Nsw (oz) - All Unfolding As Expected

[Smurf1976]

"The great concern for everyone in NSW should be the “R” word. We have finished one quarter of negative growth and another quarter of negative growth will mean NSW is in recession."

http://www.australianbusiness.com.au/?cont...nemployment.xml

Well worth reading in my opinion for a preview of how it's likely to unfold in the UK, other states of Australia and anywhere else heading for a HPC. It's all happening basically as expected by the bears on this site. Even the RBA and media admit to the falling house prices whilst the NSW state government acknowledges the economic problems and is now cutting staff by 4000.

Note that the situation is thus far confined to NSW although both Queensland and Victoria are showing some similar trends so far at a less advanced stage.

[beenhearingthisforyears]

"The great concern for everyone in NSW should be the “R” word. We have finished one quarter of negative growth and another quarter of negative growth will mean NSW is in recession."

http://www.australianbusiness.com.au/?cont...nemployment.xml

Well worth reading in my opinion for a preview of how it's likely to unfold in the UK, other states of Australia and anywhere else heading for a HPC. It's all happening basically as expected by the bears on this site. Even the RBA and media admit to the falling house prices whilst the NSW state government acknowledges the economic problems and is now cutting staff by 4000.

Note that the situation is thus far confined to NSW although both Queensland and Victoria are showing some similar trends so far at a less advanced stage.

but surely you need to wait until the measures outlined below come into effect before you write off the whole country?

Quote from same article:

“Last week Australian Business Limited launched KICKSTART NSW – a $3.5 billion plan to cut government expenditure, improve efficiency, cut employment taxes and create jobs.

[GCS15]

http://www.theaustralian.news.com.au/commo...5E25658,00.html

Reserve warns on high-risk lending

David Uren, Economics correspondent

February 18, 2006

HIGH-RISK housing loans aggressively promoted by banks are a threat to the economy, Reserve Bank governor Ian Macfarlane said yesterday.

Mr Macfarlane said banks and other institutions were offering loans that would have been unthinkable five or 10 years ago.

http://www.theaustralian.news.com.au/commo...5E25658,00.html

Working-class suburbs suffer shortage of jobs

David Uren, Economics correspondent

February 18, 2006

MORE than 10per cent of western Sydney's workforce is unemployed, according to new figures that paint a grim picture of working-class suburbs across the nation's eastern cities.

Regional unemployment figures derived from the Bureau of Statistics database show 10.2per cent of the workforce in central-west Sydney is out of a job, compared with 5.9per cent a year ago.

http://www.theaustralian.news.com.au/commo...5E25658,00.html

Prices up north may head south

OPINION Turi Condon, Property editor

February 18, 2006

LATE last year some data came out that caused a bit of a flurry. For the first time Brisbane's house prices reached and threatened to surpass those in Melbourne.

It was unheard of, the brash "faux tuscan" houses to the north rising above their ivy-covered southern counterparts.

Buyers who had plunged into Queensland housing were vindicated.

But housing markets are fickle and it may well be Melbourne that sees the most potential in the coming years, and hence the best buying opportunities.

http://www.theaustralian.news.com.au/commo...5E25658,00.html

No sellers stampede

Big sales by foreign investors may signal the end of boom times for the cattle barons, writes Fiona Cameron

--------------------------------------------------------------------------------

February 18, 2006

KNOWING how to sell at the top of the market is one of the key skills that gets billionaires where they are in life.

So perhaps two mega-wealthy foreign investors deciding it's time to cash in their Australian rural property is a sign that the market is at its peak.

http://www.theaustralian.news.com.au/commo...5E25658,00.html

No alarm on house prices

February 17, 2006

FALLING house prices in some areas are "not a cause for alarm", the nation's top central banker says.

Reserve Bank of Australia (RBA) governor Ian Macfarlane said the bank had no troubles with the slowdown in the housing market, including where prices for homes had fallen

http://www.theaustralian.news.com.au/commo...5E25658,00.html

Housing market risks have eased (note not gone away but eased - those risks are still there)

February 17, 2006

THE risks posed by an overheating housing market had eased, the Reserve Bank of Australia (RBA) governor Ian Macfarlane said today

"Household credit growth has eased back to an annual rate of about 12 per cent, and - although this may still be regarded quite high in absolute terms - it is towards the lower end of the range in which is has fluctuated in the past two decades," Mr Macfarlane said in his semi-annual testimony before federal Parliament today.

Edited February 18, 2006 by GCS15

[Smurf1976]

but surely you need to wait until the measures outlined below come into effect before you write off the whole country?

Quote from same article:

“Last week Australian Business Limited launched KICKSTART NSW – a $3.5 billion plan to cut government expenditure, improve efficiency, cut employment taxes and create jobs.

Stand back and look at the big picture!

The proposed measures involve short term pain for long term gain. That is, get rid of lots of government employees (likely to be the more useful ones such as hospital staff etc in practice IMO) which directly adds to unemployment and forces more houses on the market in the short term. The idea being that this facilitates reduced taxes (questionable given the large NSW government deficit) which then makes NSW more competitive with the other states and leads to increased business investment in the long term.

Which all sounds quite plausible but it doesn't fix the problem in the short term, in fact cutting government expenditure in the hope of future business investment can only make things worse in the short term. If present trends continue then NSW will be officially in recession in a matter of weeks. That's too soon to implement the cost savings in full, let alone cut taxes and then see that translate to increased business investment and employment.

So IMO the plan would help accelerate a recovery but doesn't avoid the recession in the first place. It's exactly the same response the Australian state governments used in the early 1990's. Cut expenses and deepen the downturn in the short term (little choice when there's a big deficit) and reap the rewards in the future. So the cycle is simply repeating pretty much exactly as it did last time.

Since the plan is NSW based only, it also doesn't help Queensland or Victoria which are showing similar trends albeit with a significant time lag. For that matter, it's likely that at least some of the increased investment would come at the expense of the other states, mostly Queensland and Victoria in practice, since Australian state governments don't realistically have the ability to make a major difference to the competitiveness of the country as a whole except through drastic reform (already largely done in the 1990's) or direct negotiation with the proponents of specific projects (realistically manufacturing).

Too little, too late IMO.

[ajh]

And yet . . .

Today's (NSW) Sunday Telegraph includes a liftout titled "Your ultimate property guide 2006". This thing comes out every year about this time, and gives stats on Sydney suburbs and NSW country towns. Numbers are supplied by a property analysis mob called Residex (www.residex.com.au).

Stats reported are (for both houses and flats) number sold during calendar year (in this case 2005), calendar year median price, previous calendar year median price, last quarterly appreciation/depreciation, last annual app./dep. and last 3 year's app./dep. (all the app./dep. numbers based on median prices). Not a bad summary, actually. I intend to keep a copy.

There is also a 5-year (1-4 star) forward projection for each area (which does not seperate houses and flats), and I quote;

The five-year projections were formulated taking into account the historical relationships between prices and economic factors such as interest rates and the consumer price index.

Residex used the economic climate to determine predictions across Sydney and NSW as a whole.

Residex then referred to historical trends in how growth in regions compares to Sydney and NSW overall to formulate area projections for future growth.

This all sounds formidably scientific, but the projections are to my eyes an absolute joke.

A quick glance down the page shows suburb after suburb rated at 3 or 4 stars. That translates to 10% per year compound or better over the next 5 years starting less than 2 years after the peak of the biggest RE bubble we have ever known. Sydney's overall median is still at 8 times median earnings FFS.

I am not an economist, but I do know that the politicians could not allow prices to re-escalate in that fashion. The results would be serious social unrest.

end rant