Housing Finance Commitments Up Strongly

[Token Funder]

The drop in business finance has nothing to do with the cost of money and has everything to do with the credit rationing, risk aversion and company delveraging.

I'm still betting on at least one 25bp move before Xmas in the absence of any genuine news.

 

[BayView]

I'm still betting on at least one 25bp move before Xmas in the absence of any genuine news.

Movement which way? Up or down?

 

[Token Funder]

Movement which way? Up or down?

Just in case you're *not* taking the ****, up

 

[BayView]

Latest RBA Financial Aggregates, for those who are interested...

Good to see housing credit growth is picking up for the first time in a few years. This really goes along with the uptick in housing finance commitments discussed earlier in this thread. Once the finance has been committed to, then it takes a little while to actually flow through and appear on the credit growth statistics.

Take particular note of the business lending.

Now, this would mean very little growth in employment, or business expansion etc.

In short; no economic growth of any significance.

No growth, no jobs - in fact, we could even see rising unemployment, even though right now the figures don't seem too bad apparently.

It takes a while for the ripples in the middle of the lake to reach the shore.

 

[willair]

Latest RBA Financial Aggregates.

Housing finance continues to pick up, however personal and business credit is still falling year on year. Hard to see how the RBA could raise rates significantly, especially given the continuing decline in business finance. Despite the runaway housing market, I think the RBA would want to see business conditions improve before hitting the brakes too hard...

Interesting chart,but what makes you think the RBA will hold back on the rates,something has to give the Australian Dollar?,Prie of Oil?,Gold ?
i think from now on in,there is only one way the rates are going and the sky could be the limit..imho..willair..

 

[blaster]

I think you'd be spot on TF . It won't surprise me at all to see them up 25 in possibly even just a few weeks time.

Cheers

 

[chilliaa]

factor in the positive retail numbers which beat market consensus.

Also remember the RBA has stated several times current interest rate settings are set for 'dire' circumstances, not merely expansionary.

Interest rates can step up from here and still be expansionary.

 

[Rolf Latham]

New housing starts down a wee bit too, but plasma sales are up..........


Clear indication that is.

I have may many micro biz owners on my books. I dont see many of them bringing on new staff, machinery or making other investments for growthIndeed, most are in lock down cost reduction survival mode. You can only do that for so long.

ta
rolf

 

[Token Funder]

factor in the positive retail numbers which beat market consensus.

Also remember the RBA has stated several times current interest rate settings are set for 'dire' circumstances, not merely expansionary.

Interest rates can step up from here and still be expansionary.

Spot on.....

 

[HiEquity]

I take it you guys are shorting the USD then? USA IRs are truly expansionary - ours are just at historic lows! A growing mismatch between ours and theirs can only do one thing to the exchange rate... and there seems little prospect of their IRs rising anytime soon.

I can see lots of scope for the RBA talking up IRs to talk down housing credit but if they actually go much higher than a token 25 basis points our exporters / businesses will get hit very hard indeed... and they know it! They also know that businesses drive the economy and unemployment at the end of the day.

Gotta feel sorry for the RBA - watching business credit fall off a cliff while housing credit recovers is exactly the opposite of what they would want to see. And there is nothing they can do about it other than "encourage" governments to reduce supply side impediments, talk up the prospect of IR rises and be "disappointed" if these low IRs resulted in a housing bubble.

Lots of talk but in reality they are caught between the devil and the deep blue sea...

 

[boz]

factor in the positive retail numbers which beat market consensus.

Also remember the RBA has stated several times current interest rate settings are set for 'dire' circumstances, not merely expansionary.

Interest rates can step up from here and still be expansionary.

Wouldn't bet on that, When Japan dropped the rates in early 90's they probably also thought it was for dire circumstances, well they are still sit at zero interest rates and Japan credit is still not expanding.
USA also is sitting at zero and credit is still expanding comparing to gdp, but it is at slowest pace in a very long time (mainly because gdp is shrinking). Australia "expansion", as you can see from shadows chart is not particulary strong and mainly also because of gov stimulus then rates.
I am not saying australia will stop expanding as well, but it is far from granted that will decouple from other major countries, specially on the interest rates.

 

[chilliaa]

Wouldn't bet on that, When Japan dropped the rates in early 90's they probably also thought it was for dire circumstances, well they are still sit at zero interest rates and Japan credit is still not expanding.
USA also is sitting at zero and credit is still expanding comparing to gdp, but it is at slowest pace in a very long time (mainly because gdp is shrinking). Australia "expansion", as you can see from shadows chart is not particulary strong and mainly also because of gov stimulus then rates.
I am not saying australia will stop expanding as well, but it is far from granted that will decouple from other major countries, specially on the interest rates.

mate i dont know how you can compare us to Japan, we havent even got a technical recession.
As to credit expansion, well what do you think has happened to personal savings rates, what do you think all the capital raising on the stock markets, all the reduced dividend pay out ratios have been doing to net lending.

The RBA doesnt make its decision based on SOLELY on movements in borrowings.

Then look at other indicators: manufacturing is in its second month of expansion, the inventory cycle has stabilised, unemployment levels are significantly below the dire expectations forecast earlier this year, government deficit is better than forecast.

Then look to the unofficial 'leakers' of RBA policy who get the quiet nudge from the RBA such as Terry Machan or what ever his name is.

Anyway time will tell, but i think there is a VERY HIGH PROBABILITY of a rate increase in November or December.

 

[chilliaa]

Gotta feel sorry for the RBA - watching business credit fall off a cliff while housing credit recovers is exactly the opposite of what they would want to see. And there is nothing they can do about it other than "encourage" governments to reduce supply side impediments, talk up the prospect of IR rises and be "disappointed" if these low IRs resulted in a housing bubble.

Lots of talk but in reality they are caught between the devil and the deep blue sea...

Reduced business credit is good for the cycle to repair itself. You cant keep getting drunk at the party, eventually you need a time to sober off.

I find this quite amusing, economic health is not dependent just on perpetually increasing business credit. Business credit moves in cycles just like everything else.

 

[boz]

mate i dont know how you can compare us to Japan, we havent even got a technical recession.
As to credit expansion, well what do you think has happened to personal savings rates, what do you think all the capital raising on the stock markets, all the reduced dividend pay out ratios have been doing to net lending.

The RBA doesnt make its decision based on SOLELY on movements in borrowings.

Then look at other indicators: manufacturing is in its second month of expansion, the inventory cycle has stabilised, unemployment levels are significantly below the dire expectations forecast earlier this year, government deficit is better than forecast.

Then look to the unofficial 'leakers' of RBA policy who get the quiet nudge from the RBA such as Terry Machan or what ever his name is.

Anyway time will tell, but i think there is a VERY HIGH PROBABILITY of a rate increase in November or December.

when do you think Japan had a recession before the end of 80's? was very much like australia now and most people thought they were going to rule the world, decoupling from everyone else, running massive gdp increases every year forever etc.
the data say Japan total debt is decreasing and soon will be less then Australia.
About the saving rate or savings in general you can get a broad idea by: total debt going up against gdp no much savings in place. If you want to study deposit and money flow more in detail you can check the RBA financial aggregate where also Shadow got the data for his chart.
You can see M1 (currency + deposit stand at 251.2 bil$, offshore borrowing at 311 bil$ (and we even have a strong AU$ and those borowing are mainly in US$), then you can do a bit of study yourself comparing this data with M3, and you should do it for the past few years at least, etc.
Then, after you finish can you clarify what do you mean with this statement:

As to credit expansion, well what do you think has happened to personal savings rates, what do you think all the capital raising on the stock markets, all the reduced dividend pay out ratios have been doing to net lending.

 

[chilliaa]

when do you think Japan had a recession before the end of 80's? was very much like australia now and most people thought they were going to rule the world, decoupling from everyone else, running massive gdp increases every year forever etc.
the data say Japan total debt is decreasing and soon will be less then Australia.
About the saving rate or savings in general you can get a broad idea by: total debt going up against gdp no much savings in place. If you want to study deposit and money flow more in detail you can check the RBA financial aggregate where also Shadow got the data for his chart.
You can see M1 (currency + deposit stand at 251.2 bil$, offshore borrowing at 311 bil$ (and we even have a strong AU$ and those borowing are mainly in US$), then you can do a bit of study yourself comparing this data with M3, and you should do it for the past few years at least, etc.
Then, after you finish can you clarify what do you mean with this statement:

Whats Japan's population growth like compared to ours?
whats japan's average age compared to ours?
Whats the break up of residential debt growth compared to the 'rest' of debt growth.

I like to keep things simple, if you over analyze you suffer from analysis paralysis.

 

[HiEquity]

Reduced business credit is good for the cycle to repair itself. You cant keep getting drunk at the party, eventually you need a time to sober off.

I find this quite amusing, economic health is not dependent just on perpetually increasing business credit. Business credit moves in cycles just like everything else.

I agree -ve business credit growth isn't the only game in town. But when combined with an increasing exchange rate making all our imports cheaper where is the evidence that inflation needs reining in through higher IRs?

I find it interesting that with an exchange rate at this level (0.86 to the USD) and a complete absence of inflation evidence, everyone reckons the logical thing for the RBA to do is to raise rates! Of course they will beat their chest about housing credit growth but are they really going to up IRs and exchange rates, in the process wiping out a heap of our exporters? Which is more important? Especially when the evidence shows Australian businesses are contracting already (the business credit consideration)...

Just my opinion - like I said I wouldn't be surprised if they went up 25 basis points to try to show people they mean business but really they are in a bind right now wrt real rate movements. They will need real evidence of inflation to force their hand in the face of all that IMO.

Obviously the market disagrees with me and it's not the first time!

 

[boz]

Whats Japan's population growth like compared to ours?
whats japan's average age compared to ours?
Whats the break up of residential debt growth compared to the 'rest' of debt growth.

I like to keep things simple, if you over analyze you suffer from analysis paralysis.

but still you've got to remember they are 5 times the population of australia in a land size smaller then victoria, that is not overanalising is it? why don't the Japanese dreams of a home with garden and drive property prices up following that dream? (I guess that is what was in fashion to say over there during their property bubble 20 years ago).
You still have to be aware correctly about the fundamental, not just with an eye closed. I don't see all this optimism in the medium future to have interest rates going up by much and decoupling from other countries (I remember NZ, Canada, US, UK, euroland are not going to rise rates for at least another 9 months, this is quite explicit from their statements)

 

[boz]

here is the latest about inflation (from 10.30 this morning).

Oct. 2 (Bloomberg) -- A gauge of Australian inflation held below the central bank target range for a fifth month in September, increasing policy makers’ scope to keep borrowing costs unchanged when they meet next week.

Consumer prices rose 1.3 percent from a year earlier, after gaining 1.7 percent in August, according to an index compiled by TD Securities Ltd. and the Melbourne Institute released in Sydney today. Prices were unchanged from August. The central bank aims to keep inflation between 2 percent and 3 percent.

Reserve Bank of Australia Governor Glenn Stevens will keep the benchmark lending rate unchanged at a 49-year low of 3 percent on Oct. 6 for a sixth month, according to economists surveyed by Bloomberg News. The index’s largest declines were for prices of computers, fruit, vegetables and cars, today’s report showed.
...

at present debt is not getting inflated away with these inflation numbers

 

[Shadow]

Housing Finance, Australia, Aug 2009

Looks like investors are coming back, as predicted...

http://www.abs.gov.au/AUSSTATS/[email protected]/Lookup/5609.0Main+Features1Aug 2009?OpenDocument

In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions increased 0.7%. An increase was recorded in investment housing commitments, up 7.6%

Up 7.6%... that's quite a jump. Probably influenced the RBA decision to increase interest rates.

 

[boz]

Shadow is a bit late with his chart...
In the meantime here is the release of September financial aggregate.

The main point is the contraction of private credit (consumers + businesses) by -0.2%, that was expected at +0.2%.
Interesting the month/month drop in M3, last time it happened was back in December, may be the strong AU$ has got something to do with it, still the RBA policy of rising rates leave me a bit wondering...