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Thursday 30 November 2017

Soft landing

Soft landing

Building approvals continued to defy the gloomers, rising to back above 19,000 in October - up from just 16,100 this time last year - a third consecutive month of gains being driven by strength in the state of Victoria.

The high-rise downturn appears to have mostly run its course now, although Queensland may see approvals continue to slide a little further in this sector.

In annualised terms private sector approvals actually increased a little in October, to about 218,200.

There has been a healthy change in composition with townhouse approvals gradually accounting for a greater share of the market, as developers turn their attention away from investors and offshore buyers (and towards downsizers and owner-occupiers). 

Around the traps

In the detached house market, sentiment appears to be strongest in Brisbane and Melbourne, while Perth now looks to be close to the bottom of its cycle. 

Attached attached dwelling approvals held up strongly in October in Sydney (3,640) and Melbourne (3,475), helped along by the shift towards townhomes, while overbuilt Brisbane (756) continues to retrace.

Finally, a point to watch: is supply finally responding to the ultra-tight market in Hobart? Early days, but this does seem to be the case. 

Tasmania's population only grows at about 3,000 per annum, so the required approvals are naturally much lower than in the mainland capital cities. 

The wrap

Overall, this was a very positive result, with seasonally adjusted approvals a considerable 18 per cent higher than in the same month last year. 

Historically dwelling commencements have tracked approvals quite closely, so on this evidence it's hard to see the feared dramatic slowdown in residential construction in 2018, except at the localised level. 

It looks as though we'll be seeing the construction of more medium-density options in the townhouse style (and fewer shoebox apartments), which can only be a good thing.

Millennial falcon

A feast for the Census

Demographic demigod Bernard Salt wrote a searching piece in The Australian today, with data research from Simon Kuestenmacher picking out future housing market hotspots based upon the growth in the 25 to 50 year old cohorts across certain regions of the country.

One challenge with the intercensal data is that since it relates to the period between 2011 and 2016, it's somewhat limited in that it can only tell you what was happening a few years ago.

Take the example of the Northern Territory, where the economy and prime working age population were on fire until the peak of the mining boom. 

The resources construction boom will not be repeated, however, and today the NT has the lowest population growth of any state or territory (in fact, the population was actually shrinking over the most recent 6 months of estimates). 

Still, it's hard to disagree with many of Salt's conclusions, which included south-east Queensland and Geelong as locations with strong prospects.

Moreover, it's refreshing to see analysis which goes a level deeper than the headline data.

Housing slinky

I've been following demographic statistics with interest, and have been particularly fascinated by the extraordinary growth in the 25 to 32 year old cohort in recent years. 

Somewhat amusingly, when I ran the chart it reminded me of the ingenious childhood toy that could stretch and re-form itself, the 'Slinky'.

If charts aren't your thing, what this shows is that, for example, in 2005 there were about 269,000 persons aged 26 in Australia, but by 2016 this figure had ripped nearly 100,000 or 37 per cent higher. 

The number of 25 to 32 year olds has exploded from about 2.2 million to 2.9 million, for an increase of 31 per cent, or just shy of 700,000.

Millennial falcon

As far as I'm aware nobody was forecasting anything remotely close to that back in 2005. 

It's an extraordinary increase in prospective household formation, and since it's been driven by immigration, it's intensely focused on the capital cities.

And this is also a significant factor which makes a severe housing market correction appear unlikely - if prices fall a bit, just look at the swelling headcount of potential bargain hunters waiting to swoop. 

Surprisingly to some, the Baby Boomer cohort moving into retirement is smaller, and in any event there does not appear to have been a meaningful decline in housing demand from Boomers (if anything, they've been adding to demand, by buying investment property). 

It was interesting to note that Salt found, as indeed I did, that the impacts of this will be felt most keenly in certain housing markets of Greater Melbourne. 

I wrote a bit more about this dynamic here, and M. Pascoe picked up the ball and ran with it a bit further in the Sydney Morning Herald.

Tuesday 28 November 2017

Upside funk

Affordability declines

UK City house price inflation increased to +6.1 per cent in October 2017, up from +5.4 per cent a year earlier.

It's the fastest rate of growth since September 2016, according to Hometrack's latest figures. 

Manchester now has the fastest rate of growth, at +7.9 per cent, while Aberdeen continues its decline.

Source: Hometrack

In London, the house price to earnings ratio rose to 14.5 times, an all-time high, while Cambridge is not far behind. 

In Bristol, the ratio is now 9.7 times and rising. 

Prices in both Cambridge and London have increased by +60 per cent since 2007.

Hometrack sees furthers upside for the regional cities:

"Were cities such as Leeds, Manchester and Birmingham to see the price to earnings ratio reach 30% over the 15-year average, this would equate to a house price increase of 20% to 25%. 

We believe this is very feasible so long as mortgage rates remain low and the economy continues to grow. 

These increases are equivalent to 3 years of growth at current levels."

In arrears

Mortgage arrears figures charted by Macquarie Bank.

Detailed analysis of mortgage arrears and where they are heading next are beyond the scope of this blog - please see our monthly subscription reports for more.

Monday 27 November 2017

At any rate...

At any rate...

Trying to second-guess where interest rates are heading has almost become a national sport in Australia, so I've been trying instead to write about a range of other topics lately. 

Nevertheless, an interesting titbit from Bill Evans of Westpac this week is worth looking at.

Later this week the Reserve Bank of Australia (RBA) will report its household credit growth numbers, with annual growth to households seeming likely to slow over the months ahead, partly due to tighter lending criteria. 

Evans was able to ask the RBA Governor during a post-speech Q&A session how he'd view the prevailing levels of credit growth of around 6 per cent, if income growth was to return to 3 to 4 per cent by 2018. 

"His response was clear. He accepted that household credit growth at around 6% (not even meeting the slowdown which I expect) was quite okay, implying that even if leverage was rising due to tepid income growth, financial stability was not being threatened."

The full note from Evans is well worth a read. 

It's significant, because it appears to all but rule out interest rate hikes in the event of moderating credit growth, even if household leverage rises a bit further. 

Given the low inflation environment and the Governor's reluctance to cut rates further, the only reasonable conclusion seems to be to expect interest rates to be on hold next year, and quite possibly for the next two years (cash rate futures are pointing to a possible hike around the middle of 2019). 

Bonds price lowflation

There's been quite a bit of discussion of bond yields over the past week or so.

Although lower than in the past, in recent times Australia's government bond yields have been higher than elsewhere in the developed world (US, Japan, Germany, UK), as global rates have plummeted, even turning negative in some countries.

Australia has a 2 to 3 per cent inflation target, which is higher than many other countries, but our inflation target has been consistently missed on the downside in recent quarters.

Aussie bond yields have consequently been on the slide again since the September quarter as markets adjust to the low inflation environment and outlook. 

Bond yields, particularly 10 year/2 year spreads, are said to be a reliable indicator of recessions - or market's expectation of a coming recession - if they turn negative. 

Normally investors are expecting lower returns when their capital is tied up for a shorter period, logically demanding a higher yield on longer term investments. 

But the yield curve can become inverted when the market has sagging confidence in the near-term economy (and consequently yields, as bonds are rolled over), and in these circumstances investors may accept lower returns for tying up their capital for a decade. 

Australia last saw this indicator flashing between June 2006 and July 2008 as the financial crisis unfolded.

The yield curve doesn't seem especially troubled now, despite a bond rally since the beginning of the year, implying a low risk of recession.

Westpac expects to see the economy having grown by about 0.9 per cent in the third quarter (the official estimates aren't reported until next week), with growth of about 3 per cent in calendar year 2018.

However, persistently weak inflation figures do suggest that interest rates will be lower for longer, even if the next move does prove to be up.

Westpac is now offering via mortgage brokers 3-year interest-only fixed rates for investors from 4.29 per cent (a discount of 0.50 per cent), with lower rates available on a 2-year fix, perhaps a signal that interest-only lending will resurface in 2018.

Peak cranewatch

Peak cranes

It's been an exciting few years for Australian crane-spotters - as well documented on this blog! - but the peak is now in, at least for the residential sector.

In fact the most active quarter for residential building work done was all the way back in June 2016; it just mightn't feel that way if you live in Sydney. 

Looking at the value of work done on new houses, the uplift through this cycle only looks moderately impressive, with a steady contraction underway, broadly since 2015.

Of course, this cycle has been far more notable for the record building of higher density projects.

This dynamic has helped to address an inherent undersupply of capital city housing, especially in a number of inner suburban areas where land availability had previously been limited.

Crane your neck...the peak is in

Jonathan Kearns from the Reserve Bank of Australia (RBA) noted in a speech this week that attached dwelling approvals have soared from less than half those of detached dwellings under a decade ago, to almost on par across recent years. 

The annual number of attached dwellings approved peaked more than a year ago back in the September quarter of 2016, but with longer build times there can be a risk that completions peak just as the residential market turns down. 

If it feels as though Sydney developers are still building new townhouses and apartments like the clappers, then this is well borne out by the statistics. 

Indeed, New South Wales is propping up the national figures, although even here the peak is probably imminent.

In Victoria, attached building activity levels have been fairly flat now for about 1½ years, while in both Queensland and Western Australia activity has been falling quite significantly throughout 2017. 

The scale on this chart matches that for detached housing, and shows how Sydney has shifted markedly towards higher density living over the past two decades (while Melbourne has simply seen lots of dwellings built of all types, both in the inner city and on the urban fringe). 

Shift in composition

Brisbane's dwelling stock historically comprised only a very small share of apartments, but the total stock of attached dwellings has now lifted by more than one-third since 2015, which is remarkable, with completions set to peak this year.

Perth has also seen a strong uplift from a comparatively small stock of existing units. 

Despite this, the RBA speech noted that apartments in Perth and Brisbane have witnessed only small median price falls in recent years.

To date there have not been widespread reports of valuations at settlement being lower than off the plan purchase prices, nor has there been a marked increase in settlement failures or arrears.

The RBA also noted that purchases by foreign buyers accounted for just 10 to 15 per cent of new construction (and about a quarter of new apartments), which intuitively feels low, although the share is higher in Sydney and Melbourne. Of these offshore buyers, about ¾ hailed from China.

Although residential building is now turning down, to date the downturn has been only moderate.

Moreover, there is also now a strong pipeline of infrastructure projects, especially in New South Wales, which might help to explain why the reported monthly unemployment rate of only 3.9 per cent for Greater Sydney has not been lower since 2005. 

Sunday 26 November 2017

Saturday 25 November 2017

Corridor of uncertainty


As a cricket tragic, I was thrilled a little over a year when we named our son Stanley, being in part a subtle or oblique reference to one end of the Gabba cricket ground in Brisbane (I felt a reference to the old Clem Jones stand - or even 'Sir Gordon Chalk'! - might have been pushing it...). 

There's been a tremendous amount of excitement in Brisbane this week as the English cricket team is in town to the play the first Test Match of the historic Ashes series.

The view of the Stanley Street End skyline today takes in many cranes, as well as the imposing $85 million Trafalgar Residences, a 20-storey apartment block at 855 Stanley Street (being a new development since the last time an Ashes test was played here). 

Looking back towards the opposite Vulture Street End of the ground, the television cameras picked up the apartments advertised for sale and for rent at 444 Vulture Street, where apartments are advertised for rent from $360/week for 1-bedroom units, and from $750/week and above for 3-bedders. 

At this stage of the construction cycle there's a risk of vacancy rates being understated as a single online advertisement can account for multiple new apartments.

The ubiquitous offers of rent-free periods for tenants, free internet (and so on) in Woolloongabba apartments reflect the clear weakness in the rental market. 

In a moment of wry amusement, even match commentator Damien 'Flemo' Fleming was moved to mention the glut of new building in the suburb, a rare yet curiously welcome departure from the discussion of Bowlology, the Fast Bowling Cartel, and heavy metal music!

Avenue of apprehension

The new high-rise apartment market can be a risky one for buyers, in part because the apartments can lack uniqueness or scarcity value, and partly because the duration of projects can span several years from approval to completion, at which point the market can suddenly become swamped with new supply. 

This cycle has played host to Queensland's greatest ever apartment construction boom, eclipsing even the post-recession boom of the early 1990s, although far fewer houses have been built this time around.

As we have seen in Perth since 2014, the long lead times mean that by the time projects are completed demand may have slowed significantly.

In fact, until relatively recently Western Australia was seeing the number of new dwelling completions exceed the growth in headcount, as population growth had slowed so dramatically, resulting in a surge of rental vacancies and falling rents. The city of Darwin went down a similar path.

Queensland has suffered from this dynamic too, albeit to a lesser extent. The good news for Brisbane landlords is that the Queensland economy, employment growth, and thus the three components of demographic change (natural growth, net overseas migration, and net interstate migration) are now aligning to create faster population growth. 

Meanwhile new apartment commencements are slowing to a crawl, helping to rebalance the market over time.

The Brisbane apartment market is heading back towards equilibrium eventually, then, but 2018 will nevertheless be a splendid year for renters, especially in some of these inner-city unit markets. 

Friday 24 November 2017

Hunter's gathering pace

Recovery momentum

Job vacancies continue to rise solidly, up by another +8.4 per cent over the year to October 2017, according to the Department of Employment.

Vacancies have now increased by +37,000 or +26.5 per cent since the October 2013 nadir. 

In New South Wales vacancies are up by +6.4 per cent over the past year in seasonally adjusted terms to the highest level since March 2011.

The recovery since 2013 has really been a Sydney and Melbourne least, until now.

Regional rebound

It's good to see momentum shifting away from the centre of the city a little, with advertisements now surging back to life in regions such as Newcastle & the Hunter (+26.8 per cent), and Gosford (+21.1 per cent).

Similarly in Victoria there was strong year-on-year growth in vacancies in Geelong (+13.4 per cent) and Bendigo (+13.5 per cent).

Of course, the absolute numbers of vacancies are much lower in regional cities than in the capitals, but the direction is nevertheless heartening. 

There was also double digit growth in Queensland and Victoria, while Western Australia (+16.5 per cent) has clearly turned the corner. 

In trend terms job ads rose in seven of the eight occupational groups over the past year, with the strongest gains recorded for technicians and trades workers (+13.6 per cent), machinery operators and drivers (+12.4pc), and professionals (+11.7pc), noted the Department of Employment.

Good to see. 

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Thursday 23 November 2017

Sydney unemployment rate dropping

Sydney unemployment falling

Greater Sydney has been creating thousands of new jobs per month in recent times, and the harbour city's unemployment rate has generally been trending down now for the past 44 months, now hitting an annual average of just 4.65 per cent.

Brisbane also recorded a neat fall in the month, but seems to be creating a dearth of full time positions.

Sydney's monthly unemployment rate dropped to just 3.9 per cent in the month of October 2017 itself, a fantastically strong result which suggests any meaningful housing market correction is unlikely for the time being.

There hasn't been a lower monthly unemployment rate since more than a dozen years ago, all the way back in August 2005, and before the financial crisis.

Sydney's labour market is tightening gradually, and there are some nascent signs of wage pressures in the trades and construction industries.

It now takes 14 weeks on average for Sydneysiders to find a job, down from 18 weeks three years earlier, so it's been a bit of a slow burn.

Newcastle and the Hunter Valley have also seen a fine turnaround in fortunes over the past couple of years as the state's economy accelerated away from the resources downturn (and coal prices in particular came shooting back with a vengeance).

Stamp duty and transfer take has exploded to $10.7 billion, leaving the state of New South Wales in a negative net debt position.

Two of Sydney's largest sports arenas, Allianz Staidum and ANZ Stadium, will now be demolished and rebuilt at a cost of $2 billion, adding to the long list of infrastructure projects.

Around the traps

Queensland is now creating the most jobs nationally, and cities such as Gold Coast are recording very low unemployment rates - at an annual average of just 4.8 per cent - with the Commonwealth Games visitors boost still to come.

That's a phenomenal quantity of new jobs being created in Queensland, but the quality to date may not be quite so inspiring, particularly in Brisbane.

Of the other regions around Australia, Geelong looks to be thriving, creating nearly 15,000 new jobs over the past two years, and the annual average unemployment rate declining from 7.8 per cent in 2015 to 5.8 per cent. 

The housing market in Geelong has also been firing.

There are still, however, some relatively high unemployment rates being recorded in the regions that are most defined by resources.

Platforms & ladders

Taking the gas

Construction work done came in at a thunderous $61.8 billion for the third quarter, the highest on record, with the distorted result again skewed higher by the import of an LNG platform.

Drilling into the engineering construction figures, if you'll pardon the pun, we can see the enormous spike in Western Australia largely relating to an imported LNG platform, sending total engineering construction a massive 68.4 per cent higher than a year earlier. 

Notably engineering work is also rising solidly in New South Wales and Victoria on the back of strength in infrastructure projects, with Queensland also now on a decent run in this regard.

Flats falling flat

Despite the record high quarterly result, residential construction is now in moderate decline, with the value of detached house building done sliding for three consecutive quarters.

Looking specifically at the building of attached dwellings such as apartments, work done is still absolutely flying in New South Wales, but is now teetering in Victoria, and dropping sharply in Queensland (down 22 per cent since the end of last year, and falling).

Melbourne increasingly appears to be at risk of failing to meet the strong demand for dwellings from rapid population growth.

The wrap

Construction employment has never been higher in Australia, both in terms of the numbers of directly employed, and as a share of the workforce. 

Infrastructure building looks to be strong, and indeed construction activity is at record highs in both New South Wales and Victoria.

The residential building boom, on the other hand, has now moved beyond its peak.

In particularly apartment construction activity is set to fall over the next few years, especially in Brisbane where fewer and fewer new residential projects are now being kicked off. 

Overall, though, this was an upbeat result, with high levels of activity driving construction price inflation to multi-year highs. 

Tuesday 21 November 2017

APRA lays foundations


APRA announced at the end of March that lenders should limit new interest-only residential borrowing to 30 per cent of new loans. 

The impact of their announcement was "notable and immediate", with the share of new lending declining to just 23 per cent by the September 2017 quarter.

Based on preliminary figures, a similar result is expected by APRA in the December quarter. 

Many borrowers have also been encouraged to switch to principal and interest repayment too, resulting in interest-only loan balances outstanding plummeting by 7 per cent in the past six months.

Lenders are also growing their investment loans books well below APRA's arbitrary cap.

It remains to be seen whether they begin to start pushing housing lending harder again in 2018.

My guess is that they will.  

Stress in the west

Non-performing housing loans remain relatively low at ~0.75 per cent, if a little higher than APRA would ideally like to see. 

The steady increase since 2014 was driven by weakness in the Western Australian economy.

Next on APRA's hit list will be a review of loans with a low "net income surplus" and tighter scrutiny of estimated household living expenses. 

APRA also aims to tackle a blind spot whereby lenders are not always clear about other debt held by prospective borrowers. 

More detailed analysis for institutional investors can be found in our monthly subscription reports.

By popular demand

Cooler, shakier

Back in February this year I went to the auction of a house in Bondi that had no fewer than several dozen registered bidders, with the final two prospective buyers bidding hell for leather and sending the final purchase price well over half a millon dollars over the guide price. 

By the end of March the market regulator APRA had understandably seen enough of all that, and introduced a range of cooling measures, and by the second half of the year stock on market levels were rising quite quickly from previously depressed levels. 

Auctions were still being reasonably well attended, but often with only a handful of serious but cagey buyers at each auction the mood was much more circumspect. 

The shift from strong price growth to a cooling market wasn't driven by an increase in the dwelling stock, at least not directly (in fact the number of houses in many parts of inner Sydney is in decline), nor by a slowdown in population growth (if anything, it's accelerated in Sydney).

The change in sentiment instead reflected a change in the balance of willing and able market participants.

Actually, population growth is rarely very strong in much of the eastern suburbs of Sydney, since not very much tends to get built - it's hard for the population to grow faster than the number of dwellings given new builds are mostly attached dwellings.

Prices are still being driven by supply and demand, of course, just not in the way that market analysis often understands it. 

One of the more thought-provoking talks I've seen in recent times was delivered Scott Keck at Charter Keck Kramer, in which he discussed why Australia doesn't really have a meaningful oversupply of dwellings, and never will have. 

Of course, there can be a stock overhang when the market anticipates demand incorrectly - especially of big apartment blocks which take longer to build - but since projects that aren't selling don't get built, the impacts should be temporary. 

Well worth a watch, many thanks to Robert Baharian of Baharian Wealth for sharing it.

Wage curve ball

It's always a bit of a worry when analysis leans towards the view that the immutable laws of supply and demand don't work any more, and we've arguably seen a bit of that in relation to wages growth  lately (and, for that matter, inflation).

It wasn't that long ago that wages were absolutely belting along during the mining boom, but after just a few short years of low wages growth plenty seem to believe that this is the new normal, possibly forever. 

A buddy of mine in London recently told me he'd just received a substantial, six-figure golden handshake (bonuses...remember them?) for signing a new contract, something that was all but unheard of a couple of years ago.

But with the UK unemployment rate falling to 42-year lows, skilled workers are slowly but surely becoming harder to find again.

The challenge for Australia is that the unemployment rate is relatively speaking still quite elevated at 5.4 per cent, so there's probably a hefty amount of slack that needs to be taken up before we solid wages growth return.

At least things are heading in the right direction. 

For reasons that are hard to fathom, some commentators even believe that the Reserve Bank will hike rates while wages growth is tracking at just ~2 per cent, though I can't believe that for a minute. 

In the meantime, a number of lenders have been quietly lowering mortgage rates again, including for investors and interest-only loans. 

Monday 20 November 2017

The car in front is an import


Automotive production continues to plummet, with annual volumes nearly 50 per cent below their December 2010 level, and falling fast, so the new car you buy next year will likely be made somewhere else. 

The Department of Employment projected that the factory closures at Elizabeth in Adelaide (Holden) and Altona in Melbourne (Toyota) could cost 27,500 jobs over the years ahead, leading some commentators to predict the end of days for Australia.

Indeed, some gloomy reports even speculated that the closures could snowball into hundreds of thousands of jobs losses, which always seemed a bit far-fetched given that the shutdowns have been discussed for years.

It was wise to be prudent and wait for the halting of operations to pass, which has now occurred, but if there were to be any earth-shaking initial impacts then they weren't yet in evidence in the October 2017 employment figures.

In the event, total employment exploded +355,700 higher over the year to October, sending the unemployment rate careering to a 4½ low, and with the ABS also now putting job openings at the highest level on record

Furthermore, the more timely SEEK job advertisements figures showed openings tearing 25 per cent higher in South Australia and 18 per cent higher in Victoria, so it's probably safe to say that the world hasn't ended for Adelaide or Melbourne. 

Interestingly some of the sectors creating tens of thousands of new job openings lately have included engineering, technicians, manufacturing, including machinery operators & drivers, trades & services, and transport & logistics.

Long term production employees at Holden and Toyota might have received a meaningful payout, potentially even providing a mini-boost to the local economies. 

"Pivot, pivot, pivot..."

There has been much criticism of the government for not propping up the loss-making auto assembly industry. 

Luci Ellis of the Reserve Bank of Australia rattled off the counter-arguments in a blazing speech on economic rationalism last week. 

There's no doubt that the auto industry is facing a fair amount of uncertainty and potential disruption over the years ahead. 

For example, a great deal has been made on the newswires this week of Tesla's forays into driverless trucks, electric vehicles, and "insane" roadsters.

Interesting stuff, though whether a company which has barely produced anything to date - let alone sustainable profits - will prove to justify a market cap north of US$50 billion (and an enterprise value of a baffling magnitude) can only be known in the fullness of time.

It's a good story, I'll grant it that!

Greatly exaggerated

For all the excitement of electric rigs and electric supercars that can accelerate ridiculously fast (albeit not on Australia's congested highways, lol), the death of the humble road vehicle has been somewhat exaggerated. 

Annual unit sales increased to 1,181,418 in October, marginally the highest result ever notched, powered by record Sports Utility Vehicle sales. 

At just under 99,000 the seasonally adjusted monthly sales were a little below the all-time monthly peak set last year, a fact which some have tried to claim represents stretched household budgets.

A more realistic narrative is that low interest rates and tax incentives pulled forward demand in New South Wales, where anyone and everyone considering purchasing a new vehicle must have done so in 2016. 

With more than 1.18 million sales recorded over the past year traffic congestion will get worse rather than better, adding to the urgency for the delivery of transport infrastructure projects, of which there are many now in the pipeline. 

A final observation, the trend in new motor vehicle sales in Western Australia has now been rising for 9 months consecutively. Western Australia saw 8,570 new motor vehicles sold on a seasonally adjusted basis in October, a solid increase of +8.2 per cent from a year earlier. 

While much commentary is focusing on more downside, a number of indicators are pointing towards brighter times ahead in the west. 

Sunday 19 November 2017

Swiss cheesed

200,000 more Oz millionaires

2017 saw another large increase in global wealth, increasing by 6.4 per cent or (USD) $16.7 trillion to $280 trillion, driven by equity prices and non-financial assets, including housing.  

Global wealth is projected by Credit Suisse to hit $341 trillion by 2022, driven largely by rapid growth in countries such as China and India. 

The US continued an unbroken run of gains since the financial crisis in 2017. 

The Eurozone saw the creation of 620,000 new US dollar millionaires as the currency picked up, and Australia once again punched above its weight in adding a further 202,000 millionaires, taking the total up from 958,000 to 1.16 million. 

Switzerland's wealth per adult has increased by by a thunderous 130 per cent since the turn of the century in US dollar terms to $537,600, albeit largely due to shifts in the exchange rate, according to the Credit Suisse 2017 Global Wealth Report. 

Among the countries in the world with available figures over the long term, Switzerland stands alone in seeing no decline in wealth inequality over the past century. 

Home to just 0.01 per cent of the global population, Switzerland alone accounts for some 1.7 per cent of the top 1 per cent of global wealth holders, with several thousand ultra-high net worth individuals with personal wealth in excess of $50 million. 

Lucky country

Switzerland is something of an exceptional case as a tax haven, but next in line comes Australia with a mean wealth per adult of $402,600, partly driven by "high property prices in the capital cities", somewhat perversely.

Australian household wealth gains have averaged 12 per cent per annum since the turn of the century, and the average debt to assets ratio is surprisingly low at only 20 per cent. 

68 per cent of Australian adults have a net worth of above $100,000, which is some eight times the world average. 

Meanwhile, New Zealand's wealth per adult moved ahead of Norway into fourth place in 2017. 

Wealth inequality is relatively low in Australia, with a far smaller share of the population having a net worth of under $10,000 than the United Kingdom or US. 

Indeed, when measured in median terms Australia's wealth per adult of $195,417 is not too far off the highest in the world, with only Switzerland edging us out at $229,059. 

There are now 36 million high-net worth individuals in the world with a net worth of $10 to $50 million.  

Some 2 million of them are located in China - nearly 40 times as many as at the turn of the century - with a further 6.3 million in India and other Asia-Pacific countries.  

Perhaps not unrelated to this, Australia is projected to be home to 1.7 US dollar millionaires by 2022, up from 1.16 million today. 

Saturday 18 November 2017

Drain the swamp

Swamp thing

Since the hiring freeze was lifted, Canberra has seen by far and way the strongest household income growth, with gross income per capita in the ACT up from $101,600 to above $110,000 over the past two financial years.

Nice work if you can get it!

At the other end of the scale household income per capita declined in Western Australia in FY2017, back to below the level seen in the 2014 financial year in nominal terms. 

Disposable incomes followed a very similar pattern, with Canberra absolutely miles ahead of the rest, by a magnitude of almost 50 per cent. 

Surprisingly the Northern Territory has been the strongest performer over the past five years in per capita terms, with disposable incomes rising by +24 per cent. 

Queensland incomes have really struggled since the peak of the resources construction boom in 2012, and income growth has been relatively modest elsewhere.

These numbers are derived from the state accounts, and as ever some household are faring better than others.