The taxing question is growing unemployment.
First and foremost when economic markets fall into decline the key performance indicator (KPI) is unemployment. Six months ago the focus was on inflation – better remembered as Wayne Swan’s “inflation genie” that vanished as quickly as his government’s “cash splash” – poof!
Just as disturbing is that the current Global Financial Crisis (GFC) remains without definition. We know that first symptoms emerged in the United States (US) and the current prognosis is that its economy is now on life support. The simple fact that the US is now faced with an unemployment rate that last week rose to a 25 – year high, sends a sobering message – as at February 2009, 12.500 million Americans were unemployed. This figure equates to just over half of Australia’s total population.
A glimmer of hope was the announcement this week that US housing starts and permits changed direction in February (following 10 months of declines). This is viewed (psychologically) as an improvement although it should be noted that some houses in the US are for sale at just $1.50. It was also revealed this week that US credit card defaults increased in February to the highest level in twenty years.
At home, economists are suggesting that we adopt a new measure that indicates when a country is actually in recession. As quick as Margaret Fulton’s recipe for scrambled eggs, Saul Eslake, ANZ senior economist, advised muffin munchers at a recent breakfast that it “was silly” to say an economy was in recession based on two consecutive quarters of economic growth. So the norm is replaced with a modern day definition even though in economic growth years, such a proposition was never considered? Mr Eslake suggested that the definition was “beloved of the media but not of most economists” and should be replaced by a measure of unemployment.
Is anybody prepared to announce that Australia’s economy is not in recession? Australia’s unemployment rate jumped to 5.2 per cent in February and it’s growing. In all probability it will hit 10 per cent (if what is happening in America is any indication). For example, businesses are not going for a knife or a machete – their weapon for survival is a chainsaw . Much like pruning a tree, businesses all over the planet are engaged in a selective pruning process – exacerbated by a Federal government that can’t see the “forest for the trees”.
The US is not alone, with the Westpac Bank – Melbourne Institute announcing this week that (wait for it) Australia is on the brink of recession. The index for economic activity noted that growth rates fell further in January to -3.1 per cent down from December’s index of -2.8 per cent. It would take a very brave individual to suggest that February and March results will not reveal further downturns. We are in recession – just that this word appears to be forbidden by institutions (I’m thinking share price = bonus?).
As Professor Stephen Sedgwick (Director of the Melbourne Institute of Applied Economics and Social Research) recently wrote “THE ECONOMY – Planning for surprising times. POLICYMAKERS and forecasters have been unpleasantly and powerfully surprised several times as the global financial crisis has unfolded. But downturns don’t last forever and history suggests that policymakers can also be surprised on the upside.”
Unlike the USA, Mosman is not offering any properties for $1.50 (the agent’s commission would equate to $0.03 cents at 2 per cent). Just as interesting is what is happening in the Sydney property market where last week, the auction clearance rate was 63 per cent, up from 47 per cent same weekend last year. The clue – the number of properties sold fell from 229 last year to 127 last weekend. This pattern has resonated throughout the Mosman market in 2009 where volume is declining, not increasing. Mortgagee sales in 2009 are all but non – existent (just the one in Mosman at the moment).
The latter stage of the 2008 property market was an absolute debacle, based on the public perception that 2009 would be a bloodbath. It is interesting to note that this week, the perception is that the second half of 2009 will be the bloodbath. Does this mean that 2010 will be a ‘property price Armageddon?’ The reality is, nobody knows!
The Mosman real estate market in 2009 is simply minding its own business and getting on with the job at hand. I did laugh this week when a Mosman/Neutral Bay agency posted online, it’s very impressive (recent) auction results – with plenty of positive spin. Just amazing what happens when the withdrawn properties somehow miss the cut – hey presto!
Spare a thought for Fort Fumble’s esteemed leader Kevin Rudd, who would have been simply devastated to learn that the British Government relegated Australia to a “low priority” for April’s G20 summit. Could this be pay back for Kevin’s indiscretion when he announced that he (allegedly) had to explain to George Bush what G20 was all about? Oh well, Kev at this summit you can tell other attendees that you are sitting in economy class (no pun intended). Makes one wonder if his alleged comments may have seen him upgraded although it would be fair to assume he does not have enough points on the World podium.
Now his (neo – nothing) G20 speech can be written on the back of a postage stamp.
No doubt Commonwealth Bank supremo Ralph Norris read last week’s edition of “Virtual Realty News”. This week, he warned that the Rudd government’s first home buyer grant could (as I suggested) lead to a residential property bubble. Too late it has already happened!
Perish the thought – our esteemed Prime Minister is struggling to come to terms with the fact that he is on the “B list” for the G20 summit. Hey presto! I always tag the names of our Prime Minister and Treasurer to give them the opportunity to read each edition of “Virtual Realty News” – maybe one day they will post on our blog?
Cheers ^__^
For this week’s recorded Mosman real estate, Cremorne real estate, Neutral Bay real estate and Cammeray real estate sales http://www.rwm.com.au/news/
