Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Sunday, 22 June 2014

NSW is the star economy (+3% growth in FY2014, 2015, 2016...)

I've been arguing for a long time that New South Wales will be Australia's star economy of the coming decade.

There are a number of reasons for that, including Sydney becoming a world class financial hub for Asia, and the harbour city becoming a self-sustaining jobs magnet, resulting in population growth and increased economic activity.

One of the key points I've been making is that Sydney in particular, unlike other locations, is not mining construction dependent, and the city has a massive backlog of homes and infrastructure to be constructed, and is is this which is going to kick-start the state economy into pole position.

In fact, it is already happening, with New South Wales to record 3% economic growth in 2014, and the state being forecast to do the same again in 2015, and in 2016 too.

The crux of the issue is that Australia's economic growth has for too long been reliant upon construction of mining and resources projects (engineering construction), and needs to rebalance towards other forms of construction while mining production ramps up (click chart):

There is some evidence of this rebalancing being underway, but the response to date has been somewhat moderate (click chart):

So far, the growth in resi construction has been mostly about a growth in apartment construction rather than detached houses as Australian shifts towards medium density living (click chart):

What is not in doubt is the rapidly escalating level of construction being undertaken in New South Wales, with total construction work done leaping by a whopping 40% over the last couple years since 2012 in response to low interest rates (click chart):

On a related theme, as usual another great piece yesterday from Ross Gittins here, which highlighted the challenges facing the mining states while New South Wales becomes the economic powerhouse:

"And this week's NSW budget papers show its government expects its acceleration to be even faster. NSW managed growth of just 1.8 per cent last financial year, but it's expected to have accelerated to 3 per cent in the year just ending, and to stay at that rate in the coming year and the following one.

So, while Victoria is expecting to catch up with the national average in the coming financial year, NSW believes it has already exceeded it, and will continue growing faster than average in 2014-15. Only by the following year, 2015-16, will the nation have caught up.

The rapid fall-off in mining construction in the coming financial year and the year after will cause those two states to grow far more slowly - maybe even contract in WA's case - while NSW and Victoria steam on.

NSW has a big backlog of home construction - arising from problems on the supply side that are the product of micro-economic mismanagement by this state government's predecessors. Its home building activity has already taken off, with much further to run.

Put all that together and you see why the last are about to start coming first."