10-year below cash

MOAR cut calls

JP Morgan was out to update its forecasts and call for no fewer than four interest rate cuts over the next 12 months to a record low of 0.50 per cent.

In the past few minutes Australia's 10-year government bond yield ticked down to 1.499 per cent.

Which is below today's official cash rate of 1.50 per cent.

Remarkable times.

Will the government take this opportunity to borrow and invest in some infrastructure?

Rebound is on

Prices rising

With the blindingly obvious caveat that an index doesn't denote anything meaningful for individual properties, metropolitan housing prices are now rising again. 

Sydney and Melbourne home values both rose over the week for the first time since all the way back in 2017, with a 0.3 per cent gain for Sydney, and a marginal increase in Melbourne. 

Commonwealth Bank CEO Matt Comyn reported the largest volume of loan applications in six months this week, now that the looming threat of wholesale changes to taxation has been extinguished. 

Whether or not those loans are approved on a timely basis...let's see. 

The bottom's been 'n' gone in the established housing market, but new dwelling markets still have a long way to clear. 

It was interesting to note during the downturn phase that all those old real estate clichés about there 'always' being a level of competition for A-grade stock did to a large extent hold true.

In saying that, some investors still got battered by paying wildly inflated prices during the frenzied peak, or through overcapitalising. 

Better lucky than smart

The Lucky Country

MYEFO sensitivity analysis showed that +/- $10 per tonne to the assumed FOB iron ore price, if sustained through the year, could add $12 billion to nominal GDP in 2019/20.

Better still it could add a humongous $3.6 billion in tax receipts.

The Budget had assumed a FOB price of $55/tonne.

Well, hold the front page, as it's currently about double that.

Indeed the iron ore price is now up by 184 per cent from the December 2015 lows at more than US $108/tonne, and it's ballooning higher by the day. 

For completeness here is the same data series charted back to the peak of the iron ore price bubble of 2008.

It's worth noting that the Aussie dollar today is trading at 69 US cents, a far cry from 110 US cents back at the peak of the heady mining boom days, which boosts the Aussie dollar value of exports enormously.

What. A. Windfall.

The Budget will apparently be back to surplus about a year earlier than previously forecast.

Can ScoMo push through some tax cuts now, please?

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Commonwealth Bank CEO Matt Comyn said the bank had its busiest week for loan applications in some six months as sentiment has turned positive after the election.

Big surge in student visas

2,322,000 temporary visas

The Department of Home Affairs released the latest temporary entrants visa holders which are always worth a squint. 

The number of bridging visas continued its apparently endless increase to record highs, representing the surge in temporary migrants looking to extend their stays on another visa type. 

But the most striking move year-on-year was the +77,000 increase in international student visas to a stock total of 613,000.

Student visas have increased by +48 per cent or +200,000 over the past five years, adding substantially to the capital city populations.

You can click on the chart to expand it:

An interesting sub-plot is the steady but determined increase in the number of students obtaining graduate visas, granting them permission to join the labour force for 2-3 years (many of these will then surely become permanent residents in due course). 

Over the past year the number of temporary entrant visa holders increased by +92,000 to a record high of 2,322,000.

And over the past five years the increase has been a thumping +430,000 or +23 per cent. 

Australia's estimated resident population has ballooned to 25,386,400.

It's always worth considering that some temporary visa holders might be inclined to depart in the event of severe downturn in economic fortunes.

On the other hand Kiwis may be inclined to remain in situ, depending upon what's playing out across the Tasman, students would presumably keep studying, and a lower Aussie dollar might also boost demand for visitor visas, so it's not quite as clear cut as it first appears.

In the end, there is just a helluva lot of demand for Australia Inc. and over the years this has been consistently reflected in surging visa numbers and massive growth in the estimated resident population. 

Recession priced out

Mood brightens

There's been a lot of excited discussion about imminent Armageddon in Australia, but markets have sent a different signal, with the ASX 200 now a surprise top performer over the past year. 

Australia's banks and financials have had a tougher time of it over the past couple of years, with the threatened Royal Commission coming to pass and sending valuations much lower for a time. 

But here too the Aussie financials index has popped 17 per cent higher since the pre-Xmas lows, with a notable bounce upon the release of Hayne's report. 

Markets took a careful look at doomsday, but have since cooled on the idea. 

The election result has also now removed a lot of uncertainty surrounding capital gains taxes and other shifts, reflected in a spate of upbeat news articles on housing today. 

THIS is where the tech demand is going

Centralising demand

Without much fanfare, and while all the election fuss dominated the news headlines, over the past fortnight the ribbon was cut at the new designer digs at the Australian Technology Park.

Some 10,000 Commonwealth Bank technology and operations staff have thus begun their mass exodus from three other disparate locations in Sydney's Parramatta, Olympic Park, and Lidcombe to these new state-of-the-art offices in South Eveleigh in central Sydney, reported IT News. 

Source: Mirvac

This move is symbolic of a broader trend of tech-driven demand for central Sydney office space.

It's thought that bringing technology and operations staff closer together increases productivity, ideas, and bottom line results. 

Tech giant Google has moved into Pyrmont on Sydney's Darling Harbour to hoover up 50,000 square metres of space, transforming the future of the suburb towards that of a tech campus.

Meanwhile, Amazon is set to take over across the water at Market Street. 

Expect to see Google, Apple, Facebook, and Tesla dominating commercial space in Sydney's CBD and its immediate surround over the years to come. 

I discussed some of the key implications of these trends in this short video here. 

ScoMo bounce

How good are auctions

Auction clearances receive a lot of attention in Australia, mainly because they're a very timely indicator of sentiment, even if they're ultimately only a snapshot.

Analysts were looking for a turnaround in sentiment this week following the election result and the signalling of looser monetary policy. 

And, in Sydney, they got it, with preliminary clearance rates leaping to 70 per cent from 505 results. 

That's up from a final result of 56 per cent a year earlier.

Sydney hasn't reported a final result above 60 per cent for more than a year now. 

Melbourne ascended to 63 per cent from 788 results. 

Source: CoreLogic

Volumes are way down from the same time last year, with the fall in stamp duty take hammering state budgets. 

The other cities don't really do much in the way of auctions, but the results are included above for completeness.

Labor U-turn

A week is a long time in politics, and it must feel like a very long time to the supposedly united Labor party, as the hustling continues over the selection of a new Deputy Leader. 

More pressingly, there has been a dramatic about-face on the controversial Adani coal project, which people like me had long assumed to be unviable.

It's amazing what a shock defeat at the hands of the polls can do, though, with media reporting that Labor Party leaders have accelerated the plans to commence "a coalfield bigger than the UK".

Source: The Times

It goes without saying that this would be huge news for Queensland's economy if it does eventuate, and especially for employment in cities and towns such as Mackay, Townsville, Rockhampton, Bowen, and the Isaac region. 

Coal production is flying already, so throw in such a massive construction project and the obvious result is a shift towards full employment and wages growth. 

It has been reported widely in the media that the Carmichael mine could be breaking ground within only a few weeks. 

See you at Gold Coast?

Can't wait!

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