Housing credit impulse picking up

Retail sales stall: per capita recession looms

Retail turnover had been expected to get a boost from tax cuts in July, but as it turned out nominal turnover was flat in the month at a seasonally adjusted $36.16 billion.

Although food retailing increased with population growth, all other industries were flat or going backwards.

Obviously that's a disappointing result, but I'd probably want to see the August figures before concluding that everybody is definitively saving their tax cuts! 

In volume terms, we've been in a retail recession for around 1½ years now. 

James Foster is your go-to guy for all the key detailed analysis.

It looks as though GDP growth for the June quarter will be soft, and perhaps very soft or even flat.

National Australia Bank is forecasting anemic quarterly GDP growth of +-0.1 per cent, for example, pointing to a per capita recession.

Housing credit firms

In lesser reported news, the Reserve Bank of Australia released its latest Financial Aggregates data for July 2024, which revealed credit growth to be trending higher.

Business credit growth has been surprisingly robust over recent months, while housing credit growth was a sprightly +0.48 per cent in July, which was the strongest rate of growth in 2 years.

Over the year to July, total credit growth picked up to +5.7 per cent (from +5.3 per cent a year earlier).

Investor credit growth was steady at a fairly modest +0.38 per cent, with plenty of landlords still offloading properties to balance their cashflows.

Total housing credit growth over the year picked up to +4.9 per cent, and looks to be gathering some momentum.

Indeed, the housing credit impulse was the strongest in about 2½ years, although an increase in listings should keep a lid on housing price growth at the national level.

With interest rates expected to drop over the next 18 months, it should be a solid period ahead for housing.

---

P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

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

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

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

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

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

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,400 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

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

Capital investments slumps in Victoria

CapeEx rolls over

Private new capital expenditure missed expectations, falling by -2.2 per cent in the June quarter to $39.8 billion on a seasonally adjusted basis. 

Business investment in the non-mining investment fell by -3.6 per cent.

Source: ABS

The decline was mainly due to falling investment in buildings and structures, especially in Victoria, where investment fell -4.1 per cent over the June quarter.

Victoria has been going through a bit of a tough time of late, following a difficult pandemic period, and it looks suspiciously as though the suburban rail loop may be the next project being softened up for a cancellation.

Following on from the loss of momentum in the construction data yesterday, it looks pretty much as though GDP growth in the June quarter is likely to be flat. 

It's the first time in 4 years that investment in both building & structures and equipment & machinery fell simultaneously.

CapEx came out of the pandemic stimulus with a bullet, but now looks to be rolling over, underscoring the likely requirement for monetary easing in 2025.

James Foster ran through all the key data as ever here.

The number of temporary visa holders increased to 2.77 million in July, with the number of students up to 696,000.

Double-digit annual increases all around, and both figures will be at record highs by December.

The government has proposed caps on the number of student visas, but there are many exemptions to the cap. 

---

P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

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

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

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

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

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

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,400 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

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

Munger's mental models #6: The power of checklists

Munger's mental models

In the latest blog in this series, a look at the power of checklists.

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

Apartment building slows further, especially in Sydney

Residential building disappoints

Residential building failed to rebound in the June 2024 quarter, disappointing expectations, as more and more construction firms have gone bust and apartment building doesn't stack up.

The quarterly drop was largely accounted for by activity in the state of New South Wales. 

Detached house construction is picking up, driven by Western Australia's nascent supply response.

Attached dwelling construction is really the doldrums, though, especially in Sydney, Melbourne, and Brisbane, where developers can't turn a meaningful profit, outside of a few thriving coastal locations.

There's also a high level of competition with public infrastructure works, where activity has still been running at very elevated levels.

The opposition Coalition announced that, if elected, the party will can Labor's Housing Australia Future Fund (HAFF), which is designed to deliver 30,000 homes over 5 years (albeit with none actually built to date).

Overall, the supply response looks set to pick up for houses in Perth and some other locations, but there will be a major shortage of units, apartments, townhouses, and duplexes over the next few years. 

The high level of insolvencies in the construction sector has driven up building costs over recent times, and most suburban unit developments aren't stacking up profitably.

The below chart from CBA sums it up well:

James Foster ran through the key facts and figures here.

Monthly inflation falls to 3.5pc on electricity subsidies

Bill relief for electricity

Here's what markets were expected for today's monthly inflation update from the Australian Bureau of Statistics, which is to say 3.4 per cent headline inflation over the year to July:

I had a crack earlier in the day at explaining what might happen - namely lower fuel prices, and lower electricity prices as bill relief and subsidies came into play from 1 July.

There was, however, a significant question mark around the timing of the impact from electricity price bill relief:

A significant bulk of the impact from lower electricity prices seemed likely to hit next month rather than this, pointing to headline inflation of about 3½ per cent over the year to July as explained below:

As it turned out, that wasn't a bad call at all, as thus clarified by the ABS:

Source: ABS

And with fuel prices declining broadly as expected, inflation was indeed 3½ per cent over the year. 

Inflation eases gradually

On this monthly index, housing is still accounting for a large chunk of the annual headline inflation, though in real time there does seem to be far less pressure on construction/building materials costs and rents in the economy (and airfares, for that matter), which should translate to lower reported inflation over time. 

Services price inflation still looks somewhat sticky for the time being, despite depleted household savings, steadily rising unemployment, and nominal wages growth having now apparently peaked. 

With further impact from subsidies due to hit these figures in August, annual headline inflation seems likely to fall to between 2½ per cent to 3 per cent over the coming months on this monthly prices gauge.

The ABS also looks at core figures and inflation with volatile items removed, which both eased from a month earlier, underscoring the disinflationary trend.

Excluding volatile items, annual inflation slowed from 4 per cent to 3.7 per cent, and annual trimmed mean inflation fell from 4.1 per cent to 3.8 per cent.

Source: ABS

Inflation in Australia peaked 6 months later than in many other countries due to border closures and extended lockdowns, among other factors, but we are heading in the right direction still. 

The wrap

At face value, then, headline inflation was perhaps a little disappointing, though there will be further declines in the annual result over the coming months.

As such, while the Aussie dollar initially rose from 67.8 US cents to 68.1 cents, the move was faded a as the day went on and all of the increase was later retraced. 

In other news, the June quarter construction figures were disappointingly flat, with both residential and non-residential building activity going backwards again.

It looks like GDP growth in the June quarter is shaping up to be another soft result, with a fading contribution from public infrastructure & works.

The data king James Foster, as always, ran through the inflation figures in more detail here.

---

P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

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

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

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

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

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

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,400 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

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

2-Sense podcast: Fixed mortgage rates begin to fall

2-Sense podcast

Interesting that markets are now pricing for an interest rate cut in Australia this side of Xmas.

Looking out to 18 months from now, markets are leaning towards Australia joining the global trend towards lower interest rates.

Source: ASX

Join Batesy and I (and now over 30,000 unique listeners) as we discuss all the week's property news here (or click on the image below):

You can also watch the video version at YouTube here:

Fixed rates begin to fall

Yields easing

Australia's bond yields are on the way back down now, as markets adjust to the disinflationary environment.

Australia's 10-year bond yield slipped back below 3.9 per cent today, back down to mid-2023 levels.

Banks have already been responding, with lower term deposit rates. 

With 3-year bond yield also back down to 3½ per cent, we should see more cuts to fixed rate mortgages over the coming months.

From today, for example, Westpac dropped fixed rates by 0.50 per cent to 0.80 per cent, across a range of investment and owner-occupier products.

Whether or not borrowers will jump on fixed rate offerings is a different question that Chris and I will be discussing on the Australian Property Podcast on Sunday morning. 

Australia is treading a fine line between bringing inflation back down and risking a potentially nasty recession (cf. New Zealand).

ausbiz: Mortgage arrears rising, and a peak in the rental market?

ausbiz TV

I joined Andrew G at ausbiz TV to talk all the latest property market news.

Tune in here (or click on the image below):

Navigating our Economic and Property Markets | Big Picture Podcast

Big Picture Podcast

I joined Michael Yardney on the Big Picture podcast to discuss all the latest news here (or click on the image below):

2-Sense: RBA takes potshot at commentators!

2-Sense

This week on the podcast, Batesy and I discussed the Reserve Bank inferring that commentators ought to take a chill pill, implying a bias towards inaction over the months ahead.

Tune in here (or click on the image below):

You can also watch the video version here:

Unemployment rate rises to 4.22pc, highest since 2021 (move to SEQ?)

Employment surge continues

A stronger than expected jobs report showed employment rising by a pumping +58,200 in July 2024, to new record highs at 14.462 million.

Over the past 3 months, the economy has added more than +150,000 employed persons, a remarkably high number.

Hours worked growth remained soft over the year, however, rising by only 0.9 per cent from a year earlier.

The participation rate increased to a record high.

Probably the only number that really matters going forward is the unemployment rate.

The unemployment rate rose from 4.08 per cent to 4.22 per cent in July, having been down at 3.73 per cent in February.

It’s the highest rate of unemployment since November 2021.

This has partly been related to the record high participation rate.

Almost a Goldilocks set of numbers, overall, with strong hiring but a gradual easing in the unemployment rate. 

Looking ahead hiring will undoubtedly be slower in time, with Seek reporting fewer job advertisements and a surge in applicants per available role.

For now the labour market remains in tip-top condition, but policymakers will be alert to the risk of rising unemployment over the second half of the year. 

Victoria had the highest unemployment rate, suggesting that more employees might head for south-east Queensland.

James Foster ran through the key details here.

---

P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

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

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

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

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

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

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,400 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

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

Munger's mental models #5: Compounding!

Munger's mental models

In the next post in this short mini-series on Charlie Munger's mental models, a look at...compounding.

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

Turning point reached as RBNZ cuts?

RBNZ cuts rates

If there's one thing that will get central banks motivated towards cutting interest rates, it's rising unemployment, and the Reserve Bank of New Zealand cut interest rates today as the rising rate of unemployment has begun to become a concern.

A dovish statement points to more rate cuts ahead for NZ, while for now the official ABS unemployment rate in Australia is only 4.1 per cent.

In the UK, both core and services inflation fell sharply and more than expected in today's release, meaning that interest rate cuts will also be following from the Old Lady of Threadneedle Street.

In the US, the Bureau of Labor Statistics reported that headline inflation fell to a slightly lower than expected 2.9 per cent, after rising 0.2 per cent in the month of July.

The core inflation figure for the month was 0.17 per cent, while the 3-month and 6-month annualised core figures were each the lowest since the first quarter of 2021 respectively.

Source: Bureau of Labor Statistics

With the US Federal Reserve and other central banks due to cut interest rates in September and further over the remainder of the year, will Australia be able to hold out, or will we soon be following suit by the end of 2024 (in line with market pricing)?

Later to the party

Inflation in locked down Australia peaked some six months later than in the US, Canada, and New Zealand, and two months later than in the UK and the Eurozone.

So in that context it's maybe not too surprising that we're the last of this select group to get back down to around ∼3 per cent inflation.

Monetary policy in Australia is obviously somewhat influenced by what happens elsewhere, and it also appears that inflation rates around the developed world are fairly well correlated these days.

There will be some helpful base effects for Australia over the coming few months which will help to push the monthly inflation gauge down to around 3 per cent in due course (in fact, government subsidies will do the same for the quarterly headline inflation figures as well).

Down Under news

Today's figures from Jobs & Skills Australia showed job advertisements dropping another -3.7 per cent in July 2024, to be -23.1 per cent lower than a year ago and at the lowest level in 3 years.

CommSec chimed in with the relevant chart:

Source: CommSec

While there we still 217,000 vacancies on this government index - which for now remains higher than in 2019 - and one doesn't want to be alarmist, is that trend is starting to look just a little bit '2009-ish'? 

In Victoria, job vacancies fell by a concerning -7 per cent over the month to be -32 per cent lower over the year, for example. 

Business insolvencies also running at elevated levels in Australia, especially across the construction sector. 

In other news, the iron ore price has plunged from $140/tonne earlier in the year and looks pretty much set to break below $100/tonne, which will make a significant difference to revenues hitting the coffers.

These and other softening trends suggest that Australia's November interest rate meeting could yet prove to be a 'live' one for a first interest rate cut - and markets have fully priced in a cut by December - but tomorrow's labour force figures will shed more light on things. 

Roy Morgan's shadow unemployment rate survey rose to above 10 per cent this month, for the highest since reading August 2023.

---

P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

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

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

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

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

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

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,400 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

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

Munger's mental models #4: Opportunity cost

Munger's mental models

In the next video in this series, I discussed opportunity cost.

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