It’s what we do best – nothing

It’s amazing how Australia tends to find its feet by doing nothing. The more I watch the public posturing in Canberra, mainly about nothing, the more I think we definitely have the politicians we need. The more they do nothing the better things get – it’s amazing!

It only took the Australian Financial Review to ask Fortescue boss Twiggy Forrester whether he though the worst was over in the commodities cycle (He said yes)  and then get their markets desk to agree that yes iron ore, coal and energy were all off the bottom and then the Canberra desk to figure out that higher tax revenue from resource exports might just cut the Federal Budget deficit by one third over the next four years.

I might be being little unkind here as most of Australia’s resource stocks still standing have actually done a good job of cutting costs that would have been thought impossible five years ago.

It took just one more day for the boffins down at the stockmarket to figure out that the commodities cycle might also put a bit of life back into our sharemarket leaders, based on the maxim that a rising tide lifts all boats. Predictions for the ASX top 200, currently at about 5500, hitting 6000 by Christmas were also being bandied about. Look out for the Santa Claus rally.

Next cab off the rank was the government trying to push through its long-horizon tax cuts for business, which be defeated in Senate. There you go, another $48 billion that doesn’t have to be spent. We’ll have that deficit licked in no time if we can only figure out how to raise more taxes on what we do best – nothing.  

Apartments may soon be hitting the supply side wall

APARTMENT WOBBLES

As one market gets some good news another looks into the abyss. The property market is awash with grim predictions from economists and analysts that the apartment market is headed for a fall with oversupply looming inthe next two years, particularly in Melbourne and Brisbane. 

You have to wonder what all those market economists were doing in their BMWs as they drove home, with every second railway station overshadowed by cranes in a building boom that hasn’t been seen since the 1970s. 

Of course there’s  going to a reckoning, of course investors are going to be hit, of course some developers/builders will go broke and their staff lose their jobs, and of course rents will probably fall in line with lower valuations. 

What I can’t understand is why people didn’t see it coming. APRA did and acted and belatedly so did the Reserve Bank and there is more pressure being brought to bear on borrowing requirements. 

But just when the banks had been told to pull their horns in on property investment, they opened up their books again. The reason is obvious. Even though auction sale prices have been holding up valiantly this year, particularly on houses and centrally-located apartments, there are just not as as many sales as last year. Banks need mortgage volume and they’ll get it any way they can.

And you wonder why the banks are getting such bad press. 

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