Reserve building its economic hopes on housing

Dogmatix

Dogmatix

Active Member
And back to stupid we go...

http://www.abc.net.au/news/2012-11-...tary-policy-november/4362644?section=business

Reserve building its economic hopes on housing

The Reserve Bank is hoping a recovery in home building will offset an earlier than expected peak in the mining boom, to sustain growth and employment.

In its latest quarterly Statement on Monetary Policy, the bank has reiterated its forecasts that mining investment will peak earlier and at lower levels than it originally thought.

The RBA says Australia's terms of trade the prices received for the nation's exports relative to its imports - are likely to be down about 15 per cent from last year's peaks by end of this year.

That fall has seen several major iron ore and coal expansion projects delayed, scaled back or put in doubt.

The RBA sees no dramatic change to that outlook, forecasting a small recovery in iron ore and coking coal prices next year on Chinese infrastructure projects, before they continue a gradual decline as global supply increases.

The weaker outlook for mining has the RBA turning its attention to the struggling home building industry as the next source of national growth.

In the statement, the bank says there are signs of an improvement in housing due to lower interest rates, pointing to recent rises in building approvals, dwelling prices and auction clearance rates.

The RBA expects this trend to continue and fuel growth in dwelling construction next year.

"Lower interest rates, rising rental yields and an improvement in conditions in the established housing market are expected to support rising dwelling investment," it forecast.

It also notes that financial assistance to first home buyers in New South Wales and South Australia has been targeted to those purchasing new homes, and this may further boost demand.

If its forecast of increasing residential construction activity comes to pass, the RBA is hoping that the building industry may reverse a trend of steeply falling employment, and start hiring again.

The bank notes the substantial 7 per cent decline in construction employment over the past year in response to falling amounts of building work.

However, the Reserve says its industry liaison suggests this adjustment may already now be coming to an end.

Next year it will be hoping the decline in construction employment will be placed in reverse.

In the meantime, the RBA expects the unemployment rate to edge a little higher, with soft employment growth partially offset by a further slight decline in participation.

However, it has observed that a slight up-tick in unemployment may provide one positive macroeconomic spin-off keeping a lid on inflation.

"Some slowing in wage growth is likely to be necessary to maintain inflation around its current level," the Reserve Bank observed.

With downward pressure on inflation from the exchange rate starting to wane, the RBA would also like to see productivity improvements to maintain low inflation economic growth.

It notes, perhaps with a degree of mild concern, that underlying inflation was close to 0.5 of a percentage point higher than it was three months ago in the latest official reading.

Currently, this is offset in the bank's forecasts by a weaker outlook for economic growth next year, although a slow economy and higher unemployment is obviously not the ideal way to keep inflation in check.

On the domestic front, it seems the RBA is in wait and see mode, looking for further signs as to whether other sectors will take up enough of the slack from falling mining investment before it decides whether to lower rates again.

The bank also turned its focus to the biggest short-term risk it sees to the global economic outlook the US 'fiscal cliff'.

The RBA says, should the US fall over its 'fiscal cliff' of automatic spending cuts and tax increases on January 1, it would take 3-4 percentage points off US economic growth in 2013, pushing the country into contraction in the first half of the year.

That would have central banks and policy makers around the world scrambling to react and try to limit the global economic fallout.
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cause slowing wages growth is good for housing.

However, it has observed that a slight up-tick in unemployment may provide one positive macroeconomic spin-off keeping a lid on inflation.

"Some slowing in wage growth is likely to be necessary to maintain inflation around its current level," the Reserve Bank observed.
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easier said then done.

With downward pressure on inflation from the exchange rate starting to wane, the RBA would also like to see productivity improvements to maintain low inflation economic growth.
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My favourite part is the bit where they say "hope".

Next they'll have us all in a circle singing kumbayah
 
Jeez doggie, we were just talking about this this morning before that news story broke. :rolleyes: Maybe we were on track for once. :lol:
 
Wonder if Swanie is starting to get a little nervous about his grand fiscal surplus call and polishing his treasurer of the cosmos statue.
 
Wormhole said:
Would love it if you could place a bet on the deficit somewhere
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You can - go to http://www.sportsbet.com.au/betting...Australian-Federal-Election-2013/14-3668.html


Current odds:
6824_deficit_bet.jpg
 
^^ haha the odds don't lie ;)

Funny how those who earn a living putting money on the line have a need to be bedded in reality - unlike Swanny.
 
The RBA pins it's hopes on a new housing bubble. Swan pinned his hopes on the mining industry. That really worked for him. Let's see if the RBA is any more competent than the "treasurer".
 
I was at my aunties a couple weeks ago.

She asked me if I want to buy a house one day.

Went to say "we have done great with real estate"

"you can never lose with bricks and mortar"

"silver is risky"

Same old stuff....
 
how can there be another housing bubble if the current one hasnt popped yet. ive got a picture in my head of a bubble with a big hole in it leaking air and someone has it hooked up to an air pump furiously pumping up and down trying to keep it from going flat. :p
 
GoldenEgg said:
AngloSaxon said:
Doesn't Swan just have a Bachelor of Arts? What a qualification for national Treasurer.
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Theatrical arts? He makes a good comedian in my book!
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Whilst I think it is bad that a Treasurer have no degree in economics, it has occurred in the past too:

http://en.wikipedia.org/wiki/Peter_Costello#Early_life
(Peter Costello) ...attended Melbourne's Monash University, where he graduated with Bachelor of Arts and Bachelor of Law degrees.[5]

During the 1980s, Costello was a solicitor at the law firm Mallesons Stephen Jaques,[6] then became a barrister and represented employers in some of Australia's best known industrial relations disputes
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And half of them were lawyers too. Maybe that's the worse crime, working in law firms, rather than not having a specific degree.

This article is interesting and talks of the qualifications of Tanner, Barnaby Joyce, Swan and Rudd:
http://barnabyisright.com/resources-articles/barnaby-vs-tanner-qualifications/

As I was saying, bloody lawyers.

Anyway, would we actually prefer a Treasurer with an economics degree? The problem being the such learning is a degree in Keynesian bulldust. I really don't think it would help, it would probably just make Swan look and feel even more qualified to mess up the economy.
 
The best and truest information in that entire article is Dogmatix's opening statement which was Spot on the money 'And back to stupid we go' :lol:

However i did love this as a comical line-

**The bank notes the substantial 7 per cent decline in construction employment over the past year in response to falling amounts of building work.**
**However, the Reserve says its industry >LIASON< suggests this adjustment may already now be coming to an end.**
This guy needs to put on a tool belt and not be a tool and see whats happening in the construction sector.

When you tear down an entire industry by removing Liquidity,grants,add rising overheads throw in the loss of community sector jobs effecting one or both parties to the mortgage,stir in the highest utility costs experienced this century,blah blah blah.
ThenDrum rollcome to this conclusion..'Next year it will be hoping the decline in construction employment will be placed in reverse.'
You have to wonder if their liaison is sending advice from a beach in Monaco sipping on a Pina colada with a hoochi coo chi massaging her breasts in his face.
Then i can understand his lack of attention to reality :rolleyes:

REDBACK
 
bordsilver said:
willrocks said:
Auspm said:
No better time, hop to it!
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Where do I sign up. :P
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Definitely! When the government subsidises something so much it must be a sensible economic decision :P
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The government only ever looks out for our best interests. That's why I think this could be a sound investment. ;)
 
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