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Ben Kingsley Blog post by Ben Kingsley

RBA Cash Rate August 2020: The Second Wave is Here — Will The Stimulus Be Enough To Steer Us Away From The Cliff?

Today, Governor Lowe and the Reserve Board met and yes, of course, they kept the cash rate on hold at a record low 0.25%.

Obviously, there’s going to be some further updates later in the week when they release their statement of monetary policy, but right now, today’s going to be all about the economic update and having a look around. We’ve got heaps to get through today, and I just want to highlight the main summary.

We’re going to talk about the government’s stimuluses. We’re also going to be talking about an interesting report that came out from ME Bank around household and how comfortable they are with money. I think you’ll be surprised by that. We’re also going to dial in on the property market, which is going to be important later in this presentation.

But right now, let’s start firstly with the global story.

Let’s turn to the US and see what’s going on over there. The big news really was around the GDP number. It was down a whopping 32.9% in quarter two. Interestingly enough, that did beat consensus expectation for a decline of 34.5 in Q2. This is the worst outcome in GDP since records were created, and it’s obviously following a contraction in the first quarter of 0.5 that we saw there. You can see that obviously the US economy is struggling.

How do I summarize that? Look, we’re definitely seeing spending decline over there, and the Americans love to spend, and we also saw job numbers have also declined. Now, they have both improved since the end of that Q2, and they are back up and running as the economy reopen, but the challenge we got in the US is obviously the continuation of the first wave of infections, and so the economy is being impacted as expected.

The other big news coming out of the US is really about the US Dollar and what that’s been doing. That’s been hovering around the two-year low. It’s really on the back of three really important things. Firstly, it’s obviously as COVID-19 cases increase not only in the US but also globally, the US Dollar is the safe haven. But because the US continue to keep throwing huge amounts of stimulus money into the economy, that safe haven is seeing a devaluation as they continue to print money.

Then finally, and probably the most important story here is what Donald Trump is doing. You’ve heard these presentations before where I’ve been talking about he was going to go to the polls with a really strong position around the economy. That obviously can’t be the case now, so what he’s doing is trying to pick a fight with China. Once again, and that obviously has ramifications for global economic activity and global economic output. So, that is going to impact the global economy, but he’s trying to position to his followers that he needs an enemy, and that’s where his enemy is going to be in the lead-up to the poll. Interestingly enough, he’s already sort of said that he’s not going to accept the results of the poll because he believes that will be corrupting in terms of the mailing votes that are coming in. So, one man you just can’t trust.

In terms of China, let’s have a look at their numbers. They’ve done very well. The people of China are benefiting from their compliance through the state orders that have been directives that have come in through the parliament there. What we’re basically seeing is they are benefiting hugely from containing the virus and seeing their economic output continue to grow.

The official Purchasing Manager’s Index, the PMI, was at 51.1 for July, and that’s up on a reading in June of 50.9, so whereas 50 is … Anything above 50 is expansion. Anything below 50 is contraction, so that’s also an excellent result. Also, their Service PMI was at 54.2, so both surveys have now reported positive outlooks for five consecutive months. We’re seeing obviously positive numbers coming out of there economic wise.

That’s also great news for our exporters in the iron ore space. It’s interesting to see that China currently is a net importer of steel. Not only just iron ore, but of actually steel, and that’s on the back of their infrastructure program. And also all of the challenges the Brazil iron ore industry and steel industry are facing with their COVID-10 pandemic in Brazil as well. That’s the story of the two biggest economies in the world. They’re two completely polar opposite stories. China moving on and seeing growth; the US also struggling with the pandemic.

Let’s turn our attention to the equity market.

We still broadly see the markets were holding firm and strong.

We saw the US markets finish up 2.4% or 615 points in July. The Australian market finished up 0.5 of 1% or 30 points higher. Really, this is on the back of tech and what’s happening in the digital age, so we’re seeing obviously all of anything to do with tech, anything to do with limited infrastructure; that mass reach is going very, very well when it comes to investments and money flowing into those markets. Interestingly enough, the future now is focused in on the reporting season and also those forward outlooks. Those forward guidance messages that we’re going to see from the business managers in terms of what they’re saying about what they see happening with COVID going forward. That could send a little bit of confidence shatter through the markets, so we might see some particular industries and some businesses being repriced based on those forward guidances. In a lot of cases, if there’s no forward guidance, it obviously means that retail and institutional investors and analysts are going to struggle in terms of understanding where they see the market moving there.

Coming into the Australian economy, I wanted to start with the federal government economic and fiscal update that we saw them deliver in late July. Underlying cash deficit of $85.8 billion, which was 4.3% of GDP in that 2019-2020 period. That’s summarized the year.

The fiscal deficit is expected to rise by another $184.5 billion in 2021, which will represent 9.7% of GDP.

Compare this to where we were in mid-year economic update back in December. We were talking about a $5 billion surplus for 2019-2020. Obviously that was gone through bushfires and also COVID. And then in 2021, we were talking about a $6.1 billion surplus. Now, that’s what a global pandemic will do to your numbers. Net debt is expected to increase by $488 billion, to move to 24.6% of GDP at June 2020. And then to 677.1 billion or 35.7% of GDP by 30 June 2021. They are obviously sobering numbers. The only bright side of that is the cost of money is super cheap. For governments, we are talking about the cost of money around that 0.5 to 0.8 of 1%. So, when you’re borrowing, those types of numbers, and you’re also paying interest on those, the interest bill is significantly lower.

I want to focus in also on the money out story. This is basically what makes up those deficits. We’re talking about the government is going to be spending around $172 billion worth of spending over the next two years as part of this pandemic. That includes $85.7 billion on JobKeeper payments, expanding eligibility for income support payments, coronavirus supplements, et cetera, et cetera, et cetera, and also write-offs and government ATO tax benefits as well.

Now, that money is flowing straight into business or straight into households, and you’ll see me talk more about this when I talk about the comfort indicators that we saw in the ME Bank survey.

That’s important. 960,000 businesses and not-for-profit associations, around 3.5 billion individuals are receiving that money, and payments already of $30 billion have gone out into households up until the 16th of July.

One thing we’ve got to remember here, because ultimately I’m talking to aspiring Australians, optimistic Australians. What I’m telling you is that that money is hitting the balance sheets of those households, and I’ve been saying this for a long time. In terms of that money, it’s just not spent and lost in the economy. It’s basically pushed through, so instead of that coming through business activity and spending activity, it’s actually coming through from governments basically printing that money and putting it out into the economy. That’s where we see that coming from. That’s money going out.

In regards to money coming in, that’s the other reason why the deficit is going to be so big, and that’s because tax revenues are going to be smaller, because business profits are going to be lower, and also the government isn’t necessarily going to be receiving as much PAYG tax receipts coming in as well. So, they’re going to be paying out more in terms of unemployment benefits. There’s going to be less tax revenues coming in from PAYG and from businesses. That’s why the deficit starts to balloon out over that period.

The other big news that was announced last month was obviously the amendments to the JobKeeper and the JobSeeker from October. We’ll just quickly roll through those and we can start to see what’s happening there…

  • JobKeeper 2.0 will be extended for a further six months, from 27 July to 28 March 2021.
  • JobKeeper payments will be cut from $1,500 per fortnight and moved to a two-tier rate, so full-time employees in JobKeeper will receive $1,200 until the 3rd of January, and then receive $1,000 per fortnight from the 4th of January through to the 28th of March 2021.
  • Part-time employees on JobKeeper will receive $750 a fortnight from the 28th of September to the 3rd of January, and then receive $650 per fortnight from the 4th of January.

You can see basically it’s an easing out of government stimulus to try and make sure that those businesses can stay alive and keep prospering.

There is some eligibility criteria attached to JobKeeper 2.0, and that will be basically tightening to see and make sure that if you have revenue reductions over quarter two, quarter three, 2020, and then also the same sort of thing in terms of quarter three into quarter four for that second…

So, make sure you make those investigations if you’re in business in terms of eligibility around those new amendments coming through.

Let’s turn our attention to the regular numbers that we want to go through.

First of all, business confidence. The quarterly business confidence survey from NAB reveal there’s deterioration as expected, from the negative 12 in the March quarter to a negative 15 in the June quarter. Business, like many people, are uncertain about what the future holds for them, and they’re not necessarily willing to spend any money in terms until they know that there’s some assurity around that.

Consumer price index. The headline number was a stunning 1.9% fall in the June quarter, and this is the largest drop in the history of the survey, which dates back to 1948. That just gives you an idea in terms of how stunning that was. The annual rate of headline inflation is by negative, to negative 0.3, so deflationary area, and that’s turning negative for the first time in 1998.

We shouldn’t panic about that, let’s stay calm. The reason for that is really clear. It’s obviously on the impacts of the COVID-19, so what we did see is things like costs of childcare falling sharply, i.e. 95% for the quarter, because we made childcare free across the country. We also made preschool free in New South Wales, Victoria, and Queensland. And we saw obviously that with this global pandemic, the oil price has crashed, and that has obviously flowed through in terms of petrol prices, which was also down 19.6%. The RBA doesn’t use the headline inflation. They use what’s called the trimmed mean, which is the trimmed average. They take 15% off the top and the bottom, they cut those out, and they just take the middle numbers. What’s happened there is, that saw inflation fall by 0.1 in the June quarter, and this has also declined for the first time ever in the series of calculations dating back to 1982. On an annualized basis, we’re seeing the trimmed mean inflation level at 1.2%. That is lower than the RBA wants it, but let’s be honest. We’re going to see low inflation till the economy starts to pick up when we get mobility and we start to see some economic growth. So, expect inflation to remain around 1 to 1.25%, which is outside the band that the RBA has set us at 2 to 3% mark. But that’s the message we just need the economy to be back up and running.

Retail spending. As I’ve been talking to you all about before, we did see another very, very strong number up to 0.4% in June. That’s on the back of an incredible 16.9% increase in May. Now, that 2.4%, just to put that into context, we still have to go back to March 2009 for a larger monthly increase. We obviously have got this massive 16.9 in May, but even at 2.4% in June, it’s still a massive increase. We have to, like I said, go back to March 2009 for that. On an annualised basis, retail turnover was 8.2% higher in June, and up from 5.8% in May. We are going to see retail spending slow, because of obviously the increased lockdown stage for lockdowns that we’re going to see introduced in Victoria, and potentially some further restrictions on group meetings and restaurant numbers and bar numbers potentially in New South Wales as we try to get back on top of this second wave that’s coming through.

That said, also be mindful that there is excellent retail spending because people aren’t holidaying. So, where is all of that money being returned to?

Well, it’s obviously going into savings, and I’ve been saying this for a long time, but it’s also going to be spent potentially on household goods and those types of things as well. What we aren’t necessarily seeing is people being able to go out and spend in terms of unrestricted spending or unconscious spending when they might go out for Friday night drinks after work, and all of a sudden they’re dropping $120 at a bar or something like that. That money is not necessarily leaving the households at the moment.

In terms of unemployment, we did see a surge in jobs created in June. 210,000 jobs were created. Obviously, that was on the back of the prior couple of months when we were in lockdown, so that was that first bounce that we got. And then we’re also seeing an increase in employment has failed to prevent the unemployment rate still moving from 7.1 to 7.4%. Obviously, 7.4% is the highest level it’s been since 1998, and it obviously was a result of people returning to the workforce after leaving for the previous two months. 

Context around that… You didn’t have to be a participant in the workforce in those early stages of the pandemic, but you now have to be looking for work and registering to look for work, so the participation rate jumped from 62.7% in May to 64% in June. We do know that the true unemployment rate and the underemployment rate is in that sort of 13% range, and there’s more work that needs to be done there. In terms of part-time jobs, that’s where most of the work came through. Again, these are sobering numbers. 249,000 new part-time jobs were created, and we did see full-time jobs decline by 38,100 for the month of June. That is the fourth straight month where we’ve seen full-time work decline at around 388,000 jobs over that time period. Again, sobering numbers.

A result released from ANZ’s job advertisements yesterday showed that the ANZ job ads rose 16.7 month on month for July following a 41.4% increase in job ads in June. Now, in context, they’re still down 30% since February, and overall year to date down to 34%. So, context are around sort of two-thirds of the economy going pretty well, but there’s one-third of the economy also still … that’s our struggle at the moment as we go through these waves of opening up the restrictions and then closing them back off. That’s going to continue on in terms of until we can find a cure or a treatment, and then we’re going to open up the economy for everyone.

Consumer sentiment. It has obviously taken a hit on the back of what’s happened with Victoria lockdowns again. We did see sentiment fall 6.1% to a reading of 87.9 in July. This had been the first decline in three months, so you guessed it. As we opened up, people got a little bit more confident. But as obviously Victoria’s own goal, with our hotel quarantine, which has been a complete disaster let’s be honest, an absolute shocking disaster causing billions of dollars of damage to the economy that we as Victorians will have to pay into the future. We’re seeing that play out.

This also means in terms of what we’ve seen, is the index is still 16.2% higher than the low that it struck in April, but we’ll also now see that we’re still 8% below where we were pre-pandemic. In February, we’re still 8% lower with the current reading at 87.9. That is still going to play, ups and downs in terms of what happens around Centrelink, until we get on top of those COVID-19 cases.

Once we start to see those case numbers start to flatten and reduce, confidence will start to come back into the economy as our mobility starts to increase as well. We’ve been there before, so we’re probably not as panicked as we were last time.

We know what we’re in for here in Victoria with Stage 4 lockdown, so we’ve just got to get through it.

In terms of lending and credit growth, well, as you’d expect and I’d mentioned this earlier, private sector spending or private sector credit I should say, fell by 0.2 in June, falling to the second consecutive fall. We did see two months now of consecutive falls in that, and that is the weakest result in 27 and a half years. Why has that been the case? It’s because we’ve had the sharpest economic contraction since the 1930s of the Great Depression. Households just aren’t out and spending money, and so they’re not tapping their credit cards. Again, they’re not impulse buying or doing any impulse spending. That’s why we’re seeing that credit growth decline.

In terms of business credit, same sort of thing. Down 0.8, weakest in three years, indicating that businesses are still not necessarily going out and borrowing money just yet, until they can see light at the end of the tunnel.

Turning our attention to housing credit, the most important one here for us in regards to seeing what‘s happening in the housing market. Housing credit grew by 0.2 in June. This is the slowest rate of growth that we’ve seen since April-May. It’s basically really sluggish at the moment, and that’s on the back of investors. Investors have completely moved away from seeing property, en masse I’m talking about here. The smarter ones have stayed, but the vast majority of people are not buying the off-the-plan house and land packages for investment. We’ve seen 18 consecutive months of sluggish credit growth. I mentioned in last month’s update that really the current demand in property has predominantly been from owner-occupiers and first-home buyers that we’re seeing there. We did see credit growth for owner-occupiers growing by 0.3 in the month of June. Still a soft number, but nothing compared to obviously the decline where we saw credit growth flat for investors in the month of June.

Building approvals. Building approvals is an important number we want to be looking at because, again, they show another fall of 4.9% in June, which is following the 15.8% contraction in May. Approvals have declined for four consecutive months and are now down 22.9 from their levels in February. We knew this was coming, so again, this was retrospective data, and the number of approvals in June are the lowest they’ve been in eight years.

That said, the big falls are what I anticipated and what I’ve said to you and I’ve been signalling to you all along, multi-unit developments are being hit the hardest. No one has an appetite for building medium and high density accommodation at the moment whilst we don’t have any immigration, whilst we have limited numbers of foreign students, and also while we have those who work in hospitality and the leisure sector not living closer to town and being the mix, heading back home to live with mom and dad for a while whilst this pandemic passes. That is absolute fact. So, that’s what we’re going to see. And those private sector, other dwellings, are the lowest in terms of approval numbers since January 2012.

On a positive note here, and I want to finish on this note because remember that’s retrospective data. The package that was released by the government in regards to the HomeBuilder or the builder package that they released, the Treasurer reported in his budget update that over the month of June, sales of new houses rose by nearly 80%. Those new house sales aren’t showing up in the approvals yet, because what you do is you sign up for the new house, and then the building plans and approvals start to get processed, and they’ll start hitting the ABS data over the coming months. That is a really positive sign for the construction industry that the home-builder stimulus has resulted in a lot of activity. Whether that’s moving that activity forward, that’s the whole idea here. We do need to keep kicking the can down the road before we can pick it up. This is another part of the stimulus program that’s going to work well for the short-term, and then hopefully the demand will come through the back end later.

That’s a wrap of the regular data that we have a look at.

I now want to spend a bit of time focusing in on… The ME released their Household Financial Comfort Report.

 There’s been a lot of commentators, a lot of media coverage around the fiscal cliff that we’re going to fall off in September, “Oh, and it’s going to be diabolical and the world’s going to end.” Well, contrary to what a lot of reports were saying about households struggling, this report clearly showed that households have received a lot of that financial stimulus.

By way of example, this report has been running since October 2011. The result in this in terms of the index score was the second best on record. That’s basically saying that households are in a better financial shape than they have been. The previous best was in 2014, and so this recording that we’ve just seen here, where we saw it move to 5.76%, that’s an increase of 3% on the previous recording that we saw in December 2019. That just basically tells you that, as I’ve been saying, if we’re not out spending it, that stimulus is coming, the government money is finding its home, we’re basically seeing households in a better cashflow position or cash savings position.

I just wanted to read some of the notes here that were in the executive summary because it’s really important that we get these positive new stories out there against all of the negative press, which obviously is all about getting ratings and also clickbait as well.

Contrary to expectation, financial comfort has jumped the most amongst typically struggling cohorts such as casual workers, the unemployed, low-income households, and single parent households.

Even though those comfort levels remain lower than the higher income’s, there has been a real shift. It goes on to say that almost all 11 measures that make up the household financial comforting index improve notably.

Comfort with the ability to cope with financial emergency was up 9% to 5.25. It’s the best reading on record. So, to cope with financial emergency, up. And also cash savings was up 8% to 5.48. That just goes to show you that what I’ve been saying, if we can’t go and spend it, it’s going to stay on our balance sheet, and we’ve obviously been able to access superfund and all those types of things. So, households are sitting in a better cash position.

It also goes on to talk about loan deferrals. It states while APRA reports that only 1 in 14 existing borrowers have deferred home loan repayments, payments into offset accounts have remained high, consistent with household saving for precautionary reasons. Broad money, mainly deposits with bank, growth accelerated to the highest pace since the flight to safety during the Global Financial Crisis, up over 9% for the year to May. What I’ve been saying, use your money smart system. Put your money in your offset account. Save for those emergencies and buffer. That is some clear indications in regards to that. If you’re looking for that report, go out there and read it. It makes for fascinating reading.

The other key takeaways from the report for me had also, contrary to the naysayers and the doomsdayers out there, only 7% of households surveyed typically spend all the money that they earn or some more, where they’re using credit in addition to that. Only 7%. 36% typically spend all the money and no more, so they do need to do better than that in terms of putting a buffer aside. But 57% of households spend less than they earn each month, so more money in than money out. And 51% are net savers, so that’s also important to know.

Just a little ‘did you know’ on the side here…

What are the numbers of what these households are saving?

Typically, those who are savers are saving on average of around $854 a month. Typically, net spenders overspend, and this is a concerning number so I’m glad it’s only a small percentage, but they typically overspend by $617 a month. It’s something to also make note of. There’s some good charts in there that also show the number of people that have got significant reserves in terms of their cashflow buffers as well, which is an important message for everyone.

Let’s turn our attention to the property market, so if households are doing well in trying to get through this period. That’s also supported in regards to how the property market is holding up. CoreLogic reports for the July headlines are these, so combined capital cities was negative 0.8 for the month and negative 2 for the quarter, and the overall year in terms of capital growth property prices are still 7.9% up across all capital cities. If you add the rental yield, those returns are still at double digit levels of 11.5% overall. That’s a positive note.

The median capital city across the nation value is $637,000. The other positive story is obviously combined regional areas have remained unchanged for the months, so there was no price falls in the regional areas. For the quarter, they’re only down 0.1 of 1%, and then over the year they’re still positive 3.9%. If you add the high yielding returns, the overall return in that particular marketplace, those regional marketplaces look around 8.7%, so that’s also positive. The median house price in the regional areas is sitting around $395,000.

Nationally, we only finished a mild 0.6% down for the month.

So, negative for the quarter of the 1.6%, but overall for the year, capital growth levels still remain positive at 7.1%. And then the overall, when you combine the yield on top of that, is still at 10.9% overall return. I always highlight this point. They are general numbers. You’re not buying the marketplace, you’re not buying the capital cities, you’re not buying the regional centres. There are markets within markets and we do know that there are marketplaces that are growing at the moment and there are other marketplaces that are falling as well.

What is supporting the more broader property market?

It’s really simple. The government stimulus, the deferrals by the banks, record low interest rates, and the overall supply of property has been the reason. Demand has still remained relatively steady, but the supply side has obviously retracted, where people aren’t selling their properties as we said they wouldn’t during these times. Total number of properties for sale are falling a third or so, the numbers of properties for sale. Supply side down 4.3% in the four weeks until the 27th of July and sitting at 15.2% below this time last year. So, 15.2% reduction in the supply side.

On the demand side, I really like this data from CoreLogic. They measure the activity on their platforms, which is predominantly all real estate agents around the country, both on the valuation platform for the banks called VALEX, and also their RP data platform. We did see activity on those platforms drop by 60% during mid-March to Easter in April, but now those activity levels in terms of quoting on properties, potentially talking to potential sellers, we’re seeing a real lift in activity on that side, so they’re back to the same levels of what they were last year.

Sales activity is 2.9% higher than the same period last year. What CoreLogic are interpreting that is saying that there’s been a strong rate of sale absorption where demand for established housing stock is outweighing advertised supply. So, there’s that demand-supply equation we’ve always talked about, and you can get to see in terms of location score and also Those measures of demand and supply still remain quite well balanced.

The summary of that is there’s been no sign of any urgent sales activity, yet the mainstream media still can’t resist the headlines around saying that “The property market is next” or “The property market is going to collapse.”

We’re definitely seen throughout history that that is NOT supported. Any of those claims of 20+ percentage correction points nationally across the property market have been unfounded and unsubstantiated in any of those claims over the past 30 years that I’ve been watching the property market in terms of those people making those types of claims. There’s no doubt that we have a significant property market. It is well supported in terms of incentives because of its critical aspect of supporting the marketplace, and so we’re not seeing any evidence of that.

That said, we are seeing a pocket of the marketplace, which is consistent with the messaging that I’ve been talking about, for which was the high density market clusters of units, there is some valuation challenges that are happening there. I see those continuing for the next six to nine months. That will dry up more supply, so as the economy starts to open and potentially immigration starts to open, we’ll probably see a level of under demand, so basically demand exceeding supply because we wouldn’t have built that stock, because it does take a while to meet that type of outstanding long term demand. So, that is going to be challenging.

It’s also going to be challenging for those people who’ve bought those properties. Ultimately, if you’ve bought into an off-the-plan property, you’re definitely going to see potentially some risk of some negative valuations on that particular property. You’re more likely going to wait it out if you adopt the economic yield behaviour of economics of loss aversion. That’s potentially going to be part of that story for you as well.

From my point of view, it’s really important to know that there are challenges in that particular market, but my observation is that there won’t be a contagion of that moving across to the more broader market. It is a segment of the market that will be challenged, and we’re also seeing that showing up in the rental market. Some of the evidence presented, again, by CoreLogic is showing that.

We also have seen what happened in Hobart, where they had a very, very strong boom, and that led to obviously increased supply, and now we’re seeing that particular market struggle in regards to an oversupply of rental accommodations. Those potential corrections are occurring now. We’re seeing rents for houses down 2% and rents for units down 4.4% in that particular market. But in the more broader market, we’re not seeing that in the housing stock or the townhouse stock in the suburban areas. We are seeing the big leader of this as being those oversupplied high density accommodations in those areas.

In summarising, I’m reading this as a mild correction.

I’m still not seeing property prices going further than a 10% correction nationally.

Yes, we do know that the further restrictions here in Victoria is going to make selling and buying property more restrictive, but ultimately if we can get the virus under control, that will see a reopening of the economy in the spring selling season, so it could lead to some very, very busy activity during that time. The pandemic isn’t affecting everyone as I’ve been saying in regards to my messaging around that, so it’s really important to make sure you don’t just read the headlines. You get into the data. You understand that data, you can see what’s happening there.

I can’t see with the low interest rates and even with the extension of deferrals from the banks, and we’ll see an update in terms of the number of households that are struggling. I can’t see that being concentrated in one suburb or in an area enough to impact any foreselling that’s going to have a material impact on property. That’s basically what I see in terms of that message.

The final thing I want to say about property is… if you don’t have to sell your property, then don’t do it. If you can hold on, it’s best to hold on because you’re potentially going to get a better price for your property on the other side of an improving economy, given the low interest rates and then unemployment starting to improve as well. It’s very important to understand that, that if you don’t have to be a seller, don’t be a seller. But I also say to those buyers, because we speak to a lot of buyers every month, is that a lot of people are telling me they’re going to wait until September. They’re going to wait to see what happens. My argument to that is if so many people are going to be waiting, then it doesn’t take very much for FOMO to kick, that fear of missing out.

Here’s my tips for you…

Make sure you start doing your research now in your local area and start to see just how long properties are staying on the market for in that particular area. If they’re staying on market for a long period of time, there’s nothing to see here, you can wait. But if you’re seeing the properties that you like selling within a reasonable timeframe of that six to eight weeks, then that tells me that that market is a balanced market, and there’s risk of supply coming in; of extra demand coming in, I should say, which is going to put pressure on property prices.

It also tells me another important story for you. That is, when you do see that asset, please take it … and it’s the dream asset or it’s an asset that meets your criteria, the last thing you want to be doing is competing against lots of people against that particular property. So, make sure you do due consideration in terms of grabbing that asset, because when that wave of demand turns up, you’re going to be paying a premium for that asset as competition starts to move into that market. You need to be starting your research now.

In summarising the overall economic update, I’ve just got a couple of things to say…. No economic cliff.

There will be no future economic cliff. The government does remain ready and we’ll see more in their October budget in regards to further spending to make sure that we don’t see any harsh decline in economic activity.

The second wave is here. We obviously haven’t done a very good job in Victoria of nullifying that wave, so more needs to be done. That’s why we’re going into those further lockdown restrictions. But overall, I’m still very optimistic about the property market. I’m still very optimistic about those people, those Australians who haven’t been impacted by this virus. I’ll give you a good indication.

I was speaking to a couple on the weekend, they live in regional New South Wales. Both of them have got stable jobs; one in government, one also in private enterprise but in a high demand enterprise. And so, those types, they’re seeing themselves as really, really strong opportunity potential to get into the property market, and I think that’s a good move for them. Once you do your due diligence around your job security and also that you can afford the property and do that stress-testing around cashflow, it’s those types of people, those aspiring Australians that are going to act now, and have the opportunity to act now. They see a bright future for their house sold, and they also see past this pandemic. And they see that Australia also has a bright future. They’re going to be acting on that and taking advantage of that opportunity. I want to congratulate them for being the smart ones to know that this is a great time for them to be looking.

Obviously, it’s unfortunate for those of you out there who have been impacted in terms of your situation. We always say to you that now’s the time to be looking at your cashflow, looking at discretionary spending versus essential spending, and doing what you can there. We’ll have more to talk about in our next update where we start to introduce what we call our Money STRETCH platform. It’s going to help you in terms of calculating how far your money can go. So, more on that in the coming month.

But until then, just remember, knowledge is empowering, but only if you act on it.

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