Manage episode 295700982 series 1537109
For Australians, real estate is something of a national obsession.
That’s understandable given our home is often the biggest investment most of us will ever make.
I’ve been investing in residential property for almost 50 years now, and throughout those decades there have been doomsayers and scaremongers claiming the Australian property market was a bubble waiting to burst.
Reputations were staked on it, bets have been made and the media has offered these property pessimists more than their fair share of air time.
Yet the crash never arrived. Instead, our property markets are booming with a number of capital cities already exhibiting double-digit capital growth this year.
And Australia’s economic growth has also confounded the pessimists as we experienced the “V-shaped” recovery that, to be honest, very few expected.
While much of the commentary is about the micro factors – what’s happening on the ground in our property markets - I like to regularly get together with property commentator Pete Wargent in these big picture podcasts to look at the macroeconomic factors affecting our economy and the property markets to help give you some more clarity about what the future holds so you can make better investment and business decisions.
The Big Picture with Pete Wargent
Since last month Australia’s economic recovery has continued to unfold, more jobs have been created, and the property market continues to grow.
Australia’s economy recovery
The latest GDP figures show that Australia has enjoyed a V shape recovery, though that’s ancient news now.
Our economic output is now higher than it was before the COVID-19 recession hit, with easy monetary policy, booming commodity prices, demand for resources from the rampant Chinese economy and fiscal policy stimulus all playing a part.
- The public service is doing okay while the private sector has borne the brunt of the Covid ‘recession’.
- Australia’s robust economic recovery has merited an upgrade to a "stable" footing from ratings agency S&P Global. This has been matched by enthusiastic bets on interest rate hikes.
- As the Reserve Bank of Australia’s July meeting approaches, when the central bank will review its quantitative easing program.
- The Reserve Bank at this month's meeting reiterated its position that the cash rate is "unlikely" to rise until 2024 at the earliest.
Biggest lift in business investment in 9 years
- New business investment (spending on buildings and equipment) rose by 6.3% in the March quarter.
- This together with the strong construction industry points to strong overall economic growth.
Why jobs confidence is a big deal
Policymakers are pushing hard for a strong improvement that will see a return to ‘full employment that brings an end to the persistently low wages growth that has held the economy back over the last decade.
There are important implications from Aussies feeling secure about their jobs:
- Catalyst for spending
- Additional support for housing demand
- The economy is in better shape than expected around six months ago and therefore so is our budget. This gives the government options to provide more assistance to have individuals and businesses.
- The recovery has led to a 4% improvement in the deficit so far this year.
Why Australia needs higher-paid migrant workers
Recently the Grattan Institute released a report into Australia’s migration policy suggesting we focus on increasing the number of young skilled workers, rather than the government’s current emphasis on older less-skilled migrants.
Grattan suggested this would help boost the economy by as much as $9 billion
8th consecutive current account surplus
In the March quarter, the current account surplus widened to 18,300,000 representing 3.5% of GDP.
This is the largest surplus on record matching to 3.5 achieved in June 2020.
Who needs China when Australia’s got Tesla:
Why do we need China when we have companies such as Tesla knocking at our door? And don’t let Elon Musk’s often ‘loopy’ and weird behaviour distract you! Tesla is a business with a huge future, being a first adopter of the electric car and the biggest proponent of big batteries as an alternative to the power delivered from the grid.
A Tesla electric vehicle (EV) has $5,000 worth of minerals and metals in it and Australia supplies 75% of the lithium and 33% of the nickel in these Tesla cars of the future.
Metropole’s Strategic Property Plan – to help both beginning and experienced investors
Gets your bundle of eBooks and reports here: www.PodcastBonus.com.au
Pete Wargent’s new book Low Rates High Returns
Shownotes plus more here: The Big Picture | Economic & property trends you must understand – June. With Pete Wargent
Some of our favorite quotes from the show:
“I guess it’s fair to say it’s probably always been about jobs, but at the moment, the focus is on our labour markets.” – Michael Yardney
“We’ve actually got big war chests, and the more comfortable we feel about our job security, the more likely we’ll be to spend it.” – Michael Yardney
“Until the vaccinations are rolled out, everyone’s had their second shots, or at least enough of us have, I can’t see the borders opening.” – Michael Yardney
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