Pete Wargent blogspot


'Must-read, must-follow, one of the best analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Wednesday, 11 December 2019

This is why you should fit your own mask first

Self-care first

Here's why (or click on the image below):

Births up; fertility down

Fertility rates decline

Total registered births increased by +1.94 per cent in 2018, to a record high 315,147, according to the ABS. 

79 per cent were born to the usual residents of New South Wales, Victoria, and Queensland. 

Source: ABS

Despite the record high number of births, fertility rates continue to fall to just 1.74 per woman, well down from the recent peak of 2.02 per woman in 2008.

Source: ABS

Labor's Kristina Keneally jumped on the figures as a government failing with the baby boom having 'gone bust'.

But, of course, the fall was inevitable since teenage fertility rates have dropped so dramatically since 1998 (it’s also unlikely there’ll be an increase in the fertility rates of the rapidly growing number of Chinese-born parents).

On average, Aussies are also having babies later these days.

The median age for mothers was 31.4 years, and for fathers it was 33.5 years, both of which were record highs. 

Source: ABS

Relatively few babies are now born to parents born in Europe, with Asian-born parents now dominating the statistics. 

The statistics by mother's country of birth have long implied that families of Indian origin have a greater propensity for having multiple children than those from China. 

Both the fertility rate and the total number of births were considerably higher for mothers born in India (1.77 and 16,161) as compared to mothers born in China (1.21 and 9,871). 

This is how to learn a new language

Language barriers

Here's how to do it (or click the image below):

Tuesday, 10 December 2019

Patchy recovery for housing in Q3

Patchy recovery

From peak to trough, Aussie capital city housing market prices fell by 8 per cent between 2017 and 2019, with some variation between the cities.

Although it was obvious anyway in real time, today’s official release at least puts to bed the conspiracy theories about the rebound being a bogus media construct, forged in cahoots with CoreLogic and Domain.

The solid rebound in residential property prices was, as expected, led by Sydney (+3.6 per cent) and Melbourne (+3.6 per cent) in the third quarter of 2019. 

Brisbane also saw a steady gain of +0.7 per cent, but there were declines in all of the other capital cities except for Hobart. 

The rebound was seen across both houses and units, but weighted average capital city prices remained -3.7 per cent lower than a year earlier by the end of September 2019.

The latest figures show that residential prices exactly doubled over the 16 years to Q3 2019, with capital city detached house prices (+107 per cent) outpacing attached unit prices (+79 per cent).

Sydney is the largest component of the weighted index, and prices remained lower year-on-year in September for both houses (-4.5 per cent) and attached dwelling units (-4.8 per cent), despite the rebound.

Unit prices tend to fare better in mature capital cities, and in Sydney's case there was only a modest difference between detached house prices (+91 per cent) and attached unit prices (+78 per cent) over the past 16 years of available data.

Units tend to achieve higher yields than houses, so net-net...a very similar outcome.

The preliminary estimate for the number of dwellings was about 10.4 million as at Q3 2019.

The total dwelling stock value increased by +2.8 per cent from $6.7 trillion to $6.9 trillion, driven by New South and Victoria.

This will see Australian household wealth per capita surging to record highs in 2020, with both Aussie and global stock market indices experiencing rollicking gains in 2019. 

Penultimately, Australia’s mean dwelling price increased from $645,200 to $660,800 in Q3, also driven by New South Wales and Victoria. 

Finally, the ratio of dwelling stock to GDP was back up to about 3.6x, having previously peaked at 3.8x. 

Of course, headline numbers only ever mean so much...

The wrap

Overall, there was the expected solid rebound in prices in Sydney and Melbourne prices in Q3.

That said, even within those cities the rebound was patchy (while prices were actually still falling in the other capital cities ex-Brisbane and Hobart).

Since the end of September, CoreLogic has reported further solid price gains in October through December, so a similar result can be expected in Q4. 

How to thrive in a capitalist economy

Free market economies

Here's how to thrive (or click on the image below):

Monday, 9 December 2019

No slowdown in visa issuance

Education boom

Despite election talk of reducing the permanent intake into Australia, any prospective slowdown has been offset by an increase in temporary visa issuance. 

The big drivers have been seen in student visas, bridging visas, and other visitors.

In particular, student visas have exploded into Sydney and Melbourne.

The total number of temporary visas hit a record high 2.3 million in Q3 2019.

Temporary visas on issue have fairly consistently increased by about 100,000 per annum over the past six years, from 1.7 million in 2013 to a record high of 2.3 million as at September 2019. 

This means that population growth, when including temporary and permanent immigration, and the natural population increase (births minus deaths), is running at close to 400,000 per annum.

I recently discussed here that while population growth can drive housing prices, it isn't a precondition for rising prices. 

Sunday, 8 December 2019

Saturday, 7 December 2019

Weekend reads and podcast

Weekend reads

The must-read articles of the week summarised for you here at Property Update (or click on the image below).

This weekend a look at stock listings, housing prices, and interest rates:

By the way, you can subscribe for the free podcast here.

The stars will never align

Perfect timing

See here for more (or click the image below):

Smash...even better US data

Lowest unemployment rate since 1969

Wow, another big US jobs report, as employment spiked following the end of the auto strike.

Manufacturing employment alone jumped +54,000 as a result.

Nonfarm payroll employment growth thumped expectations (+266,000) while there were upwards revisions totalling +41,000 to October (+28,000) and September (+13,000) too.

This made for a record 110 consecutive months of employment growth, and the 3-month average gain increased to a very healthy +205,000, which is the highest in 10 months. 

That was enough to push down the unemployment rate to 3.5 per cent, which is the lowest US unemployment rate since the 1960s. 

Underemployment (U6) fell to 6.9 per cent, which is the lowest since 2000.

Earnings growth beat expectations at 3.1 per cent year-on-year.

Stocks will be off the races again!

Friday, 6 December 2019

3 types of freedom

3 types of freedom

See here for more (or click the image below):

'Dumb country' reaps the rewards

Exports boom 2019

There was a daft Harvard report a little while back which effectively found Australia to be a rich but dumb country, essentially due to its lack of economic complexity (we ranked below Uganda, Morocco, and Senegal, but one place above Pakistan).

Mmm, seriously?

Back in the real world, almost every data series in Australia from the dollar to demographics to domestic investment has followed the terms of trade through the resources boom.

Luci Ellis of the Reserve Bank has delivered some excellent speeches on economic rationalism: thank goodness we invested in iron ore mines and not microchips, as Ellis pondered.

And, by the way, have you ever been to any of the mega-projects in Australia?

The technological ingenuity and innovation is often on a mind-boggling scale. 

But, yeah, an export profile like Angola. 

Anyway, annual iron ore exports (FOB) ripped to an unprecedented $92 billion over the year to October 2019, with coal, natural gas, are all at or about record highs in 2019. 

It's reasonable to expect a slowdown now after such a storming run.

This sent the annual value of total exports up to a record $488 billion, despite a softer monthly result, up by 15 per cent from $427 billion a year earlier.

There's been weakness on the imports side, with little appetite for investment in capital goods and services, and this has been reflected in record monthly high trade surpluses (although these too are now paring back as commodity prices soften). 

Tourism is continuing to benefit from the lower Aussie dollar.

And Western Australia is racking up those iron ore and LNG royalties like there's no tomorrow.

The wrap

It's been a record run for Australian exports, although commodity prices are now looking set to fall.

But the time has now come to prove the Harvard geeks wrong by ramping up investment in services businesses such as the industrials, financial services, sciences, retail, utilities, and healthcare. 

Construction crashing

The horror...

RBA liaison believes it can see through the downturn in construction to the other side.

Below Scutty reports on the latest AiG construction index gauge:

Apartments (37), engineering (33.3) and commercial (43.7) all came in with very contractionary readings. 

Perhaps house building is due to lift soon, but otherwise, it's another stinker.

Thursday, 5 December 2019

This is how you can invest and travel

Investing remotely

Here's how you can do it (or click the image below):

Retail turnover declines...woeful

Retail turnover

Bit late to all this as I'm travelling today.

Retail turnover missed expectations of a 0.3 per cent increase in October, instead recording a decline (although the result rounded to 0.0 per cent, after an increase of just 0.2 per cent in September). 

The annual turnover increase continued to decline to a 2-year low of just 2.1 per cent.

The monthly decline was driven by clothing and footwear (-0.8 per cent), department stores (-0.8 per cent), and household goods (-0.2 per cent). 

At the state level there were monthly declines in New South Wales and Victoria, as well as in South Australia, perhaps in line with the asymmetric wealth effect thesis. 

For excellent analysis of online retail sales from data king James Foster, see here:

'Meanwhile, online retail spending lifted by a healthy 8.5% in October to $1.930bn according to the ABS's estimates to be up by 13.9% over the year. 

At 6.5% of total retail turnover, the online segment seems poised to rise to a record high next month on the back of Black Friday sales promotions.'

Overall, though, this was frankly another terrible result, with the only potential (if dubious) 'silver lining' argument being that some savings were being held back for Black Friday and Xmas shopping. 

Occam's Razor, but...

Mob baying for blood

This calendar year began with the RBA still talking of the next move in interest rates being up, despite years of below-target inflation.

The experiment could have worked, but now that the central bank forecasts are being shredded the baying mob is growing increasingly restless.

Yesterday's national accounts figures showed a healthy rise in government spending, but private demand sinking into the abyss. 

Bear in mind I'm in a different timezone this week, and thus am picking up my morning news from my Twitter feed, and this is what I woke up to...

Und so weiter, und so fort...

It's brutal stuff out there, and not always edifying.

But on the other hand if you take on the top gig with a 7-figure salary, this comes with the territory for not vowing to do 'whatever it takes' to hit the target.

It could've worked out differently, but one suspects that the reset of hundreds of billions of dollars of interest-only loans is dragging pretty hard now, and will continue to do so until the effect washes through. 

It's hard to see how credibility now gets restored without either a regime change or a renewed and vigorous commitment to achieving full employment and hitting the inflation target.