Mar 16, 2022
Boy, there’s a lot going on in the world right now isn't there?
Overseas there are all the geopolitical issues, and back home there are our own political issues plus concerns about wages growth, inflation, and the economy.
Of course, Australia’s economy and our property markets don’t operate in isolation, and that’s why each month I take time out to have a look at the big picture, the macroeconomic factors affecting not just Australia’s economy, but the world economy, to help us understand what’s ahead for us, and I do this once a month in these Big Picture Podcasts with Pete Wargent.
There has been a lot happening since I last spoke with Pete, so I’m sure you’ll get a lot out of the show.
Russia / Ukraine
There has been some recent dramatic flooding in Brisbane, and while in the medium term our focus must be on the safety and rebuilding of Queensland, we also must consider the long-term effect of this flooding.
Australia’s Great Resignation?
Information from the NAB Survey:
Wages data and Interest rate rises.
As expected, the Reserve Bank Board decided to maintain the cash rate at 10 basis points.
When is the Reserve Bank going to raise interest rates? How high will interest rates go this cycle?
These are questions of speculation and concern to commentators, homeowners, and investors.
Some commentators were pointing to the possibility of rate hikes as soon as this June.
If the RBA raises interest rates this year this will further decelerate already slowing housing price growth.
However, for the bank to raise the cash rate, it will need inflation 'sustainably' within the 2% to 3% range – a scenario that would require wages growth in the order of 3-4%.
Although the latest inflation data was stronger than expected and underlying inflation is back within the RBA’s target range, the board will be waiting for evidence that wages have turned a corner.
What are neutral interest rates?
Interest rates are currently at very low stimulatory rates, and at some point, the Reserve Bank is going to need to raise them, not to slow down the market, but to allow a comfortable level of inflation and wages growth to occur.
Home loan activity up again over January
Net arrivals positive for the first time since June 2021
Links and Resources:
Metropole’s Strategic Property Plan – to help both beginning and experienced investors
Get a bundle of free reports and eBooks – www.PodcastBonus.com.au
Shownotes plus more here: Economic and property trends you must understand. The Big Picture with Pete Wargent
Some of our favourite quotes from the show:
“There’s already a shortage of tradespeople, there’s a shortage of builders, shortage of materials, and there’s now all of a sudden going to be a huge extra requirement for all of those sorts of things.” –Michael Yardney
“What’s been happening up to now is the Reserve Bank’s been saying, “we’re waiting for wages to go up.” – Michael Yardney
“I think one has to take into account in one’s planning, but not be worried by these Armeggedon forecasts by the same people who thought the property market was going to crash in 2020.” – Michael Yardney
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