The Economy 2: Houses Up, Manufacturing Up, Rates To Go Up
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Australian house prices have risen by a greater than expected amount in the September quarter, suggesting that the Reserve Bank's previously stated concerns about the impact of a housing boom might not be misplaced.Several times since late August, RBA Governor Glenn Stevens and a couple of his senior executives have made the very valid point that the social impact from sharply rising housing prices is not good for the country, or for the economy.They made it clear that housing would not be allowed to develop into a bubble.RBA credit data last Friday showed that lending to owner occupiers was the only bright spot for the banks, up 0.8% in the month of September and 9.7% over the 12 months & #160;to the same month.In the & #160;September quarter, lending to owner occupiers ran at a shade under 10%, the fastest since the June quarter of 2008.So it's no wonder we've seen a return to strong clearance rates at home auctions and lots of media talk about surging home prices and interest rate rises.We will get a 0.25% rise today (justified by the solid mid-year economic forecasts & #160;from the federal government) and could get another in December if these housing figures are supported by solid retail September sales and building approval figures for release tomorrow.The Australian Bureau of Statistics added a bit of fuel to the debate with the news that its Australian house price index rose 4.2% in the September quarter.While this was steady on the unrevised 4.2% jump in the June quarter, it was above market forecasts for a rise of 3.4% and the 2.5% rise reported in the RP Data Rismark survey last week.In the year to September, the house price index rose 6.2%, up from the 4.8% forecast from the market and fall of 0.7% in the year to June, 2009.That has been revised from the originally reported fall of 1.4%.The ABS said today & #160;the & quot;main contributors to the weighted average of the eight capital cities were Sydney (+4.3%) and Melbourne (+4.7%), and there were also positive contributions from Perth (+4.5%), Brisbane (+4.4%), Adelaide (+1.7%), Canberra (+4.3%), Darwin (+3.4%) and Hobart (+1.8%). & quot;Over the year to September 2009, the ABS said & #160; & quot;house prices rose in Darwin (+12.3%), Melbourne (+8.4%), Canberra (+7.8%), Sydney (+5.9%), Brisbane (+5.6%), Hobart (+5.4%), Perth (+4.4%), and Adelaide (+3.7%). & quot;Macquarie Bank's Rory Robertson said that & quot;after dropping by just 5.5% (revised) between Q1 2008 and Q1 2009, the ABS measure recorded jumps of 4.2% in both Q2 and Q3. & #160;It's now 2.6% above its previous peak in Q1 2008 & quot;.The ABS report & #160;came after the Performance of Manufacturing Index showed a slowing in the rate of expansion in the sector.Activity was still positive for a third consecutive month in October, but the rate of growth fell 0.3 to 51.7 from 52 in October, indicating a slower pace of expansion.Falling employment and soft exports put pressure on the sector, according to the PMI from & #160;the Australian Industry Group/PricewaterhouseCoopers.(As with these surveys, any reading above the 50 point level separates expansion from contraction.)Australian Industry Group chief executive, Heather Ridout said a high exchange rate, easing fiscal stimulus and a soft export sector had put pressure on manufacturing. & quot;The high exchange rate is adding to the pressures on manufacturers who export or compete with imports and will ease pressure on prices, & quot; she said in a statement. & quot;In this regard, the high dollar is reducing the need for a significant tightening of monetary policy. & quot;While the lift in manufacturing activity over the past three months and rising new orders in particular are welcome, growth is not accelerating and there remains a considerable way to go before we recover the ground lost over the past year. & quot;
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Daniel Kertcher established Platinum Pursuits in 2001 as a vehicle in which to share his knowledge of strategies to use the financial markets to grow wealth, with the aim of achieving financial freedom by making your money work for you.
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