From Glenn Steven's address to the Brisbane Economic Forum:
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Showing posts with label consumers. Show all posts
Showing posts with label consumers. Show all posts
Thursday, June 14, 2012
Where we are. The economy in seven magnificent graphs
From Glenn Steven's address to the Brisbane Economic Forum:
Related Posts
. Surprised by Joy. How Treasury underestimated China.
. Coal and iron ore, they're less than they were
. The right way to present budget forecasts
Thursday, June 07, 2012
GDP. We're booming, if you can believe it.
On one side of the country
North of the Brisbane line:
Trend growth in demand, year to March
Northern Territory 15.1%
Western Australia 13.6%
Queensland 7.8%
The South East:
ACT 3.2%
NSW 2.1%
Victoria 1.9%
South Australia 0.7%
Tasmania -0.2%
A surge in mining investment and an apparent upswing in consumer spending have delivered Australia one of the fastest economic growth rates in the developed world.
At 4.3 per cent, Australia’s annual growth rate is faster than any of the developed nations in the Organisation for Economic Co-operation and Development. The quarterly rate of 1.3 per cent is more than twice the most optimistic forecast.
One day after Coalition Treasury spokesman Joe Hockey described the Australian economy as “underperforming” Treasurer Wayne Swan used the March quarter news to lambaste the opposition for talking the economy down, denting confidence and then complaining about weak confidence.
He said business figures were also to blame, echoing concerns held within the Reserve Bank.
Asked who in the business community was relentlessly negative he declined to name names, telling ABC 7.30 there were “one or two who go out there and run the economy down all the time”.
“Let’s make these figures an extraordinary circuit breaker. This tide of negativity, this relentless negativity from the doomsayers has to stop. It insults the hard work that so many Australians put in to make our economy strong.”
“We have seven Eurozone economies in recession, as well as in the UK, and many more developed economies which are crippled by unemployment. This result says something very special about Australia and about our capacity to face up to the worst that the world can throw at us.”
New engineering construction - most of it related to mining - accounted for almost all of the quarter’s economic growth, jumping 19.7 per cent over the quarter and 53 per cent over the year. Consumer spending was almost as important, with the volume of goods and services bought swelling a near record 1.6 per cent over the quarter and 4.2 per cent over the year.
The figures suggest Australians bought 4 per cent more food during the quarter, 6 per cent more transport services and 3 per cent more health services, outcomes described by UBS economist Scott Haslem as “positively unbelievable”...
The consumer inflation rate reported in the figures is zero in the March quarter and 1.4 per cent over the year. Household incomes grew 2.5 per cent in the quarter. Household savings was little changed at 9.3 per cent of income.
The best measure of spending by state shows NSW spending slipping a seasonally-adjusted 0.3 per cent in the quarter, Victoria advancing 1.8 per cent and Western Australia climing a phenomenal 7.8 per cent.
More reliable trend figures show NSW spending climbing 2.1 per cent per year and Victoria 1.9 per cent. In contrast Western Australian spending balooned 13.6 per cent - a faster rate of growth than in China’.
The news sent the Australian dollar to its highest close in a fortnight - 98.48 US cents. The share market inched ahead 0.29 per cent.
Describing the figures as “surprising to all” shadow treasurer Joe Hockey said they would be better with a better government.
“Imagine how well our country could do if we had a good government,” he told a press conference. “This is not the time to make conditions more difficult for the mining industry. It is not the time to put a new tax on the mining industry.”
Asked whether he was running a scare campaign Mr Hockey said “the scariest thing in Australia is Wayne Swan and quite frankly if you look at his words over the last few months he confirms it.”
“Today the Treasurer is suggesting that everything is very rosy in Australia, but he is handing out cash to people and telling people it is pretty tough out there, that’s the government is borrowing money - to hand you cash.”
In today's Canberra Times, Sydney Morning Herald and Age
SUGGESTED READING
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Read more >>
North of the Brisbane line:Trend growth in demand, year to March
Northern Territory 15.1%
Western Australia 13.6%
Queensland 7.8%
The South East:
ACT 3.2%
NSW 2.1%
Victoria 1.9%
South Australia 0.7%
Tasmania -0.2%
A surge in mining investment and an apparent upswing in consumer spending have delivered Australia one of the fastest economic growth rates in the developed world.
At 4.3 per cent, Australia’s annual growth rate is faster than any of the developed nations in the Organisation for Economic Co-operation and Development. The quarterly rate of 1.3 per cent is more than twice the most optimistic forecast.
One day after Coalition Treasury spokesman Joe Hockey described the Australian economy as “underperforming” Treasurer Wayne Swan used the March quarter news to lambaste the opposition for talking the economy down, denting confidence and then complaining about weak confidence.
He said business figures were also to blame, echoing concerns held within the Reserve Bank.
Asked who in the business community was relentlessly negative he declined to name names, telling ABC 7.30 there were “one or two who go out there and run the economy down all the time”.
“Let’s make these figures an extraordinary circuit breaker. This tide of negativity, this relentless negativity from the doomsayers has to stop. It insults the hard work that so many Australians put in to make our economy strong.”
“We have seven Eurozone economies in recession, as well as in the UK, and many more developed economies which are crippled by unemployment. This result says something very special about Australia and about our capacity to face up to the worst that the world can throw at us.”
New engineering construction - most of it related to mining - accounted for almost all of the quarter’s economic growth, jumping 19.7 per cent over the quarter and 53 per cent over the year. Consumer spending was almost as important, with the volume of goods and services bought swelling a near record 1.6 per cent over the quarter and 4.2 per cent over the year.
The figures suggest Australians bought 4 per cent more food during the quarter, 6 per cent more transport services and 3 per cent more health services, outcomes described by UBS economist Scott Haslem as “positively unbelievable”...
The consumer inflation rate reported in the figures is zero in the March quarter and 1.4 per cent over the year. Household incomes grew 2.5 per cent in the quarter. Household savings was little changed at 9.3 per cent of income.
The best measure of spending by state shows NSW spending slipping a seasonally-adjusted 0.3 per cent in the quarter, Victoria advancing 1.8 per cent and Western Australia climing a phenomenal 7.8 per cent.
More reliable trend figures show NSW spending climbing 2.1 per cent per year and Victoria 1.9 per cent. In contrast Western Australian spending balooned 13.6 per cent - a faster rate of growth than in China’.
The news sent the Australian dollar to its highest close in a fortnight - 98.48 US cents. The share market inched ahead 0.29 per cent.
Describing the figures as “surprising to all” shadow treasurer Joe Hockey said they would be better with a better government.
“Imagine how well our country could do if we had a good government,” he told a press conference. “This is not the time to make conditions more difficult for the mining industry. It is not the time to put a new tax on the mining industry.”
Asked whether he was running a scare campaign Mr Hockey said “the scariest thing in Australia is Wayne Swan and quite frankly if you look at his words over the last few months he confirms it.”
“Today the Treasurer is suggesting that everything is very rosy in Australia, but he is handing out cash to people and telling people it is pretty tough out there, that’s the government is borrowing money - to hand you cash.”
In today's Canberra Times, Sydney Morning Herald and Age
SUGGESTED READING
These figures strain credulity - Tim Colebach
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5206.0
Thursday, March 15, 2012
"Things are getting worse, but the shoping's good" - confidence survey
It’s hard to credit. We feel bad about our finances but good about shopping. The latest Westpac Melbourne Institute consumer sentiment survey finds an extraordinary 43 per cent of us believe our family finances have worsened over the past year, way in excess of the 19 per cent who believe they have got better.
But asked whether “now is a good time to buy a major household item” 50 per cent say it is; only 27 per cent disagree. Asked whether now is a good time to buy a car 44 per cent say yes and only 22 per cent no. Asked whether it’s a good time to buy a house 48 per cent say yes and 28 per cent no.
Westpac’s chief economist Bill Evans has an explanation for the paradox.
“When we ask whether now is a good time to buy, people say ‘yes’ because stuff is cheap on account of the high dollar. But that doesn’t mean they’ll do it.”
“We have found actual purchases to be much more closely related to how they feel about their finances, and people are worried"...
The latest retail figures show spending growing at a trend rate of just 0.1 per cent per month, much lower than the rate of inflation. Stores such as Dick Smith and JB Hi Fi whose prices have been held back by the high dollar, report disappointing sales.
Although wages are holding up and unemployment is fairly steady Dr Evans believes falling house and share market prices are making families nervous.
“If you have a lot of debt and your asset is performing well you will be confident, but if you’ve got high debt and your asset is under-performing, you’ll be worried about your finances and less prepared to spend, he says.
The consumer confidence index slid 7.7 per cent to 96.1 in this month’s survey, dipping below the neutral of 100 where optimists balance pessimists.
“The awkward thing for the Reserve Bank is it is now back below where it was before the Bank started cutting rates in November,” said Dr Evans. “Moves by the retail banks and global concerns have offset everything the Bank has done.”
“The weak jobs market is also biting, even though it is not yet showing up in the unemployment rate.”
“Last year was appalling for jobs - the first time since 1992 we failed to expand employment. The only reason unemployment didn’t rise was that men walked away; construction workers and manufacturing workers gave up rather than add to unemployment.”
The survey shows a sharp switch to caution in managing savings. Only 5 per cent of those surveyed now believe the share market is the wisest place for savings, down from 12 per cent a year ago. The proportion believing a bank is the safest place has climbed from 27 to 35 per cent.
In today's Sydney Morning Herald and Age
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Tuesday, January 10, 2012
What's inferior? Not much, according to the Reserve Bank
"...a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed."
Get it? The more your income, the less you want this good -- in absolute terms, not just proportional terms.
So which goods are inferior, in Australia?
The RBA has worked it out, using the ABS household expenditure and income surveys:
"Less than 1 per cent of total spending was on goods
and services that were estimated to be inferior
goods in 2009/10. Given that many of these have
elasticities only slightly less than zero, it is difficult to
be definitive.
However, based on the data from the
2003/04 and 2009/10 HES, examples of goods which
may be classified as inferior goods are powdered
milk, TV rental and tobacco other than cigarettes."
I can think of others: Cask wine, International Roast.
Are there others?
Insights From the Household Expenditure Survey
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Thursday, December 15, 2011
Bleak Christmas? Europe is scaring us
The Westpac Melbourne Institute consumer sentiment index slipped 8 per cent after last week’s interest rate cut instead of bouncing as usually happens following interest rate easings.
“The most likely explanation is that concerns over the reasons behind the cut have overwhelmed the perceived benefits of the cut” said Westpac chief economist Bill Evans.
Asked which news items they recalled in the past month only 31 per cent remembered hearing about interest rates. But 60 per cent had heard about economic conditions and 56 per cent about international conditions.
“The constant stream of news on developments in Europe will have had an impact. The news on economic conditions, international conditions and budget and taxation was considered the worst since 2008,” Mr Evans said.
The proportion of people believing now was a good time to buy a major household item slipped 10 per cent, meaning pessimists outweighed optimists for the first time since the 2008...
Views about economic conditions in the year ahead slipped 19 per cent, views about economic conditions over the next five years slipped 14 per cent.
“Risk aversion increased markedly. When asked about the wisest place for savings 27 per cent nominated paying down debt, up from 19 per cent in September. It’s the second highest result on result on record.”
ComSec economist Savanth Sebastian said the the new conservatism was disturbing.
“Consumers are clearly batting down the hatches, using savings to cut their debt levels, unwilling to take on risk and curbing spending.”
“They harbour reservations about what lies ahead. If consumer sentiment doesn’t lift, retailers and policymakers alike will have genuine reasons to be very worried.”
Reserve Bank deputy governor Ric Battellino told a Sydney conference the European problems were likely to worsen and spill over into the Australian economy.
“It is possible a combination of credible fiscal commitments by governments and short-term support from the European central bank and International Monetary Fund will provide a solution that is relatively benign,” he said.
“However, other outcomes, including some disruptive event such as a change in the composition of the euro area, cannot be ruled out.”
“We need to remain alert to the risks.”
Published in today's SMH
European Financial Developments - Ric Battelino
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Thursday, May 05, 2011
Inside your grocery cupboard: Inflation, but not as you know it
Milk (2 litre whole) down 62 cents, $3.11
Eggs (dozen free range) down 22 cents, $5.26
Breakfast cereal (750g) down 11 cents, $3.85
Bread (700g sliced) down 8 cents, $3.71
Baked beans (420g can) down 5 cents, $1.45
Bananas (1 kilo) up $2.84, $5.39
Tomatoes (1 kilo) up 40 cents, $5.67
Tomato sauce (600 ml) up 22 cents, $2.09
Onions (1 kilo) up 21 cents, $3.23
Butter (500g) up 11 cents $4.36
Average Sydney prices, March on December quarters
If you want a handle on the confusing currents and counter currents driving inflation, go through your grocery cupboard.
The detailed price records collected by the Bureau of Statistics in the three months to March show the milk discount war and the soaring Australian dollar aggressively driving down the prices of shelves worth of staples while the floods and climbing commodity prices play havoc with others.
The average price paid for a two litre bottle of full cream milk in Sydney fell 62 cents between the December and March quarters to $3.11 -- a substantial cut, but a long way shy of the $1.99 being charged by Coles and Woolworths, in part because we are continuing to buy milk from other outlets and in part because the lower price didn’t apply for the full three months.
Free-range eggs, also discounted by Coles, fell in price 22 cents to $5.26 per dozen.
The soaring dollar pushed down dozens of other prices and shielded still more from the full affect of climbing international prices...
The average price of a box of breakfast cereal fell 11 cents to $3.85. A can of baked beans fell 5 cents cheaper to $1.45. Although these products are often made in Australia, they are subject to downward price pressure from international competition.
The average banana price recorded by the Bureau was $5.39 per kilo, up an extraordinary $2.84, but well short of the $12 per kilo many Sydneysiders are paying because the bureau averaged prices over the entire three months.
The average price of a kilo of onions climbed 21 cents, tomatoes 40 cents and tomato sauce up 22 cents to $2.09 for a 600 ml bottle.
Products derived from commodities caught up in the world-wide economic recovery climbed in price despite the restraining influence of the dollar.
Instant coffee climbed 18 cents to $7.81 per 150 gram jar and milk chocolate climbed 10 cents to $3.78 per 200 gram block. Sydney petrol climbed 11 cents per litre to $1.38 with the price higher at the end of the quarter than at the start.
The cross currents paint a picture of building inflationary pressure held back for the moment by the climbing Australian dollar and supermarket discounting. With milk and eggs unlikely to discounted further and with the dollar likely to soon find its top they suggest higher inflation in the year ahead partly offset by the unwinding of flood-affected fruit and vegetable prices.
Published in today's SMH
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6403.0.55.001
Wednesday, May 04, 2011
Meet Australia's next Competition Czar
The man in line to succeed Alan Fels and Graeme Samuel as the third head of the Australian Competition and Consumer Commission says he wasn’t looking for a new job, until he ran into Wayne Swan at the Brisbane Airport.
“I would like to have a chat with you,” Rod Sims recalls the deputy prime minister saying. As they talked later in Canberra it became clear Sims would have to give up several of the jobs he loved.
Often referred to as a former economic advisor to Bob Hawke, he says his passion is world poverty.
“I took the job with Hawke in 1988 as part of a standard two-year public service rotation,” he told the Age after his appointment was announced yesterday.
“I stuck to two years. I took the view that if I had stayed longer I would have crossed a line which I didn't want to cross. I don’t have any political affiliations,” said Sims who needs the approval of state governments, many in Coalition hands, to be formally endorsed as ACCC chairman.
For ten years a bureaucrat ending up as deputy secretary of the department of Prime Minister and Cabinet, and before that for ten years a development economist working in Papua New Guinea and for the Commonwealth Secretariat, Sims these days regulates water, electricity, and gas prices as head of the NSW Independent Pricing and Regulatory Tribunal and provides economic advice to the Gillard government’s Multi-Party Climate Change Committee.
He has also been a corporate consultant at Port Jackson Partners advising on mergers and acquisitions, territory he will revisit as head of the ACCC.
But the job he loves most - the one he says will be hard to surrender - is the one that takes to Singapore as head of the InfraCo Asia, a development company funded by foreign aid that sets up wind power, irrigation and hydro electricity projects “in the poorest parts of Asia, where the private sector won’t get involved”...
He has just set up two hydro projects in Nepal and is proud of what InfraCo is achieving.
“But I think I’ll have to give up everything,” he says. “Chairman of the ACCC is a full-time role.”
“Actually I think it is fair to say its the only job I would give up my present jobs for.”
Asked why, he says the ACCC’s is fundamental to the proper working of a market economy.
“It looks after consumer protection, safety standards, market conduct, mergers and acquisitions, the regulation of infrastructure. It’s the core.”
“Unless you have a body that is actively looking after these things, market economies can run off the rails.”
Born in Lorne on the Great Ocean Road two and half hours out of Melbourne and studying development economics at Melbourne University he says the ACCC job is the one his career has been moving towards.
“I honestly think, and this is going to sound a bit arrogant, the role needs somebody who has a good public policy background but also understands the real world of business, and I guess I think I can probably do it pretty well and make a contribution, whereas I wouldn't’ say the same about other positions,” he said.
Announcing the nomination yesterday along with that of Greg Medcraft as the next chairman of the Australian Securities and Investments Commission Mr Swan said both who would play an important part in promoting competition and ensuring the integrity and confidence of financial markets.
Graham Samuel had done an outstanding job at chair of the ACCC for five years under both Coalition and Labor governments. He leaves in August.
Mr Sims wouldn't be drawn on his priorities as one of Australia's two new corporate cops saying his appointment hadn’t yet been approved and he didn’t want the states to think he was taking them for granted.
Published in today's SMH and Age
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Friday, March 25, 2011
I thought the price signalling law was directed at banks, until I read it
Legislation introduced into parliament Thursday to crack down on price signalling by banks has a much wider application and could soon be used to regulate firms such as petrol retailers and supermarkets, leading competition lawyer says.
Treasurer Wayne Swan told parliament the price signalling amendments to the Competition and
Consumer Act would mean the "big end of town" could no longer "dud Australian families" on interest rates.
But the bill itself is broader, applying to whatever classes of goods and services are "prescribed by the regulations".
"Once it becomes law it could be made to apply to other sectors of the economy without proper debate," said Allen & Overy competition partner Dave Poddar.
"In my view the draft regulations that will specify the industry sectors should be released at the same time as the bill so business and the parliament can properly consider them"...
A cabinet briefing sent to Mr Swan in October by Treasury released under the Freedom of Information laws warns that a series of court decisions had made it increasingly difficult for the Australian Competition and Consumer Commission Commission to prove collusion.
It says consumer laws should be changed to give the commission sweeping powers to impose so-called per se bans on the private exchange of pricing information between competitors, eliminating the need to prove an explicit intention to collude.
It is understood that when the regulations are made public they will only prescribe banks. The Treasurer will extend them to other sectors after detailed review and consideration.
Mr Swan told parliament the new law would convictions where banks gave each other a "nod and a wink" about plans to raise interest rates even where it wasn’t written down and signed in blood.
It includes exemptions allowing for disclosure to the stock exchange and where banks need to exchange information because they are part of a lending syndicate.
Published in today's SMH and Age
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Monday, February 07, 2011
Time to consider the implications of the $8 floor fan
Stuart Washington's important piece in today's SMH:
A friend pointed out an electric floor fan he bought at Bunnings the other day to beat the recent heat, asking me to guess the price
You know the thing, a fan on a stand with a rotating head, standing about a metre tall with a wire guard to ensure small fingers aren't clipped.
"I don't know, $80? Maybe $90?" was my best guess.
My friend explained the fan's shelf price was $12. But when he got it to the counter, there was a special and it only cost $8.
Now, don't expect from here on a tirade about the perils of discounting for retailers. Nor should you expect a critique of the recent controversy over internet shopping versus the so-called brick-and-mortar retailers.
What I want to explore is a sense of unease about just how a fully functioning electric floor fan lands from China and can be sold for about $8.
The unease I feel about where the profit from an $8 floor fan lies - and don't get me wrong, this is still a column about business and profits - feeds a deeper unease about a broken pricing system.
And I believe failures in pricing are posing grave dangers to what we know as capitalism...
Now it's a long way from a cheapo floor fan to grave misgivings about the future of capitalism itself, so I will try to explain.
How much do you reckon the individual components of a floor fan cost? Let me say from the outset, I have no idea.
However let's say there is some metal in the electric motor and cabling (to my knowledge these things can't be made of plastic yet).
Then there are some petrochemicals necessary to create the polymers for the plastic that cases the motor and makes up the floor stand.
Then, of course, labour is a component, being the price of labour "embedded" in the final product.
What a piece of work is a fan, to badly paraphrase Shakespeare.
Here you have the world's great extraction industries - mining and oil - and the world's largest labour pool. Combined, they give you a fan that sits in the corner of your front room and cools you on a blistering Sydney summer day.
Now let's think what also sits in the fan's price. There is packaging. There is transport from China. There is the cost of the store's advertising. There is the additional cost of the store labour that stacks the shelves and operates the checkouts.
Wow! All this for just $8. It's better than a Demtel advertisement.
Anyone else starting to wonder how this is happening? As a capitalist, I want a profit from the fan for the mining industry, the oil industry, the manufacturer of the plastic, the manufacturer of the motor, the packaging supplier, the distributor and the retailer.
But I just don't see it - unless inputs are being ridiculously cheaply priced.
Now, I understand various arguments can be levelled against my example. For instance, the retailer is "loss leading" with the fan, and therefore there is no profit in the $8 price.
But I think there are enough examples of absurdly low prices around the place to allow me to draft the fan (pun not intended) for my argument.
My argument is that the floor fan is an indicator of a world in which certain inputs are not being accurately priced.
I don't think the metals that went into the fan were priced properly. Nor were the petrochemicals. I will leave labour for another day.
Funny things start to happen when you don't price things properly. For example, the global financial crisis was a great example of what happened when people did not put the right price on money by offering absurdly low interest rates.
The mispricing encouraged short-term behaviours - think of, say, private equity's bid for Qantas - that were not sustainable over the longer term.
Capitalism, incidentally, has never promised to be sustainable. Karl Marx raised fears about the inherent instability of capitalism, long before his shaggy visage was shackled to the baggage of 20th-century communism.
John Maynard Keynes held similar fears about what we all now know as the ups and downs of the business cycle. Indeed, Keynes's great contribution to economic thinking was to encourage government spending to ward off the worst effects of downturns. The goal of the spending was to address fears of capitalism becoming so unstable it would cease to exist.
Despite a lurch towards Keynesian thinking, economics in recent decades has been dominated by the austere belief that markets will generally sort themselves out.
But they don't sort themselves out when prices are wrong in the first place.
Going back to the $8 floor fan, my fear is that there is nothing in the price reflecting the allocation of precious resources. There is nothing in the price reflecting the depletion of those resources.
It's a cheapo throwaway fan, and there's plenty more where that came from, is the current thinking.
Our current economics fail us when it comes to the issue of resource depletion. Our economics also fail us when it comes to the issue of environmental impacts from resource depletion. And yes, those environmental impacts include emissions from the manufacture of the fan.
We are lacking an economic framework that joins Adam Smith's profit maximisers with what we now understand as the broader impacts of our economic endeavours.
Despite the momentary thrill of an $8 floor fan, I believe we are all poorer for failing to recognise its full price.
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Thursday, December 16, 2010
A turkey of a Christmas?
An near-record 64 per cent of us agreed that now was a good time to buy, a result bettered only once in the past decade. But just 3.7 per cent of us felt that spending was the best use for savings, the second-weakest result on record.
By contrast 30 per cent us felt the best place for savings was in a bank and 22 per cent felt it was paying down debt, both totals only significantly exceeded at the height of the economic crisis.
"Australian consumers have turned conservative," said CommSec economist Savanth Sebastinan.
"Interest rates need to remain on hold for an extended time before they'll be tempted to part with their cash... This will only make things more difficult for retailers. They will need to discount to generate interest."
The Westpac-Melbourne Institute survey found awareness of news about the Australian dollar doubled between September and December, perhaps providing a clue as to why consumers increasingly thought it was a good time to buy.
Awareness of news about interest rates also almost doubled, perhaps providing a clue about the reasons for renewed consumer caution.
Labor voters are far more optimistic than Coalition voters with positive responses to the survey questions exceeding negative responses by a wide margin. Among Coalition voters positive and negative responses were evenly balanced.
The overall consumer confidence index held firm in December, advancing by a fraction of a point.
Within the total there was a sharp drop in the proportion of people expecting better economic conditions over the next 5 years balanced by an increase in those reporting improved family finances over the past year.
In the past year retail spending as climbed at a trend rate of 2.7 per cent - merely in line with inflation and well below the 3.7 per cent rate of employment growth - implying the amount spent per worker has been falling.
Access economics this week forecast a "turkey of a Christmas,'' predicting the November double interest rate hike would hit sales retail directly and also indirectly by further limiting home building, one of the key drivers for major household purchases.
Published in today's SMH and Age
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Monday, June 28, 2010
More than two years on from the bank-switching package...
His much-vaunted "bank-switching package" unveiled in February 2008 amounted to little more than a website, a "hotline" which turned out to be the Securities Commission switchboard, and a requirement for banks to give their customers a list of their direct debits to take to their new lender.
But from Thursday the Securities Commission will actually be given teeth declare void so-called "unfair" or "unconscionable" exit fees that don't relate to the costs banks actually incur in closing accounts.
Financial Services Minister Chris Bowen told the Herald lenders would still be able to recover costs from lenders who left early, but would no longer be able to "gouge".
A new consumer credit law in place from Thursday will give the Commission the power to strike out "unconscionable" fees... and a new national consumer law will give it power to strike out "unfair" ones.
And some of them are high. Rate-watching service InfoChoice says a "Smart Saver" variable loan offered by Homeloans Ltd would cost $5178 to exit if $300,000 were borrowed for 25 years and the loan closed within three years.
The sum is made up of $678 exit administration fee and a $4500 so-called deferred establishment fee.
Others are much lower, the Credit Union of Australia charging $350, The ANZ charging $700 and Westpac $1150.
But the bad news is customers already on subject to those high exit fees will continue to face them.
The new powers will apply only to loans entered into after July 1.
Minister Bowen says he considered legislating to give the Commission the power to amend existing contracts but was advised it would be unconstitutional.
"It would have removed existing rights and almost certainly invited a constitutional challenge with a reasonable likelihood of success," he told Herald.
"But I do think we will see behavioural change affecting existing contracts. I wouldn't overstate it, but I think the increased attention and the the likelihood of public opprobrium will improve the way lenders treat the customers they have," he said.
The National Australia Bank which stands to benefit from the change offering the lowest variable rate of the big four was enthusiastic.
"If these new laws give Australians more power to walk down the road and find a better deal that’s a great thing," said chief executive Cameron Clyne. "It'll be good for competition and good for lenders like us who offer the most competitive rates."
The Bankers Association was more circumspect arguing that some of the fees charged on exit benefited borrowers.
"Some fees reflect the real costs of closing accounts and others are deferred establishment fees which can actually help borrowers who would otherwise have to pay upfront," said chief executive Steven Munchenberg.
"One way or another banks have to charge for setting up accounts."
Jenny Mack, chairperson of the consumer group Choice said the market wouldn't work until customers could cheaply switch.
"As rates went down consumer advice centres and the Financial Ombudsman were flooded with consumers trying to get out of mortgages."
"We think it's great that with new laws in place this is the first area ASIC and the government will target," she said.
Published in today's SMH and Age
Unconscionable?
What it costs to get out
ANZ Simplicity Plus $700
Credit Union of Australia $350
Commonwealth Bank Economiser $1050
Homeloans Smart Saver $5178
NAB Choice Package $1800
RAMS Basic $3295
Resi Smart Pro $2228
St George Basic $1500
Westpac First Option $1150
InfoChoice
Assumes 25 year $300,000 variable mortgage discharged before 3 years. Includes exit fees, deferred establishment fees and early termination fees.
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Thursday, June 10, 2010
Consumer confidence is plummeting, but...
...Labor voters are as happy as Larry
Consumer confidence is plummeting with the latest slide - the third in three months - blamed in part on the budget and the proposed resource super profits tax.
As high as 117 in March the Westpac Melbourne Institute index is now just 101.9 on a scale where 100 means pessimists balance optimists.
"While the fall in May was largely due to the Reserve Bank’s decision to raise rates that month, the fall in June seems to reflect a mixture of concerns about deteriorating conditions abroad, financial market turmoil and uncertainty around the proposed resource tax," said Westpac economist Matthew Hassan.
Westpac found the most recalled news items during the month concerned the budget and tax. The perception was negative with the number of people feeling bad about the news outweighing the number who felt good.
But their were very sharp differences according to the way people vote...
The survey found Australians planning to vote Labor feel the most confident of any deomographic group with an index number of 120, meaning optimists outweigh pessimists 20 per cent.
Australians planning to vote for the Coalition feel the least confident of with an index number of 90, meaning pessimists outweigh optimists by 10 per cent.
The gap between the confidence of Labor and Coalition voters is amongst the widest on record.
Australians are now far less likely to believe that now is a good time to buy a house than at any time since the depths of the financial crisis with the balance of optimists versus pessimists sliding from 146 to 95 in a year.
"We are reigning in our exuberance," said CommSec economist Savanth Sebastian. "We are now barely more confident that a year ago and the slide in the share market hasn't helped."
Separately released figures show home loans sliding for the ninth time in ten months with the number of loans to owner occupiers falling to its lowest point in almost a decade.
Just 46,300 Australians borrowed to buy houses in April, down from a recent high of 64,600 in September.
In NSW loan approvals were down 30 per cent on September. Nationwide approvals were down 28 per cent.
Against that trend investment loans are climbing and are now 26 per cent higher than a year ago.
Concerns about share prices and international conditions are weighing heavily on consumers with only 11 per cent believing the share market is "the wisest place for savings" and the assessment of overseas conditions the worst since the financial crisis.
"The proportion of Australians recalling international news is actually higher than in the crisis," said Mr Hassan. "It's the highest since the Asian economic crisis of 1997 and 1998."
Overwhelmingly Australians believe the bank is the safest place for savings with real estate and paying down debt the next highest categories.
Surprisingly for Australians who are increasingly negative, the proportion of people believing that "now is a good time to buy a major household item" high with 58 per cent answering yes and only 28 per cent answering no.
Optimists about buying cars also far outweighed pessimists, possibly reflecting good car prices flowing from the cut in tariffs in January and the recently high Australian dollar.
Published in today's SMH and Age
Consumer Sentiment June 2010
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Thursday, September 10, 2009
Our economic future has never looked better
Asked last week how they felt about economic conditions over the next five years a record 49 per cent of Australians were positive. Only 18 per cent were negative. The gap - 31 percentage points - is the widest on record.
Importantly the optimism is widespread. Coalition voters were predominantly negative up until August. This month Coalition optimists outweighed Coalition pessimists by 15 points. Even mortgage holders facing an increase in rates have become increasingly positive with optimists outweighing pessimists by 21 points.
An unpublished breakdown of the answers made available to the Herald suggests an almost carefree compulsion to buy...
Around 54 per cent of those surveyed agreed that "now is a good time to buy a major household item" with only 24 per cent saying it was a bad time; the widest gap since the height of the mining boom in mid-2007.
Asked about economic conditions in the year ahead 43 per cent were positive, more than double the 18 per cent who were negative; also the widest gap since 2007.
The results are useful to the Government because they suggest its stimulus measures have been working, but also useful to the Opposition because they suggest its safe to wind them back.
More importantly they suggest that negative messages won't wash with voters in the coming election . Acceptance that the economy is improving is overwhelming in every income group, every occupational group, in both the city and the country and among both women as well as men.
The overall Westpac Index has surged a record 34 per cent in the four months and 5 per cent in September to 119.3 on a scale in which 100 indicates a balance between optimists and pessimists.
Westpac chief economist Bill Evans described the result as "stunning" and "truly extraordinary".
"Good news appears to be drowning out warnings on rate rises," he said.
"We asked about the news people could remember hearing and 'economic conditions' dominated 'interest rates' 69 per cent 33 per cent."
"Given the extensive media coverage of likely rate hikes this is surprising."
Actual retail spending eased off in July with figures released yesterday reporting a dip of 1 per cent, still up 5.2 per cent on the year up 5.8 per cent since before last December's stimulus payments.
But the detail of the figures points to optimism. Spending in supermarkets fell 1 per cent while spending on takeaway food climbed 2.5 per cent. Spending on household goods slipped 3.5 per cent while spending on pharmaceuticals and cosmetics grew 1.4 per cent.
Borrowing for housing slipped 2 per cent. The Melbourne Institute Index survey has consumers continuing to feel better about buying houses than at any time since 2001 with optimists outweighing pessimists 45 points. Asked whether now is the right time to buy a car, optimists outweighed pessimists 39 points.
How do you feel?
Economy next 5 years:
Good: 49%
Bad: 18%
(Best result since records began)
Economy next year:
Good: 43%
Bad: 18%
(Best since December 2007)
Buying a major household item:
Good time: 54%
Bad time: 24%
(Best since August 2007)
Source: Melbourne Institute
Published in today's SMH and Age
Thursday, August 13, 2009
Two years on, even Coalition voters feel good
The Westpac-Melbourne Institute confidence index soared 28 per cent in three months to August, a far bigger jump than the 23 per cent recorded as Australia climbed out of the early 1980s recession and the 20 per cent recorded as Australia climbed from the 1980s recession.
Significantly, optimists now outnumber or equal pessimists in every age group, every income range, every occupation type, and for the first time in almost 2 years every political persuasion.
"I am amazed," said the Melbourne Institute's Professor Guay Lim, who compiled the survey. "We asked the questions this weekend after a week of very good news on employment and the Reserve Bank's positive assessment of the economy. People seem to have come around to the view that the worst won't happen to them."
Coalition voters have been consistently negative in their views about the economy since just after the election of the Rudd Labor government in November 2007...
This month they jumped well into positive territory for the first time since early 2008 with optimists outweighing pessimists by a margin of 12 per cent.
Labor voters have been in positive territory for 3 months with optimists outweighing pessimists by 20 per cent.
Treasurer Wayne Swan described the turnaround in confidence as "staggering" and raised the prospect of it becoming self-fulfilling.
"Ultimately it is the confidence of Australian consumers and businesses that will provide the spark for the sustained economic recovery," he told parliament, adding that retail spending was up 5 per cent on November and the construction of new homes up 55 per cent on October.
The detail of the figures suggests that the retail boom will continue even after the government's stimulus payments have been spent with the Australians who agreed with the proposition that "now is a good time to buy a major household item" outnumbering those who did not by an exraordinary 2 to 1.
There were also big increases in the proportions of Australians agreeing that "now is a good time to buy a dwelling" and that "now is a good time to buy a car", with both well above long-run averages.
"This will encourage the Reserve Bank to begin the process of normalising interest rates, probably from early 2010," said Westpac economist Matthew Hassan. "It is clear that as far as consumers are concerned, the worst appears to have passed."
Absent from the Treasurer's language yesterday was the usual reference to Australia not being "out of the woods".
Instead Mr Swan spoke of "good news and bad news before this crisis is behind us," suggesting that the government's own views may be becoming more optimistic.
The Australian stock market edged 0.3 per cent higher Wednesday, closing at its highest point since October 2008.
Published in today's Age
Saturday, July 11, 2009
"Woolies boss heavied me: Choice man"
It's war, and of course this is great, but Woolies is cheaper than IGA - GroceryChoice (deceased) said soStory 1 - AAP
Consumer group Choice has set its sights on keeping the two supermarket giants honest - a job it says went begging following the scrapping of the Grocery Choice website.
Choice has ordered its policy and campaign teams to drop all other issues to try and figure out how to bring down supermarket prices in Australia, which rate among the highest in the developed world.
Story 2 - Kelly Burke SMH
NICK STACE has sat with Sinn Fein and Ulster Unionists at the bargaining table; he has had tough dealings with giant European car manufacturers and survived the political uber-egos of 10 Downing Street.
But it was a meeting that took place in Australia on the morning of June 5 this year that the chief executive of Choice says has been the most hostile and intimidatory in his career. That meeting was with the Woolworths boss Michael Luscombe.
Worth a read.
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