How real was the ScoMo bounce?
That's the question being asked today upon release of Westpac's consumer sentiment index, which dropped 0.6 per cent in June. Critically, it saw consumer confidence dip following the Reserve Bank interest rate decision last week. According to CommBank, "it looks like the RBA's decision to cut the cash rate has raised fears around the health of the economy."
Of the 1,200 people surveyed, a quarter said they would use any excess money to pay down debt, and another quarter would put their cash in a bank. Sentiment among respondents servicing a home loan was marginally higher, but still lower than it would normally be under different economic circumstances.
That drop in confidence among mortgage-holders is understandable, partly due to the increase in homeowners falling into negative equity territory on their assets. The chart in this story shows the problem is particularly acute in WA and the NT; Morgan Stanley reckons if home prices fall another 10 per cent, we'd see a doubling of the number of Australian homeowners in negative equity.
Little wonder the banking regulator, APRA is proposing a range of reforms that would crack down on riskier home loans. Investor loans and interest-only mortgages get special attention, as do the rising number of second-tier and non-bank lenders who have been warned to expect to be held accountable under the same rules applied to the big four banks.
Reserve Bank considering its options, Productivity Commission weighs in
We've seen a few pieces of commentary over the past couple days around the RBA's consideration of quantitative easing - the supply of new money into the RBA's coffers - as a means to avert crisis.
RBA assistant governor Luci Ellis also went on record yesterday saying that the central bank will continue with cuts until the Australian jobless rate falls to 4.4 per cent; currently, it's sitting around 5.2 per cent.
Enter the new head of the Productivity Commission, Michael Brennan who was on the hustings yesterday outlining his organisation's recommendations for kick-starting the economy by driving productivity, boosting wages and stimulating employment. It wasn't a simple plan; he's recommending dozens of macro and microeconomic changes, much of which would need to be driven by Canberra.
Development challenges, opportunities
AFR National Infrastructure Summit attendees received a sneak-peak of a report into building defects yesterday. The report, to be released next week, showed that combustible cladding is "the tip of the iceberg" for owners of high-rise apartments in Australia, who faced a much bigger range of major issues that would make their assets unsaleable. This will not be good news for anyone selling apartments in large-scale projects.
Not that this is the biggest issue apartment project developers are facing right now. Solido Finance released a survey yesterday showing the major issues facing the development industry. Purchaser finance, developer finance and pre-sale covenants were the problems most likely to be keeping developers up at night right now.
Stockland's also feeling bullish right now; it's moving to rebuild its residential project pipeline in response to improvement of sentiment following the election. It says inquiries are up 30 per cent in Sydney and Melbourne, and that numbers are also rising in WA and Queensland.
They've clearly been talking to REA's Nerida Conisbee (pictured). Her opinion piece in today's The Australian argues that this downturn really hasn't been that bad, and the good times are nearly back. I know a few selling agents who might disagree with her - but for positivity, it's a gold-star effort.