Pete Wargent blogspot


'Must-read, must-follow, one of the best analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Thursday, 19 May 2022

Unemployment rate at 48-year low of 3.9pc

Unemployment at half-century low

Employment growth in Queensland may have been negatively impacted by flooding in April.

But New South Wales has added a massive 122,000 jobs over the past year, taking the state's unemployment rate to a series record low of 3½ per cent. 

Total employment increased 2.9 per cent over the year, significantly outpacing growth in the labour force of 1.2 per cent. 

Although monthly employment growth was only 4,000, full-time jobs surged +92,400 higher to a record high, so it was a better result than it looked.

As a result, the unemployment rate has fallen to a 48-year low of 3.9 per cent, which is a godsend for the Coalition going into Federal election polling day. 

Zooming in the graph, the unemployment rate ticked down from 3.93 per cent to 3.85 per cent in April, which is the lowest level since 1974 (when the annual inflation rate was above 15 per cent by the way). 

Hours worked were up 2.8 per cent from a year earlier, and hit a record high of 1.83 million.

Overall, strong figures still, and job vacancies suggest the unemployment rate can still go lower from here, although wages growth is still weak. 

Meanwhile, things are still fraying at the seams in the construction sector, with the nation's largest homebuilder suffering the untimely passing of its founder this week, and most of the major media outlets reporting on insolvency and collapse rumours. 


Detailed analysis from James Foster here

Wednesday, 18 May 2022

Joining Owen Rask on The Australian Investors Podcast

Australian Investors Podcast

Really excited to catch up with the legendary Owen Rask this week.

Check it out here (or click on the image below):

You can also watch at Youtube here:

Wages growth...meh

Wages miss badly

Wages increased only 0.65 per cent in the March quarter, badly missing expectations of 0.8 per cent growth. 

Wages increased 2.35 per cent over the year (and barely any more including bonuses).

This is not exactly a graph which is screaming the need for interest rate hikes.

With real wages sitting at negative 2.7 per cent, households probably don't need an increase in mortgage costs to dampen consumer demand! 

Private sector wages rose 0.65 per cent for the quarter, while public sector wages growth really was dismal at only 0.56 per cent.

The ACT and Tasmania topped the charts with 2.8 per cent growth over the year, with the Northern Territory bottom of the pile in recording only 1.9 per cent wage price growth.

Apparently we need to hike interest rates urgently, though, to bring down energy prices, or something. 


Tuesday, 17 May 2022

Hayden West: How to build a powerhouse portfolio by 32

Property Pod

This week on the podcast, Hayden West originally trained as a carpenter, setting up his own carpentry business by the age of 21. 

Now aged 32, he has built a powerful portfolio of residential and commercial investment properties in Moreton Bay and southeast Queensland.

I discussed with him how to go about looking at commercial properties - and other insights - here (or click on the image below):

You can also tune in at Spotify, Apple podcasts, and the usual other outlets.

And, of course, Youtube:

Vacancy rates record first rise in 2022 (SQM Research)

Rental crisis easing a touch?

Rental vacancies were stone dead flat in Sydney in April, at 12,758, according to SQM Research's latest figures. 

Melbourne recorded a modest rise from 12,400 to 12,655 vacancies, though this still meant a flat result in percentage terms for the Victorian capital at 1.9 per cent. 

This was driven by a jump in rental vacancies in the CBD, where the vacancy rate gapped a bit higher from 2.4 per cent to 2.9 per cent. 

Brisbane also recorded a flat result at a 0.7 per cent vacancy rate.

The trend in the major capital cities may still be down, despite flat results for the month. 

All other capital cities, which have seen extremely tight rental markets in recent months, recorded an increase in vacancy rates in April.

This is the first time we've seen an increase in rental vacancies in 2022, with the national residential rental vacancy rate increasing slightly from 1 per cent to 1.1 per cent, according to SQM Research.

Certainly in my neck of the woods (Noosa) there has been some tenant pushback against surging rents, and some properties are lying empty as a result. 

Asking rents have increased 20 per cent year-on-year for housing in Sydney, Brisbane, and Adelaide, and 10 to 15 per cent elsewhere, according to SQM's asking rents index.

It's worth noting that not all markets have seen such strong increases, and there may be something of a base effect in these numbers (i.e. in many cases rents went down, and now are going back up again).

Source: SQM Research

Overall, there may be some easing of the rental crisis underway, but it hasn't stopped landlords raising asking rents by another 1.4 per cent over the past 30 days, according to SQM Research. 


The RBA released its May Meeting Board Minutes this morning.

It appears that if the wage price index figures are strong tomorrow the cash rate target could well be lifted by 40 basis points in June, to 0.75 per cent...but let's see. 

Monday, 16 May 2022

Inflation expectations drop 0.3pc points in April

Inflation peaking

The TD-MI monthly inflation gauge turned slightly negative on the headline measure last month, at -0.1 per cent in April. 

Now Roy Morgan sees inflation expectations ticking back down from 5.8 per cent to 5.5 per cent, for the same month.

Source: Roy Morgan

The main driver was the fuel excise cut, and brings inflation expectations back into line with where they were from 2009 to 2014 (when the actual underlying inflation rate was in the target band). 

Sunday, 15 May 2022

Untethered: breaking the buck

Tether breaks the buck

A few years ago I started writing a blog post about the unaudited backing of the Hong Kong company Tether - which was ultimately charged with lying about its misstated reserves and fined - but after a couple of thousand mostly fruitless words I gave up on writing it. 

Firstly, because it gradually dawned on me, not for the first time, that I didn't have a single original thought in my head.

And secondly, because since the company was both unaudited and basically unregulated I couldn't see a way it would actually blow up in any case.

Unstable coins

After public blockchain protocol Terra (and Luna) face-planted and blew up 100 per cent of its tokens and $45 billion in market cap this week, not-so-stable stablecoins have suddenly crept back into the financial news pages as a topic of note.

And then Tether temporarily caused a stir when it also broke the buck. The $1 peg remained broken for some time, and briefly traded as low as 95.1 cents. 

A Herculean effort from the instos saw the dollar peg 're-Tethered' in time, for want of a better phrase, but there may be a twitchy week or two ahead.

Any bank or currency run which gains momentum can be devilishly difficult to stop in its tracks, and in the unregulated Wild West there is no lender of last resort if the shit does prove to hit the fan.

Steadying the ship

Tether previously claimed that its gargantuan market cap was largely backed by billions in Chinese commercial paper, although ostensibly nobody in financial markets has ever heard of them making a trade. 

With the huge Chinese developer Evergrande lurching onto the precipice of default, there had been some nervous speculation that Tether might be adversely impacted.

But now - somewhat ludicrously - the company claims it has changed tack, apparently offloading their Chinese "commercial papers" (sic), and stating to the Financial Times that it can't disclose any details of its new ~US$40 billion investment in US T-Bills for fear of revealing its "secret sauce".

Which is to say - since the company refuses to be audited - nobody knows which organisation holds the assets, where exactly they hold them, or for that matter which firms are handling the trading on Tether's behalf. 

There were already more red flags than a matador fight here, but not knowing the lexicon cf. "commercial papers" also seems...sub-optimal. 

Anyway, redemptions appear to have steadied for now, so hopefully there will be no further significant withdrawals this week, as even at a trimmed down US$76 billion Tether is no small cookie in the game.

Thar she blows

Nobody can pretend to know what happens next in financial markets, but it's worth noting that some of the valuations have been obliterated at the more speculative end of the tech space, before the Federal Reserve has even tightened interest rates beyond 1 per cent. 

With the Fed set to tighten by another 50 basis points in June, and then another 50 basis points in July, as the central bank's balance sheet now shrinks in the second half of 2022 it appears pretty likely that something else might blow up.

It's impossible to say what, exactly, but for investors managing their own capital it's something to bear in mind. 


Super scheme

The Coalition has announced that first homebuyers may be able to use $50,000 of superannuation to buy a first home, if it wins the election.

Unlike previous moves Labor can't or won't match this policy, as the union super funds wouldn't allow superannuation to be used in this way (since it would reduce their management fees).

So this is one point of difference between the major parties going into polling day. 

If it gets up, then it's obviously a bullish moving for housing, not least because wealthy parents may gift funds to their kids sooner to grow in a low-tax superannuation environment for their first home. 

Friday, 13 May 2022

Arrivals filtering back, slowly...

Borders open

Arrivals into Australia increased in April, having declined to almost zero in last year's lockdowns. 

Source: ABS

Preliminary arrivals figures of 575,000 were still absolutely miles below their decade average (in April 2019 there were 1.67 million arrivals into Australia, for example). 

Source: ABS

Arrivals are becoming to filter back from New Zealand, India, the UK, and other key countries in Asia and Europe. 

To date, however, Chinese arrivals have not bounced, mainly due to China's domestic travel restrictions.

This has implications for Australia's Universities, until normal service can be resumed. 

Only 28,000 international students arrived in March, some 60 per cent lower than the 2019 figure. 

A long way to go, but at least international travel is off the lows.