The Australian economy shrank just 0.3 per cent in the March quarter… pretty good when you consider drought, bushfires and the start of the pandemic. By comparison, the US economy shrank 5 per cent in the March quarter; the UK fell 7.7 per cent; Germany fell 8.6 per cent; and China fell 33.8 per cent.
Βut the current June quarter will be a lot worse when the figures come out in early September. A lot of the experts are predicting a 5-10 per cent contraction in the June quester, an improvement in the September quarter and maybe back to an expanding economy in the December quarter.
But there is important caveat… that Australia’s COVID curve stays flat. If we get a second wave here in Australia and need to go back into lockdown, then all bets are off.
Further economic stimulus is also on the cards as seen by this week’s home builder grants and both the Arts and Tourism sectors also may be in line for additional funds.
So far, $285 billion in stimulus measures (around 13 per cent of GDP) have been promised by all levels of government and the Reserve Bank.
The world has noted the good news story ‘down under’, pushing the Aussie dollar to near US70 cents. If the dollar continues its ascent, that could slow momentum of export-focussed sectors and companies.
The Reserve Bank maintains its optimism
RBA board meeting day on Tuesday and, as expected, they kept official interest rates on hold. That’s despite some economists wanting more cuts into negative rates.
I reckon the RBA is very reluctant to go into negative territory (it didn’t work when Japan did it for an extended period) but will keep rates at this low level for some time.
After previously cutting rates on March 3 and March 19, 2020, each by 25 basis points, there have been 17 rate cuts since November 2011 with the cash rate cut from 4.75 per cent.
Previously rates rose seven times from October 2009 to November 2010 from 3.00 per cent to 4.75 per cent.
According to the RBA, the best barometer of the economy you should be following is consumer confidence.
“In the period immediately ahead, much will depend on the confidence that people and businesses have about the health situation and their own finances.”
“It is possible that the depth of the downturn will be less than earlier expected.”
Remember Property is driven by demand and supply
That’s why it is important to follow the level of properties coming onto the market and being built… that’s the supply side.
On the demand side, history tells us the number of buyers is influenced by immigration, interest rates and unemployment levels.
Figures released by SQM Research show national residential property listings increased in May by 3.9 per cent to 304,137… down by 12 per cent for the year.
All capital cities experienced increases in property listings over the month except for Canberra. The largest listings increase were in the big Melbourne and Sydney markets… 11.6 per cent and 10.9 per cent respectively. Hobart also recorded a large increase.
Year-on-year listings show more significant declines for all capital cities with Perth recording a 20 per cent decline, followed by Darwin with a 18.8 per cent and Hobart a 15.8 per cent decline.
SQM’s Louis Christopher sums it up nicely;
Overall, there was a rise in listings at the national level, driven by older stock not selling. We have recorded a 12 per cent increase in listings of over 60 days.
This tells me it is a patchy market with vendors struggling to meet their pricing expectations. New listings actually fell for the month at the national level, which is abnormal for May.
Though we have recorded rises in new listings for Sydney and Melbourne, other cities such as Brisbane, Adelaide and others recorded a decline in new stock. Many regional locations also recorded falls in new listings.