The dud Kangaroo bounce thread

[Sugarlips]

Big picture economist telling it like it is, nice and succinct, oh and the comments..!

https://www.macrobusiness.com.au/2019/08/scummo-has-a-big-problem/

we are having a mini housing bounce post election/rate cuts/tax cuts but it won’t last as Aus is finally nearly zero bound and out of (traditional) ammo..

[Sugarlips]

Regional NSW & Queensland are in a serious drought, water is scarce, everything is dying. It was 39 degrees in Brisbane last week, a record for th3 first week of spring. Even Sydney water supply is impacted with dam levels below 50% and a record heat coming this summer..and yet the immigration taps are still fully open.

https://www.theguardian.com/australia-news/2019/sep/06/dead-things-everywhere-is-australia-facing-the-summer-from-hell

[spygirl]

https://www.housepricecrash.co.uk/forum/index.php?/topic/195761-is-prime-london-crashing-merged-threads/&do=findComment&comment=1103506201

A little bit o Oz sunshine in London ....

 

[Don Coglione]

13 hours ago, spygirl said:

https://www.housepricecrash.co.uk/forum/index.php?/topic/195761-is-prime-london-crashing-merged-threads/&do=findComment&comment=1103506201

A little bit o Oz sunshine in London ....

 

And she claims to have worked in banking? No wonder the financial world is fucked.

[sancho panza]

46 minutes ago, sancho panza said:

The canaries are warming theri vocal chords.

Point to note-46% of new Aussie mortgages are IO.

Ponit to note 30% of exports are coal/iron ore.

https://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/top-goods-services.aspx

 

 

Worth noting that the article refers to the miscalculation of inflation,something this thread has been referencing-hattip to Shaun Richards from me- since it's inception.It also refers to the fact that different socio economic deciles experience varying levels of inflation-again something this thread has been referring to since inception.

https://www.abc.net.au/news/2019-09-08/economy-grinds-down-as-consumers-keep-their-wallets-shut/11487524

On a warm weeknight, Carol Salloum greets a couple of regulars at her restaurant, Almond Bar, in Sydney's inner eastern suburbs.

A year or so back, the popular Syrian eatery would have been full. Tonight, empty tables are a sign of the times.

And it's not just that custom is down; spending is slimmer, even among loyal guests.

"I mean, we've been here now for 12 years and the last 12 months have probably been the most difficult by way of customers not spending," Ms Salloum says.

"You know, rather than two people getting a bottle of wine, they are getting a glass of wine each, that kind of thing. They are thinking twice about where their money is going."

It's no isolated case.

Consumers aren't quite on strike, but there's definitely a consumer go-slow

"At one point I thought we were going into a recession, to be honest but I'd say [it's] somewhere before that," Ms Salloum says.

"Very weak; it doesn't look great from a business point of view."

Her assessment is on the money.

According to the official estimate from the ABS, Australia's economy expanded at an annual pace of just 1.4 per cent in the last quarter — the slowest rate of economic growth since the global financial crisis.

You have to back nearly 20 years to find a weaker result — in the year 2000 when the GST was introduced. Leave that one-off event aside, and the economy is the weakest it's been since the early 1990s.

Wage growth remains a massive issue

Parlous consumption was one of the big drags on the economy, which is not surprising, considering what's been happening with wages growth.

It's been woeful.

Why is wage growth so low?

Why is Australia experiencing its slowest wages growth since World War Two? There are countless theories, but many come back to a shift in power between workers and employers.

 

"The last six years has been the worst period for wages growth since the Second World War," says Jim Stanford, chief economist and director of The Australia Institute's Centre for Future Work.

"Wages have grown so slowly it's undermined consumption, it's undermined job creation and it's contributed to Australia being the most indebted consumers of almost any country in the world."

The wage price index has managed to pull ahead of consumer price rises. But only because — reflecting the weakness in the economy — the inflation rate is extraordinarily low.

If it doesn't feel like your cost of living is falling, though — and you're scratching your head at the talk of wages beating price rises — there may be a good reason.

The price of many necessities of life — food, healthcare, electricity and other utilities — has risen strongly over many years, far outpacing average wage gains.

But the "basket of goods and services" that make up the consumer price index also includes stuff most of us only buy now and again, and people on tight budgets might just forgo: the latest smartphone, for example, or a new whiz-bang laptop, the latest fashion clothing, or international travel.

It means, in effect, that there's a bias towards the well-off and people with a lot of disposable income in the cost of living.

"It all depends on what you buy," says Dr Stanford.

"The reality is that the price of many household essentials has been rising much faster than wages."

"So, if you can afford to spend a lot of your income on luxuries, your inflation rate may well be lower than average, but if you spend most of your income goes on the basic necessities, your cost of living will be likely to have risen far more than your wages and your standard of living will be going backwards."

Home ownership a distant dream for many

House prices aren't included in the Consumer Price Index. If they were, it would tell a very different story.

Despite recent falls, the cost of buying a home has soared in recent decades relative to incomes, pushing the Australian dream of home ownership out of reach for many.

Lower rates, not higher wages

With unemployment looking more likely to rise than fall, don't expect stronger wage growth this year. Expect another rate cut instead.

 

Soaring property prices have also created a huge debt burden.

On some measures, Australia's household debt is the highest in the world; on others, merely second to Switzerland — and that makes us vulnerable.

Martin North of Digital Finance Analytics, who has long warned about the dangers of Australia's high household debt levels, notes that mortgage "delinquencies" — the share of borrowers who aren't keeping up with required loan repayments — have risen significantly, even though the RBA's cash rate and bank lending rates are at historic lows.

"If unemployment starts to rise, that will accelerate," he says.

Australia's unprecedented levels of household debt have never been tested in a recession — but it's worth noting that in the last recession, in the early 1990s, house prices fell by in the order of 20 per cent.

If Australia were to experience mass unemployment at the levels seen back then with today's levels of household debt, Mr North is among those who fear the consequences will be dire.

PHOTO: Martin North has long warned about the dangers of Australia's high household debt levels. (ABC News: Bryan Milliss)

 

During the election campaign and the lead up to it, Treasurer Josh Frydenberg and his colleagues boasted of "the strong economy" — a claim that was not accurate even back then.

The mantra then became that the "economy is sound". Then, as a weakening economy mugged the rhetoric, it changed to "the fundamentals are strong" — a phrase echoed by the Reserve Bank governor.

The claims don't wash with Ms Salloum.

"I can't see it," she says. "Nothing seems 'sound' or 'strong' from our point of view."

There's plenty of folks who would share her feelings.

Low productivity growth by historical standards doesn't sit well with the claims about a "sound" economy with strong fundamentals, either.

Mr North and Dr Stanford are among the many economists and financial analysts worried about the structure of the Australian economy, which relies heavily on two industries to sustain its momentum — mining and construction.

"Both of those sectors have gone from boom to bust and right now we have very little of the hi-tech export-oriented sectors we need to drive growth," says Dr Stanford.

Many of the new jobs being created are not in "hi-tech, export-oriented" sectors but in a suite of industries that Mr North refers to as "the bedpan economy" — labour intensive human services such as aged care, community care and health care.

"Those jobs are not necessarily productive jobs, they are important jobs but they won't tend to deliver high productivity growth," says Mr North.

"My question is where is the next generation of value in the economy going to come from?"

How long can Australia's 'resilient' economy hold on?

In the face of the undeniable weakness, Mr Frydenberg has not dropped the reference to a "strong" economy, instead describing it as "resilient".

That's a fair call; a world-record 28 years without a recession is evidence enough.

Is the economy actually strong?

The Australian economy has been growing for 28 consecutive years, but there are troubling signs, and the future is difficult to see, writes Josh Gordon.

 

Australia's weathered the Asian financial crisis of the 1990s, the tech wreck of the 2000s, and the Global Financial Crisis a decade ago without succumbing. But that record has involved some sound management and a lot of luck.

At some stage, the luck will run out.

Alongside spluttering economic growth and households hunkering down at home, a series of risks lurk offshore — a bad Brexit, the US-China trade war, underlying problems in the Chinese economy blowing up among them.

"Any one of those could play us into a GFC 2.0," says Mr North.

"And if that happens then essentially all bets are off."

"We are going to see very high levels of unemployment, we're going to see a lot of households defaulting on their mortgages and that would have a spillover effect on the economy. That would hit the banks and take us into a very dark corner, in my view."

In recent times, it's only been population growth that's kept Australia out of recession. More people have created more demand but high immigration has also helped to suppress wages.

While the pie's been growing larger, the slices have been getting smaller (leaving aside the distribution of the pie, which is skewed towards those at the top).

Per head, living standards have fallen — a phenomenon that's been dubbed a "per capita recession".

The government and the RBA will be banking on the tax cuts which commenced in July and interest rate cuts to lift the economy out of the doldrums. If we're lucky, things may start to turn around.

But if the luck runs out, there could be far worse to come.'

 

On 07/09/2019 at 06:16, Sugarlips said:

Regional NSW & Queensland are in a serious drought, water is scarce, everything is dying. It was 39 degrees in Brisbane last week, a record for th3 first week of spring. Even Sydney water supply is impacted with dam levels below 50% and a record heat coming this summer..and yet the immigration taps are still fully open.

https://www.theguardian.com/australia-news/2019/sep/06/dead-things-everywhere-is-australia-facing-the-summer-from-hell

Posting this here as well.Incredible to hear that 46% of new mortgages are IO.Insane.Debt levels higher than the UK,no recession for 28 years with a reliance on iron ore/coal exports in a world going green.............what could go worng

On 07/09/2019 at 20:50, spygirl said:

https://www.housepricecrash.co.uk/forum/index.php?/topic/195761-is-prime-london-crashing-merged-threads/&do=findComment&comment=1103506201

A little bit o Oz sunshine in London ....

 

Too funny.Yeah,it's not the price of the £5million flat that's putting off buyers,it's the laminate in the kitchen.....this is the first of many in the capital.

[sancho panza]

I'm in the camp that thinks they're going to tank

 

dare I sufggest that low inventory may be due to negative equity?

https://www.centraltelegraph.com.au/news/australian-house-prices-at-a-tipping-point/3825780/

PROPERTY

Australian house prices at a tipping point

 

 

Australia's housing market is in a situation that can't possibly continue.

A high auction clearance rate and prices rising sharply, plus really low amounts of stock being put up for sale? That's got to change one way or another.

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If prices keep rising, more people will come to the table to sell their house. The other possibility is the recent lift in property market is a temporary blip.

So which is it?

Capital city house prices are rising swiftly. Picture: Supplied.

 

Spring selling season is going to bring us the answer.

The next several months represent the usual peak of the housing market, when buyers and sellers come together en masse to trade homes. If buyers are excited, numerous and ready to borrow, house prices will likely rise. If sellers are excited, numerous and in a hurry to sell, then house prices could level off again, or begin to fall.

One theory is the weak state of the economy will soon take a hold in the housing market and buyers will get nervous.

Australia's economy is in a precarious position. Yes, you can point to things that are going well - exports are strong, the federal budget has spare spending capacity, and employment growth has been high.

But unemployment isn't improving, wages growth remains grim and our GDP growth rate is the lowest it's been in a decade. Per capita GDP growth is negative.

It might make sense for Australian homebuyers to proceed with caution in this scenario. Our household debt remains at historically high levels (as the next graph shows), and trying to pay off debt in a weak economy would be a herculean task.

 

Our household debt remains at historically high levels. Picture: Supplied.

It sure doesn't feel like there's a lot of room for house prices to go up another 20 per cent - not while wages growth remains barely above inflation. If buyers think like this, the property market could soon revert to weakness.

ON THE OTHER HAND

Going off gut feelings about what the property market should do is a good way to be wrong. Yes household debt has already gone up. But the thing about "up" is there is always more of it available. Debt can keep going up for quite some time.

Especially when you look at the policy settings Australia has recently adopted. Two systemic factors have just changed and will make it easier for prospective home buyers to borrow big bucks for a house.

The first change is to do with lending policies. During the house price slip-and-slide of the last two years, several lending rules were changed. Relevant to higher house prices is the rule that banks had to assess borrowers ability to pay back loans assuming an interest rate of at least 7 per cent. Now banks can use their own assessment threshold, which should make it easier for some borrowers to get their hands on bigger loans.

The second big change is in interest rates. In the last few months, the RBA cut interest rates from 1.5 per cent to 1 per cent, as the next graph shows. The market expects them to keep on going, maybe all the way down to 0.25 per cent. The cuts have already translated into much lower mortgage interest rates. You can now find advertised mortgage interest rates below 3 per cent. That's an extremely cheap loan, and buyers have good reason to hope that if they get a variable rate loan it could fall further.

 

The RBA dropping interest rates means buyers can get their hands on some extremely cheap loans. Picture: Supplied.

(By the way, if you already have a home loan, please ring the bank and get a new lower rate. If they won't budge, refinance it. You're going to save a fortune, and if you spend that extra money at the shops, the economy could potentially begin to recover. Which is, after all, the whole point of the interest rate cuts.)

It would be wrong to assess the housing market without considering these two policy changes - changes that should make buyers feel they can afford a property more easily. They suggest buyers could come flooding back, and that the sellers with the confidence to put their home on the market this spring will find buyers to be ebullient.

SPRING

That is why Spring selling season is so important. The number of houses for sale usually peaks in Spring, with the busiest weekend of the year for house sales usually found in October or November.

Relatively few homes were auctioned last year when the real estate news was so bleak. It felt like the houses that were open for inspection were mostly deceased estates, i.e. if people were able to avoid selling, they did. After enough time, that pent-up desire to sell has to be released.

 

The number of houses for sale last weekend is down compared to the same weekend in 2018, according to CoreLogic data. Picture: istock.

 

But the big release has not happened yet.

At the moment, the number of houses for sale is even fewer than last year. There were 1605 houses for sale last weekend, down from 1748 on the same weekend in 2018, according to CoreLogic data. As a result of this mismatch of seller caution and buyer enthusiasm, clearance rates are now much higher - 78.9 per cent in Sydney compared to 53.8 per cent this time last year.

Buyers are squabbling over the few houses that are for sale. If homeowners want to sell in Spring, they need to be getting their skates on now. It takes time to get a house ready for sale. Whether enough vendors are doing so may well determine if house prices go up or down for the rest of the year.

Jason Murphy is an economist. He is the author of the new book Incentivology. Continue the conversation @jasemurphy

[spygirl]

12 minutes ago, sancho panza said:

 

Posting this here as well.Incredible to hear that 46% of new mortgages are IO.Insane.Debt levels higher than the UK,no recession for 28 years with a reliance on iron ore/coal exports in a world going green.............what could go worng

Too funny.Yeah,it's not the price of the £5million flat that's putting off buyers,it's the laminate in the kitchen.....this is the first of many in the capital.

Add to that a totally bent financial sector, which is actually supported by bent Pols, who happen to be drinking buddies with the bank CEO.

The snakes, sharks and crocs are not the things  to worry about in Oz

 

[One percent]

Oh dear. 

https://www.dailymail.co.uk/news/article-7511593/One-ten-Sydney-homeowners-selling-LOSS-highest-proportion-2009.html

Experts have revealed one in 10 Sydney homeowners sold their properties at a significant loss during June, July and August. 

Strathfield, Botany Bay and Fairfield were all named as the most affected areas by CoreLogic's Pain and Gain report, obtained by Nine News.

In Strathfield, located in Sydney's inner west, a whopping 22.8 per cent of properties were sold at a median loss of $76,000. 

[Durabo]

Fantastic news - fingures crossed we get similar headlines here soon!

I write that, then immediately feel guilty for the misery this must be causing people. I hate that I want something so horrible to happen in order to give me a chance at my own family. It shouldn't be this way

[Sugarlips]

10 hours ago, One percent said:

Oh dear. 

https://www.dailymail.co.uk/news/article-7511593/One-ten-Sydney-homeowners-selling-LOSS-highest-proportion-2009.html

Experts have revealed one in 10 Sydney homeowners sold their properties at a significant loss during June, July and August. 

Strathfield, Botany Bay and Fairfield were all named as the most affected areas by CoreLogic's Pain and Gain report, obtained by Nine News.

In Strathfield, located in Sydney's inner west, a whopping 22.8 per cent of properties were sold at a median loss of $76,000. 

Not so fast Batman

https://www.smh.com.au/national/nsw/sydney-s-property-market-is-set-for-a-new-boom-20190927-p52vle.html

3 more .25% rate cuts predicted and the treasurer wants to turn on the infrastructure spending now he’s got his surplus in the bag

still only a matter of time before it blows up but Sydney/Melbourne is definitely a case of ‘the market can stay irrational longer that we can stay solvent’

[sancho panza]

Oz bull is strong what could go wrong with FTBers taking our $410k loans??

 

https://www.smh.com.au/money/investing/buoyant-housing-market-at-odds-with-weak-economy-20200122-p53trh.html

Key parts of Australia's economy are starting the year looking weak, but the housing market is one glaring exception.

There are early signs the first few weeks of 2020 have been strong for property, with two consumer surveys by banks last week showing people were becoming more bullish about bricks and mortar

The typical house in Melbourne will now set you back nearly $860,000.

Commonwealth Bank said its survey of home-buying intentions had reached a record high. Westpac's survey of consumers also said house-price expectations had soared by a "staggering" 58 per cent in the past year, despite an overall slide in confidence this month.

After rapid house-price gains late in 2019, market researcher CoreLogic said Sydney and Melbourne prices rose by another 0.7 per cent in early January, pointing to a strong opening month.

 

Mortgage brokers are also arranging more loans, with broking group AFG last week reporting a 19 per cent rise in loan values compared with last year.

It's early days but, at the very least, the optimism that buoyed housing in the second half of 2019 seems to have carried into the new year, despite the hit to consumer confidence from the bushfires, ongoing sluggish wage growth and weak retail conditions.

 

The Sydney and Melbourne property markets have posted strong starts to the year.Credit:Rob Homer

Why would housing be immune to other forces slowing the economy? And what does all this optimism suggest about property in 2020?

The truth is, rising house prices would not come as much of a surprise to many economists, because of the close links between interest rates and bricks and mortar.

 

Residential property is one of the first parts of the economy to respond to cuts in official interest rates because most people need a lot of debt when buying a house. And official rates are at rock-bottom levels of just 0.75 per cent, with predictions they will fall even further this year.

But there's more than just cheap credit at play here. In the second half of 2019, banks were also allowed to slash the internal interest rates that they use when checking how potential customers would cope if interest rates were to rise.

And from this month, the government started guaranteeing a portion of 10,000 first-home buyer loans a year. The scheme allows people to take out a loan with a deposit of a little as 5 per cent, without paying the added cost of mortgage insurance.

If you put this all together, it paints a picture of strong demand for property this year.

Rising prices should also lead to more properties being listed for sale (i.e more supply), but many analysts don't think that will be enough to prevent prices climbing.

Another house-price boom would encourage more building activity, creating jobs, and could improve consumer sentiment through a so-called "wealth effect".

However, it could also create its own problems.

Rising prices would clearly worsen the problem of housing affordability, and lead to people taking on even more debt. ANZ this month pointed out average loan sizes for first-home buyers have been pushed up to a record high of about $410,000.

Another worry is that we could see a return of  "fear of missing out,"  (FOMO),  driving speculative growth in housing prices in our big capital cities.

 

Eliza Owen, CoreLogic's head of residential research, says the first-home buyer guarantee scheme may "marginally boost" demand from buyers, but it may only be bringing forward purchases that would have occurred anyway.

"While there's probably an element of FOMO at play, the first-home buyer cohort will probably decline as prices rise further in 2020," Owen says.

[Don Coglione]

37 minutes ago, sancho panza said:

Oz bull is strong what could go wrong with FTBers taking our $410k loans??

We were offered $1.4m as FTBs (we were looking for $200k).

The crazy irony is that, had we been daft enough to take it, we would have doubled our money and more (assuming we hadn't topped ourselves over the pressure of paying the mortgage)...

[Noallegiance]

3 hours ago, Ponty Mython said:

We were offered $1.4m as FTBs (we were looking for $200k).

 

Wow. And not in a good way.

[Don Coglione]

30 minutes ago, Noallegiance said:

Wow. And not in a good way.

Indeed. That was between 5 and 6 times joint income, from memory we had but $100k as a deposit too.

The amount of pressure from mortgage advisors to gear up and grab that waterside property was incredible - turns out that the imbecilic cunts were right.

From this experience, I was sorely tempted to short the Australian banks. The royal commission into banking practices uncovered all manner of malfeasance; as far as I am aware, no-one is doing porridge...

[spygirl]

Oz is so tied into China that the economic n political fallout of the virus is going to hammer Oz too.

Nairu. Nairu. Nairu.

[sancho panza]

https://wolfstreet.com/2020/02/27/australia-in-the-grip-of-an-epic-construction-downturn/

Epic Construction Downturn Grips Australia

by Nick Corbishley • Feb 27, 2020 • 18 Comments

The bushfires were just the latest problem: The slump started well before them and also affects states unaffected by them.

By Nick Corbishley, for WOLF STREET:

Construction activity in Australia slumped by 3% quarter on quarter in the fourth quarter of 2019, the Australian Bureau of Statistics (ABS) reported this week. Compared to the same quarter of 2018, construction activity fell 7.4%. It was “a weak end to what was a weak year for the construction sector,” said Westpac senior economist Andrew Hanlan. The sector, which accounts for 13% of Australia’s GDP, has been in cyclical decline since mid-2018, as the Australia’s housing bubble began to deflate and feed through into the construction industry.

The residential building segment has borne the brunt of the pain, with a 4.6% drop in the fourth quarter from the third quarter. On a year-over-year basis, residential construction slumped by 12.6%:

Given the scale of the housing bust that has swept through Australia’s core markets from late 2017 through mid-2019, with prices down by as much as 14% in Sydney and 10% in Melbourne, it’s hardly surprising that residential building is in the doldrums. Despite a rebound over the second half of 2019, property values across most regions remain below their previous record highs, set in 2017.

Disruptions from the extensive bushfires that decimated more than a fifth of Australia’s forests also had an impact on construction activity. New South Wales, the worst-hit state, suffered big year-over-year declines in both residential building (-21%) and total building (-11%) in the fourth quarter. Bushfire rebuilding and recovery activity is likely to have a positive impact on construction activity in the coming quarters, ABS says, though stiff regulatory obstacles could make it more difficult to get permits to build in fire-prone areas.

But significant year-on-year falls across all regions, including ones that were either just mildly impacted by the bushfires (Tasmania, south-eastern Queensland and south-western Western Australia) or not impacted at all (Northern Territories), suggest that the problems besetting Australia’s construction industry extend far beyond the disruption caused by the wildfires.

Work on “non-residential buildings” (mainly commercial real estate) decreased by 3.4% in the fourth quarter from the third quarter, although year-on-year it was up just over 3%. BIS Oxford Economics says the recent decline was probably due to patchy quarterly activity since there is a strong pipeline of office, hotel and hospital projects.

Also in the dumps is the “engineering construction” segment — a category that includes the design and delivery of industrial plant, such as the construction of structures for the oil and gas industries, power generation, processing, mining and manufacturing industries, and water and environmental works. According to the ABS data, the volume of engineering construction work performed during the fourth quarter of 2019 dropped by 8% year on year.

The declines affected all of the country’s regions including Western Australia (down 9.8% year on year) whose massive mining boom turned to bust a few years ago, leaving the region’s economy and housing bubble in tatters. Growth in lithium mining initially helped pick up some of the slack for a while but even the lithium mining sector has been in a bear market for a year.

As construction in Australia slows, more and more companies in the sector appear to be engaging in the high-risk supply-chain finance technique of “reverse factoring” to improve the outward appearance of their cash flow situation.

Australia’s largest construction company, CIMIC has made liberal use of “reverse factoring.” Its stock has plunged over 50% since last April, wiping close to AU$8 billion (US$5.3 billion) off its market value. The initial trigger was a report that accused CIMIC of using reverse factoring agreements with financial institutions to create the illusion of cash flow, reduce the appearance of debt, and lower its leverage ratios — a charge the company has since admitted.

“Reverse factoring” was in part responsible for the recent collapse of companies like Spanish energy giant Abengoa and UK outsourcing behemoth Carillion, and is a key issue in the scandal surrounding NMC Health, whose shares were suspended in London today.

CIMIC can’t seem to get a break. In January, CIMIC announced it was abandoning its Middle Eastern operations and booking a AU$1.8 billion ($1.2 billion) charge-off.

Now, it could face a similar problem with a major project in Australia: the construction of the $6.7 billion West Gate Tunnel, which has been brought to a grinding halt following a dispute between the state government, the toll road company, Transurban, and the project’s builders, including CIMIC, over who should pay the extra costs of dealing with large amounts of contaminated soil. As the delays drag on, the likelihood of the construction companies walking away from the project altogether, citing “force majeure”, grows — which could all culminate in costly litigation. And that is the last thing that CIMIC needs right now

[Sugarlips]

https://www.macrobusiness.com.au/2020/03/by-year-end-scomo-will-own-your-house/

The predictions here are so massive it’s hard for me to get my head around it

[Sugarlips]

Restlessness is growing at the inertia down under, fromReddit:

“I hope when this is all said and done, Australians take stock of how and why we were exposed to this crisis.

It’s not the Chinese or the Italians or the Iranians we should be looking at. But in our own back yard. Decades of weak and corrupt political leaders have put us at risk.

We are a continent of almost unlimited resources. Until recently we were the most affluent (on paper at least). We are a net exporter of food. We are one of the most technically advanced countries in the world. We have the intelligence, resources and ability to control the spread of this virus, care for our sick, and wait out all the supply issues while the rest of the world implodes.

And yet, here we are. We can’t protect our first responders because we can’t manufacture masks. Our hospitals will buckle under the weight of our sick because we’ve spent decades trying to force people into an American style private health system while neglecting the staff and resourcing of our public system.

We can’t even be adults and warn the public without freaking everyone out. We spent the months since the start of the crisis in China telling everyone not to worry – it’s just the flu bro. This was so pervasive that even some of our healthcare professionals are paying off the threat. And now we shame the people who, perhaps misguided, rushed out to protect their families when the collective realisation set in. That we don’t make anything in this country. Our medications, our antibiotics, anything not grown in the ground (except TP) is shipped in from China.

We all know this. We ship wool to China, they ship cheap T-Shirts to us. We ship coal and iron ore to China, they ship cheap steal to us. We import most of our oil. We can barely keep electricity affordable despite having some of the largest gas and coal reserves in the world. Our political leaders, from Keating, to Howard, to Rudd/Gillard/Rudd/Abbot/Turnbull/Scotty from marketing. All they have achieved is the dismantling of Australian sovereignty. They have exported our security and turned us into a tributary state. People will die, not just from the virus, but from all the secondary complications caused by supply issues and overloaded hospitals. It is these people, their corporate overlords, and their media mates, who have traded the wealth of this country for beans.

They will not be affected by this. Their families are protected. Yours are not.”

[spygirl]

1 hour ago, Sugarlips said:

Restlessness is growing at the inertia down under, fromReddit:

“I hope when this is all said and done, Australians take stock of how and why we were exposed to this crisis.

It’s not the Chinese or the Italians or the Iranians we should be looking at. But in our own back yard. Decades of weak and corrupt political leaders have put us at risk.

We are a continent of almost unlimited resources. Until recently we were the most affluent (on paper at least). We are a net exporter of food. We are one of the most technically advanced countries in the world. We have the intelligence, resources and ability to control the spread of this virus, care for our sick, and wait out all the supply issues while the rest of the world implodes.

And yet, here we are. We can’t protect our first responders because we can’t manufacture masks. Our hospitals will buckle under the weight of our sick because we’ve spent decades trying to force people into an American style private health system while neglecting the staff and resourcing of our public system.

We can’t even be adults and warn the public without freaking everyone out. We spent the months since the start of the crisis in China telling everyone not to worry – it’s just the flu bro. This was so pervasive that even some of our healthcare professionals are paying off the threat. And now we shame the people who, perhaps misguided, rushed out to protect their families when the collective realisation set in. That we don’t make anything in this country. Our medications, our antibiotics, anything not grown in the ground (except TP) is shipped in from China.

We all know this. We ship wool to China, they ship cheap T-Shirts to us. We ship coal and iron ore to China, they ship cheap steal to us. We import most of our oil. We can barely keep electricity affordable despite having some of the largest gas and coal reserves in the world. Our political leaders, from Keating, to Howard, to Rudd/Gillard/Rudd/Abbot/Turnbull/Scotty from marketing. All they have achieved is the dismantling of Australian sovereignty. They have exported our security and turned us into a tributary state. People will die, not just from the virus, but from all the secondary complications caused by supply issues and overloaded hospitals. It is these people, their corporate overlords, and their media mates, who have traded the wealth of this country for beans.

They will not be affected by this. Their families are protected. Yours are not.”

Indeed.

Beyond digging stuff up ir cash crops, the rest of Aus economy is just dumb banks n housing.

Aus should have led the way with solar power and infrastructure esp autonomous n rail.

Instead it's a pure Nairu play on housing n bent chinky money.

[sancho panza]

23 hours ago, spygirl said:

Indeed.

Beyond digging stuff up ir cash crops, the rest of Aus economy is just dumb banks n housing.

Aus should have led the way with solar power and infrastructure esp autonomous n rail.

Instead it's a pure Nairu play on housing n bent chinky money.

https://wolfstreet.com/2020/03/22/australias-construction-industry-on-brink-of-collapse-industry-chief-problems-started-in-2019-now-comes-covid-19/

Australia’s Construction Industry “On Brink of Collapse”: Started Going to Heck Last Year, Now Comes COVID-19

by Nick Corbishley • Mar 22, 2020 • 63 Comments

Bailouts, please!

By Nick Corbishley, for WOLF STREET:

Australia’s construction industry, which accounts for 13% of Australia’s GDP and one in ten jobs, is unsustainable and on the brink of collapse, according to Joe Barr, the CEO of John Holland, one of Australia’s biggest infrastructure firms and a wholly owned subsidiary of China Communications Construction Company (CCCC).

“I won’t sugar coat it,” he told The Australian Financial Review. “Tier one contractors in Australia are not making any money, and governments across Australia keep having successive project cost blowouts.”

The underlying message was not exactly subtle: Unless the government recognizes the pressures the industry is under and allows construction companies to renegotiate contracts that are either behind schedule or beset with cost overruns, companies could begin dropping like flies. Bailouts, while not explicitly mentioned in the interview, may also be on the docket.

It’s a message that has been conveyed by captains of all kinds of industry in all kinds of countries since Financial Crisis 2 began. As the economy freezes, companies suddenly see their revenues and earnings drop precipitously. Out of force of habit, they then ask the government to make up the difference.

In the case of Australia’s construction industry, it was already in trouble before the virus crisis hit. By the tail-end of last year, a multi-year boom had begun to turn to bust. And companies in the sector are now beginning to panic.

“We are in the midst of Australia’s biggest infrastructure boom, but as an industry, we are teetering on the brink of collapse,” Barr said. “While [the government has] projects worth hundreds of billions in planning along the east coast, it is unclear if there will be an industry left to build them.”

John Holland posted a A$60 million loss for 2019 after multiple margin write-downs on specific projects. Its biggest headache is the A$6.7 billion (US$3.9 billion) West Gate Tunnel project in Melbourne, which has been suspended for months following a dispute over who should pay the extra costs of dealing with huge volumes of contaminated soil at one stretch of the tunnel: the builders (John Holland and CIMIC, Australia’s largest construction company) or roadtoll company Transurban.

CIMIC and John Holland already terminated a contract to build the new tunnel in January, arguing they were not responsible for the unexpected cost and difficulty of disposing of the soil, which contains dangerously high levels of PFAS (per- and polyfluoroalkyl substances). Neither the government nor Transurban wants to stump up the cash either. The longer the dispute simmers, the more likely it is to scupper the project altogether.

That is the last thing that either John Holland or CIMIC needs right now. Both companies were in the red for 2019 — CIMIC to the tune of $1 billion. The loss came from the company’s decision to book a A$1.8 billion (US$1.2 billion) charge-off after failing to recover debts owed for projects built (or in some cases, barely built at all) at the tail end of Dubai’s property bubble. These project failures have cost the company billions in losses.

CIMIC’s stock has plunged by 60% since April 2019, wiping around A$9 billion in market value. Even before the arrival of Financial Crisis 2, the shares had plunged 40%. The initial trigger was a report that accused CIMIC of using reverse factoring agreements to create the illusion of cash flow, reduce the appearance of debt, and lower its leverage ratios — a charge the company has since admitted. Like other companies in the sector, CIMIC appears to have been making liberal use of supply chain finance techniques like reverse factoring to mask its cash flow issues.

And then the virus crisis began. While Australia, currently in early autumn, has not been as affected by the virus as many countries in the northern hemisphere, the number of Covid-19 cases down under is rising, recently surpassing 1,000. The virus has also hit Australia’s production and supply chains which are heavily dependent on Asia, in particular China, Australia’s largest trading partner. For CIMIC, the recent market turmoil could end up scuppering the sale of its massive mining services unit, Thiess, which was supposed to help stabilize its finances.

The market response was brutal. Last Thursday, CIMIC’s shares crashed by 31% to their lowest level since 2005. Then, on Friday, the shares bounced back 51%, but only after CIMIC’s majority shareholder, German construction giant Hochtief, signaled that it was buying 4.3 million new shares. That was enough to reassure investors, at least for one day. But concerns are rising, both at CIMIC and the industry at large.

Even before COVID-19 struck, disrupting the sector’s supply chains and halting activity on a few projects, Australia’s construction industry was already in the doldrums. In the fourth quarter of 2019, activity in the sector slumped by 7.4% year on year. The residential building segment bore the brunt of the downturn, with a 12.6% year-over-year drop in the fourth quarter. This was largely a result of the housing bust that swept through Australia’s core markets from late 2017 through mid-2019. The disruptions from last year’s bushfires then added to it:

Also in the dumps is the “engineering construction” segment — a category that includes the design and delivery of industrial plant, such as the construction of structures for the oil and gas industries, power generation, processing, mining and manufacturing industries, roads, water and environmental works. According to ABS data, the volume of engineering construction work performed during the fourth quarter of 2019 dropped by 8% year on year.

These sorts of projects are bread and butter for companies like CIMIC and John Holland. Now there’s less of them, industry representatives are clamoring for the government to lend a helping hand.

The government has already unveiled a A$6.7 billion stimulus package for small businesses while the Reserve Bank of Australia has made extra funds available to banks and non-bank lenders so that they can provide support to companies. It’s a welcome step in the right direction, says Rebecca Casson, CEO of industry group Master Builders Victoria, but not enough. Casson urged all levels of government to approve reasonable requests for time extensions even if the contracts do not technically allow them.

Industry groups are also calling on the government to launch a new public infrastructure maintenance program across Eastern Australia, to provide fresh work for companies in the sector. But fulfilling that work might be easier said than done given the growing problems companies are facing getting hold of basic raw materials, many of which are sourced from South East Asia, where countries such as Malaysia are already beginning to shut down their economies. By Nick Corbishley, for WOLF STREET.

The bushfires were just the latest problem: The slump started well before them and also affects states unaffected by them. Read… Epic Construction Downturn Grips Australia

[sancho panza]

https://www.theguardian.com/australia-news/2020/apr/03/australian-housing-market-takes-a-huge-hit-with-auctions-set-to-plummet-further-this-weekend

Australian housing market takes a huge hit with auctions set to plummet further this weekend

Analysts at investment bank UBS, meanwhile, have modelled house price falls of anywhere between 5% and 20%, depending on how severe the pandemic becomes.

The bank’s chief economist, George Tharenou, said the number of properties will “collapse – likely more than halving near-term – as long as the ban on auctions and open home inspections remains”.

“We also revise our forecast for home prices to start falling, given the hit to demand from the looming sharp recession and spike in unemployment,” he said in a note to clients on Wednesday.

Meanwhile, on online property investment forums, greed battles with fear amid guesses that falls will be in the order of about 20%.

 

[Don Coglione]

7 hours ago, sancho panza said:

https://www.theguardian.com/australia-news/2020/apr/03/australian-housing-market-takes-a-huge-hit-with-auctions-set-to-plummet-further-this-weekend

Australian housing market takes a huge hit with auctions set to plummet further this weekend

Analysts at investment bank UBS, meanwhile, have modelled house price falls of anywhere between 5% and 20%, depending on how severe the pandemic becomes.

The bank’s chief economist, George Tharenou, said the number of properties will “collapse – likely more than halving near-term – as long as the ban on auctions and open home inspections remains”.

“We also revise our forecast for home prices to start falling, given the hit to demand from the looming sharp recession and spike in unemployment,” he said in a note to clients on Wednesday.

Meanwhile, on online property investment forums, greed battles with fear amid guesses that falls will be in the order of about 20%.

 

A fall of 20% wouldn't even touch the sides in the major cities. At 50% off, I might start to browse.

It is extraordinary that the Australian police are moving on anyone with the temerity to sit on a park bench, yet the schools remain open; I can only put this down to the levels of mortgage stress out there.

[sancho panza]

@Sugarlips

What news of the Ozzie hosuing market?

[Sugarlips]

42 minutes ago, sancho panza said:

@Sugarlips

What news of the Ozzie hosuing market?

Hi SP

I follow this site, excellent insights backed up with hard data, worth listening to Martin when you get the time.

https://digitalfinanceanalytics.com/blog/

His macro take is nothing new but very succinct: we are at the end of a 25 year period which was a complete anomaly, ever reducing interest rates, govt incentives (first home owner grants, negative gearing etc), families going from single to joint income, QE, China going ex-growth, aging population, no wage growth, high under employment, tapped out consumers, end of the immigration ponzi etc.

The Oz govt has put most employees/ employers on bail out schemes til end of Sept so we are at the Wiley Coyote gravity defying moment but even the ABC are saying 9% unemployment by Christmas and not improving in 2021. The banks are also deferring payments on mortgages and moving some on to interest only, for now. 

Could take another year to play out but high rise apartments and cheaply built townhouses an hour+ from cities will hurt the most (30-40% down predicted).

Inner city Syd/Mel rental vacancy rates shooting up so this is where the pain will be felt along with Gold Coast whose hoteliers are bleeding due to the interstate travel restrictions 

Perth was already more than 20% down and back to 2006 prices pre-CoVID but with tight rental supply WA may be less impacted all depending on how the China situation plays out. If the shtf with China invading we intend to move to IOW with David Icke &  @wightflight.

[TheCountOfNowhere]

5 hours ago, sancho panza said:

@Sugarlips

What news of the Ozzie hosuing market?

Up of course....house prices only ever go up.

Joking aside, I know a man from Sydney, old school friend, who is into property...let me ask