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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Sydney brick-maker says “It’s all in the land”

ScreenHunter_5164 Nov. 26 11.04 By David Collyer, cross-posted from Prosper Australia The AFR today reports Brickworks Ltd calling for steep increases in Sydney land supply to assist affordability for homemakers. Developers on the outskirts of all the major Australian cities are dribbling out lots piecemeal – stifling supply, household formation and economic activity. It is entirely rational for them to seek to maximise their profits in this way, but I see no reason why state governments should aid and abet this private capture of the future earnings of citizens through staggeringly high land prices. From The AFR: The...
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PM Pork to pull funding if VIC votes Labor

Capture By Leith van Onselen Prime Minister Pork has warned Victorians not to vote for the Labor party in this weekend's state election, claiming that he would pull funding allocated to the East-West Link road project if Labor fulfills its promise to tear-up the contract to build the road if it forms government. From The Australian: “I want to make it absolutely clear to the people of Victoria that the $3bn the commonwealth government has committed to this project is for one purpose and one purpose only — and that is to build East West Link. “Let me repeat: the $3bn the commonwealth government has...
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NT LNG boom softens construction downturn

ScreenHunter_5170 Nov. 26 12.01 By Leith van Onselen The ABS has released data on the value of construction work done for the September quarter of 2014, which registered a seasonally-adjusted 2.2% fall in total construction activity over the quarter and a 5.1% decline over the year. The result disappointed analysts' expectations of a 1.9% fall over the quarter. The 2.2% quarterly decline in construction activity was broad-based, with engineering construction falling 3.2% and building construction falling 1.0%: Residential construction – the great hope as the mining investment boom unwinds – disappointed, falling...
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PPL ball and chain drags on Budget progress

bloom By Leith van Onselen With the year winding down, and many of the May Budget measures still stuck in limbo, the Abbott Government is preparing to "clear the barnacles" and water down or junk some unpopular measures in order to start the new year on the front foot. As reported in The AFR today, the $7 medical co-payment is set to be scrapped by the Government, along with the attached Medical Research Fund, with Abbott's signature paid parental leave (PPL) policy also likely to be watered down. It is also seeking a compromise with the Senate on university fee deregulation: Senior government...
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Phil Lowe’s grand plan to kick the can

imgres By Leith van Onselen As noted by Houses & Holes earlier, RBA deputy governor, Phil Lowe, has delivered another Panglossian assessment of the prospects facing the Australian economy, effectively endorsing Australia's 'population ponzi' economic model and 'selling dirt' without adequately considering the downsides to Australian's living standards. Lowe's comments about Australia's rampant immigration intake are particularly curious: Over the past decade, Australia has had almost the fastest rate of population growth in the OECD and this is expected to continue for some time to come...
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Links 26 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: The commodity super-cycle aint over yet - Market Anthropology Oil prices: What’s the futures market telling us - covestor.com The bull case for European equities - Financial Times US Stocks Surge To ’Best’ Streak In 86 years - Zero Hedge The 51% Chinese Stock Rout That Analysts Never Saw Coming - Bloomberg Millennial Investors Don’t Trust The Market - mebfaber.com North America: US GDP registers best consecutive quarters of growth since 2003 -  Real Time Economics Q3 GDP revised upwards - Bespoke US house price inflation slowing -...
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Taxis and hire cars declare war on Uber

ScreenHunter_5153 Nov. 25 11.54 By Leith van Onselen The fight against Uber's ridesharing service, Uber-X, is getting ugly, with taxi and hire car companies resorting to making citizens' arrests against drivers illegally carrying passengers. From The SMH: Hire car owner Russell Howarth has now carried out multiple arrests of uberX drivers, and other drivers are attempting to mobilise in various ways against what they see as an existential threat to their pay and conditions... The incident demonstrates the volatility of situations where the incumbent industry attempts to turn the tables on its upstart competitor... Anger...
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Risk on, as interest only mortgages hit record

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen APRA just released their quarterly data on housing exposures, which captures Authorised Deposit-Taking Institutions (ADIs) loans to the housing sector for the September quarter of 2014. According to APRA, ADIs’ total domestic housing loans were $1.3 trillion, an increase of $103.4 billion (9.0%) over the year to September, with the value of interest only loans growing by 14%. There were also 5.2 million housing loans outstanding with an average balance of $239,000. Of mortgages issued in the September quarter, 42.5% were interest-only loans. Moreover, over the year to...
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Fitch: Aussie banks will need to raise capital

ScreenHunter_06 Jun. 26 22.42 By Leith van Onselen Global credit ratings agency, Fitch, has labelled Australia's big four banks’ capital profiles as “about average” and claimed that they could be forced to increase their capital buffers by up to $53 billion - equivalent to nearly two year's combined profits - if the Murray financial system inquiry takes aggressive action to bolster the banking system: Australia's Financial System Inquiry (FSI), due to report by end-2014, is likely to recommend higher capital requirements for the large banks, says Fitch Ratings. A higher capital charge and/or a rise to the mortgage...
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Consumer confidence tracks sideways

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index rose by 1.3 points in the week ended 23 November to 114.3, to be just above its long-run average reading of 113.2 (see next chart). ANZ chief economist was particularly happy with the result, noting that “alongside low interest rates and rising house prices, this should support consumer confidence and retail spending as we head into the Christmas season”. ANZ also provided the below chart, which compares the sub-index of the financial situation compared to a year ago against real household consumption...
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Aussies flee to New Zealand

ScreenHunter_5145 Nov. 25 09.48 By Leith van Onselen Statistics New Zealand has today released its permanent & long-term migration figures, which revealed that New Zealand net migration is at record highs, with net migration from Australia to New Zealand also at the highest level in 21 years: Seasonally adjusted permanent and long-term (PLT) migration figures showed a net gain (more arrivals than departures) of 5,200 migrants in October 2014. This surpasses the previous high, recorded in August 2014 (4,800). Before 2014, the last peak was in February 2003 (4,700). Net migration has increased in most months over the...
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The population monster that’s swallowing Victorian governments

ScreenHunter_5140 Nov. 25 08.03 By Leith van Onselen The Australian's Judith Sloan has questioned why Victorians are set to throw-out the one-term Napthine Government when its performance has not been all that bad: It’s not as though the Coalition government has been especially bad. There is a good news story to tell about fiscal management, expense control and initiatives for some needed new infrastructure. Victoria retains its AAA credit rating, which is in marked contrast with most of the other states. To be sure, the Victorian economy has been sagging along with the rest of the economy. And given the relative...
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NZ gives Oz an income thrashing

ScreenHunter_5138 Nov. 25 07.35 By Leith van Onselen Statistics New Zealand has released its annual National Accounts (Income and Expenditure) data for the year to March 2014, which revealed that New Zealand national disposable income increased by a strong 8.2% over the year: New Zealand earned $14.4 billion more as a country than in 2013, Statistics New Zealand said today. National disposable income was up 8.2 percent to $189.2 billion, in current prices, in the March 2014 year. The growth was led by business profits, while income from employment also grew. Business profits were up $9.0 billion (9.8 percent), due to large...
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East coast leads national income shock

ScreenHunter_5123 Nov. 24 15.26 By Leith van Onselen The income shock afflicting the Australian economy has been well documented on this site. Essentially, the ending of the biggest commodity price (terms-of-trade) boom in the nation's history in 2011 ushered in a new era of sluggish income growth, whereby real national disposable income (NDI) would significantly lag the growth in the economy, as measured by GDP. This situation is best captured by the next chart showing the falling terms-of-trade dragging down NDI per capita: As well as the below charts showing NDI per capita falling relative to GDP since...
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Links 25 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: What big economies got right (and wrong) after the financial crisis - Wall Street Journal The $400 billion bond mis-match keeping bears at bay - Bloomberg Hedge funds bet big on coal mining failures - Wall Street Journal The global policy mix turns more growth friendly - FT Blog Are low interest rates responsible for the soaring stock market? - The Fat Pitch Louis CK on bull & bear markets - A Wealth of Common Sense What is a CEO really worth? - MoneyBeat North America: US home renovations are booming again - Real Time...
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Is Medibank’s sale a dud deal for taxpayers?

ScreenHunter_5121 Nov. 24 12.54 By Leith van Onselen Business Spectator's Alan Kohler has penned an interesting rebuke of the Medibank privatisation today, arguing that it represents a dud deal for taxpayers: ...someone might have pointed out (but didn’t) that taxpayers are forgoing a dividend of $231m that grows each year, and could have borrowed that $5.7 billion for $185.4m in interest, fixed for 10 years. But that would be debt, wouldn’t it, and we can’t have that. ...with the bond rate at 3.2 per cent, taxpayers would be better off keeping Medibank and borrowing the money for infrastructure rather than...
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BIS’ happy mining cliff

ScreenHunter_08 Nov. 07 08.52 By Leith van Onselen BIS Shrapnel is out today warning of a 40% slump in mining investment: the biggest decline on record. From The ABC: BIS Shrapnel has released the findings of its Mining in Australia 2014-2029 report which points to a 40 per cent collapse in investment in the sector over four years. "Already we're seeing a substantial slump take place in iron ore and coal investment around the country but now with the LNG investment boom about to end we're about to see the biggest slump ever in mining investment," spokesman Adrian Hart said. He said the current slump had barely...
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HIA sees record new home construction

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The Housing Industry Association (HIA) has released a new report forecasting a record level of new home construction across Australia in 2014, and elevated construction levels to 2016: “In aggregate, we will commence nearly 190,000 new dwellings in 2014, surpassing the previous record of 187,000 back in 1994.” “The momentum culminating in this milestone has provided a substantial boost to Australia’s economy at a crucial juncture in the cycle. Below trend economic growth and weak labour market outcomes would be considerably worse without the reach a new home...
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Hammer to fall on dodgy Chinese property money

ScreenHunter_5115 Nov. 24 09.52 By Leith van Onselen Details about the parliamentary inquiry's report into foreign investment in Australian property, which is scheduled for release this Thursday, are becoming clearer, with information leaks pointing to the implementation of a new $1,500 application fee on foreign property purchases, as well as an overhaul of the existing monitoring and compliance regime. As reported yesterday in the Daily Telegraph, the proposed new $1,500 application fee would raise some $600 million over the next decade, which would be used to beef-up monitoring and compliance activities by the Foreign...
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Aussie banks ill-prepared for property crash

ScreenHunter_5114 Nov. 24 09.00 By Leith van Onselen Australia's big four banks are ill-prepared for a housing crisis, according to AMP Capital's head of credit markets, Jeff Brunton, who claims that official stress tests failed to account for the impact on mortgages that did not default. He takes up the argument pioneered at MB by Deep T, from The Canberra Times: "The banks will have enough capital to deal with the mortgages and the corporate borrowers who default, but they will then be left with a financial system that has got a high loan-to-value, with many Australians in negative equity positions"... "The standard stress...
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Senate to block cuts to auto industry assistance

ScreenHunter_5113 Nov. 24 07.42 By Leith van Onselen The Australian is reporting today that the Senate will block the Abbott Government's bid to cut assistance to the automotive sector (known as the Automotive Transform­ation Scheme, or ATS) by $900m between 2013-14 and 2020-21, by bringing forward the end date for the scheme and lowering the amount that individual firms can claim: Blocking the bill would reverse $500m in cuts to 2017-18 announced in last year’s Mid-Year Economic and Fiscal Outlook and a further $400m in savings announced in the May budget... “All available evidence shows that decimating the...
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NSW surges to top of land cost leaderboard

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Earlier this month, the Australian Bureau of Statistics (ABS) released its 2013-14 Australian System of National Accounts (ASNA) data release, which provided a detailed presentation of annual national accounts data. Locked away on Table 61 was my favourite section of the release: data on aggregate land values at the state and national levels. This years release confirmed that, at a national level, the land values underpinning the Australian house prices surged, with all states and territories recording growth in nominal terms, but with New South Wales and Victoria leading...
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Auction clearances slip on high volumes

ScreenHunter_19 Mar. 13 13.12 The national auction clearance rate slipped over the weekend on the back of falls in Sydney and Melbourne. According to RP Data, the national weighted average preliminary auction clearance rate was 67.7% over the weekend, which was down 1.3% from the 69.0% preliminary clearance rate reported last weekend. Sydney’s clearance rate fell by 0.9% to 74.3%, whereas Melbourne’s fell to 64.9% (last weekend 66.7%). Brisbane, which typically only has a small number of auctions, experienced a big jump in its clearance rate (up 6.9% to 52.2%). Overall auction volumes (3,294) were up slightly on last...
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