COVID-19 impacts on the Australian economy & housing market

Discussion in 'Property Market Economics' started by Redom, 17th Mar, 2020.

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  1. Rex

    Rex Well-Known Member

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    This is a preview of what is to come across perhaps 20% of businesses in the economy. And it will be followed by massive redundancies (or simply bankruptcies and then workers don't even get their redundancy and outstanding leave). Without revenue businesses must shed staff rapidly to stay solvent.

    The government must step in to allow businesses in these 'dead' sectors of the economy to temporarily stand down employees, and bring them back in when things return to "normal". Maybe a mechanism whereby a business can pay government the equivalent of a redundancy payment for each employee, as a bond. Employees are then sent home and exhaust their annual and personal leave pay, after which government takes over and pays them directly at minimum wage or a % of their normal wage, until business restrictions are over and the business can take them back on. If the business goes bankrupt in the meantime, or does not require all staff to return, the government has this redundancy bond which can be paid to affected workers who then become unemployed, but at least with a few months redundancy payment buffer.

    Very expensive for government yes but the best way of ensuring adaptability, prevent a severe recession via huge unemployment, and a quick "bounce back" when the crisis passes.
     
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  2. MWI

    MWI Well-Known Member

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    Agree, no one knows, the aim is to lower the bell curve, and the only solution would be a vaccine....
    I have lived through martial law and restrictions in another country and political unrest but this is different.
     
  3. Tattler

    Tattler Well-Known Member

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    On residential loans, I reckon banks will pull the pins on Line of Credit (LOCs) first. I remembered reading those T&Cs, it mentioned that banks can pull it anytime.

    I wonder how many people have outstanding LOCs, if so better move to proper home loans ASAP.
     
  4. JohnPropChat

    JohnPropChat Well-Known Member

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  5. PandS

    PandS Well-Known Member

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    LOC and Living on Equity man you are in a world of hurts
     
  6. LeeM

    LeeM Well-Known Member

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  7. LeeM

    LeeM Well-Known Member

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  8. Tony3008

    Tony3008 Well-Known Member

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    Chicken or beef, madam? Bad news for sheep farmers :)
     
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  9. Redom

    Redom Mortgage Broker Business Plus Member

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    Monetary policy bazooka fired, quick smart too.

    RBA have basically taken one of the risks noted on OP of the table. No funding related crisis in Australia.

    Bank & non bank funding costs will fall (not rise), and the RBA will provide the necessary funding required to meet this. This means securitised non-banks will have access to LOWER cost of funding and can continue to put price pressure on banks.

    The QE measures have targeted the longer end of the yield curve, 3 years specifically, will mean that there's no risk spread over time (i.e. a flat yield curve), which will drive fixed costs down.

    Variable rates should fall too (despite CBA's move). CBA the first mover, have chosen to keep SVR's the same and pass on lower costs elsewhere to other customers.
     
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  10. ttn

    ttn Well-Known Member

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    Scomo did not tell the banks to pass the cut in full this time :confused:
     
  11. euro73

    euro73 Well-Known Member Business Member

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    CBA did say they will reduce fixed rates by up to 0.7% though....

    1,2 and 3 year O/Occ P&I will move to 2.29% from April 3.
     
    Last edited: 19th Mar, 2020
  12. ttn

    ttn Well-Known Member

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    How many % of borrowers on variable and fix loans? 50-50?
     
  13. paulF

    paulF Well-Known Member

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    Good move from the RBA for the banks for sure but definitely lacking from the economys' perspective.
     
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  14. euro73

    euro73 Well-Known Member Business Member

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    Doubt it... variable is traditionally more popular. But its going to be very difficult for borrowers to ignore fixed rates this low....
     
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  15. Gabbaking

    Gabbaking Well-Known Member

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    How's this going have affect the current housing prices? Expect people to keep throwing money and bidding 200k above reserves at auction.
     
  16. wilso8948

    wilso8948 Well-Known Member

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    @euro73 any news on existing fixed loans? I have 2 fixed loans with CBA. One is P&I other is IO.
     
  17. LeeM

    LeeM Well-Known Member

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    Most real estate agents I dealing with emailed me that their offices are closed until further notice. And No open for inspections.
     
  18. euro73

    euro73 Well-Known Member Business Member

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    I would imagine they will stay fixed, at their current rates, until the fixed periods expire.
     
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  19. Lacrim

    Lacrim Well-Known Member

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    O
    Oh god I hope so. Putting one on the market tomorrow.

    I didn't ask for COVID-19 (or APRA). I need to be cut some slack.
     
  20. Traveller99

    Traveller99 Well-Known Member

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    What do we see clearance rates doing this weekend? There are plenty of scheduled properties going under the hammer. Many properties I'm following have been selling prior to auction this week with 'Contact Agent' for price. Could this be panic selling to get a deal before it all hits the fan? I think another 5% pullback for Sydney and Melbourne. Fewer (quality) properties have been advertised this week where I'm looking.