It’s still 2008

As H&H reported today the housing finance data for February is simply plain bad. This is not a surprise to me as I have been warning about this for some time now. As I have been saying recently I simply could not see any drivers for new credit and it looks like I was correct in that assessment with a large fall in seasonally adjusted housing finance numbers.

However the seasonally adjusted numbers hide some very interesting details. As my readers would know I prefer long running raw datasets so I can see the patterns for myself without data manipulation. The raw data for the 5609 ABS dataset is very telling. Below is the value($) of owner occupier loans issued per month for each state.

You can see that what usually happens each year from the data. The value falls off in January, bounces back in February to a level near or above the previous November, moves around a bit during the year and then falls back next January with an overall YoY upward trend. There was only one year in the decade preceding 2010 when this didn’t occur and that was 2008 the year of the GFC. Now have a look at 2011. What do you see ? No bounce in February!! Just as I said last week, it is 2008 again

Previously I have also stated.

[I’ll] say it once, [I’ll] say it again. Sustained falls in the rate of debt issuance in a debt driven economy lead to recession.

Now look at the trend and current level of debt issuance in Western Australia. It is down and now sits at 2005 levels so it shouldn’t be too much of a surprise to read this.

Western Australia is generally regarded as Australia’s economic engine room with its booming resources sector, but its manufacturing and retail sectors are struggling.

The WA Chamber of Commerce says the state’s economy experienced a technical recession in the last six months of last year.

“The state of Western Australia very much mirrors the broader national economy in that there is very much a two-speed economy at play,” said John Nicolaou, the chamber’s chief economist.

“You have the resources sector and anything connected to that sector that’s performing very strongly.

“Against that you have other sectors in the domestic economy, particularly those consumer facing sectors which are struggling.”

I note that Access Economics seemed to have predicted WA’s troubles back in 2009.

You will also notice that my favourite state Queensland is in an even worse predicament with current OO credit issuance back at 2004 levels (Remember this is not population adjusted data). I suspect a mix of capital spending by the miners and the sale of QR national that raised $4.6 billion for the government have been able kept the books in black for now. However I am doubtful this will be able to offset the falls in credit for too much longer. I therefore expect to see Queensland joining WA shortly.

I am getting the feeling we didn’t actually avoid the GFC at all, we just avoided it for a few years.

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  1. Well the “G” in GFC does stand for Global, not “only in America and Europe”.

    China’s recent interest rate rise puts the 2008 to 2011 reflection into a different light (sic). If they continue to tighten, where does that leave the Aussie government?

    Another round of stimulus?

    Watch. This. Space.

  2. AFG are supposedly reporting a much stonger result for March DE. Financing up 22% on February, though still around 9% lower than last February.

    Though I do seem to remember something similar last November, an even bigger rise which petered out.

  3. “I am getting the feeling we didn’t actually avoid the GFC at all, we just avoided it for a few years”

    I have always felt this was the case…

    What really freaks me is I cannot see anyone in Government who has demonstrated the skills and ability required to sort this mess out when it all goes pear shaped.

    And it seems to be getting more unstable.

    Thanks for the great work folks on posting these articles.


    • “What really freaks me is I cannot see anyone in Government who has demonstrated the skills and ability required to sort this mess out when it all goes pear shaped.”

      Or the opposition either.

    • Ok I found the original article.

      I assume the AFG data will be “officially” released tomorrow so I will keep and eye out for it. I usually analyse it every month and have been looking out for it.

      The report suggests that NSW managed a bounce, but the others weren’t so lucky.


      New South Wales bucked the national trend, recording exactly the same figure for mortgage sales in March 2011 as March 2010. Elsewhere South Australia saw a slight year on year softening (down 2.7 per cent) with greater differences recorded for Western Australia (down 10.9 per cent), Victoria (down 11.7 per cent) and Queensland (down 15.4 per cent).

      New South Wales also showed the highest level of investor activity, with 40.2 per cent of all new home loans being processed for investors – well above the national average of 34.7 per cent.

      This is somewhat different to reports by the banks themselves but certainly does suggest NSW at least is still going OK.

  4. The_Mainlander

    The recession we forgot to have.

    Oh no wait here it is… gosh lucky we nearly forgot to have that one!

    Next we will have the great recession we’re supposed to have had!

    Dear oh dear.

  5. The AFG March data appears to show a strong rebound in the volume of mortgages and also a rise in the average $ value.

    This seems to fly in the face of the notion of a crash.

    To be clear, I’m not a property bull – I want to see these ridiculous prices come down. But the data is what it is, as far as I can see anyway.

    • The average value trend is still a mystery that I haven’t quite worked out. I talked about it here.

      I am keen to see the latest data to see if the trend has continued.

      It must also be noted that AFG are a brokerage firm and not a final lender. I have been warned previously that there are issues with using AFG as source. However I must admit that I have found their data very useful as a leading indicator in the past.

  6. Can’t thank you guys enough for providing this commentary, at least theres a non-corrupt source out there beyond all the rubbish said in the news. Very interesting seeing that chart, I can’t wait to see how it continues in the next few months!

  7. The more I look at it, the more it appears “after-flood recovery” has been mainly confined to NSW as you say DE.

    The two worst flood affected states – QLD and VIC – appear to have shown very little bounce. Nor has non-flood affected WA.

    I can’t see anything to suggest that this is remotely caused by confidence returning after the floods – it looks like it’s mainly happening in places that never were flood affcted, while flood affected areas (as well as others) continue to languish.

  8. I am looking at the graph and the Feb data point. It looks identical to previous years apart from 2008. The little kick up from Jan is as expected so I would suggest that the Mar data point is the one to look out for? I can’t see any change in trend from this graph.

    Please correct me if I have misunderstood your comments.

  9. I dont know what graph you guys are looking and but I think the trends for the Oz housing market are…
    – continued fall in finance for housing
    – slight easing vacancy rates
    – slight rise in rents
    – declin proportion of FHBers in market
    – increasing amount of garbage spewing out of the pages of SMH….

    How can prices not be sliced at the moment by people just hoping to make a sale. When the market is ‘stale’ for this long, people reduce prices and move units (Agents got to eat and buy nice cars!)

    By July 2011 panic will have set in as 10% declines will show that Australia WAS NEVER different!

  10. Thinking aloud: Our government debt to GDP level is around 6% yeah? Compared to the UK, the US and of course Japan doesn’t this put us in a different position with regard to successive rounds of fiscal stimulus?

    Might we not to see property inflation policies for years to come, until tea-party style anti-deficit politics emerge?

  11. I think the numbers on this report is based on the number of home loans that AFG proceessd, which is approx 10% of total national figures:

    “AFG has 10 per cent of the national home loan market and its figures are usually strongly indicative of ABS statistics published six weeks later”

    For sampling size, 10% is too little of a sampling … isn’t it?