Oil prices plunge -27 per cent (oh, and the Aussie economy)...

Per capita recession for Australia

Perhaps it's no surprise that the massive hikes in interest rates are now belting households, with the saving ratio down to just 1.1 per cent in the September quarter, and set to turn negative by the time this year is out. 

GDP growth came in at just +0.2 per cent for the September quarte, or -0.3 per cent in per capita terms.

If it hadn't been for the FIFA Women's World Cup - and the Matildas exhilarating run pumping up travel exports by +4.4 per cent - the headline GDP figures would've been close to negative as well.  

In fact GDP per person has been falling throughout 2023, so the per capita recession is now well and truly entrenched, with growth is set to slump below trend in 2024 under the current settings. 

The terms of trade boom is now also unwinding, with lower coal, oil, and natural gas prices all set to play a role in pulling income lower in 2024. 

Critically mortgage interest payable by households has exploded by an outlandish +173 per cent since the March 2022 lows.

I doubt this will prove to be sustainable for the current levels of household consumption. 

Australian commentary is still intensely focused on the need to defeat inflation, but across most of the rest of the developed world the narrative has moved on to how much interest rates will need to fall by next year to stave off a recession. 

As global demand plunged oil prices have crashed to $69/barrel overnight, falling below $70 for the first time since July, and down by -27 per cent from the highs. 

Natural gas prices were also down by -5 per cent.

I wonder if oil is shaping up to be an outstanding 'Buy' again sometime soon. 

I reckon we'll soon discover we're fighting yesterday's war on the inflation front, and market pricing has certainly shifted that way with OIS pricing now sloping markedly lower over the next 18 months, and looking set to drop below 4 per cent by the end of 2024. 

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RBA on hold, slightly dovishly

Weaker data rolls in

There was another rather large data dump today - for want of a better phrase! - most of which we don't need to go into in too much depth here!

In brief, Australia's current account balance slipped quietly back into a very slight deficit in the third quarter, on stronger services imports and lower commodity prices. 

Although inventories will add to economic growth in the September quarter, net exports will deduct around -0.6 percentage points. 

James Foster ran through the detailed figures here. 

Household consumption will likely prove to be soft also, at least it appears that way based upon the retail trade volume figures already reported. 

In nominal terms, household spending was only +2.7 per cent higher over the year to October based upon today's latest figures, which is lower after accounting for inflation (and quite a bit lower in per capita terms). 

Source: ABS

Overall, GDP growth in Australia's national accounts looks set to be positive, but underwhelming...a per capita recession, if you will. 

In other news, the value of Australia's dwelling stock increased to $10.3 trillion in the September quarter, with the mean dwelling price ascending by $19,200 over the period, driven by solid gains in New South Wales, Queensland, Western Australia, and South Australia. 

Source: ABS

The Reserve Bank of Australia kept interest rates on hold as expected, in a slightly dovish statement this afternoon, as the brutal interest rate hiking cycle approaches its peak.

Market pricing expects the next move in rates to be down for Australia, but probably not for some time to come. 

Other news saw some very weak results reported for Judo Bank's activity gauge, with services activity recording the weakest reading in the history of the survey, exclusive of the pandemic lockdown periods.

Jobs and Skills Australia also reported lower job advertisements and expectations for slower hiring activity in the recruitment outlook.

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Oil prices are threatening to take out a 5-month low on weaker global demand, which should translate to lower petrol prices over the coming weeks. 

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Sign up for this rematch Property versus Shares webinar with the Australian Shareholders Association here (or click on the image below):

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P.S. Whenever you’re ready…here are 4 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust in 2023 – 20 minute online workshop for investors

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2. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

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Will housing market reignite post silly season? (ausbiz TV)

ausbiz TV

I joined Danielle Ecuyer at ausbiz to discuss here (or click on the image below);

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Domain reported that rental vacancy rates held at an all-time low of 0.8 per cent in November, for the third month in a row. 

There may be some seasonal increases in the capital cities at various points over the next few months, but the general trend has been lower over the past two years. 

Domain's rental report can be found here.

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P.S. Whenever you’re ready…here are 4 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust in 2023 – 20 minute online workshop for investors

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You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

2. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is one of Australia's biggest business podcasts.

And our enormously popular Low Rates High Returns Show is also available on Spotify.

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4. Work with me privately

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Lending for housing picks up solidly

Housing firms

Fairly well a Goldilocks set of numbers for property market participants today.

New housing finance comfortably surpassed expectations, rising +5.4 per cent in October. 

Thanks to Alex Joiner from IFM, who I swear must be using AI to pull together this information so quickly:

Lending for the purchase and construction of new housing was well down on a year ago, but may just be turning a corner (good luck finding a builder right now, mind you). 

James Foster plotted the speed of the rebound here - although the refinancing boom has ended, activity is generally trending higher quite quickly.

The Housing Industry Association warned again on this point, and the ensuing housing shortage:

Source: HIA

More good news was also reported on the inflation from, with the trimmed mean inflation gauge from the Melbourne Institute dropping to 3.8 per cent over the year, portending further declines in the 'official' ABS figures ahead. 

Source: IFM Investors

Looking ahead, consumers should also get some further declines in unleaded petrol prices over the coming weeks. 

Finally, job ads fell by a steeper -4.6 per cent in November, following a revised -3.4 per cent fall in October. 

The index has fallen by a sharp -8.4 per cent over the past 3 months, will further declines looking very likely. 

ANZ also apparently thinks the Reserve Bank of Australia has done enough:

Source: ANZ

Higher interest rates are working to bring down inflation and are cooling the hot jobs market noticeably now. 

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P.S. Whenever you’re ready…here are 4 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust in 2023 – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan for 2023 - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

2. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

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And our enormously popular Low Rates High Returns Show is also available on Spotify.

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Are high house prices killing off our entrepreneurs?

2-Sense podcast

This week Batesy and I discussed all the latest property market news here (or click on the image below):

You can also watch at Youtube here:

Fed Funds futures price 121bps of cuts in 2024

Higher rates have bitten

Canada's unemployment rate continued to rise last month, ticking up to a 22-month high at 5.8 per cent, according to Statistique Canada. 

The Canadian economy is still adding jobs, but this hasn't been nearly enough to keep pace with the population explosion.

This is an issue that Australia, too, will likely grapple with in 2024. 

In Europe, inflation has suddenly vanished, with the inflation rate crashing far lower than expectations down to just 2.4 per cent across the Eurozone, following a -0.5 per cent reading for the past month. 

The next move in interest rates will therefore almost certainly be down for the ECB, to below 4 per cent.

In the US, Federal Funds futures are pricing close to 125 basis points of cuts in 2024 (with an 80 per cent chance of a cut as soon as March). 

That's approximately 100 basis points more than was the case a month ago, with a sub-4 per cent policy rate priced in before the end of 2024. 

It almost makes you wonder what markets know about the potential (or otherwise) for a soft landing that we don't...

Of course, there's an equivalent risk that such a rapid loosening in financial conditions prevents inflation ever getting back down to 2 per cent. 

No matter what, it's going to be an eventful year ahead! 

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The Aussie dollar has surged about 3½ cents higher against the US dollar over the past 5 weeks, to 67.7 per cents, which should help in the fight to bring inflation down faster. 

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Sydney rents have really surged back rapidly over the past couple of years, according to Domain's latest quarterly rental report:

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P.S. Whenever you’re ready…here are 4 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust in 2023 – 20 minute online workshop for investors

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2. Subscribe to our Top 10 Podcasts for Investors

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And our enormously popular Low Rates High Returns Show is also available on Spotify.

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Temp visa holders eclipse records

Record visa issuance

The number of temporary visa holders in Australia hit a record high in October of 2,664,523. 

Excluding visitors, the total was a record 2.32 million. 

Student visas hit a record high of 672,782, while working holiday visas have roared back to 159,638.

It's been well documented that this is causing some ructions in the rental market, but it's also solving the labour shortages in hospitality, retail, and other sectors which were chronically short-staffed when the borders were closed. 

Many temporary visa holders will now be eligible for permanent residency in Australia, under newly-announced rules, effective November 25. 

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P.S. Whenever you’re ready…here are 4 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust in 2023 – 20 minute online workshop for investors

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2. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is one of Australia's biggest business podcasts.

And our enormously popular Low Rates High Returns Show is also available on Spotify.

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Credit growth picks up, but only for housing

Housing credit firms

Housing credit growth firmed in October, increasing by +0.37 per cent, which was the largest monthly increase in 11 months. 

The increase was largely driven by owner-occupiers.

On the other hand, higher mortgage rates are leading more investors to sell, and net credit growth to investors was very weak again in October - as it has been all year - at only +0.2 per cent. 

No end in sight for the rental crisis here...

Capital city prices are up +8½ per cent over the past year, and have outpaced the credit impulse indicator due to record high immigration, developer insolvencies and project cancellations, and very low stock levels. 

Overall credit growth for the month was soft at +0.3 per cent, matching the recent pace of growth, and pointing to a slowdown in the economy in 2024. 

In other news, the US PCE Price index fell to 3 per cent, far below the peak at 7 per cent of mid-2022, and the lowest since March 2021.

The Federal Reserve's preferred measure of core PCE slowed to 3½ per cent, also the lowest since early 2021, and almost 2 per cent below the Federal Funds rate. 

Monetary policy settings are the most restrictive since...2007.

Markets are accordingly pricing for 5 interest rate cuts in 2024 for the US. 

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P.S. Whenever you’re ready…here are 4 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust in 2023 – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan for 2023 - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

2. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is one of Australia's biggest business podcasts.

And our enormously popular Low Rates High Returns Show is also available on Spotify.

3. Subscribe for my free daily blog

Subscribe for my free daily blog with 3½ million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 13,000 followers. 

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For a limited time you can book in a free diagnosis call with me here.