― Confidence around the labour market has been mixed, improving slightly but with choppy monthly moves. The Westpac Melbourne Institute Unemployment Expectations Index fell 2.3% from 135.5 in May to 132.5 in Aug (recall that lower reads mean fewer consumers expect unemployment to rise over the next year). The Index is now at its lowest level since November 2011. The measure is a proxy for consumers’ job-loss fears. As such it suggests that, at the margin, job security is becoming less of an inhibiting factor for buyers.
― More generally, consumer attitudes towards risk remain a restraining factor. The Westpac Consumer Risk Aversion Index – a proxy based on consumer responses to questions on the ‘wisest place for savings’ – held at 43.9 in Jun, vs 44.2 in Mar and 20 at the end of 2015. Notably, the detailed responses underlying the measure show consumers remain more inclined to pay down debt and wary of investing in residential real estate.
― Auction markets have continued to cool, Sydney in particular is tracking a slowdown almost identical to that following the regulator’s previous round of macro prudential tightening in 2015. Adjusting for seasonal variations, clearance rates have pulled back to around 65% in Sydney and just over 70% in Melbourne, both still marginally above long run averages.
The full report is here.
There’s certainly been a cooling in interest but nowhere near enough and the 10% per annum trend growth in Sydney and Melbourne prices is so far uninterrupted:
It’s still too early to judge the efficacy of macroprudential 2.0. The full impact of the June rate hikes won’t have flowed through yet. June investor lending numbers showed some progress with CBA hitting the brakes but others hits the accelerator:
Year on year is still rising at 4.9% in the majors:
And the chart:
But the signs are not great. The Council of Financial Regulators should be cooking up the next round of tightening.
I’d look at cutting the investor lending growth ceiling to 5% for all banks. They’ll be forced to operate clearly under it.