IMF reduces Growth predictions for Australia

https://www.smh.com.au/politics/fed...5-p530uv.html?js-chunk-not-found-refresh=true

Does this impact house prices?

 

"
The RBA noted that consumers continue to be squeezed by low wages growth and an increase in total taxation, although it conceded recent interest rate cuts may have hit shopper confidence.

The ANZ-Roy Morgan weekly measure of consumer sentiment, released on Tuesday, showed another drop in confidence, which has fallen 6.5 per cent since the RBA started cutting rates.

Separate research from ratings agency Standard & Poor's suggests consumers, rather than spend their income tax cuts, are using the cash to get on top of their mortgages.

Its measure of prime mortgages showed a drop in the number of people behind on their repayments in August, with the biggest fall amongst those 30 to 60 days in arrears.


The agency said while arrears traditionally fall early in the new financial year, it appeared the drop was due to borrowers using the recent cuts in interest rates and income taxes to fix their finances.
"

 

The lower growth due to no wage growth will effect jobs.

You can expect more retail store closures - Big W, Retail Food Group, Red Roosters etc.

As for the housing market, it doesn't matter if the RBA drops rates to zero, if you have no job, you can't pay the mortgage, so expect mortgage defaults to increase and hence mortgagee sales to start rising.

 

Greece is expected to have higher GDP growth than us in the next year

 

The day I gave up trying to figure out what affects house prices was loong ago.

Imho no one exactly knows. And to make it even more complicated, there are thousands of markets, many affected in different ways.

Quite a few times I've bought when sentiment was very low because I saw value while everyone was claiming doom and gloom, and I've well. Caught a few booms too.

I decided long ago to invest based on long term value and add value ability which matches my own financial situation and risk profile.

I leave the crystal ball stuff to the economists.

 

Im not too sure about the IMF predictions about Australia's growth figure, particularly comparing to Greece. Our economy is a bigger and more diverse than Greece and more productive as a nation as well,

 

I think the problem is we have a lot more household debt than Greece, hence our citizens are trying to service this over spending in the broader economy.

This is why Australia has been downgraded significantly compared to other countries. Australia has the 2nd highest level of household debt in the world, second only to Switzerland.

A lot of Australian's are going to have to stop spending and start deleveraging. Greeks to a lesser extent.

 

btw the comparison to Greece was tongue in cheek - the economy there got annihilated and unemployment soared to 27.5% - even now 10 years on from the recession the unemployment rate is 17% & youth unemployment is 22%.

Oz...well the stats are out later today, but more like 5%, and 4% for Melbourne & Syd...

 

Can't quantify how much this makes of a difference when it comes to property but OZ is still the number 1 country attracting millionaires. Lots of cashed up buyers but most probably affecting only high tier property.

Mapping the Global Migration of Millionaires



Another point is that in the past few days, it seems like the government is being forced to accept that they might need to start spending their surplus before Christmas to help the economy and to stop relying on rate cuts. So jobs can get a boost from this.

Also, IO vs P&I differential seems to be going down and looking at current rates , seems like the banks are looking for more IO loans.

Things don't seem to be this bad to me, at least in the short run.

 

A good article in the ABC today about Australia's excessive household debt levels. They are also saying the debt overhang means Aussies now have to spend less and pay down debt, hence why our economy will be worse than Greece. 60% of Australia's GDP is made up from household expenditure.

Australians' record debt is making us work longer, spend less

Australians have the world's second-largest household debts. We know it, we worry about it, and there is increasing evidence it is changing our way of life.

Hovering around 120 per cent of GDP — that is everything the nation produces in a year — Australia's household debt is second only to Switzerland, and we're not too far behind the Swiss.

It wasn't always like this, with that debt burden almost trebling in the 28 years since Australia's last recession in the early 1990s.