Tag archive: Australia

Australians Increasingly Under Financial Stress, Report Finds

Concerns over rising costs of necessities, stagnant income growth and prospects of increased loan rates are stressing Australian households, a survey has found.

The latest ME Household Financial Comfort Report, which surveyed 1,500 Australian households, revealed that concerns over budget balancing are increasing, as 51 per cent are found to have no spare cash at the end of each month. Rising costs of groceries, fuel and utilities have been blamed, along with weak salary growth and rising underemployment.

“Australian households are under financial stress,” said ME Bank consulting economist Jeff Oughton to ABC’s AM. “They’re concerned about the rising cost of bills but also there are income woes, interest rates are starting to rise and there’s mortgage and rental stress.”

While the unemployment rate has gone down, underemployment is still strong, with 27 per cent of casual and part-time workers saying they were eager to increase their hours.

Furthermore, 68 per cent of the respondents reported wage fall or stagnation in the past 12 months, and 40 per cent of households in debt are becoming less confident about their ability to repay their mortgage.

RBA’s eventual plan to lift the cash rate is also expected to worsen this burden on Australians “as it will impact monthly cash flows, ability to pay off debts, save and spend”, Oughton said. “It will bite into those young couples with children, single parents and also generation X-ers who are concerned about the impact on their monthly cash flows from rising rates.”

News: Labor Vows to Reverse Penalty Rate Cuts

Opposition Leader Bill Shorten has pledged to reverse the cuts to Sunday penalty rates if Labor wins the upcoming election.

Cuts to weekend penalty rates for workers in retail, hospitality and fast food industry will be applied starting July 1, under a decision by the Fair Work Commission.

“I promise you this: a new Labor government will restore the Sunday penalty rates of every single worker affected by this cut,” Shorten said at an address to the Australian Council of Trade Unions in Sydney Tuesday night.

Labor’s bill to block the cuts was voted down 73 to 72 in Parliament in June.

Labor employment spokesperson Brendan O’Connor said the party will continue to fight against the cuts when parliament resumes in August.

Earlier this month, Employment Minister Michaelia Cash accused Shorten of hypocrisy on the matter.

“Bill Shorten has no problem with reducing penalty rates when he himself does it, and when his union mates do it in deals with big businesses,” said Cash. “He only objects when an independent umpire does the same thing for small business.”

News: Business Conditions Remain Strong Despite Fall in Confidence, NAB Says

Australia’s businesses reported strong conditions despite declining confidence, the National Australia Bank’s (NAB) May business survey found.

The survey, containing responses from more than 400 firms, showed a slight ease in conditions – encompassing trading, profitability and employment – with one index point decline to +12. The drop was attributed to the sluggish construction, finance, property and business services. Despite the fall, it is still well above the average of +5.

“The business sector is looking quite upbeat, maintaining the apparent disconnect with a rather melancholy household sector,” said Alan Oster, chief economist at the NAB. “It is good to see that the strength has been quite broad-based, and even at the state level we have seen some significant improvements in Western Australia, which signals that the worst of the mining sector drag is probably behind us.”

Oster also predicted improvements in profitability and employment. “Profitability has remained elevated for some time now, backed up by solid profit outcomes in the first quarter National Accounts,” Oster said.

“Similarly, the current level of employment conditions is consistent with the recent improvements in ABS employment growth. That has helped to close the previous departure between the NAB and ABS measures of employment, while the NAB index suggests that we can expect more solid employment growth to continue over coming months.”

However, the survey also found a fall in confidence from +13 to +7, two points above the long-run average.

“The wedge between confidence and conditions is likely a reflection of the heightened uncertainty around the outlook, although the degree to which this reflects global versus domestic factors is difficult to gauge,” the bank said.

The bank said economic growth is expected to rise for the second half of the year, but the longer term outlook may not be as positive. “Significant structural headwinds still pose a hurdle that will prove difficult to overcome, keeping wages growth subdued and consumers cautious with their spending,” said Oster.

“The longer-term outlook could be less sanguine as important growth drivers (LNG exports, commodity prices and housing construction) begin to fade.”

News: Chinese Investment in Australia Reaches $15.4b, Highest Since GFC

Chinese investment in Australia has reached a record high since the Global Financial Crisis to $15.4 billion, a report found.

A record 103 deals were signed with Chinese companies in 2016, according to the report “Demystifying Chinese Investment in Australia” from the University of Sydney and KPMG.

Commercial real estate accounted for 36 per cent of Chinese direct investment, followed by infrastructure with 28 per cent and a record amount of $4.34 billion thanks to the purchase of stakes in Asciano and the Port of Melbourne. In agribusiness, there were 12 deals with a record of $1.2 billion invested, threefold of the 2015 amount.

Despite the high record, report co-author Professor Hans Hendrischke from the University of Sydney Business School said investment from China is slowing down.

“Australia has proven itself to be a preferred destination for Chinese capital, but we must be cognisant that the growth in investment is slowing compared to other parts of the world such as the United States and the EU,” Hendrischke told ABC.

The report found that Australia is the second biggest destination of new Chinese investment with a total of $US90 billion ($120 billion) since 2007, losing only to the US with over $US100 billion.

Australian Housing Market Has ‘Peaked’, According to UBS

The Australian housing prices boom has reached its peak, investment bank UBS said.

“After housing activity rose consecutively for over four years, its longest ever boom, we are now calling the top and think that housing activity has already peaked,” UBS economists Scott Haslem, George Tharenou and Jim Xu wrote in a note.

“Mortgage rates are rising, and sentiment of home buying collapsed to a [near] record low… Hence, we are ‘calling the top’, but stick to our forecasts for [dwelling construction] commencements to ‘correct but not collapse’ to 200,000 in 2017 and 180,000 in 2018.”

National house price growth is currently at 13 per cent, the highest in seven years, but UBS expected the growth to fall to 7 per cent this year, and 0-3 per cent next year. “We see a moderation ahead amid record supply and poor affordability, with the new buyer mortgage repayment share of income spiking to a decade high,” UBS said.

While house prices will still be out of reach from first home buyers, the bank said more rental options will be available following completion of units this year, allowing rents to rise more slowly than incomes.

The bank also warned that while the risks for housing slump are low, considering strong population growth and stable employment, the country’s record household debt and high housing prices could still cause trouble.

Bank Regulators Hint Further Loan Curbs

Bank regulators may take further actions to limit home lending in an effort to mitigate risks from the booming housing market.

The statement came less than a week after the Australian Prudential Regulation Authority (APRA) introduced restrictions on interest-only loans to 30 per cent of all mortgage lendings.

In a speech in Sydney on Wednesday, APRA Chairman Warne Byres described the restriction as a “tactical response” to the growth in lending property investors, especially in the south-east Australian property market.

Byres said the rules were to ensure that banks hold bigger reserves in case of housing-related crises. The regulator would also review the lenders’ capital requirement for mortgages.

“The capital adequacy framework needs to address the concentration in housing lending that has built up in the banking system over time,” said Byres. “If we are going to put an increasing number of eggs into a single basket, we’d better make sure that basket is an unquestionably strong one.”