Sun sets on Sydney stamp duty boom

Transaction volumes tank

An interesting data series from the Office of State Revenue in New South Wales.

Annual stamp and transfer lodgements are still tracking at around $7.9 billion, which is historically quite high, but are heading sharply lower. 

And transaction volumes have been absolutely annihilated, with the rate of housing market turnover in New South Wales quickly headed towards record lows according to the latest available figures. 

More of the unintended consequences of making it so darned hard to borrow. 

The squeeze on higher LVR lending has at least now eased, and some lenders are quietly bringing back mortgage products for investors, including interest-only loans. 

In brighter news for the state the NSW state government is still set to pursue a number of huge infrastructure projects after the Libs won the state election this week. 

Apocalypse now?

Household debt

I did the Your Money Australia live show tonight, where we discussed all the usual economic Armageddon predictions by all the usual suspects. 

It was a pretty good slot, and a decent amount of time to discuss what can be a varied and complex topic.

I'll upload the video at some point, but summarily many of the points I covered previously here and here. 

The ABS will release its latest figures on Thursday for household sector, and they will show debt serviceability ratios having improved massively over the past dozen years for Australia. 

Knock me down with a feather, Cy-clone Trevor...

Clever Trevor

Good news for the Top End, as it looks as though the very threatening Cyclone Trevor is set to be downgraded to a tropical low for the Northern Territory. 

There was no such luck over at Port Hedland, though, where the severe Cyclone Veronica has already led to the shutdown of the iron ore exporting ports of Port Hedland, Ashburton, and Dampier, with all anchorages and harbours cleared.

Expected to move along midway between Karratha and Port Hedland on Sunday, authorities have warned that the Cyclone poses "the biggest risk to the region in a decade" (ABC News). 

The ports shutdown was announced a couple of days ago on March 22, so the end of the first quarter of calendar year 2019 will see some negative impacts on iron ore cargo tonnages shipped...and therefore on GDP growth.

Iron ore has delivered a thunderous boom to the budget bottom line this year, but this enormous windfall has largely been driven by price rather than volumes, and all the more so since the closure of the Vale mine in Brazil after a truly terrifying tailings dam disaster over there. 

And since it's volumes that feed into GDP, iron ore exports may now struggle to add anything to GDP in the first quarter of 2019. 

This is in spite a record February tonnage exported in 2019 (partly driven by Cape Lambert and the Port of Dampier) as the Vale closure fed through. 

In total, a sum of ~67Mt of iron ore exports were reported for February. 

The partials suggest that GDP growth for the March quarter will likely be pretty soft anyway, but this Cyclone disruption will just shave a bit more off. 

The Reserve Bank will already need to revise down its growth forecasts, which is adding further pressure to cut interest rates. 

Success is not an event

We all know that quick fixes probably won't work (at least, not for long).

That's because success is a process, rather than an event.

Here's how you can get on the right track:

First Sydney market to bottom?

Lower north leads

Lower north shore once again with the highest auction clearances reported, followed by City & East.

Yeah I know, I know...

Here are CoreLogic's prelim figures:

Yields, inflation expectations, credibility...all falling

Bond yields collapsing

No doubts what is pre-occupying the minds of many financial observers at the moment. 

The rising interest rates story - which was always being rather over-egged - appears to be well and truly over.

Yield curves are inverting in the US, and elsewhere.

In Australia, meanwhile, yields are plummeting to record lows right across the board.

Note how even the 3s have now sunk way below the official cash rate.

If charts are more your thing, the red line below shows the 3-year, and the grey line denotes the 10-year, both of which are now at the lowest level on record. 

This has been quite an amazing collapse since the early part of November. 

Markets have been pricing that the Reserve Bank won't cut interest rates until later in the year.

And market measures of inflation expectations have crashed to shockingly low levels, suggesting that financial markets believe the Reserve Bank isn't serious about returning inflation to the target range. 

As Stephen Kirchner points out, the nominal variables tell you most of what you need to know.

Growth in the economy seems likely to slow to levels pointing well below earlier forecasts by next quarter.

It's therefore hard to see how inflation can credibly get back to the target range in the next round of forecasts.

And thus rate cuts could be on the table sooner rather than later.

One positive, at least, is that fixed mortgage rates have already been falling. 

Weekend reads

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How to deal with criticism

If you're going to take the path less travelled in life, then you're going to cop some criticism.

Here's how to deal with it.