Australian House Price Developments
The RBA’s quarterly Statement on Monetary Policy includes a useful discussion of recent house price developments. One of the major problems with existing house price data is that the majority of the measured variation is attributable to compositional distortions, so the RBA has developed an index which adjusts for these shifts, giving a more reliable and less volatile series for house prices.
The RBA seems to have come around to a rather benign view of the role of recent house price developments in the economy, consistent with the view I have been arguing for some time:
The correction in the housing market appears so far to have proceeded reasonably smoothly, and the prospect of an excessive and unwelcome slowing in domestic demand has been reduced by the boost to national incomes coming from the favourable terms of trade.
posted on 08 August 2005 by skirchner
in Economics
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Comments
Have you read Ross Gittins today?
http://www.smh.com.au/news/business/vendor-duty—great-tax-pity-about-the-timing/2005/08/07/1123353206826.html
I’m sure you agree with every word (not)
Posted by .(JavaScript must be enabled to view this email address) on 08/08 at 02:25 PM
The RBA says:
“With export prices up strongly, this has meant a narrowing of the trade deficit, which should also be reflected in lower current account deficits in coming quarters.”
As I understand it, export prices (for coal etc) are up, but volumes are not, so Australia’s future trade performance is heavily dependent on where commodity *prices* head.
Is it true that our international competitors (Canada, Brazil, South Africa, Russia etc) have been been “gearing up to feed the commodity demand from China”?
Ref: http://www.smh.com.au/news/business/commodity-boom-is-over-access/2005/07/26/1122143845245.html
Posted by .(JavaScript must be enabled to view this email address) on 08/08 at 02:57 PM
The increase in bulks prices has already seen a dramatic narrowing in the monthly trade deficits.
Posted by skirchner on 08/08 at 04:17 PM
“The increase in bulks prices has already seen a dramatic narrowing in the monthly trade deficits.”
Yes, but will it last?
Access Economics says:
“the report predicted the prices of coal and iron ore - Australia’s largest export items - would fall by more than 40 per cent in the long term.”
Posted by .(JavaScript must be enabled to view this email address) on 08/08 at 04:25 PM
I’ve done a bit more research into commodity prices (esp. iron ore and coal) and it seems steel prices have softened significantly in recent months suggesting that iron ore and coal prices can’t be far behind:
Steel Input Commodities: Is The Next Move Down?
http://www.aireview.com/index.php?act=view&catid=5&id=2206
Chinese Steel Demand Softening
http://www.aireview.com/index.php?act=view&catid=8&id=2408
Don’t Buy Steel Recovery Story, Says GSJBW
http://www.aireview.com/index.php?act=view&catid=5&id=2346
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This article is probably of interest also:
Is Housing Really Overvalued?
http://www.aireview.com/index.php?act=view&catid=7&id=2362
“[Commonwealth Bank] economists believe a large part of the house price story in recent years was a one-off price level adjustment as the economy adjusted to the move to low inflation.”
Posted by .(JavaScript must be enabled to view this email address) on 08/09 at 11:36 AM
Most of the improvement in the terms of trade is on the import side and is secular rather than cyclical, attributable to declining prices for ICT. The commodities boom on the export side is icing on the cake. The terms of trade have been on an improving trend since the mid-80s, so it is not a flash in the pan.
Posted by skirchner on 08/09 at 12:32 PM
Do you subscribe to the “super-cycle” view of commodity prices? i.e. long term growth trend driven by emergence of China as an economic powerhouse. If so, the Australian dollar is sure to remain at current levels (or higher) in the long term.
Sure makes for depressing reading if you’re an Australian exporter not involved in digging stuff out of the ground.
Posted by .(JavaScript must be enabled to view this email address) on 08/09 at 02:07 PM