At Smith's press conference yesterday, there was an air of maturity to his person, a quite resolve and a great amount of modesty. To an unknowing spectator it would be hard to comprehend that this man had captained a side that had recently rewritten the history books. This was a different Smith to the one who last led the Proteas to Australia in 2005. He arrived for that series full of bluster and pomp, and the Australians understandably revelled in the defeat of South Africa after they had beaten us in the series. The Australian press and the public shamed Smith for his over-confidence and for his inability to back it up with results.
However in this current tour, Smith has won over the same press and public by beating his opponents on the pitch, as a gentleman, and playing a hard-fought series full of conviction and bravery. The Australian press has always been extremely partisan when covering their nation's sporting events, and South Africa has on more than one occasion fallen shy of the persistent media frenzy that ensues during a tour Down Under. For the first time in living memory the Australian press not only began to present South Africa in a positive light, but rallied behind the touring side with an enthusiasm previously, and strictly, reserved for their own national side.
Headlines such as "Day the losing captain won" and "Maimed king wins hardest hearts of all" appeared in the Sydney Morning Herald, but these sentiments paled in comparison to the admission by Australian journalist Andrew Stevenson: "And for the first time in my life as a cricketing spectator I felt my loyalties shift. Having grown up on a diet of Lillee and Marsh and Chappell, I'd found an opponent I could love.
"With every play-and-miss, Ntini seemed more worthy. Every time Steyn stood in line with the stumps and offered fierce resistance, I was in his corner. Smith's arrival at the crease was the crowning moment. In defeat, South Africa issued a proclamation to the cricketing world every bit as resounding as their twin victories entering this match. If you want to beat us be ready for a long fight: we will not concede an inch.
A new champion has arrived in world cricket: long may they reign."
South Africans around the nation woke up early for that final test day at the Sydney Cricket Ground. Children, wives, husbands and grandparents, many of whom had never been cricket fans before, watched in anticipation as the South African bowlers stood their ground, bats in hand, against the Australian onslaught.
After an almighty performance, Dale Steyn's wicket fell, and the Australian fans went wild in victory. As if scripted, as if on a movie set, the camera panned to the South African dressing room, and clad in borrowed clothes, battered and bruised, Graeme Smith made his way to the crease.
As he descended those steps, as he walked out onto one of the most hostile cricket grounds in the world, the stands erupted in a standing ovation. The fact that he lasted seventeen deliveries matters not.
As he walked from that change room Graeme Smith, our boy captain, our broken soldier, showed us what mettle really is. Despite this, despite the praise and the accolades, despite the symbolism of the moment, Graeme Smith demonstrated one thing; he demonstrated bravery, spirit and ultimately a moral victory won through action, conviction and good sportsmanship.
South African sport has come of age; our captains and players demonstrate a standard to the rest of the world that demands recognition, respect and a certain form of emulation. They offer all of us a reason to be proud, a reason to be hopeful, an example to follow, but most of all the pleasure of seeing South Africans showing the best in the world how it is meant to be done. Earlier this week we were forwarded this (unfortunately anonymous) email from someone who had been moved by Smith's courage:
"What a day of contrasts. The early hours saw one previously unpopular South African; walking down the stairs of the SCG, to a standing ovation and bringing even the hardest SA fan close to tears of pride. That's us isn't it? That's you and me, or at least visions of how we'd like to see ourselves, battered and bruised but defiant in the face of improbability.
"I have this constant debate with my wife who fails to see the point of sport. We may not have an Obama to give us a speech that invokes in us strength to keep believing in the impossible, but even my wife sat transfixed this morning as a picture of a man striding down 20 steps said, without uttering a single word, to the rest of the world "try tell me that I can't."
"Later in the same day headlines are made by another ex-South African who quits his role as England cricket captain after just 5 months at the helm. The odds were too tough to make it happen in South Africa, the greener grass of foreign pastures too alluring to resist. Without realising it KP, you represent so many others like you. You are not alone, there are many like you who figure the odds are stacked too high to make it happen here in South Africa and look for the easier option. But you forget one thing; you forget that dealing with adversity in life breeds strength and character. Having the chips stacked against you, only to believe in something enough to defy the odds to come through these things again, and again, and again... that's something another coloured passport can not offer you.
"Thank you Graeme Smith, you gave us the Obama moment that reminded us why we love being South African this much. We are in for one hell of a tough year this year with no promise of what the end result might be. The rest of the world keeps telling us that we are just another part of the crippled body of Africa with no hope and a one way ticket to failure. Seems like a pretty good time to go and bat then."
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Tuesday, February 17, 2009
What is the future for SA economy?
Can the country head off the shocks laying us low?
This needs a qualifier. Just how big will the external shocks still become? A global meltdown-cum-depression-cum-deflation would be in a class all of its own.
Such an ultimate shock is not what we face today. At least, that is the current reading. Even so, the actual reality is still daunting in the extreme.
The global banking system is bankrupt in important parts, with $2 trill of bad assets still to be written off.
There is a deep sense of fear and therefore defensiveness encouraging private spending withdrawal, abruptly pushing the global economy into deep recession.
What we face needs to be unpacked and compartmentalised.
There is the aftermath from last year: electricity shock cutting output, commodity inflation shock cutting real buying power, interest rate response increasing the debt servicing burden, national credit act inviting banks to be more conservative in granting credit, and a pervasive fear of more bad news to come deepening defensiveness.
All of that very expertly floored the economy, especially household consumption spending but also critical parts of private fixed investment. From July 2008 non-agricultural GDP (98% of the total) entered recession (-0.1% annualized). It only got (much) worse since then.
At the very moment the economy entered recession in mid-2008, some of the recession drivers abruptly let up.
Oil started collapsing, with food price inflation following more sedately. From December the SARB followed with its first interest rate cut of 0.5%. Throughout the Minister of Finance quietly accepted his tax receipts were falling (especially VAT, sin taxes, customs and excise, and above all property transfer fees), borrowing the difference rather than add insult to injury and start cutting his own spending, too.
Thus throughout 2H2008, we had many shock absorbers coming to the rescue.
The Rand went 40% down compared to 2007. The Finance Minister accepted an R14bn revenue shortfall while allowing R29bn of additional spending overruns (we now know). The SARB, not before time, decided to relent from December 2008, cutting rates by 0.5%. Oil dropped by over $110. Infrastructure spending continued at full throttle.
Yet in that very period, Lehman Brothers lost its battle and Paulson/Bernanke succeeded in frightening a world audience. The financial hit spilled over, pushing the world economy into deep recession overnight.
From October onward, it was obvious South Africa would be hit hard in a number of ways. Directly, there was to be fallout for our exporters. Indirectly, would external financing remain accessible?
This kind of shock event needs to be addressed on two levels. Foremost, the currency needs to absorb part of the external shock. And domestically there needs to be accommodation.
Happily, imported oil turned out to be our biggest shock absorber, falling over $100, thereby neutralizing most of our export commodity price declines. Although the Rand still needed to complement the oil shock absorber by also declining to compensate for net export volume losses (possibly of the order of 0%-5% this year), not all the burden would fall on it.
The Rand settling at 10:$ may have been enough, but coming months will tell whether more would have been better.
Meanwhile, what’s the use of accumulated economic strength if you don’t use it?
The Finance Minister has reduced the national debt from over 50% of GDP 15 years ago to nearer 22% today, allowing his budget two years ago to gradually drift anti-cyclically into surplus.
Following last year’s many hits to the economy, not only did he need to cover the revenue shortfall without cutting his spending, but ideally he would find ways to increase critical spending to prevent too much of a slide below growth potential.
The Minister did so by allowing a swing from 1% of GDP surplus to 4% of GDP deficit spread over two years, with half the swing accounted by tax shortfalls and half by extra spending, mostly focused on the poor.
Meanwhile what’s the use of high real interest rates? Well, you can cut them drastically in an emergency. From prime 15.5% in the crisis month October 2008, the SARB cut by 0.5% in December 2008, and by a further 1% in February 2009.
Further 1% cuts are expected in March and April, and possibly June 2009, with 0.5% rate cuts also still possible, prime now aiming for 10%-11% by 3Q2009, as already fully discounted by markets, realistically so.
Also, with political pressures independently building to do more for the poor, these stressful times create the opportunity to increase public spending on the poor without too many questions asked.
Exactly that has happened.
In this manner we are now addressing four shock demands within a year, counting local electricity and politics, and global commodity and financial upheavals.
Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics
Go to www.ipsinvest.com for more information.
This needs a qualifier. Just how big will the external shocks still become? A global meltdown-cum-depression-cum-deflation would be in a class all of its own.
Such an ultimate shock is not what we face today. At least, that is the current reading. Even so, the actual reality is still daunting in the extreme.
The global banking system is bankrupt in important parts, with $2 trill of bad assets still to be written off.
There is a deep sense of fear and therefore defensiveness encouraging private spending withdrawal, abruptly pushing the global economy into deep recession.
What we face needs to be unpacked and compartmentalised.
There is the aftermath from last year: electricity shock cutting output, commodity inflation shock cutting real buying power, interest rate response increasing the debt servicing burden, national credit act inviting banks to be more conservative in granting credit, and a pervasive fear of more bad news to come deepening defensiveness.
All of that very expertly floored the economy, especially household consumption spending but also critical parts of private fixed investment. From July 2008 non-agricultural GDP (98% of the total) entered recession (-0.1% annualized). It only got (much) worse since then.
At the very moment the economy entered recession in mid-2008, some of the recession drivers abruptly let up.
Oil started collapsing, with food price inflation following more sedately. From December the SARB followed with its first interest rate cut of 0.5%. Throughout the Minister of Finance quietly accepted his tax receipts were falling (especially VAT, sin taxes, customs and excise, and above all property transfer fees), borrowing the difference rather than add insult to injury and start cutting his own spending, too.
Thus throughout 2H2008, we had many shock absorbers coming to the rescue.
The Rand went 40% down compared to 2007. The Finance Minister accepted an R14bn revenue shortfall while allowing R29bn of additional spending overruns (we now know). The SARB, not before time, decided to relent from December 2008, cutting rates by 0.5%. Oil dropped by over $110. Infrastructure spending continued at full throttle.
Yet in that very period, Lehman Brothers lost its battle and Paulson/Bernanke succeeded in frightening a world audience. The financial hit spilled over, pushing the world economy into deep recession overnight.
From October onward, it was obvious South Africa would be hit hard in a number of ways. Directly, there was to be fallout for our exporters. Indirectly, would external financing remain accessible?
This kind of shock event needs to be addressed on two levels. Foremost, the currency needs to absorb part of the external shock. And domestically there needs to be accommodation.
Happily, imported oil turned out to be our biggest shock absorber, falling over $100, thereby neutralizing most of our export commodity price declines. Although the Rand still needed to complement the oil shock absorber by also declining to compensate for net export volume losses (possibly of the order of 0%-5% this year), not all the burden would fall on it.
The Rand settling at 10:$ may have been enough, but coming months will tell whether more would have been better.
Meanwhile, what’s the use of accumulated economic strength if you don’t use it?
The Finance Minister has reduced the national debt from over 50% of GDP 15 years ago to nearer 22% today, allowing his budget two years ago to gradually drift anti-cyclically into surplus.
Following last year’s many hits to the economy, not only did he need to cover the revenue shortfall without cutting his spending, but ideally he would find ways to increase critical spending to prevent too much of a slide below growth potential.
The Minister did so by allowing a swing from 1% of GDP surplus to 4% of GDP deficit spread over two years, with half the swing accounted by tax shortfalls and half by extra spending, mostly focused on the poor.
Meanwhile what’s the use of high real interest rates? Well, you can cut them drastically in an emergency. From prime 15.5% in the crisis month October 2008, the SARB cut by 0.5% in December 2008, and by a further 1% in February 2009.
Further 1% cuts are expected in March and April, and possibly June 2009, with 0.5% rate cuts also still possible, prime now aiming for 10%-11% by 3Q2009, as already fully discounted by markets, realistically so.
Also, with political pressures independently building to do more for the poor, these stressful times create the opportunity to increase public spending on the poor without too many questions asked.
Exactly that has happened.
In this manner we are now addressing four shock demands within a year, counting local electricity and politics, and global commodity and financial upheavals.
Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics
Go to www.ipsinvest.com for more information.
Friday, January 30, 2009
2009 – A year to be creative!
Scott Picken, CEO IPS, Jan 09
I have been asked to try and understand the property market in 2009, an interesting task! At the end of 2008, we spoke of the challenges of 2008 and the exciting opportunities which were before us in 2009. The global community has undergone a paradigm shift where what was common practice has changed, and global markets, banks, companies and individuals are coming to terms with the new era of doing business in amongst this uncertainty. The Chinese only have one word for ‘crisis’ and ‘opportunity’, ‘wēijī’ and I firmly believe that if one can see through the short term situation, focus on fundamentals and act on these principles, they will find that the genuine value they invested in this year, will provide the opportunity to set themselves up for life! To achieve this though, you will have to be creative to overcome the obstacles.
The year begins with allot of hope and possibly the biggest example of the impossible becoming possible with Barrack Obama being sworn in as the 44th American President. He has completely challenged normality and won and now USA and the global environment rest on his shoulders in the hope that he can resurrect the global economy. He won buy being creative, by changing the way things were done, by communicating through the new technology mediums and most importantly by reaching the hearts and minds of the people on the street. He won by thinking out of the box and turning the crisis into his biggest opportunity!
In the South African market, many people have been hesitant about property in the last 18 months. However there is now real value, rents are rising and interest rates are coming down. South Africa has been slow in reducing interest rates and this can be seen by Australia. Since September 08 they have reduced their interest rates by 30% and it has had a marked affect on the market, with momentum really starting to come back into the market. I believe South Africa is 6 months behind and the expected rate cut in February and March, will begin to stimulate the market like in Australia. The biggest challenge in any market is calling the bottom of the market. I personally believe you can only ever call the bottom in hindsight and that you need to evaluate every opportunity, based on its potential. The second biggest challenge you currently have at the moment is you can find a ‘no brainer’ of an investment and still battle to get finance. It will be a time to get creative! Keep your eye open for some of the first investments opportunities for 2009.
However to start with, get your momentum going; watch this great video to help you achieve the most of your potential in 2009! – click here.
I finish with a saying my mother gave me at the end of last year, “Rather than worry about the storm, learn to dance in the rain!”
Be creative, have a great 2009 and get started!
Regards
Scott Picken
CEO, International Property Solutions (IPS)
www.ipsinvest.com
I have been asked to try and understand the property market in 2009, an interesting task! At the end of 2008, we spoke of the challenges of 2008 and the exciting opportunities which were before us in 2009. The global community has undergone a paradigm shift where what was common practice has changed, and global markets, banks, companies and individuals are coming to terms with the new era of doing business in amongst this uncertainty. The Chinese only have one word for ‘crisis’ and ‘opportunity’, ‘wēijī’ and I firmly believe that if one can see through the short term situation, focus on fundamentals and act on these principles, they will find that the genuine value they invested in this year, will provide the opportunity to set themselves up for life! To achieve this though, you will have to be creative to overcome the obstacles.
The year begins with allot of hope and possibly the biggest example of the impossible becoming possible with Barrack Obama being sworn in as the 44th American President. He has completely challenged normality and won and now USA and the global environment rest on his shoulders in the hope that he can resurrect the global economy. He won buy being creative, by changing the way things were done, by communicating through the new technology mediums and most importantly by reaching the hearts and minds of the people on the street. He won by thinking out of the box and turning the crisis into his biggest opportunity!
In the South African market, many people have been hesitant about property in the last 18 months. However there is now real value, rents are rising and interest rates are coming down. South Africa has been slow in reducing interest rates and this can be seen by Australia. Since September 08 they have reduced their interest rates by 30% and it has had a marked affect on the market, with momentum really starting to come back into the market. I believe South Africa is 6 months behind and the expected rate cut in February and March, will begin to stimulate the market like in Australia. The biggest challenge in any market is calling the bottom of the market. I personally believe you can only ever call the bottom in hindsight and that you need to evaluate every opportunity, based on its potential. The second biggest challenge you currently have at the moment is you can find a ‘no brainer’ of an investment and still battle to get finance. It will be a time to get creative! Keep your eye open for some of the first investments opportunities for 2009.
However to start with, get your momentum going; watch this great video to help you achieve the most of your potential in 2009! – click here.
I finish with a saying my mother gave me at the end of last year, “Rather than worry about the storm, learn to dance in the rain!”
Be creative, have a great 2009 and get started!
Regards
Scott Picken
CEO, International Property Solutions (IPS)
www.ipsinvest.com
Bold rate cuts urged as factory prices stall
Business Day, Jan 30th
PRICE increases for goods leaving local farms, factories and mines eased to an 11-month low last month, subdued by falling fuel and metal prices and giving the Reserve Bank more scope to slash interest rates next week.
The annual rise in factory gate prices measured by the producer price index (PPI) retreated to 11% from 12,6% in November, well below consensus forecasts and adding to evidence that inflation is falling much faster than expected.
Coming on the heels of news that consumer inflation also slowed more than expected in the same month, analysts said the data sealed the case for a full percentage point interest rate cut at the Bank’s monetary policy committee (MPC) meeting.
“There is now clearly a window of opportunity for the Bank to be more aggressive in cutting rates,” said Stanlib economist Kevin Lings. “A reduction of 100 basis points is certainly very feasible at the MPC.”
The Bank signalled the start of an easing cycle in interest rates with a half percentage point cut last month, taking the repo rate down to 11,5%.
With inflation on the back foot and growth in the economy slowing to a near standstill, lending rates are expected to fall by another 2,5 to four percentage points this year.
“Today’s PPI figure is good news for the consumer inflation outlook, as it provides further evidence that both local and global inflationary pressures are slowing,” said Nedbank economist Carmen Altenkirch.
“We expect that the Bank may opt to front-load interest rate cuts, opting for more aggressive loosening early in the year followed by more modest easing in the second half.”
Government bonds extended gains prompted by the benign consumer price figures earlier in the week. The yield on the R157 bond due in 2015 fell 12 basis points to 7,34% yesterday.
It was the fourth month in a row that the annual rise in PPI slowed, after peaking at 19,1% in August. During the month, the PPI index fell 1,1%, the data from Statistics SA showed.
Most of that fall was spurred by lower prices for fuel and minerals, which have plunged in the past few months as a recession gripped the global economy.
Electricity costs and food prices at the agricultural level offset some of the downward pressure. Over the whole year, producer prices rose 14,2%, up steeply from 10,9% in 2007.
But analysts expect producer prices to subside dramatically this year, which will feed through to consumer inflation.
Efficient Research economist Doret Els predicts that the PPI will show an average 5,5% rise this year, tamed mainly by lower commodity prices, which make up most of the producer basket.
Price rises for exported goods eased dramatically to 4,8% from 11,2% in November, while the annual increase for imports also slumped to 3,4% from 6,3%.
But there are still concerns that volatility in the rand could tarnish the benign price outlook in SA by making imports more expensive. The unit depreciated by nearly 30% against the dollar last year, making it the world’s worst-performing currency.
So far this year, it has weakened about 4% against a trade-weighted basket of currencies.
“Any further weakening in the rand might reduce the expected sharp slowdown in PPI as commodities are often priced at import parity,” Altenkirch said. But she pointed out that the construction industry — SA’s fastest growing — had come under pressure as companies put expansion plans on hold.
That should help subdue prices of bricks, iron and steel.
PRICE increases for goods leaving local farms, factories and mines eased to an 11-month low last month, subdued by falling fuel and metal prices and giving the Reserve Bank more scope to slash interest rates next week.
The annual rise in factory gate prices measured by the producer price index (PPI) retreated to 11% from 12,6% in November, well below consensus forecasts and adding to evidence that inflation is falling much faster than expected.
Coming on the heels of news that consumer inflation also slowed more than expected in the same month, analysts said the data sealed the case for a full percentage point interest rate cut at the Bank’s monetary policy committee (MPC) meeting.
“There is now clearly a window of opportunity for the Bank to be more aggressive in cutting rates,” said Stanlib economist Kevin Lings. “A reduction of 100 basis points is certainly very feasible at the MPC.”
The Bank signalled the start of an easing cycle in interest rates with a half percentage point cut last month, taking the repo rate down to 11,5%.
With inflation on the back foot and growth in the economy slowing to a near standstill, lending rates are expected to fall by another 2,5 to four percentage points this year.
“Today’s PPI figure is good news for the consumer inflation outlook, as it provides further evidence that both local and global inflationary pressures are slowing,” said Nedbank economist Carmen Altenkirch.
“We expect that the Bank may opt to front-load interest rate cuts, opting for more aggressive loosening early in the year followed by more modest easing in the second half.”
Government bonds extended gains prompted by the benign consumer price figures earlier in the week. The yield on the R157 bond due in 2015 fell 12 basis points to 7,34% yesterday.
It was the fourth month in a row that the annual rise in PPI slowed, after peaking at 19,1% in August. During the month, the PPI index fell 1,1%, the data from Statistics SA showed.
Most of that fall was spurred by lower prices for fuel and minerals, which have plunged in the past few months as a recession gripped the global economy.
Electricity costs and food prices at the agricultural level offset some of the downward pressure. Over the whole year, producer prices rose 14,2%, up steeply from 10,9% in 2007.
But analysts expect producer prices to subside dramatically this year, which will feed through to consumer inflation.
Efficient Research economist Doret Els predicts that the PPI will show an average 5,5% rise this year, tamed mainly by lower commodity prices, which make up most of the producer basket.
Price rises for exported goods eased dramatically to 4,8% from 11,2% in November, while the annual increase for imports also slumped to 3,4% from 6,3%.
But there are still concerns that volatility in the rand could tarnish the benign price outlook in SA by making imports more expensive. The unit depreciated by nearly 30% against the dollar last year, making it the world’s worst-performing currency.
So far this year, it has weakened about 4% against a trade-weighted basket of currencies.
“Any further weakening in the rand might reduce the expected sharp slowdown in PPI as commodities are often priced at import parity,” Altenkirch said. But she pointed out that the construction industry — SA’s fastest growing — had come under pressure as companies put expansion plans on hold.
That should help subdue prices of bricks, iron and steel.
Wednesday, January 21, 2009
Australian Property Market, through the eyes of a South African - Jan 2009
Scott Picken, CEO of IPS has just spent 4 weeks in Australia exploring the Australian Property market. There is allot of global turmoil in property, but there are some very interesting characteristics of the Australian Property Market.
Scott has written a report about the market and he says, “Although this needs to be very detailed and thorough, I will try and focus on the most pertinent points which I believe are essential in understanding the market there.” Please Click here to download the full version of the detailed review of the Australian Property Market through a South African's eyes.
Briefly, like South Africa, the Australians know that there is tremendous global uncertainty, and because of this and lack of available credit, things have slowed, but it is not as dire and as negative as the US or UK markets. They have 4 of the top 15 most secure banks in the world, which brings stability to the market and the government initiatives have created the desired effect of stimulating demand. An example of this is the government has doubled the First Time Buyers Allowance and as long as First Time buyer buys before the 30th of June 2009 they get $21 000 (new build) or $14 000 (existing) and this has created huge demand in this sector.
This, along with the fact that interest rates have dropped 30% over the last 3 months (now 4.25% from over 8%) has vastly improved affordability, which is stabilising the market. They are expecting further drops in interest rates in February.
However across Australia the gap between property supply and demand continues to grow. Supply continues to decrease based on current market conditions - over the year ending June-08 approximately 157,000 new dwellings commenced construction (in Nov 08 building approvals were only 115 000); well below the 200,000 dwellings estimated to be required by the Commonwealth Treasury. In fact, this is around 43,000 too few dwellings being built over the year and getting worse. Australia’s permanent population growth is near record levels, increasing by just under 320,000 people over the last twelve months with more than half that growth coming from overseas migration. This is also examined in contrast to unemployment and the effects it might have.
In conclusion, Australia is being affected by the global situation, but they have strong fundamentals and a government which has a surplus budget and therefore can implement stimulus packages which are having a strong effect on the market. It is very clear where the market activity is and where both the growth and rental market is placed and we believe an investor should be focusing between £300 000 and $600 000, either inner city apartments or houses which are in strategically good locations.
Click here to download the full version or go to www.ipsinvest.com and search under Australia and Documents.
Scott has written a report about the market and he says, “Although this needs to be very detailed and thorough, I will try and focus on the most pertinent points which I believe are essential in understanding the market there.” Please Click here to download the full version of the detailed review of the Australian Property Market through a South African's eyes.
Briefly, like South Africa, the Australians know that there is tremendous global uncertainty, and because of this and lack of available credit, things have slowed, but it is not as dire and as negative as the US or UK markets. They have 4 of the top 15 most secure banks in the world, which brings stability to the market and the government initiatives have created the desired effect of stimulating demand. An example of this is the government has doubled the First Time Buyers Allowance and as long as First Time buyer buys before the 30th of June 2009 they get $21 000 (new build) or $14 000 (existing) and this has created huge demand in this sector.
This, along with the fact that interest rates have dropped 30% over the last 3 months (now 4.25% from over 8%) has vastly improved affordability, which is stabilising the market. They are expecting further drops in interest rates in February.
However across Australia the gap between property supply and demand continues to grow. Supply continues to decrease based on current market conditions - over the year ending June-08 approximately 157,000 new dwellings commenced construction (in Nov 08 building approvals were only 115 000); well below the 200,000 dwellings estimated to be required by the Commonwealth Treasury. In fact, this is around 43,000 too few dwellings being built over the year and getting worse. Australia’s permanent population growth is near record levels, increasing by just under 320,000 people over the last twelve months with more than half that growth coming from overseas migration. This is also examined in contrast to unemployment and the effects it might have.
In conclusion, Australia is being affected by the global situation, but they have strong fundamentals and a government which has a surplus budget and therefore can implement stimulus packages which are having a strong effect on the market. It is very clear where the market activity is and where both the growth and rental market is placed and we believe an investor should be focusing between £300 000 and $600 000, either inner city apartments or houses which are in strategically good locations.
Click here to download the full version or go to www.ipsinvest.com and search under Australia and Documents.
Friday, January 16, 2009
Steep rate cut expected in Feb in South Africa
Jan 07 2009 17:48 Ines Schumacher
Johannesburg - Inflation could fall to as low as 6% in January and therefore back into government's inflation band - a development that could prompt a heavy cut in interest rates, economists have said.
"The inflation rate for January stands to decline massively from the 12.1% CPIX inflation rate for November to little over 6% for January," said Tony Twine, a senior economist for Econometrix, in a note to clients. CPIX, or the consumer price index excluding mortgage bonds, represents the cost of certain goods for the man in the street.
"Our prediction is 7% which is a dramatic fall in the inflation rate," said Kay Walsh, an economist at Rand Merchant Bank (RMB).
The South African Reserve Bank would then weigh into interest rates, she said. "We forecast that the MPC [monetary policy committee] will cut 50 basis points at every meeting until the end of the year."
Twine predicts that interest rates could be cut as much as 100 basis points at the MPC's next meeting, scheduled for February 11 and 12.
A 60% decline in the price of oil from its 2008 peak of about $147/barrel and technical changes to the way inflation is calculated in South Africa were behind the lower inflation expectations. Oil is trading at about $48/bbl.
Apart from the petrol price cut, lower food costs and the replacement of interest on home loans with owners' equivalent rent (the rental a homeowner forgoes by living in his house instead of renting it out) would present a convincing argument to the MPC to cut interest rates, said Econometrix in its Ecobulletin dated January 5.
As for the re-weighting of the CPI, it is a recurring statistical procedure. "The new weights would most likely result in a decline in the level of measured inflation," said Statistics SA on its website. For one, food will carry a smaller weight, while vehicles will carry a higher one.
Even though the January inflation rate will be unavailable to the MPC at its February meeting, it can make an accurate estimate to base its decision on, said Twine.
"If the MPC decides to cut interest rates in February and April, it would remove cost pressure from households and business, because of the reduction of inflation against the background of rapidly rising wage rates," said Twine.
However, RMB's Walsh said that there was a risk to the rand if interest rates were cut too drastically. RMB's prediction is more conservative; there has been a tendency in the past for the MPC to cut interests more when inflation falls rapidly, said Walsh.
Johannesburg - Inflation could fall to as low as 6% in January and therefore back into government's inflation band - a development that could prompt a heavy cut in interest rates, economists have said.
"The inflation rate for January stands to decline massively from the 12.1% CPIX inflation rate for November to little over 6% for January," said Tony Twine, a senior economist for Econometrix, in a note to clients. CPIX, or the consumer price index excluding mortgage bonds, represents the cost of certain goods for the man in the street.
"Our prediction is 7% which is a dramatic fall in the inflation rate," said Kay Walsh, an economist at Rand Merchant Bank (RMB).
The South African Reserve Bank would then weigh into interest rates, she said. "We forecast that the MPC [monetary policy committee] will cut 50 basis points at every meeting until the end of the year."
Twine predicts that interest rates could be cut as much as 100 basis points at the MPC's next meeting, scheduled for February 11 and 12.
A 60% decline in the price of oil from its 2008 peak of about $147/barrel and technical changes to the way inflation is calculated in South Africa were behind the lower inflation expectations. Oil is trading at about $48/bbl.
Apart from the petrol price cut, lower food costs and the replacement of interest on home loans with owners' equivalent rent (the rental a homeowner forgoes by living in his house instead of renting it out) would present a convincing argument to the MPC to cut interest rates, said Econometrix in its Ecobulletin dated January 5.
As for the re-weighting of the CPI, it is a recurring statistical procedure. "The new weights would most likely result in a decline in the level of measured inflation," said Statistics SA on its website. For one, food will carry a smaller weight, while vehicles will carry a higher one.
Even though the January inflation rate will be unavailable to the MPC at its February meeting, it can make an accurate estimate to base its decision on, said Twine.
"If the MPC decides to cut interest rates in February and April, it would remove cost pressure from households and business, because of the reduction of inflation against the background of rapidly rising wage rates," said Twine.
However, RMB's Walsh said that there was a risk to the rand if interest rates were cut too drastically. RMB's prediction is more conservative; there has been a tendency in the past for the MPC to cut interests more when inflation falls rapidly, said Walsh.
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