When it comes to house prices, it seems you can’t win

Fri, 26 Oct 2018  |  

This article first appeared on the Yahoo 7 Finance web site at this link: https://au.finance.yahoo.com/news/comes-house-prices-seems-cant-win-210644370.html?soc_src=social-sh&soc_trk=tw 


When it comes to house prices, it seems you can’t win

Australians just love to complain about house prices, whether they are going up or down. 

Some of those expressing concern about rising house prices a year ago are the same ones concerned about them falling now.

When it comes to house prices, it seems you can’t win.

Up until a year ago, there were regular complaints about high house prices. Those high prices were freezing potential first home buyers out of the market, it was claimed, there was vitriolic abuse directed to “baby boomers” who bought their houses decades ago and were sitting on huge price gains and there were notions, admittedly peddled by snake-oil salespeople, that a crash in prices would drag the economy into recession. These comments generally ignored the fact that, according to analysis from the Reserve Bank, affordability and the ability to service a standard mortgage was no harder in 2017 than in the average of the prior 25 years.

This was largely because of record low mortgage interest rates which meant that someone on an average income, buying a median priced house with a standard variable interest rate was paying approximately 25 per cent on their household income on servicing the loan which was the same as the average of the prior quarter century.

Which brings us to now

Since the peak in late 2017, the Corelogic measure of Australia-wide house prices has fallen 4.5 per cent. The falls in Sydney and Melbourne have been larger. Over the same time and even with weak wages growth, household incomes have risen by around 3 per cent which has helped to deliver a clear improvement in affordability.  Mortgage interest rates, a vital element in housing affordability, have been broadly steady with some banks lifting their standard variable rate, but this has been largely offset by the spread of ‘special deals’.

With wages rising, house prices still falling and the RBA firmly on hold with official interest rates, it seems affordability will be supercharged into 2019.  The problem now, according to the house prices worry warts is that the fall in house prices will leave some people with negative equity and will hurt the economy into 2019.

To be sure, some people will have negative equity as prices drop. But in a classic case of ‘so what’, if people retain their job, get the odd promotion and can still comfortably service their mortgage, it means little or nothing in terms of heighten chance of default.

Where the issue is important – and this has nothing much to do with affordability per se, is that it threatens to undermine household wealth and with that, consumer spending.  With household wealth being undermined by falling house prices, even for those would bought their house 20, 30 or 40 years ago, the ability and willingness to ramp up spending is being curtailed.

It is why most sensible economic forecasters are looking for slower growth in Australia into 2019. Falling wealth will curtail spending and when this is most evident, policy makers, including the RBA will likely react with easier policy, which will cushion and downturn.

For housing, the decline is getting close to a bottom.

By the middle to latter part of 2019, cashed up first home buyers will increasingly tap the market and will inevitably provide support to prices. If the RBA eventually cuts interest rates, which is still a good chance, the housing market and with it, the economy, will sail through another year without loosing too much paint on the way through. At the end of the day, house prices do go up and they do go down and there are some winners and losers as this cycle inevitably unfolds from year to year.

For those who were aggrieved at ‘missing out’ on the housing market when prices were elevated a year or two ago, are now rejoicing at the prospect of buying a cheap house with low interest rates at a time when wages growth is starting to pick up.

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How Labor lost the federal election SO badly

Thu, 07 Nov 2019

This article first appeared on the Yahoo Finance website on 20 May 2019 at this link:  https://au.finance.yahoo.com/news/why-labor-lost-the-election-so-badly-211049089.html 

How Labor lost the federal election SO badly

The Coalition did not win the election, Labor lost it.

The tally since 1993 for Labor is a devastating seven losses out of nine Federal elections. By the time of the next election in 2022, Labor will have been in Opposition for 23 of the last 29 years. Miserable.

The reasons for Labor’s 2019 election loss are much more than the common analysis that Labor’s policy agenda on tax reform was a big target that voters were not willing to embrace.

Where the Labor Party also capitulated and have for some time was in a broader discussion of the economy where it failed dismally to counter the Coalition’s claims about “a strong economy”.

In what should have been political manna from heaven for Labor, the latest economic data confirmed Australia to be in a per capita recession. This devastating economic scorecard for the Coalition government was rarely if ever mentioned by Labor leader Bill Shorten and his team during the election campaign.

This was an error.

If Labor spoke of the “per capita recession” as much as the Coalition mentioned a “strong economy”, voters would have had their economic and financial uncertainties and concerns confirmed by an elevated debate on the economy based on facts.

This parlous economic position could have been cited by Labor for its reform agenda.

Why animals are a crucial part of the Australian economy

Thu, 07 Nov 2019

This article was written on 31 October 2019: It was on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/animals-crucial-australian-economy-192927904.html 


Why animals are a crucial part of the Australian economy

Animals are a critical part of the Australian economy, either for food, companionship or entertainment.

But every month, millions of sheep, cattle, pigs, chickens, fish and other animals are bred and then killed. Most of them are killed in what we define as ‘humane’, but no doubt tens of thousands are horribly mistreated, as are a proportion of the animals we keep as pets.

Animals are slaughtered to provide food for human food consumption, to feed other animals (your cats and dogs are carnivorous) and for fertiliser.

The Australian Bureau of Statistics collects a range of data on animal slaughterings and the most recent release of the Livestock and Meat data release included the following facts.