The Greens oppose the CPRS not because it is too weak, but because it will point Australia in the wrong direction with little prospect of turning it around in the timeframe within which emissions must peak, says Senator Christine Milne.
If this is a recession, the figures are telling lies
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Housing finance strong. Consumer sentiment rising. Those two indicators, out this morning, suggest the Australian consumer seems determined to avoid thinking about recession. While an expected rise in unemployment in June is tipped in tomorrow’s ABS labour force figures, that news will be hard pressed to offset the surge in consumer confidence to its highest level since December 2007. And housing finance approvals continue to rise, especially for owner-occupied housing, thanks to the first home buyer’s grants with the amount lent and the proportion of all buyers hitting new record highs in May. Consumer confidence had plunged in 2008 as the markets worsened; the fall was exacerbated by the rise in petrol prices, the slowing in demand in retailing as a result and the surge in gloom and doom stories. House prices came under pressure in some markets and the resources boom bubble was popped and jobs started being lost, especially in WA and Queensland. The Bear Stearns problems in March and then the crunch in September when Lehman Brothers failed and more banks, brokers and other companies were bailed out, trembled or raced for the safety of government help, saw another fall in confidence. But those days are well and truly behind us — for the time being at least. Consumer confidence has risen to its highest level in 19 months on the belief that economy has averted a recession. The Westpac/Melbourne Institute survey showed a 9.3% rise in July from June to 109.4 points, the highest since December 2007. “This is unquestionably a stunning result”, says Westpac’s Chief economist, Bill Evans, concluding that the main driver of sentiment “must be the huge financial handouts introduced by the government to counter the global financial crisis.” Meanwhile, the influence of first home buyer builders continues to dominate housing finance. First home buyers hit a record proportion of nearly 30% of all home purchases in May, and the seasonally adjusted number of new owner occupied homes finance surged 8% in May to 6,334, the highest level since January 2002. The amount of money lent for home building shows the influence of first home buyers: the $1.550 billion lent in may was a record, up 6.9% from April and more than 55% on November’s $998 million. No wonder the Reserve Bank and the Government are confident that home building will help support the economy later this year and into 2010. |
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8 Comments
My latest research figures show exactly the same thing. Thirty six percent of some 2500 respondents to a recent survey of ours in NSW believe the stimulus package will have a lot of impact and a further 37% say at least some impact. In addition, 6% see life over the next 12 months as extremely positive and a further 56% generally positive. Just 18% are negative.
Finally, when asked what the most likely scenario is for the next 12 months, 19% believe things will pick up pretty soon, 17% say they will remain as they are and 40% say we can expect a minor recession. I can find barely 1% who believe we are facing a depression and only 17% who see a major recession on the horizon.
So public mood in Australia is positive despite the fact that most of the stimulus package is a long way from being spent. Local boutiques are telling me they have never had such strong sales. But people cannot live on mood alone or can they? If liquidity holds up, you never know but unfortunately all the money being created by central banks is still way less than the money that has or is still to be lost. So I can’t see this deflationary cycle ending globally any time soon. The Chinese can’t keep stockpiling raw materials and when the Shanghai index starts to dip once again, Australia may wake up with a jolt.
The current optomistic economic conditions have been created solely by government spending on stimulus payments and first home owner grants.
There is already a considerable reduction in the number of first home owners looking for properties and expect this to continue as the extra grants wind back to $7k by the end of the year.
Real estate agents have very litle stock so enjopy the good times now because they will get worse over the next 6-12 months as the government’s money dries up.
Wonder what clever Kevin will do then when he doesn’t have any more money to spend propping up his economy?
Since when did ” consumer confidence”, a little like ” wrestling with smoke”, to borrow a recent Crikey metaphor, trump unemployment, as an indicator of economic contraction or expansion.
I note that the Dow Jones has dropped to a new 2 month low because of what are reported as ” market doubts” about global recovery.
We got into this mess because of poor risk management, exorbitant debt and government manipulation of markets creating asset ‘bubbles’ and I fail to see how Rudd and Obama will resolve this by plowing their respective economies into more debt.
You have to pay for the ‘money from heaven’ eventually. Higher taxes and interest rates are that “train a ‘comin”.
What a silly commentary this is on a MSM article designed to instil false confidence in - who? The FHB populace? Shoppers? One nebulous statistic on ‘consumer confidence’ to cheer us up? The Christmas turkey probably feels supremely confident on the 24th Dec also. ‘House finance’ is strong? When the Federal govt has just gone $300bn into debt to hand out anything up to $36,500 to build a new house, or a mere $14K for a new one? When and how is the $300bn in debt going to be repaid? Australian households have never been in more debt as a proportion of GDP. There’s every chance many of the new first home buyers will be in foreclosure within 2 years, just like the hopeful marriages with huge celebrations that promptly fail. This is like deciding to live off credit cards and feeling ‘confident’ about the things you’ve just bought with them. You can’t spend your way out of a recession when the fundamentals are out of balance, skewed by impossible debt levels.
This ‘good news’ article is skewed and has been put out by some vested interest, interested in boosting house sales some more. Or similar. It is cherry-picking the couple of measures that are up and ignoring the ones that are down, and simply not looking at the problem areas over the next couple of years.
20,000 formerly well-paid finance workers have been laid off in Sydney alone, with no prospects for reuptake. Loads of lawyers, architects, construction workers, &c &c are getting the chop also, as per the Crikey SackWatch. Medical staff are not being paid in some hospitals while councils and governments face a cash crisis. Major construction projects in Sydney and Melbourne are foundering for lack of finance from banks leery of the property market. After the current projects finish up in 2010-11, there’s nothing. New housing starts are way down. Commodities prices are way down. International students are staying away from the universities and colleges in Australia’s CBDs in droves.
This is how the Great Depression started. Every year after the Wall St crash, another shock came along, just as people thought it was over. By the early 30s, you had 30% unemployment. And throughout the Great Depression, market cheerleaders continued to opine that ‘the recession is well and truly over’. When in fact the conditions set the stage for WWII.
As French president Nicolas Sarkozy said: “We must overhaul everything. We cannot have a system of rentiers and social dumping under globalisation. Either we have justice or we will have violence. It is a chimera to think that this crisis is just a footnote and that we can carry on as before.”
The barrel is halfway down Niagara Falls, and we are still ‘going well’, according to Glenn Dyer and the vested interests that supplied the MSM commentary.
Get a good dose of doom and gloom from our Australian housing forum site, .
Try Global House Price Crash
(I still don’t speak HTML fluently.)
Wot an innovative new idea, why wasn’t this “peepel’s bank” thingy thought of before? Perhaps it could be called something like the “Bank of Common Weal”?
lol, indeed AR. Although the credit unions and building societies argue that they provide a not-for-profit service with more favourable rates than the Big 4 and so on, thus obviating the need for a gubmint bank as a solution. Very 1950s.
Perhaps they’re right, too — perhaps the days of gubmint-owned and run banks and telcos and other profit-making concerns are over. Christopher Joye has got it wrong again with another hare-brained scheme.
The problems with a gubmint owned and run bank are manifold, in the detail:
1) Bank executives are used to getting multi-million dollar salaries — so how do you remunerate the executives in the gubmint bank? There would be a public outcry on every announcement of multi-million dollar salaries and executive bonuses and perks, etc, and, equally well, if the gubmint bank therefore offered teachers’ salaries to its top execs, they would presumably have trouble attracting the ‘talent’ they apparently need, as the rival banks could always pay more. I think governments are increasingly afraid of getting directly involved in the private sector in this fashion for this sort of reason.
2) Anything the gubmint bank does wrong will bounce back onto GOD (the gubmint of the day). The Opposition will be actively targeting any such business ventures constantly to look for points of weakness to bring down a gubmint. Hence, not running these things makes for good ‘small target’ politics, once again the order of the day.
Another solution might be to simply regulate the existing financial institutions better — APRA is probably doing a barely competent job at best. If you listen to Prof Steve Keen, Australia, the Anglosphere and indeed the entire West has got itself up to its eyeballs in debt through loose banking standards and it won’t end well — hence the GFC. As Sarkozy said, this is not just a blip or a footnote — free market capitalism itself may well be seriously broken as a model. When you consider that lax lending standards have doubled house prices in Australia relative to wages and salaries in a handful of years, you can see just how precarious the system is — and the current problems look like just another downcycle on the endless rollercoaster of the last century of capitalism (really probably a 250 year old experiment now) — where the first time last century it was the Great Depression, with very similar run-up conditions to now. But then of course there was a major international banking crisis, economic crash and subsequent depression in the 1880s where, in Australia, Melbourne house prices were cut by half and suicide rates soared. Housing speculation is actively encouraged by the big party governments in this country, and property spruikers continue to go unregulated year after year.
APRA and the RBA and the politicians have happily watched house prices double relative to salaries, without thought for households’ debt positions, the plight of young families, and so on, uncritically celebrating every increase as the sign of a healthy and prosperous economy, and without thought for the causes of the increase — toxic international finance from Wall St in the form of the financial weapons of mass destruction of CDOs and MBSs, irrational exuberance of the commodities boom being pumped into house prices, creation of the NBLs in Australia offering investment mortgages at the same rates as own-occupier, and at ‘historically low interest rates’ as every stupid talking head politician and pundit loves to recite as a catchphrase. Mainly brought about by the famous Greenspan put, in an attempted recovery from all the other collapsing bubbles.
With the exception of a handful of doom and gloomers like Steve Keen, or Peter Schiff in the US, and Marc Faber wherever he is in the world, ‘nobody saw the downcycle coming’.
They now have to bribe first home buyers with the FHOG and now the FHOB just to lead the lambs to slaughter. Developers want more money? Banks’ profit position hurting? Just draw the difference down from Treasury and go into national debt to the tune of $300bn then. We can’t have the banks and developers losing money based on their poor decision-making and inattention to their risk profiles, the sort of punishment for running a business poorly that the free market is supposed to virtuously self-correct.
I would prefer to see the creation of a nationalised approach to land ownership for the purpose of controlling housing costs. Whitlam did this very successfully in the 1970s, ushering thousands of families in Melbourne into affordable housing in the face of developer corruption and scandals, so successfully that the big developers today would wish and pray that the system is never re-created — and given their stranglehold on the present day ALP, it probably won’t be, although it is the most direct and commonsensical solution to the problems of today — and would have stabilised the economy against the GFC even more. Unfortunately, developer corruption and scandals and land-banking are now an accepted and normalised part of the Australian economy today, a Rum Corps quietly bleeding the country dry.
And while the gubmint is handing out from $14K to $36,500 to FHBs due to the pathologies of the market, if you rely on the public health system for a coronory bypass you will wait for 3 months or more at death’s door, whereas if you pay for the operation they can see you tomorrow.
How does Keane and Dyer’s view gel with this article from today’s Business Age, We’re deaf to the economy’s screeching tyres, cited on Global House Price Crash, Australian forum, in particular mentioning the likely fallout from high and continuing unemployment levels. It’s hardly the longview to be looking towards the end of year or next year in the economy, surely?
Seems like strangely naive reporting from crikey to be honest. Seems well off the mark, and lacking crikey’s usual contrarian vision.