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).

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 finest 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.

Wednesday, 16 March 2016

AAA

Mining cliff three parts cooked

The Commonwealth Bank of Australia (CBA) today noted that Australia is an estimated 92 per cent of the way through its commodity price corection, and 74 per cent of the way through its so-termed mining "investment cliff" or "capex cliff". 

The latest available ABS data I have charted below on engineering construction activity only runs to September 2015, but projecting it forward to March 2016, the CBA assertion seems feasible. 

By the third quarter of calendar year 2015, engineering construction had already declined by more than a quarter over nearly three years since the end of 2012.

Although Queensland has already gulped down most of its medicine in this regard, Western Australia and the Northern Territory must still face down the brunt of their respective declines. 

Unfortunately the Commonwealth Bank estimates that only 55 per cent of likely mining job losses have occurred to date, meaning that there is still considerably more pain to come for resources regions. 


The ABS figures for expected mining capital expenditure into 2016-2017 also lend weight to CBA's appraisal, showing a massive 36.2 per year-on-year decline for Estimate 1. 

Financial Year Actual & Expected Expenditure - Mining Capital Expenditure

Source: ABS

That Australia is now close to three quarters of the way through the investment decline is great news, for it means that sooner or later the decline in resources construction activity will cease to act as a drag on economic growth. 

Fitch affirms AAA rating (stable outlook)

In related news Fitch Ratings, which has arguably been the most downbeat of the ratings agencies on banking and housing market risks, after last night's market close affirmed Australia's IDR as a AAA rating with a stable outlook.  

Fitch's reasonings included Australia's low public debt, its strong institutions, and effective governance, noting that Australia's banking system is one of the strongest globally.

In line with CBA's findings, Fitch also expects mining investment to be a smaller drag by 2017, thereby helping to push up GDP growth.

You can read the rest of Fitch's assessment here