Economics

Australia’s annual inflation rate edged up to 3.6 per cent in April, and this included food price inflation of 3.8 per cent. And according to the U.S. Bureau of Labor Statistics, energy and food represents 7 per cent and 13 per cent, respectively, of the U.S. consumer price index (CPI), whilst commodities represent close to 36 per cent. That said, central banks in setting monetary policy, generally place less emphasis on the price changes of these more volatile inputs.  continue…

by David Buckland Posted in Economics.

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Baby boomers won the genetic lottery in so many ways, not just because a whole chicken in 1973 was $1.09 (Figure 1).  

Take Wayne, for example, born in Sydney in 1945 after World War II. As a teenager, he lands a job earning the national award wage of £13.80 per week. He changes his mind after a couple of years and decides to study engineering. University is free (no HECS), so he continued to work part-time while at university and became an engineer in 1965, earning the average wage of £1,145 per year.    continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Property.

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For almost a decade, I have described Australian residential property owners as a “protected species”; Whether we look at the banks, the banking system in its entirety, regulators, including the Australia Prudential Regulation Authority (APRA), the government and even individual politicians – many of whom own multiple residential investment properties – nobody wants to see property prices fall.  continue…

by Roger Montgomery Posted in Economics, Property.

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As you have probably garnered by now, I am optimistic about the prospects for equity markets for the remainder of 2024 and for all of 2025. I believe a process of risk adoption is underway, reversing the conservative stance that dominated sentiment in 2022 and most of 2023 amid fears of rising interest rates and recession. With the subsequent side-stepping of recession along with the acceptance that rates have probably peaked, and with slow deflation continuing, investor appetite for risk can begin to improve.   continue…

by Roger Montgomery Posted in Economics.

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Over the period since the global financial crisis beginning in 2008, the U.S. Federal Reserve (Fed) has seen the yield on three-month treasury bills trade at a premium relative to the U.S. consumer price index (CPI) for less than 5 per cent of the 16.5 year period in question.   continue…

by David Buckland Posted in Economics.

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For decades, I have been asked if I watch the budget and analyse the government’s annual statement about income, spending, and macroeconomic forecasts. My short answer has always been, ‘no, because there’ll be another one next year.’ It sounds a little flippant and is certainly intended to be irreverent.  continue…

by Roger Montgomery Posted in Economics.

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It has been a while since we reported on the major banks, which have now all provided half-year updates to their operating performance. 

Before reporting on their results, I think it worthwhile to provide you with a usefully simplified framework for analysing or comparing a bank’s performance.  Despite claims of complexity in their reporting and differentiation in their offerings, the big four banks are relatively simple businesses to understand at a high level, and broadly undifferentiated, offering everyday banking, loans, credit cards, wealth management and insurance.  continue…

by Roger Montgomery Posted in Companies, Economics, Editor's Pick.

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In this week’s video insight, I discuss the transition from a long period of unusually low interest rates to what may be a new era of higher interest rates. Following the global financial crisis (GFC) in 2008, the U.S. Federal Reserve (Fed) implemented a policy of keeping the Fed funds rate extremely low, which encouraged fiscal behaviours based on the assumption of persistent low inflation. However, recent spikes in inflation and cost of living, alongside escalating U.S. public debt and government spending, prompt a reevaluation of this policy.   continue…

by David Buckland Posted in Economics, Video Insights.

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Both sides of politics and most businesses are obsessed with a “big Australia”. Dick Smith is one of the few on the opposing side of the narrative. And as the Minns NSW Government usurps local councils’ planning powers by announcing their support for residential property located within 400 metres of a train station to be turned into 8–storey apartment blocks and within 800 metres of a train station to be turned into 6–storey apartment blocks, infrastructure will inevitably be left behind, and many streets will become a carpark. More public golf courses will likely be stolen in the name of green space.  continue…

by David Buckland Posted in Economics, Property.

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In this week’s video insight, I explore the challenging dynamics of the Victorian rental market – a pressing issue that uniquely impacts both renters and investors. Amid a nationwide rental crisis, Victoria stands out due to its plummeting rental vacancy rates and the surprising exodus of investors from the market. Despite what seems like a prime scenario for property investors, with demand high and supply low, why are many opting to leave? I delve into the reasons behind the investor retreat, explore the economic forces at play, including significant tax increases and the broader implications of these changes.   continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Property, Video Insights.

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