At Werri Beach today this large shark was approaching a surfer, and I used my drone's speaker system to warn him. Watch him look up at the drone, then bolt, with the sudden splashing warding off the approaching shark
@smh
@FinancialReview
It's increasingly clear that the RBA has made a major policy error by not following peer central banks, and the recommendations of its own models, by lifting the cash rate to 5% to crush this inflation crisis. It has sadly learnt nothing from history. It's equally clear that
I'm often asked how much time/effort it takes to write an AFR column. It’s funny because traders on the street know that on Friday mornings, I will be buried in one. Last Friday was a normal day for us: we did about $450m of trades, and I actively directed ~$300m of them. A
It is astonishing to think that in the middle of the worst inflation crisis in decades driven by what the RBA characterises as “excess demand”, Australian politicians are running bigger budget deficits than they did during the global financial crisis.
An essential feature of the
Australia’s fall in disposable income is the worst in the world:
Australian households experienced the largest fall in disposable incomes across the OECD over the past two years, and economists forecast it will take another two years for purchasing power to recover to
Australia is now among the biggest government spenders on disability in the world, outlaying more than $84 billion a year (more than 3 per cent of GDP), including for the NDIS, disability support pension, and the carer payment. This is more than double the share of GDP in the
Top resi real estate agent in Australia, Alexander Phillips who sells >$1bn of homes a year, called tonight and said market is turning. His phone has been inundated with nervous vendors wanting to quickly list homes to catch this bounce. He thinks "gains between Feb and May are
Huge story in AFR today with RBA's recently departed head of economics research smashing the central bank:
"The Reserve Bank’s recently departed research chief says a decision not to raise interest rates further risks entrenching high inflation and hasn’t been adequately
Big upside surprise on Aussie inflation, as we expected, with core printing at 1% in the quarter and 4% over the year vs the inferred RBA forecasts of 0.8% and 3.8% - RBA should be lifting rates here in line with global peers (RBNZ is at 5.5%, US is at 5.25-5.5% and Britain is at
RBA resisted political pressure and did the right thing, lifting the cash rate to 4.35%, still only a shade above what they say is the "neutral rate" of 3.8% - and still not getting inflation *inside* their target 2-3% band until 2026... They look like they are behind the curve
So the RBA considered hiking rates this week, but took the dovish option of keeping rates on hold and fudging their forecasts to pretend they can get inflation below 3pc next year so as to not annoy their political masters. Yet another central bank trading away its political
The RBA estimates that about 16pc of all Australian borrowers cannot refinance their home loans at current interest rates because they cannot meet the serviceability requirements for a new loan…
RBA now on track to hike rates in June given upside surprise to today's inflation, lifting the cash rate from 3.85% to 4.10% in more pain for borrowers and home owners. This will bring the RBA much closer to global central banks like BoE at 4.5%, the Bank of Canada at 4.5%, the
My preternaturally diplomatic analysis today in the AFR: The Reserve Bank of Australia is truly screwed. It has once again been humiliated by a predictably protracted, and now re-accelerating, inflation crisis that it refuses to tackle for fear of upsetting its political masters,
Looks like RBA will meet expectations for a terminal cash rate of 3.6% with another two rate hikes in Feb and March following the upside surprise to Aussie CPI...
Interesting to see Treasurer Jim Chalmers trying to directly jawbone the RBA into not hiking by arguing that the inflation result does not meet the "material" upside surprise test Bullock set - despite every economist and the market saying it does... Treasurers don't normally
Does any seriously believe house prices will not fall after the RBA cutting the cash rate from 1.50% in 2019 to 0.1% in 2020 drove Aussie houses prices 37% higher---reversing this out by lifting the cash rate back to 1.50% will push prices 15-25% lower...
Acquire everything! It’s a bull market! Equities are cheap! The buy-the-dip-reflex will prevail! Central banks will slash rates and lift their inflation targets! Residential and commercial investment properties paying net yields that are half the return on risk-free cash are
From DB: We estimate that Australia's Federal and state governments are adding fiscal stimulus in 2023-24 worth around 2% of GDP (or $50bn). Outside of the GFC and covid eras, that is the most since at least 1998-99 and sits entirely at odds with the 400bps of monetary policy
Big upside surprise on Aussie inflation: RBA expecting 0.9bps, printed 1.2% to 1.3% in Sep quarter; core inflation was 5.2% last 12mths (vs 2.5% RBA target); trimmed mean last quarter revised up from 0.9% to 1.0%. Last 6mths core annualised is 4.3% vs RBA forecast of ~3.6%. They
If the Libs allow first time buyers to unlock their super to buy a house, which has never been allowed before and is a real surprise, we would have to revisit our forecast for a 15-25% correction in prices after the first 100 basis points of RBA cash rate increases…
The RBA is hierarchical, insular, supercilious, hubristic, resistant to outside influence, and exceptionally slow to recognise and respond to its own mistakes. It must be overhauled...
Australia’s inflation rate highest among major advanced economies: The Economist last week found Australia had the most entrenched inflation of 10 large advanced economies. “In Australia, our worst performer, the labour market is on fire,” it wrote.
“Over the past year, labour
Sorry to be the bearer of bad news, but the luxury housing market is tanking, contrary to what real estate agents claim...My analysis enclosed
@Johnkehoe23
@GrogsGamut
@GreenJ
RBA and others like to talk about Aussie households having large mortgage "repayment buffers" on average. Yet this CBA data shows that 36% of all borrowers have zero buffer and almost 50% of borrowers have less than 3 months.............
House prices to get whacked by rates again: If the cash rate does indeed hit 4.8 per cent, it would mean that purchasing power has been eroded by a total of 33 per cent since the RBA kicked off this cycle in May last year. In dollar terms, the value of a home that the median
The RBA is not forecasting inflation will get back to 2.5% until 2027. This is what Phil Lowe said last year: “Many countries now are saying that inflation won’t get back to target until the end of 2025. That’ll be four years with inflation above target … and if central banks
Why you don’t swim at Hyams Beach at dusk - two massive great white sharks filmed today a few metres from shore, patrolling the beach. Beautiful creatures, but they need space
@NSWSharkSmart
@DorsalAus
@smh
Full vid on my Linkedin page
Westpac highlighting that most of the demand/growth/inflation in Australia is being driven by public, not private spending. Where would interest rates be in the absence of this:
"The domestic demand impulse (spending by consumers, businesses, and governments) is expected to
Interesting from the RBA: "some borrowers will not feasibly be able to service their loan. In this case, provided their property can be sold for more than their loan amount (i.e. they are not in negative equity), these borrowers could sell their property and pay back their loan
ANZ: "House prices on track to fall 18% by end 2023... The biggest factor driving down prices is reduced borrowing capacity not a rise in forced sales."
Impressive analysis from Kehoe et al:
"Inflation and higher taxes are eroding household incomes by triple as much as elevated interest rates, undermining Treasurer Jim Chalmers’ claim that the Reserve Bank of Australia’s monetary policy is “smashing” the economy.
Analysis from
Interesting RBA chart: over 52% of borrowers will see “spare cash” fall by 20-100% assuming cash rate hits 3.6%. Spare cash = income borrower has after mortgage payments + “essential expenses”. Staggering 15% of borrowers will have -ve spare cash, meaning they risk default...
Anecdote from my AFR column today: “For Australia’s inflation rate to subside, we will also need more productivity to rationalise the brisk rates of wage growth. This will in turn demand radical attitudinal change from entitled millennials who have never experienced high
According to Kehoe, prepare for "multiple interest rate rises that are needed to quash inflation". But who seriously thought the most dovish central bank in the world would get away with the weakest monetary policy stance in the world in the midst of the biggest inflation crisis
Super nasty US core inflation number for Q1, coming in at 3.7% vs consensus forecast of 3.4%. The global reacceleration is clear---and it will worry RBA deeply. Next question is when, if at all, does market contemplate Fed hikes?
RBA governor Phil Lowe said today that for Aussie inflation to hit its 2-3% target, wages can only grow at circa 3.5% pa, or 2.5% plus 1% productivity. The RBA's currently preferred measure of labour costs, Unit Labour Costs (wages less productivity), have risen from 6.3% pa
Super strong US employment data will embolden Fed to push to 5.25pc and possibly beyond, also raising risk RBA hikes past 3.6pc. House price declines not likely to slow until RBA stops hiking. Lower bound of our 15-25pc forecast correction could be an optimistic outcome…
The RBA should hike in August - our analysis: Underlying inflation continues to track above the RBA’s forecast profile, suggesting that the board should raise rates in August.
Headline inflation came in above market expectations for the third month in a row in May, up 4.1% over
DB's Phil Odonoghoe: The RBA released its latest semi-annual Financial Stability Review today, and below we reproduce a chart from that document that tells a vitally important story about Australian household sector resilience.
Bottom line: Australia's labour market is too strong
RBA and Fed clearly now captive to the political and asset pricing oligarchies where the central banks' inflation targets are not worth the paper they are written on as politicians wrest control of monetary policy back from unelected bureaucrats. Treasurer doing to the RBA
After some cajoling, I’ve dusted off my double barrel shottie and have agreed to track, hunt and eliminate the biggest housing bull of them all:
@TheKouk
via the
@PodcastFear
podcast hosted by Sean Alymer. You smell that in the air? It’s gonna be a Bull BBQ!
@Johnkehoe23
Aussie house prices now down 7.1%, and falling at a 14.6% annual pace. Sydney and Brisbane house prices falling at an 18-20% annual rate... (with corrected chart)
My AFR column - Central bank independence is dead
The US Federal Reserve is politically compromised, and it’s entirely plausible that the Reserve Bank of Australia suffers from similar problems.
This should not come as a surprise. Central banks subjugating their inflation
The monthly CPI showed underlying inflation remains uncomfortably high, tracking above the RBA’s forecast profile and placing pressure on the RBA to hike again in July, where its peers are confronting the same problem of it taking too long for inflation to return to target with
Reserve Bank ‘smashing the economy’ via rate hikes, Treasurer Jim Chalmers declares: Jim Chalmers has declared the Reserve Bank is “smashing the economy” with its aggressive run of rate hikes in comments that shift blame on to the central bank governor, Michele Bullock, ahead of
CBA: There is on av. a 3 month lag b/w an RBA rate hike and when CBA borrowers on variable rate mortgages experience an increase in their repayments. This explains why official spending data has remained strong but consumer sentiment sits at levels associated with a recession.
Westpac data shows that exactly 50% of all borrowers are less than one month ahead on their mortgage repayments, or behind... I believe this includes offset accounts.
From the best rates strategist in Australia, Barrenjoey's Lilley: "Using the trimmed mean is preferable – Australia's six month annualised rate of trimmed mean inflation of 3.6% is the highest inflation globally (higher even than the US at 3.2% 6mAR trimmed)."
Farewell Terry McCrann, arguably the greatest business columnist Australia has ever seen. While many disagreed with the content, and some found fault with the prose, there was a touch of genius in almost every column Tezza wrote. We will miss you great man...
It is funny how many people don’t like looking at a chart plotting the peak to trough fall in Aussie house prices and who ask me to zoom out to make it appear more palatable…
It's a real worry when top journo's say the reason the RBA may not raise rates today is to avoid upsetting politicians like the treasurer
@JEChalmers
:
"Given this global backdrop, Bullock might be tempted to hold off raising interest rates at Tuesday’s board meeting. Instead,
A property I heard about was listed with hopes of $6m plus, then cut to $5.75m, then $5.25m, and looks like it will trade at $4.5m, around where it was bought 2yrs ago...
Wishing everyone an excellent 2023, thanks for the discussion, debate, education and general interaction. I really appreciate it. To my crypto bros, here's hoping bitcoin can stay above US$10k :)
Warren Hogan, who has called this rates cycle very well: "Make no mistake this is domestic inflation. Not global. Not supply chain. Not oil prices. Those factors are secondary to the domestic inflation pulse which seems to be running around 4.5%."
RBA now on track to hike rates in June given upside surprise to today's inflation, lifting the cash rate from 3.85% to 4.10% in more pain for borrowers and home owners. This will bring the RBA much closer to global central banks like BoE at 4.5%, the Bank of Canada at 4.5%, the
Australia's top rates strategist, Barrenjoey's Andrew Lilley:
I think the RBA are very close to hiking- it is a line ball call. I’d assign a 40% chance they hike by August and a 60% chance they don’t. Part of that 40% encompasses two hikes (so it is close to 20% of one hike, 20%
Sydney house prices have now fallen 3.0% from their peak according to CoreLogic; Melbourne house prices are off 1.8%... Did anyone seriously think that rate hikes would not lead to sharp house price falls after rate cuts pushed house prices up 37%?