Murray Inquiry to boost small business lending

ScreenHunter_5219 Nov. 28 15.00 By Leith van Onselen The AFR's Chris Joye has published article today arguing that the Murray Financial System Inquiry will likely drive the major banks to increase loans to businesses as increased capital requirements on mortgages makes housing lending less profitable: The Murray inquiry could also drive a dramatic increase in major-bank lending to small businesses and companies as the 67 times leverage (or 1.5 per cent equity) they currently employ when lending against Australia’s housing market shrinks significantly. More equity and less leverage mechanically yields skinnier returns on home...
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Australia: Haven for bank control frauds?

ScreenHunter_2952 Jun. 24 12.41 By Paul Egan & Philip Soos - Co-Author’s ‘Bubble Economics: Australian Land Speculation 1830 – 2013’   Exuberant household credit growth over the last twenty years has a sinister dimension: the likelihood of widespread predatory lending and bank fraud. Every developed country, including Australia, has laws to regulate and hopefully prevent predatory lending, defined as providing credit to a borrower in full knowledge they lack the capacity to repay it in a timely manner, if at all. Relevant laws and regulations stipulate loan amounts must not exceed the assessed debtor repayment...
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ANZ forecasts rates rise into lower GDP growth

ScreenHunter_24 Oct. 16 09.13 By Leith van Onselen ANZ has revised its forecasts, now tipping lower GDP growth and weaker income growth, but curiously still forecasts 100 basis points of interest rate rises from November 2015: We have revised down our growth profile for Australia, and now expect slightly softer growth in 2015 and 2016 of 2.9% and 3.2% respectively. This new forecast incorporates recent sharp downward revisions to our iron ore price forecast, and has seen us take around 1ppt off our nominal GDP forecast and around ¼ppt off real GDP growth. Lower commodity prices will weigh on profits and wages, while also...
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The banks’ real capital levels are falling

ScreenHunter_06 Jun. 26 22.42 By Martin North, cross-posted from the Digital Finance Analytics Blog: APRA yesterday published the quarterly ADI performance statistics to September 2014. Over the year ending 30 September 2014, ADIs recorded net profit after tax of $33.5 billion. This is an increase of $3.6 billion (12.0 per cent) on the year ending 30 September 2013. As at 30 September 2014, the total assets of ADIs were $4.2 trillion, an increase of $345.0 billion (9.1 per cent) over the year. The total capital base of ADIs was $210.4 billion at 30 September 2014 and risk-weighted assets were $1.7 trillion at that date....
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House prices to rise further in 2015?

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen The AFR is has published results of a new survey of prominent economists and market observers forecasting that house prices will continue to rise in 2015: The finder.com.au Monthly Reserve Bank Survey of 37 market experts found that 69 per cent of those questioned think that house prices will continue to rise over the next year. However, 14 per cent expect prices to stabilise and 17 per cent expect them to fall. For what it's worth, I expect house prices to rise next year, but at a slowing rate, and expect values to peak sometime in late-2015/ early 2016. This view is...
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Investor mortgage credit gains momentum

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of October: A chart showing the long-run breakdown in the components is provided below:   Personal credit growth (0.0% MoM; 0.4% QoQ; 1.0% YoY) remains in the gutter, whereas business credit growth (0.7% MoM; 1.1% QoQ; 4.3% YoY) and housing credit growth (0.6% MoM; 1.8% QoQ; 7.0% YoY) continue to accelerate, but remain below its long-run average growth rate (with housing credit still growing more than twice as quickly as wages and off a very large debt...
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Cabcharge in hypocritical attack against Uber

ScreenHunter_5210 Nov. 28 10.23 By Leith van Onselen Russell Balding, the Chairman of one of Australia's biggest rent seeking companies, Cabcharge, has hypocritically attacked Uber's ridesharing service, Uber-X, calling for a government crackdown on the grounds that it is both "dangerous and illegal". From ABC's The Business (video above): "It's a rideshare activity that's illegal. And alls I'm asking governments to do is to look at the issues of having a level playing field"... "I welcome competition. I welcome app-based competitors. But the taxi and hire car company operates in a regulated market, and I think all...
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7.30 Report does foreign property investment

ScreenHunter_5115 Nov. 24 09.52 By Leith van Onselen ABC's 7.30 Report did a good job covering the parliamentary inquiry's report into foreign investment in Australian real estate, featuring two segments on the issue last night. In the first segment, the show interviewed a number of players in the real estate industry with direct exposure to foreign investors, with real estate agent, Robert Simeon, providing the most damning assessment: "All of a sudden we're seeing this tsunami of overseas money coming in and it's sort of, like, wiping out markets, wiping out market demographics, it's denying people of the opportunity to...
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Residex on why boomers are hog wild for housing

ScreenHunter_05 Apr. 15 22.08 By Leith van Onselen Residex has released its dwelling price results for October, which revealed 0.49% growth for houses nationally and 0.15% growth in unit values at the national level. Over the year, there has been a clear slowing of momentum, with house values growing by 6.71% nationally, with unit values up by 6.69% (see next chart). As shown above, there is significant divergence in growth rates across the capital cities and regions, with Sydney (+16.83% YoY houses, 13.99% YoY unites) way out in front of the other capitals, and driving growth nationally, and at the other end of the...
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Parko departs with bitter message from the pulpit

ScreenHunter_05 May. 21 15.13 By Leith van Onselen Outgoing Secretary of the Australian Treasury, Dr Martin Parkinson, has given his final speech to the Committee for Economic Development of Australia (CEDA), in which he Below are the key extracts. First, Dr Parkinson outlines the conundrum facing the Australian economy, whereby GDP growth will be supported by rapidly rising mineral export volumes, given a reasonable "headline figure", but national income and employment growth will be anaemic due to falling commodity prices (terms-of-trade) and declining mining investment: Australia’s growth over the past decade has...
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RP Data weekly Australian house price update

ScreenHunter_15 Mar. 05 15.42 By Leith van Onselen In the week ended 27 November 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, fell by 0.27%.  It was the second consecutive weekly decline (see next chart). Home prices fell in three major capitals and rose in two (see next chart). So far in November, home values have fallen by 0.30%, dragged down by Melbourne and Adelaide (see next chart). Since the start of the year, home values nationally have risen by 7.14%, with all major capitals except Perth rising in value (see next...
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More evidence on why house prices are outpacing credit

ScreenHunter_06 May. 15 16.47 By Leith van Onselen Up until a year ago, I used to report monthly State Government data on housing transfers and mortgage lodgements for Queensland. However, for some reason, the State Government ceased publishing its monthly series and I stopped reporting on the matter. After various Google searches I discovered that Queensland now produces a fortnightly series, dating back to mid-2008, showing the number of housing transfers, mortgage lodgements and mortgage discharges. As shown below, the number of housing transfers and mortgage lodgements (including refinancings) bottomed in...
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Links 28 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: OPEC Takes No Action to Ease Supply Glut as Oil Slumps - Bloomberg Causes of the G7 fixed investment doldrums - VOX North America: Top 400 taxpayers paid almost as much in federal income taxes in 2010 as the entire bottom 50% - aei.org US Congress considers host of tax breaks - Financial Times New timelapse the ultimate in Toronto skyline porn - blogto.com The US Census Bureau is cooking the new home sales numbers - HousingWire 24 Hours in Ferguson - Bloomberg Businessweek Europe: Russia’s Banks Feel Capital Squeeze in Grip of Sanctions...
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Poll: Should pollies disclose negatively geared property?

ScreenHunter_5190 Nov. 27 14.55 There's an online survey running over at Easy Poll asking whether "members of the Australian House of Representatives and Senate should be forced to disclose whether they own a negatively geared property?". The survey comes in the wake of revelations that Australia's federal members of parliament hold a combined $300 million property portfolio, creating clear conflicts in relation to housing policy. Go on, make your views known. The survey can be accessed...
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Chaos overtakes $7 medical co-payment

ScreenHunter_5189 Nov. 27 13.57 By Leith van Onselen Will they or won't they? Confusion is running wild today on whether the Abbott Government will abandon its $7 co-payment on medical visits, with Treasurer Joe Hockey seemingly contradicting Prime Minister Tony Abbott on the issue. Last night and this morning, it seemed as if the $7 co-payment was on the chopping block, with the Canberra Times (and other outlets) reporting the following: Prime Minister Tony Abbott has privately conceded defeat on his controversial budget proposal to introduce a new $7 co-payment on bulk-billed GP visits and will formally shelve the policy...
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ALP dill opposes foreign property buyer regime

ScreenHunter_16 May. 13 15.31 By Leith van Onselen If you want a textbook example of just how useless the federal Australian Labor Party (ALP) has become, look no further than the member for Chifley, Ed Husic, who noted the following in parliament in response to the Parliamentary Committee's eminently sensible recommendations to actually enforce the rules governing the purchasing of pre-existing dwellings by foreigners. From The ABC: The committee's Labor deputy chairman Ed Husic has condemned much of the report as a "new tax grab" on foreign investors, prompted by racially charged media reports. "While some good might have...
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Actual capex records surprise lift

ScreenHunter_5182 Nov. 27 11.43 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released data on capital expenditures (capex) for the September quarter of 2014, which registered a surprise 0.2% seasonally adjusted lift in capex over the quarter but a 5.9% decrease over the year. The result beat analyst’s expectations of a 1.9% fall over the quarter (see below table). While Houses and Holes has covered the more important capex intentions survey, which covers industry’s forward-looking capex plans over the coming years, below are some backward looking charts showing actual capex up to the September...
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Parliament acts on dodgy foreign property buying

ScreenHunter_5115 Nov. 24 09.52 By Leith van Onselen The Parliamentary Committee examining foreign investment has released its report, and if I had to sum it up in one word it would be "transparency". Here is a summary of the recommendations: Retaining the current framework applying to foreign purchases of Australian housing to encourage foreign investment in new dwellings and increase housing supply. Improving the internal processes at Treasury and the Foreign Investment Review Board (FIRB) and removing barriers to enable adequate audit, compliance, and enforcement of the foreign investment framework. Applying a modest...
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Murray review a boon for smaller banks?

ScreenHunter_01 Aug. 01 06.58 By Leith van Onselen The head of Suncorp, Patrick Snowball, has claimed that the recommendations of the Murray Financial System Inquiry are likely to make it much easier for smaller authorised deposit-taking instritutions (ADIs) to compete against the Big Four banks. From The Australian: “The inquiry has fuelled a robust level of discussion and debate about capital and what levels should reasonably be expected to improve financial system stability"... “It seems a very real possibility that one outcome of the inquiry will be that Australia's largest banks will need to increase their capital...
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Uren: Throw FHBs to foreign wolves

snarling-wolf By Leith van Onselen The Australian's David Uren has produced a half-baked defence of foreign investment into pre-existing dwellings, arguing that concerns about foreign investment are a fallacy and that there is "little economic justification" for tightening enforcement of the foreign ownership rules. Let's examine Uren's arguments. If I am selling a house, and a Chinese buyer wants to pay more than an Australian, I make a larger capital gain and can use the additional proceeds to buy the house of my dreams — possibly a new one — or add more to my superannuation, or spend it on consumption,...
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PBO describes Budget carnage

small-red-ink-splash-md By Leith van Onselen Following Macroeconomics' forecast earlier this month that Federal Budget revenues would be slashed by $52 billion over four years courtesy of slumping commodity prices, falling mining investment, and weak income growth, analysis by the Parliamentary Budget Office (PBO) has released a new report predicting big increases in the Budget deficit if labour productivity is not improved and if world commodity prices fall by 30%. Key extracts from the report, which analyses the "sensitivity" of three main drivers of the Australian economy -  labour productivity growth, the labour...
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Gittins: Australian house prices are different

economists-carmen-reinhardt-and-ken-rogoff-explain-why-growth-wont-cure-debt By Leith van Onselen Fairfax's Ross Gittins has produced a thinly veiled defence of Australia's exorbitant housing costs, arguing that housing values are inflated "because Australians have an unusual relationship with their homes". In making his case, Gittins draws on a recent research report from Saul Eslake, which provided six reasons for Australia's expensive housing. Much of the explanation comes from the insights of economic geography, the study of how we're affected by the spatial dimension of the economy and, in particular, of the way big cities work... Almost 60 per cent of Australians...
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Links 27 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Cheap energy is the new cheap labor - Financial Times Oil prices won’t stay low forever - Alliance Bernstein Krugman: Keynes Is Slowly Winning - New York Times The brutal monotony of all-time highs - The Reformed Broker Bullish find assets double bears for first time - Dana Lyons The case for international stocks - Total Return The energy sector has been declining for some time now - Pension Partners Seven simple things investors don’t do - A Wealth of Common Sense How limits (or constraints) can actually make you a better trader -...
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Foreigners guzzle Melbourne apartments

images By Leith van Onselen The AFR has produced an interesting report today on a 92-storey apartment development by Malaysian developer, UEM Sunrise, which reportedly has all but sold out after just two weeks, with three-quarters of the apartments selling to foreign buyers: With 941 apartments, the 92-storey Aurora is the first project in Australia by the developer... The developer has sold down 895 units already, mostly through its strong networks in south-east Asia and China, local buyers will account for 25 per cent of the stock. Around 60 per cent of buyers are investors... UEM Sunrise plans to...
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‘Straya: Determined to be dumb

ScreenHunter_16 May. 13 15.31 By Leith van Onselen Australia is cementing itself as a houses and holes economy, with the report today that the CSIRO will cut 1,400 science jobs: Previous governments have fought to stem the flow of our cleverest minds offshore in their search for better pay and research facilities. Now, cuts from the previous and current Federal Governments are driving out one in every five jobs at the nation’s internationally renown research centre, CSIRO. That’s the total loss of about 1400 scientists and assistants. Science communicator Julian Cribb told ABC Radio yesterday the cuts were...
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