Monetary policy works
Lest there was any doubt about whether the current stance of monetary policy has moved into the contractionary phase, this month's Westpac survey was an absolute mess.
Consumer sentiment has collapsed to near-record lows - actually now sitting below the global financial crisis nadir - and Christmas retail is now widely expected to be poor.
Source: Macrobusiness, Westpac
Indeed all aspects of the survey were utterly crunched...except for unemployment expectations, which are now rising.
Source: Westpac, MI
Lending for housing recorded its biggest drop on record last month, with construction lending back down at mid-2020 slump levels.
New home sales, meanwhile, were absolutely crushed in October, dropping by a further -23 per cent.
Source: HIA
HIA's Chief Economist Tim Reardon clearly believes that interest rates have increased too much and too quickly, and the results will be felt in new housing supply.
Reported the Housing Industry Association:
"For the three months to October 2022, compared to the previous three months, new home sales in Queensland were down by 31.9 per cent, Victoria down by 22.8 per cent; New South Wales down by 19.6 per cent; and Western Australia down by 9.1 per cent."
"The full effect of the November 2022 increase in the cash rate is not likely to flow through to new home sales fully, until June 2023."
“The consequence of the fastest increase in the cash rate in almost 30 years will see detached home building activity slow to its lowest level in a decade by 2024."
“If the RBA doesn’t ease the cash rate in 2023, the Government’s goal of building 1 million homes in five years will be very difficult."
Oh, and then there's the crypto space, with the US$32 billion FTX going up in smoke yesterday, and no doubt further contagion in the post.
After 275 basis points of hikes since May, it's surely gotta be time to hit the pause button!
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