Apocaholics dragging down the mood of the nation

Posted on 6/07/2011  

By Michael Matusik, Matusik Property Insights

From the mundane (housing market crash; mortgage defaults climbing; low housing affordability; interest rates set to rise; household costs skyrocketing; double-dip recession) to the catastrophic (Malthusian population explosions; peak oil everything; climate change; global warming; deforestation; urbanization and over-consumption), all we hear these days is doom and gloom. 

Janet Albrechtsen, in her regular Wednesday column a few weeks back in The Australian, titled these portrayers of gloom, the “Apocaholics”.  An apt description, indeed.

Let’s turn the tables on some recent reports of gloom and doom and see how they sound.

    Australian dwelling prices fell just 2.3% over the last 12 months despite the pessimistic jawboning of expectant falls in excess of 10% to 15%. Brisbane’s values fell just 5.9% – a great result if you ask me given the flood, ham-fisted governance and pending local/state elections.

    Sellers are starting to get the message – i.e. taking their dwelling off the market –with fewer new “for sale” listings this month across Brisbane when compared to the same time last year.

    It is a good time to buy a dwelling in Queensland according to the Westpac-Melbourne Institute.  Their June Queensland index is sitting at 134.4, up 11% on May and a massive 52% on this time last year.  Queensland not only has the highest “good time to buy a dwelling” index in the country but also enjoys the largest monthly and annual improvement as well.

    Queensland’s dwelling approvals have risen for the second consecutive month.   The ABS monthly approvals figures released earlier this week show a 1.1% increase in Queensland activity.  Not much, true, but an improvement nevertheless.  In contrast, across Australia approvals were down 7.9% in May.   While the small rise in Queensland numbers was largely due to the volatile apartment sector, the monthly trend provides grounds for optimism.

    Forty-nine out of fifty Queensland households pay their mortgage on time.  Just short of 99% of other Australians do so, too.

    Australians are now saving one-eighth of their take-home pay.  A massive plus for our economy as household balance sheets become stronger and more resilient to difficult times.

    Official interest rates have been raised only once in the last 15 months and actual mortgage rates are starting to fall.  Three-year fixed interest rates are also starting to fall and are lower than the current variable rate of interest, suggesting that interest rates could fall.  Bank bills and governmentbonds are, at present at least, only slightly up on the current cash rate, suggesting that any interest rate rise should be modest.

    According to Rismark International, Australian homes are currently at their most affordable in almost a decade.  Rismark’s work looks at all properties across the country and not just detached houses in our capitals; and also uses household incomes rather than average weekly earnings.

    Weare doing better, financially that is, than we think.  Whilst the cost of certain consumer items has increased, real household incomes are rising faster than inflation.  Since March 2009 to now, inflation rose 6.3%, whereas real household income rose 7.3%.  Real household incomes have grown by about 16% in the past six years.  Maybe John Howard was right after all –we have never had it so good.


Too optimistic? Was the last point a step too far?  Well consider how long we have to work these days to earn an hour of reading light.  On the average wage today, half a second of work will pay for an hour of light.  Just fifty years ago you had to work for ten seconds.  In 1880 it took 15 seconds to burn a kerosene lamp and more than six hours of work for an hour of light by a candle in 1800.

In1750 BC your average Babylonian needed to work 50 hours to get 60 minutes of light from a sesame oil lamp.  Little, obviously, happened at night before the birth of Christ.  How many TV screens, laptops, iPads and other mobile devices do you have at home?  We have 11 and both our children, at present at least, aren’t living at home.

Healthy economic growth doesn’t only have to be supported by government and, ideally anyway, shouldn’t be that frustrated by perverse policies.  Increasingly of late, however, that isn’t necessarily the case.  Yet the greatest barrier to recovery is psychology – stubborn gloom – which is conditioning household and business spending decisions.

Foolish optimism led to the GFC by assuming things would work out for the best. Now, automatic pessimism weakens growth by ignoring good news or believing it cannot last.  Our greatest challenge this financial year is to think and act more optimistically.  I will give it a serious try.  How about you?

This report is published with permission of Matusik Property Insights. 


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