MI's monthly inflation gauge slowed further, actually printing negative for the month.
Excellent chart courtesy of Dr. Alex Joiner of IFM:
If the ABS figures follow suit in Q1 2019 it will be interesting to see how long the Reserve Bank can argue that inflation is heading back to the target (thus justifying its ostensibly hawkish stance on rates).
The final Royal Commission report was out belatedly this afternoon with some 76 recommendations for the banking, superannuation, and financial services industry.
And it was a pretty light touch on the major banks by the looks of it.
Admittedly it's a punishingly long read at 530 pages, which I haven't endured in full yet.
Notably, there appears to be nothing too dramatic on responsible lending, which may come as some blessed relief for the housing market.
Here were a few initial thoughts that I had at 5pm:
I think the band in the background may well be CBA's Matt Comyn partying, having successfully deflected a good deal of criticism onto mortgage brokers.
And wrongly so, in my view - after all, if mortgage brokers weren't providing a valuable service, why, pray, do most borrowers then use them?
Potentially momentous changes were recommended for remuneration in the mortgage broking industry.
Source: Royal Commission
I wrote speculatively in a report back in April 2018 year that a fee-for-service model could come into play for mortgage brokers, albeit for different reasons.
But whether or not this Royal Commission recommendation is ever implemented in full is another question entirely.
The government will be reluctant to follow through with such a change to commissions given that it would significantly reduce competition in the lending market, which would be a hammer blow to smaller lenders and non-banks.
That said, this government is all but cactus in the opinion polls, and the ALP in its infinite wisdom had previously pledged to follow all recommendations sight unseen.
All of the major banks saw a marked move higher in their stock prices today, bringing into question whether the tenor of the report - which was a bit of a nothing burger for the major banks - found its way into the market's domain before the official release.
Quite conclusive, if not all that surprising, with building approvals crunched to under 14,000 in December 2018.
It's worth noting that these are seasonally adjusted figures - the original figures came in at just 12,000 in the quiet month of December.
The monthly trend has gone from around 20,000 to 15,000 in double-quick time, and this before the impact of the Opal Tower fiasco, an apartment tower fire in Melbourne today, or Labor's negative gearing changes.
No way to dress this up, with the leading indicators of both money growth and building approvals pointing towards weaker or even recessionary conditions over the period ahead (Australia can often dodge technical recessions due to its population growth, but let's fact it, these are quite dire indicators).
Unit approvals in December fell to just 1,790 in Sydney, 1,390 in Melbourne, and 519 in Brisbane, and it's questionable whether even this smattering approvals will get off the ground in the prevailing environment.
The rolling annual figures by capital city remain somewhat flattering, though collapsing fast.
And annual detached house approvals are also falling in all major cities.
Stranger than fiction...
Gee whizz.
The intriguing thing about this as an observer is that we have a government trumpeting a plan to accelerate the return to surplus and a central bank with an apparent tightening bias.
'Interesting times'!
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The final Royal Commission report is due out after market close at 4pm today.
Surprising strength in commodities markets, with the Reserve Bank's index of prices up by 6.9 per cent over the year to January 2019.
In Aussie dollar terms the index was some 15½ per cent higher.
There will be plenty more where that came from next month too on a monthly average basis, with the iron ore price ballooning higher on Vale production cuts.
The strength hasn't all been due to bulk commodities for once, with LNG and alumina driving the index gains.
After years of under-investment a number of other commodity markets appear relatively tight, which perhaps combined with central bank liquidity will lead to some price inflation ahead.
US nonfarm payrolls increased by a thumping +304,000 in January 2019 despite the government shutdown, although there was a substantial downwards revision to the preceding month.
The 3-month average gain for hiring is still very solid at +241,000, and this was the 100th consecutive month of gains - more than doubling the previous record of unbroken gains at 48.
Well batted.
Part-time employment may have offset any impacts from the shutdown in the month.
The unemployment rate edged higher to 4 per cent, so now sits a little above the cyclical low of 3.7 per cent (again, perhaps an impact of the shutdown).
Earnings growth was still +3.2 per cent, and to a second decimal place was the strongest gain of the expansion to date.
This was the 74th consecutive month where wages growth outpaced inflation in the US.
The wrap
Overall, still pretty good numbers, and despite a possible slowing of the US economy US job openings have remained extremely strong.
For whatever reason, the suddenly cautious rhetoric from the Fed this week was very much dovish, suggesting that the tightening cycle could be over, in spite of the strong labour force results.
There will be no hikes until inflation accelerates, at the least.
This could be a plus for Australia if it plays out, given that funding costs have been rising here, though it also makes you wonder exactly what the Fed is fearful of.
January isn't a very good time for measuring much related to housing, with so few transactions to analyse or extrapolate from, but since everything is reported these days here are the latest tables.
Sydney house prices were 10.9 per cent lower over the year to January 2019, and unit prices in teh harbour city were 6.9 per cent lower.
Melbourne followed quite a similar trajectory, with house prices down by 10.6 per cent.
Source: CoreLogic
The upper quartile - the most expensive end of the market - has borne the brunt of price falls.
The cheaper end of the market has generally speaking held up better, partly thanks to first homebuyer incentives, and partly because that sector of the market is less volatile through the cycle anyway.
Source: CoreLogic
Over the past year the worst performing Sydney sub-regions have included many of those supply-responsive markets where construction has boomed such as Ryde (-13.4 per cent), Sutherland (-11.6 per cent), Baulkham Hills and Hawkesbury (-11.3 per cent), Parramatta (-10.9 per cent), and the south west (-10.8 per cent).
Source: CoreLogic
Quite messy in many parts of Sydney, and in some parts of Melbourne too.
If the ALP's Bowen and Shorten are successful in ramming through their proposed tax changes it seems quite likely that rental yields in the big cities will need to be closer to 4 per cent than the ~3 per cent we had seen at the lows.
They aren't there yet, but with prices down through 2018 yields are at least moving in that direction.
Source: CoreLogic
Treasurer Frydenberg has said he wants to see the finalisation of the Royal Commission report next week allowing credit to flow more freely.
Good to see the pendulum theory of credit cycles getting a run courtesy of Dr. Joiner!
