The Block unearths home truths about renovation spending

Posted to The Age (5/11/2011) on 6/11/2011 at 11:35 AM
Commenting on "The Block unearths home truths about renovation spending"
http://theage.domain.com.au/real-estate-news/the-block-unearths-home-truths-about-renovation-spending-20111105-1n0qw.html

Posted to The Age (5/11/2011) on 7/11/2011 at 9:50 AM
Commenting on "The Block unearths home truths about renovation spending"
http://theage.domain.com.au/real-estate-news/the-block-unearths-home-truths-about-renovation-spending-20111105-1n0qw.html

I have been writing about the over presumptuous model used by RBA in determining inflation and interest rate. This is why must read the ABS data with great caution, and interpret the underlying trends more carefully.

Read http://sinfongchaneconomy.blogspot.com/2011/10/australian-consumers-starting-to-spend.html and other by the same author.

It is presumptuous that TV program The Block has great influence on renovation resulting in such positive impact on the economy. Insurance claims on damaged properties caused by unseasonal strong winds, storms and floods of previous few months do not get processed overnight. The delay effect comes through likely and coincidentally with the ABS reporting period.

There is another flaw in the data: there is no guarantee that the windfall is derived from retail business data NOT from tradespeople. There are fair amount of unethical practices whereby some tradespeople charge their client 10% less, that is GST not charged, on condition that the clients pay cash instead of by means that the taxman can trace.

I have seen many people over capitalised their properties by being overzealous. It is important to note that many property buyers are buying similar type of properties they were raised in or familiar with. One must not romanticised about living in a weather board home if they have been raised in a brick veneer one during their childhood days. This is the same reason why some buyers over commit themselves in buying big homes because they cannot imagine living in a small one since the day they were born!

Low inflation raises case for RBA rate cut

Posted on The Australian (27/10/2011) on 27/10/2011 at 3:23 AM (Cannot post as non-subscriber)
Commenting on “Low inflation raises case for RBA rate cut”
http://www.theaustralian.com.au/business/economics/low-inflation-raises-case-for-rba-rate-cut/story-e6frg926-1226177799948

The table headings are incorrect - Quarterly change should be Annual change, and vice versa. Please refer to http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0

The problem with inflation calculation tied with CPI is that they are not totally correlated. Basing on inflation rate to adjust interest rate by RBA is unrealistic and to some extent nonsensical.

Most services are labour related and provided locally. In almost all cases, services increase in absolute dollars each quarter, and are based on our own currency. The utility prices have been on the increase to the point where many cannot afford such basic needs in everyday living.

Product supply / provision are influenced by currency exchanges, parity, and supply / demand of the products. For the example, the rise of fall of petrol prices are not caused by local supply and demand but parity prices and import prices beyond our control.

I have written often on the issue that increase in utility prices is NOT inflation. Users of utility do not push up the price due to additional demand, and it is through no fault of theirs that they copped double whammy - one from price rise, and two increases in interest rate to curb "inflation".

Data quells double-dip recession fears

Posted to Herald Sun (9/10/2011) on 9/10/2011 at 4:38 AM (Not published by Newspaper)
Commenting on “Data quells double-dip recession fears”
http://www.heraldsun.com.au/business/data-quells-double-dip-recession-fears/story-fn7j19iv-1226162061336

It's a load of mumbo-jumbo when ABS provides two sets of data, one actual and the other seasonally adjusted. The latter is used by RBA and for other reporting purposes. This contradicts the argument about climate change - if such man-made phenomenon does take place, the seasonal pattern cannot be relied on, and the mathematical model will be inaccurate.

There is another flaw using seasonally adjusted data; the real disastrous impact of financial crises resulting from external environment may be diluted which thus leads to incorrect formulation of corrective policies.

Australian consumers starting to spend again

Posted to Adelaide Now (5/10/2011) on 5/10/2011 at 9:51 PM
Commenting on “Australian consumers starting to spend again”
http://www.adelaidenow.com.au/business/australian-consumers-starting-to-spend-again/story-e6frede3-1226159410714

With closer examination, ABS figures show that many household items including carpets, furniture, goods for renovation etc increased the most while departmental stores suffered. This can be explained easily - many houses had to refinish and repair after severe storms and floods during the same period.

The departmental store spending decline is due to online purchases, much of the money went overseas. For argument sake, even if only 25% of the $22b spent on online were overseas purchases and if the government had collected GST, it would have a windfall instead of a shortfall of $550m.

While many items are subject to currency fluctuations, it is not the case for cafe/restaurant prices. Commonsense tells us that no matter what happens to foreign exchange, cafe/dine-out meal prices can only go up but never down. If the patronage remains unchanged, the total spending will still increase, theoretically by the same percentage as the price.

I have written often about the state of Australian economy, and tempest is yet to come. I believe the China's forward orders for our iron ore and coal will be less, coupled with lower price offered, the next quarter export income will NOT be rosy

Pushing bricks and mortar

Posted to The Age (13/12/2010) on 14/12/2010 at 3:36 PM

Commenting on “Pushing bricks and mortar”

http://theage.domain.com.au/home-investor-centre/pushing-bricks-and-mortar-20101213-18ull.html

1. Economy is not as robust as what ABS reckoned, and the real unemployment rate is much higher than reported. Many people face financial trouble in meeting mortgage payment, and more mortgagee auctions will take place;
2. Closing the loophole of allowing the foreign investors to invest in secondhand properties without FIRB approval results in the collapse in sale price in many suburbs due to lack of competition;
3. Change of government policies in international education results in drastic drop in international students coming to Australia, thus kills off student accommodation rental demand. Many properties used for such purpose will be forced to sell;
4. Change of policies also results in closure of international colleges, which normally lease commercial buildings used as classrooms. Many of such buildings will be vacant;
5. 2010 Christmas retail sales will be below previous years', threatening the survival of some small businesses. Unemployment will shoot up beyond many economists' forecast in Jan and Feb 2011. Businesses for sale will be increased;
6. The median price across the board in Melbourne will decline to around $550,000 by June 2011;
7. In general, there will more listings than sales from December onwards;
8. 2011 is not a year for the rookies - only the experienced survive

ASX index will be below 5000 points for another few more months, likely up till March

Pushing bricks and mortar

Posted to The Age (13/12/2010) on 14/12/2010 at 3:36 PM

Commenting on “Pushing bricks and mortar”

http://theage.domain.com.au/home-investor-centre/pushing-bricks-and-mortar-20101213-18ull.html

1. Economy is not as robust as what ABS reckoned, and the real unemployment rate is much higher than reported. Many people face financial trouble in meeting mortgage payment, and more mortgagee auctions will take place;
2. Closing the loophole of allowing the foreign investors to invest in secondhand properties without FIRB approval results in the collapse in sale price in many suburbs due to lack of competition;
3. Change of government policies in international education results in drastic drop in international students coming to Australia, thus kills off student accommodation rental demand. Many properties used for such purpose will be forced to sell;
4. Change of policies also results in closure of international colleges, which normally lease commercial buildings used as classrooms. Many of such buildings will be vacant;
5. 2010 Christmas retail sales will be below previous years', threatening the survival of some small businesses. Unemployment will shoot up beyond many economists' forecast in Jan and Feb 2011. Businesses for sale will be increased;
6. The median price across the board in Melbourne will decline to around $550,000 by June 2011;
7. In general, there will more listings than sales from December onwards;
8. 2011 is not a year for the rookies - only the experienced survive

ASX index will be below 5000 points for another few more months, likely up till March