.

Soft drink exports have shown some sparkle here too. 


When you delve into the detail the picture is a little more murky. The values of petroleum and oils exports, for example, have naturally hit slipped on a nasty slick over the past year. 

And while the rolling annual total of export values has yet to show any great improvement, total export values evidently have picked up in the six months of data available since April.

Overall, the figures over the past six months lend some weight to the RBA's contention that the lower dollar is supporting trade, although progress does appear to be both slow and somewhat mixed across sectors.