The Wallet: welcome to a world not as we know it.

We're changing tack a little with our regular blog. In early 2019, we were particularly focused on buyer behaviour in the Australian property sector. That naturally evolved over the course of the year into a broader look at the political, social and economic factors influencing consumer sentiment in Australia.


Hence, The Wallet. Do you have money in your pocket, and are you confident you'll have more tomorrow? How secure is your job, and are you comfortable spending your money right now - or are you instead trying to hold on to what you've got?


The willingness of Australians to spend or save is the foundation of our economy. Since we last spoke, we've seen some pretty spectacular examples of that; Jeanswest, for example, went into administration over Christmas, with more than 1,000 jobs on the line. It's one of more than half a dozen retail chains that have bit the dust over the summer, and the pundits are predicting more to come as consumers hold their purse strings tight.


In that time, Australia has been on fire. From an economic perspective, this has been a catastrophe impacting businesses big and small across many sectors - and none so heavily as the Australian tourism industry. Coronavirus, which the WHO has today declared an international public health emergency in the same league as Ebola and SARS, is another major blow for a tourism sector already on the ropes from the devastating bushfire season.


And yet, two of the key indicators that influence Australian economic policy are improving. Late last week, we got news that the jobless rate had dropped unexpectedly in November, to the lowest level since last April. And this week, inflation rose 0.7 per cent in what has been described as a "gentle turning point in the economy."


After these results, anyone hoping to see the Reserve Bank cutting interest rates when it meets next week - like this guy, for example - will most likely be disappointed. The markets weren't happy; the S&P/ASX 200 dropped 45 points when improved unemployment rates reduced the chance of further rate cuts. The Australian dollar, however, jumped half a percent at the news.


Australian business not happy, as international investors brace for a bubble


The latest NAB Business Survey shows that Australian business conditions got slightly worse, but were stabilising in December - with confidence at its lowest reading since mid-2003 thanks to poor performance in retail, construction and manufacturing.


This week, the US Federal Reserve kept its own rates on hold, sparking fears of a recession that will impact local share markets. "Massive bubble" was the headline in the AFR earlier this week.


Little wonder that despite Josh Frydenberg's and other's best efforts to convince them otherwise, Australia's CEOs do not intend to spend more than they have to this year. The Australian Industry Group's latest survey shows only one in four businesses intend to increase spending on physical capital in 2020, and less intend to invest in R&D.


...and yet, property.


While other areas of the economy are struggling, the housing market is going gangbusters. Consumer confidence is down, but house price expectations are soaring.


ANZ has lifted its forecast for house prices again, saying it expects residential property prices to increase by 8 per cent in 2020. First-time buyers and cashed-up auctiongoers are expected to drive continued increases in demand, as supply in city markets increases.


First home buyers, in particular, are a segment to watch. FOMO is driving buying intentions according to the ME Bank Quarterly Property Sentiment Report, which shows 51 per cent of those polled in Q4 intend to buy this year - a 13 per cent jump from the second quarter.


Keep an eye out for that pesky loyalty tax, however. According to this piece, the practice of banks sacrificing existing customer benefits to lure new business is getting worse, not better as competition continues to escalate into 2020.