Westpac’s hidden message

Back on the 31st of March Bill Evans from Westpac presented a talk to the Real Estate Institute of Queensland(REIQ).  However I am unsure whether anyone liked what he actually said, because the only reference I can find to the presentation’s contents is on some obscure websites such as this one.

As the Reserve Bank of Australia (RBA) remains focused on the mining boom, Westpac Bank’s chief economist Bill Evans says only drastic job losses would stop interest rate ‘pain’ this year.

Speaking at a Real Estate Institute of Queensland (REIQ) event today, Evans highlighted a cautious consumer market, ‘pessimistic’ public outlook on the economy and restrained spending as keeping inflation under control.

However with a low unemployment rate and the resources sector continuing to boom, he says the RBA is certain to hike rates in the second half of this year.

“If those inflation numbers remain under control, then it’s going to be really hard for the Reserve Bank to raise rates (but) the other thing we look for on rates is the labour market, and that’s where the problem is,” says Evans, Westpac’s managing director and global head of economics and research.

A few days later he repeated the “cautious consumer” theme in his weekend economist piece on Business Spectator.

Our thinking was very much based around our observations of the cautious consumer. We never denied the sustainability of the mining boom and the strains it would impose on capacity but we saw consistently soft consumer spending and its associated impact on the housing market as being likely to ease the pressure on capacity by enough to allow the mining boom to proceed without the need for drastically higher interest rates.

However the “cautious consumer” story does not seem to be the only thing Bill talked about at this event. It looks as though he also made some fairly interesting statements about his expectations for the Queensland property market and what prospective buyers in that market should be doing about it. Being a Real Estate Institute event I appreciate that this particular message probably wasn’t supposed to make it to the outside world.

But it seems someone forgot to tell the Quest News, because they printed this story in the “Property Pulse” section of the Quest local new papers on the 27th April.

Now that is interesting.

Comments

  1. I also read another message there… to small businesses; if you want the economy to pick up, start firing people….

    thus he said ““The unemployment rate is at 5 per cent and they (the RBA) consider that to be full employment. If we start to see labour market numbers printing unemployment below 5 per cent, the market is going to go haywire.

    “The thing that really surprises me is why some of these sectors that are doing it so tough at the moment aren’t slashing jobs. I’m telling you the job correction isn’t coming. When I talk to my customers in retail I say ‘why aren’t you slashing jobs?’”

    Manipulation mucho?

    • I’d also argue that unemployment is much higher than what is being reported. Many unemployed people are being put on disability for seemingly no reason. Disabled people don’t count as unemployed.

    • I still don’t understand how any mainstream economist can say with a straight face that “Australia has full unemployment”.

      Last time I checked, nearly 1 million unemployed and a greater number underemployed.

      The only skills shortages are highly skilled technicians and engineers required for the only expanding part of the economy: mining.

      There are plenty of workers, but not jobs, available in the deflating parts of the economy: education, retail, construction, tourism, healthcare.

      The very concept of NAIRU needs to be taken out the back and put down.

      As H&H put it yesterday its because the mining companies are retaining funds in the country, whilst hiring anyone with a pulse and a HR license $140K a year, that inflation is swirling around.

      Not “full” employment. There’s not many retail bunnies or tradies forcing their employer to give them a payrise at the moment is there?

      • Education is a dud sector ATM. I work for a large university and despite the work piling up we’re about to lay off a heap of contractors across our IT services because the high dollar is crashing our international student intake. Many of the staff about to be laid off are operational and many long-term contractors. Most are also damn good at their job, but they’re contractors and hence easy to cut. Thank goodness I scored a permanent job early last year.

      • You wanna see a real credit bubble!?

        Look at the university ‘sector’. If I was a gambling man I’d be short university credit.

      • Some unis have been downright reckless but the one I work for is VERY conservative. This year is the first time in 15 years that they’ve taken on any debt and it’s quite insubstantial. We’d rather scale back operations and services than load up on cheap $hit money.

  2. I HAVE A MUCH BETTER MESSAGE TO ANY POTENTIAL HOME BUYER THAN BILL EVANS; IF YOU’RE PATIENT ENOUGH YOU WON’T NEED A MORTGAGE AT ALL AS HOUSES IN MANY PARTS OF AUSSIE WILL BE WORTH AS MUCH THEY’RE GOING FOR IN THE U.S., IRELAND, SPAIN, GREECE, U.K., DUBAI, PORTUGAL AND THE LIST IS GROWING DAILY. HAVE A LOOK AT http://WWW.FORECLOSEDHOMES.COM

  3. “The very concept of NAIRU needs to be taken out the back and put down.”

    Hear hear Chris!!

  4. Meanwhile, on the western front, the Real Doctor, Dr Andrew Wilson, blames the mining tax for..hold your breath.. the property slump:
    .
    Perth property in freefall as price slump shows no sign of ending
    .
    “A lot [of the dent in confidence] has been driven by the mining tax issue. Buying and selling a house is a big decision, when there’s a lack of confidence going forward … it dissuades people from taking large commitments on.”
    .
    🙂

    • “The continued decline surprised analysts who had expected to see the city’s property market start to stabilise by the March quarter.”

      Maybe these analysts need to start reading MacroBusiness.

      Morons 🙂

    • “We’d be lucky to see price growth at the end of the year. There are no clear signs yet that we have either stabilised or that we have potential to move off the bottom.
      .
      Pinch me.. Did he also just call the bottom on the Perth property market?

  5. The shifting of people from unemployment benefits to disability pensions covers up the real extent of unemployment in Australia.

    The big 4 uses offshore funding with fixed rate a lot, and their interest margin increases every time the RBA raise interest rate. Westpac’s 1 year fixed interest rate is nearly 1% above the variable interest rate, The RBA will at most raise another 0.5% this year, so it is nothing but a rip off.