Saturday, June 26, 2010

Feeling wealthier? You probably are

We're clawing back our wealth.

New figures show financial wealth per capita climbed to $46,000 in the March quarter, an impressive increase on low point of $36,200 reached just 12 months earlier.

The measure includes household wealth held in the form of cash, bank deposits, bonds and shares net of borrowing but excludes "non-financial" wealth in the form of real estate.

The latest recent high of $46,000 per person is still well below the all-high of $58,900 reached before the financial crisis.

Both household financial assets and household liabilities climbed to record highs of $39 billion and $25 billion in the March quarter.

Our debt to liquid assets ratio climbed to 154 per cent meaning that households don't have enough readily available assets to cover debts in an emergency.

"Households generally have plenty to cheer about," said Commonwealth Securities economist Savanth Sebastian who calculated the per capita figures from the Bureau of Statistics data released yesterday. "As the recovery gains traction the lift in wealth should support confidence... and in turn translate to an increase in spending and overall economic activity."

Both superannuation funds and Australian businesses remained cautious, with the funds holding 14 per cent of their assets in forms such as cash and bank deposits at the end of March - almost double the usual proportion of 8 per cent. The proportion of company assets held in cash climbed to the highest point in a decade.

"Super funds are spoilt for choice given the attractive yields being offered on term deposits," said Mr Sebastian. "But the longer that fund managers maintain an abnormally high proportion of money in defensive assets, the greater the risk their returns will underperform those of their competitors."

Foreign investors continued their love affair with Australia, buying an extra $6.3 billion of Australian shares in the past quarter. Just over 40 per cent of listed shares are now held abroad, close to a record high.

"The next round of data might show a reversal of this trend," said Mr Sebastian. "The Resource Super Profits Tax had a clear impact on the way global investors view Australia’s sovereign risk profile and as such until it is resolved, foreign investors are likely to remain cautious on Aussie equities. But in the longer run, the strength of domestic companies, and in particular the resilience of the Australian economy will no doubt remain a strong drawcard."

Published in today's SMH and Age

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. We're weathering the storm - RBA

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carbonsink said...

The March quarter was a high point for asset prices.

Super funds will soon reflect the 10-15% fall in equities since April, and house prices have stagnated recently thanks to a rapid tightening of monetary policy.

The post-GFC housing boom was restricted to Sydney, Canberra and most notably Melbourne. Outside of these cities there's been no real bounce, which is precisely the opposite of what you'd expect in a resources-led recovery. It suggests a market driven by speculative demand rather than fundamentals. The owner occupiers have already left the arena, and all the recent demand is from "investors".

Reality is now dawning of the Sydney and Melbourne markets as they are flooded with sellers trying to cash in on the boom. Consequently, Auction clearance rates are collapsing, which according to the experts always leads house prices.

carbonsink said...

Clearance rates fall below 60% in Melbourne & Sydney

Clearance rates dipped to 58.6 per cent in Sydney from 60.7 per cent the weekend before, while in Melbourne, the clearance rates fell to 57.4 per cent - a new low over the past year - from 63.3 per cent the previous week, according to Australian Property Monitor's data.


Since March auction clearance rates - a leading indicator of home prices – have eased. Also, the volume of home loans – another forward read of home prices - has dropped every month for most of the year.

Prices were already retreating in the Gold Coast and Sunshine Coast, and would likely fall in Brisbane, Perth, and parts of Melbourne


"In terms of actual price, there will be some regions where prices may already be falling," said APM chief economist Matthew Bell. "These will be the affordable areas of capital cities, those most sensitive to interest rate rises, and indeed, preliminary indications are that some of the least expensive suburbs in Sydney have had some price falls in the last month or two."

...during the past three or four years of market effervescence, "Melbourne was the boom-town, the premiere place where things were moving."

Melbourne's home prices jumped 28 per cent in the year to March, of buoyant local and international demand.

"Melbourne's longevity in this market has now gone down and it means rest of Australia will follow suit."

Perth and Brisbane, the epicentres of the new China boom, never really participated in the post-GFC bounce. The only place that really took off was Melbourne. Go figure.

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