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'.

Friday, 17 March 2017

Pushing on a string

Pushing on a string

There's a general line of argument in Australia that goes something like: there won't be any more rate cuts because we all know they don't work any more (or something along those lines).

There may or may not be further cuts in this cycle, granted.

But where's the evidence that rate cuts don't work?

Below I've posted a very simple chart which tracks the unemployment rate in the US (4.7 per cent) and United Kingdom (4.8 per cent), against Australia (increasingly the outlier at 5.9 per cent). 

Australia did well to avoid a technical recession through the financial crisis, partly thanks to stimulus in China pushing up the prices of coal and iron ore, and partly because pro-active Prime Minister Rudd moved swiftly to announce a series of stimulus packages.

Britain and the US have turned things around through zero interest rates and other unconventional measures, with the UK employment rate now surging to the highest level since comparable records began in 1971.

Strangely there have been few signs of strong price inflation to date.

Thunder Down Under

While other economies move towards full employment, in Australia we are grappling with oodles of spare capacity.

And this may get worse if what I am hearing from developers is right - that apartment construction is about to drop off dramatically.

The Reserve Bank of Australia (RBA) mandate includes delivering full employment, yet the youth underutilisation rate is as high as have ever seen.

Meanwhile, the inflation rate is also below the target range, so policy is arguably behind the curve.

And weak inflation may persist.

In its Bulletin this week the RBA noted some possible causes of ongoing subdued wages growth, including a shift to contract work (on-costs!), advancements in technological processes, and competitive pressures from the internationalisation of services trade.

All of which is a convoluted way of saying interest rates may yet decline further.

They may have to.