Telling moments from the head teller at our central bank

Telling moments from the head teller at our central bank

Based on revelations from the Reserve Bank of Australia (RBA) when it released the board meeting minutes from its April 1 gathering, unlike other commentators, I remain somewhat mystified, concerned and confused with its rationale. For some strange reason the RBA is of the opinion that its previously noted expectations with regard to inflation are being scaled down from its initial concerns back in February. Next Wednesday, the Consumer Price Index for the March quarter 2008 will be released and rest assured it will be well north of 4 per cent. The simple facts are that the present inflation rates are the fastest growing since 1991.

Yet again the inflation accelerants fail to crack a mention although interest rate increases have obviously slowed the economy. The RBA minutes revealed that “on the other hand, the slowing global economy and tighter financial conditions in Australia were likely to reduce expansionary forces on the economy.” Although figures compiled by the RBA and the Bureau of Statistics revealed that housing affordability fell to a 20 – year low, at the end of 2007.

In February 2008 housing finance commitments fell 5.9 per cent month-on-month which is the worst result since January 2004. I still stand by my recent comments and predict that inflation will hit 5 per cent despite economists predicting that it is now in decline mode. The question that I pose is that dysfunctional governments (federal, state and local) have taxed consumer sentiment out of the equation and today Australians are no longer investing in our economy.

No greater example than the release last week that the rental vacancy rate surrounding the Sydney CBD fell to a record low of 0.9 per cent. This figure will now continue to reduce and most wait with ‘baited breathe’ to see how the governments of the day address these issues. The latest Residex data has revealed that rents in Sydney have now risen 16.5 per cent in just 12 months. This explains why the number of families needing government crisis accommodation in the past 12 months has skyrocketed from 20,775 in 2006/07 to 20,008 in 2008 (to – date).

Enter the NSW Premier Morris ‘Dilemma” who commented that “we can’t have over – zealous real estate agents putting unreasonable pressure on tenants.” With respect “Dilemma” has no idea and forgets that his government increases Land Tax annually. Bumped Stamp Duty on property from 5 per cent to 7 per cent for property acquisitions over $3,000,000 and who could forget their failed Vendor Exit Tax – which identified the final nail in the NSW investment coffin. A clue – the NSW government financially raped investors and the net result is a 0.9 per cent vacancy rate and diminishing. Rental increases will remain a major driver that will continue to see the inflation rate climb.

The other inflation driver is petrol which climbed above $1.50 per litre this week (again the other inflation driver). Whilst the Federal government makes a motza from excise tax, just put the weekly fuel bill on the credit card. Australia’s credit card balances rose 2.16 per cent in February where the amount owed climbed to $43 billion. With repayments falling, this sends out another clue.

So just what part are we all missing – journalists write about economists and the RBA who somehow believe that our markets have weathered the economic storm. Way too much political correctness in the media where I like many others remain lost for words that the Sydney CBD vacancy rate of 0.90 per cent remains on ignore.

In the blame game, although you can’t point the finger at Morris “Dilemma” for petrol prices, his government is wholly and solely responsible for rental increases as a direct result of his mismanagement of these markets that have resulted in an investor exodus of grand proportions.

To those who agree with our “head teller” and think that petrol and rents are on the decline. You have lost the plot!

What an amazing impact elected governments have on our property markets. The property theory that vacancy rates need to be at 2.5 0– 3.00 per cent in Sydney CBD simply identifies mistaken perceptions on the strength of our economy.

The simple truth with NSW is that the elected government has trashed all investor confidence. Cheers ^__^

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