The impostor phenomenon

How to tackle impostor syndrome.

Gold Coast day 2

Presenting with Doron Peleg, CEO of RiskWise, yesterday at Gold Coast.

These guys are hard-hitters when it comes to independent market research.

Could Australia have another mining boom?

New mining boom to fire up?

Mineral exploration spend surged 31.2 per cent higher year-on-year in the March 2018 quarter to $516.7 million. 

And this is not just a little bit of money being tipped into speculative exploration.

Metres drilled have surged 63 per cent higher since June 2015, in seasonally adjusted terms, so there is something meaningful going on here in the commodities space. 

However, this renewed surge is not being driven by mineral exploration spend on new coal or iron ore deposits.

Rather the expenditure is following global growth - including a wave of EV demand - and now surging prices since 2016 for commodities such as cobalt, nickel, aluminium, vannadium, manganese, lithium, zinc, lead, copper, and gold. 

That's seriously welcome news for struggling Western Australia, and to a secondary extent, Queensland and New South Wales. 

Could we, then, have another mining boom?

Well, no-one has a crystal ball - nobody predicted the sheer scale or extent of the last resources boom, after all - but the commodities clock and recent price action suggest that we could have another resources boom of sorts.

The copper price is often seen to be a bellwether for such things, and the copper price is now up by 70 per cent from the 2016 lows. 

But this resurgence might assume a different guise - instead being driven by base metals and other metal deposits, rather than bulk commodities, although coal, iron ore, and LNG will continue to dominate export values.

Watch this space!

Gold Coast live

Presenting all morning at Gold Coast (doors open at 9 - it's not just quiet!).

Ah, there we go.

Some great exclusive content this week, looking forward to it!

Trade surpluses keep rolling in

Tricks of the trade

The international trade balance came in at a preliminary surplus of $977 million in April 2018, making it 11 surpluses out of the past 12 months (the month of December being an anomalous deficit thanks to Cyclone Debbie's unwelcome disruption). 

The monthly result was down by $754 million from an upwardly revised $1.73 billion in March.

But you get these up and downs. 

And anyway, in spite of the weather-related blip the cumulative trade surplus over the past 18 months has been a thumping $22½ billion, so there's not exactly too much wrong with that. 

The resources boom, then, is beginning to bear fruit as the export phase ramps up.

Iron ore export values have remained solid, while in June coal prices are now being driven to multi-year highs in Asia, due to simultaneously strong demand from China, India, Japan, and South Korea. 

So there's a further windfall in the post for Australian mining revenues and royalties. 

Meanwhile services exports are running pretty hot too. 

Underpinning all of the above, gas exports are breaking records by the month, approaching $3 billion for the month of April alone as Gladstone LNG fires up.

There's plenty more where this came from, too, with Santos announcing a total of nearly $1½ billion dollars of further investment in Queensland LNG.

Despite a moderate 2.2 per cent monthly decline, exports were 11.3 per cent higher than a year earlier, with annual exports to China nudging back above $100 billion.

Thus a heady combination of bulk commodities, gold, and services exports have driven record high annual revenues over the past year. 

At the state level, Western Australia's trade balance has stabilised, and Queensland will now enjoy the LNG boost and a period of resurgent coal prices. 

Finally, inbound tourism services is zooming along with phenomenal strength - largely due to Chinese tourism - with credits notching another all-time high in April. 

Overall, while the domestic economy has been spluttering along a bit at times, there's plenty to cheer in terms of international trade right now. 

Aussie economy grows by 3.1 per cent

Solid growth in Q1

The economy grew by 1 per cent in the March quarter, seasonally adjusted, and the 3.1 per cent GDP growth over the year to March 2018 was the strongest annual expansion in 7 quarters. 

Exports contributed 0.5 percentage points to growth in the March quarter and government consumption chipped in 0.3ppts, while the March result itself was the best quarterly reading in six years. 

Playing around with the national accounts aggregates shows that real gross national income increased by 1.7 per cent in the quarter, to be 2.4 per cent higher over the year. 

We've seen a bit of a kick from commodity prices, then, with the terms of trade up by 20 per cent from their March 2016 nadir, and mining was one of the strongest performing industries over the March quarter, notching a 2.9 per cent expansion.

Nominal GDP growth measured in current prices picked up to 3.9 per cent year-on-year, but that's still some way below the level where good things generally start to happen. 

13 of the 19 industries recorded a quarterly expansion: there was solid growth in manufacturing (2.4 per cent) but a decline in agriculture, forestry, and fishing (-1.7 per cent). 

Results were mixed around the states and territories, with decent growth in New South Wales, Victoria, Queensland, and Tasmania, but contraction seen elsewhere. 

Household squeeze

It seems almost churlish to point out the downsides after a record 106 quarters since the last recession, but households have yet to experience too much joy from stronger employment growth.

Compensation of employees increased by 1.2 per cent in the March quarter, while the household saving ratio trend was up just a tiny tick to 2.2 per cent. 

For a final interesting discussion point, the Reserve Bank noted in its Monetary Policy Decision that the average mortgage rate on outstanding loans 'is continuing to decline'. 

This may be so - just about - but the total interest paid on dwellings now appears to be trending north, and seems likely to continue doing so now. 

The wrap

Overall, quite a handy GDP result, which sees the economic expansion moving into its 27th consecutive year, and will buy some time.

But not too much to cheer here for households, and there seems to be some level of hope being pinned on commodity prices remaining elevated...or maybe just something else turning up. 

Here's hopin'! 

Brisbane is filling up, slowly

Heading north

If you've been reading this blog for a few years you'll have enjoyed (or quite possibly not!) my tracking of the super-boom in Queensland apartment construction, and especially Brisbane construction. 

The boom is now drawing to a close as fewer projects achieve the requisite pre-sales to reach the commencement phase and the Chinese bid dissipates. 

At the same time, the post-resources boom decline in Queensland's population growth has long since reversed, with interstate migration from down the congested southern capitals an increasingly key driver. 

The inner-city is now quietly buzzing as the apartments fill up. 

A comfortable enough win for the Blues last night, granted, but that isn't stopping many Sydneysiders from taking the plane journey north. 

There's more to the equation than just this, since strong demand for detached housing is keeping construction activity on its toes across the Greater Brisbane area.

But the big picture is that population growth is picking up, and dwelling completions are now falling away fast, and the official figures lag by about 6 months. 

I haven't been following the My Housing Market rental data for long enough to have a firm handle on it, but it was interesting to see Brisbane unit vacancy rates dropping to 2.1 per cent in May 2018, way down from 3 per cent a year earlier. 

That puts the Brisbane unit vacancy rate well below that of Sydney, for example, with Airbnb playing a material role in soaking up the rentals.

The vacancy rate for Brisbane units is also now lower it is than for houses on this data series, with Brisbane's more dated 'weatherboard and iron' stock proving harder to rent out these days as it competes with all those shiny new apartments. 

Source: My Housing Market

Other data providers such as SQM Research have tentatively begun to report the same tightening trend. 

In some of the suburbs where construction was at its most hectic, such as Hamilton, Fortitude Valley, Toowong, South Brisbane, West End, and the CBD itself, vacancy rates have come back down from orbit, and are trending lower. 

I've been watching the local suburb of Newstead with similarly keen interest. 

A couple of years ago there were hundreds of empty apartments as the completions rolled in, but they're clearly filling up now.

The quality Mirvac developments are now 100 per cent occupied, with furniture on every balcony, but some of the, ahem, lower grade investor stock is still seeing more stubborn vacancies (some developments are sold with rental guarantees, which will be needed). 

And the trend is clear enough, with the soft indicators - traffic, cafes, bars, restaurants, Woolies, and DJs - all telling the same story: Brisbane is filling up.

Speaking of Mirvac, the developer has reportedly sold a site in the suburb previously earmarked for potentially more apartments, another indicator of the market rebalancing. 

Even on State of Origin night - when half of Queensland was at their local hotel - postcode 4006 looks pretty well occupied, although the retirement village to the right of shot is as yet incomplete.

We're also now seeing good quality family-appropriate properties rent immediately at the first open home with multiple parties showing interest, and some instances of moderate rent increases. 

There's still a way to go yet, but at the current rate of change Brisbane's vacancy rate will be tracking down towards 2 per cent by about April next year, after the seasonally weak Christmas break. 

There's also some cool new stuff coming down the pipe to draw younger renters in towards New Farm, Fortitude Valley, Teneriffe, and the CBD too, including the Howard Smith Wharves precinct in the shadow of the Story Bridge. 

Brissy is slowly but surely becoming the place to be! 

Requiem for a construction bubble

Construction sector now contracting

Private new house sales fell sharply in April 2018, as this phase of the construction cycle draws to a close.

Source: HIA

The Australian National Accounts recorded surprisingly strong real GDP growth, at 3.1 per cent over the year to March 2018.

However, the ABS reported the construction sector contracting by 0.7 per cent, with new building contracting by 0.6 per cent and construction services declining by 1.7 per cent.

This was consistent with slower dwelling approvals and commencements, according to the ABS.

And this was in spite of an increase in civil engineering construction.

Which leads us nicely into our latest monthly report.

Total construction employment recently exploded to 1.2 million through this cycle, and is now at its most bloated level in a century.

About three-quarters of construction employment is accounted for by the residential sector.

Of course, this cannot last as residential construction now slows.

Sophisticated investors and fund managers can grab a free copy of our monthly report at LiveWire Markets here.