Australia has too many eggs in the commodity basket

Australia has too many eggs in the commodity basket

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As Europe’s leaders bicker over crisis solution and the euro tumbles to a 22  month low against the US dollar this week, the crisis is highlighted by infighting when, in the short term, it is clearly apparent that they agree to disagree. You can’t keep reaching for the duct tape in the hope that the debt problems will self-correct. Before our very own eyes we are witnessing an enormous global correction that is both fascinating and alarming and it’s playing out in nearly every sector of the Australian economy.

Although I read yesterday that Andrew “Twiggy” Forrest dubs Europe woes as a media beat – up. I don’t see bankruptcy as a beat-up, but Forrest says Australia is still “lucky to be next to Asia and not Europe”. Maybe he should be rethinking labour for a China slow down. The World Bank warning to commodity exporting nations is, “that putting too many eggs in the China basket is risky”. The bank has revised its projection for the 2012 GDP growth in China from 9.2 percent to 8.2 percent, prompting World Bank East Asia chief economist Bert Hoffman to comment: “In the longer term we do see China slowing down to a more moderate level – around 5 percent growth by the end of the decade,”

A mining boom cut-off is coming with current mining investment running in the vicinity of $40 billion to $45 billion a year – a more than fivefold increase in a decade. In the next few years it is expected to at least double, making mining investment more than twice the size of the domestic housing market (according to Macquarie Equities.)

BUY PRINT

Forget for a moment what is happening in Europe – Australia has its own problems to address. In 36 days, Australia will be lumped with a Carbon Tax and the strain is already starting to show carbon tax faces heat over aluminium smelter closure with the company stating that the long-term viability of its operations has been negatively affected by a number of factors, including increasing energy costs and the carbon tax.

As quick as a flash, the Union leaders jumped in although it should be noted if Australia’s unions are such a good thing why are their current memberships at record lows. Just ask the HSU members for their thoughts on that matter. BHP wants to be free of unions which prompted Workplace Relations Minister, Bill Shorten to label the claim as a pack of lies. The problem for Bill Shorten is that although he has never run a business, he believes he can tell the World’s biggest mining company (which also accounts for 13% of the ASX investment) how they should be running theirs.  The man is delusional!

It certainly looks like the ANZ’s decision to stand alone on interest rates last December is backfiring with customer satisfaction ratings (measured by Roy Morgan) falling in April for the third straight month – ANZ’s independent rate decision turning off customers. For a clue, look no further than mortgage refinancing at four – year high as non – major bank lenders pick up market share: ABS.

Nearly 18,000 borrowers re-financed their home loans in March, the biggest number of refinanced home loans in one month since April 2008. What we are seeing now is consumers switching lenders with non-major lenders showing the greatest market share growth.  Suncorp 3.6 percent, AMP 3.5 percent, Macquarie 2.5 percent and ING Direct 2.1 percent.

If you factor in cash rate could fall to 3.25% by August: Westpac’s Bill Evans which is slightly above the lowest cash rate of 3 percent in October 2009.

Again this week we continue to observe the property Mexican stand-off with limited offerings of new properties to the market. It is quite possible that over winter we will see the number of houses on the market fall to around 90 (and possibly lower) which would be unprecedented.

    MOSMAN – 2088 

    • Number of houses on the market last week– 109
    • Number of houses on the market this week – 105
    • Number of apartments on the market last week – 99
    • Number of apartments on the market this week – 100

    CREMORNE – 2090

    • Number of houses on the market last week– 11
    • Number of houses on the market this week – 14
    • Number of apartments on the market last week – 31
    • Number of apartments on the market this week – 30

    NEUTRAL BAY – 2089

    • Number of houses on the market last week – 19
    • Number of houses on the market this week – 18
    • Number of apartments on the market last week – 66
    • Number of apartments on the market this week – 68

    Source: Domain Property Monitors

    For this week’s sales in Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Cremorne real estate, Cremorne Point real estate, Neutral Bay real estate, Cammeray real estate
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    For this week’s open for inspections –
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    Wayne Swan’s May 2012 – 2013 Federal Budget delivered a sickening double whammy blow for non-resident taxpayers who must all be Liberal voters. The living-away-from-home allowance was abolished which will severely impact rents downwards. As well, the announcement that the Capital Gains Tax calculations for non-residents, where after May 8, 2012 the 50 percent discount will no longer apply and any capital gains between 8 May 2012 until the actual sale date will now be taxed at 100 percent. I spoke with Simon Feilich from Dyson Austen Valuers who told me “so the 2012/13 budget has removed the tax discount from May 8, 2012. The implication is that non resident owners will be able to claim the deduction up to that date – so long asthe property is valued at that date.” We advise all non- resident property owners to arrange a valuation as soon as possible.

    Whilst on the “World’s Greatest Treasurer’s” Budget – How $1.5b surplus hides $8.7b deficit well that’s easy, because Wayne Swan believes we are all stupid. Bury the debt, reach for the magic wand and abracadabra, it disappears!

    Wayne Swan will learn that budget creativity does eventually have accountability with that “Kangaroo Court”, otherwise known as the electorate.

    Cheers ^__^

     

4 Responses to “Australia has too many eggs in the commodity basket”

  • Ann says:

    Yes Robert the grey clouds are getting much thicker. I travelled through a few international airports this week and it was interesting to note that every shop I went past in Asia and Sydney were extremely empty. Especially Singapore and the ones at Sydney airport has more staff that buying customers. Never see that before

  • Yes, like Bill Shorten, most of the Politicians running the place have never been involved in let alone RUN a business of any kind! Not even a fish and chip shop!
    God help us..

  • Ann says:

    They seem to have experience in running ‘certain’ businesses!!!

  • Ann says:

    Not surprised to see Australia’s competitiveness slip down the ranking and it will now get much worse

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