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  • šŸ¦ CommBank Insights: First Home Buyers Navigating Property Market Alone

šŸ¦ CommBank Insights: First Home Buyers Navigating Property Market Alone

Good Morning. Miko here! Welcome to Bada Embankment! I just wanted to give you a quick update on what's going on across Australia and New Zealand.

Please support us and spread the word to your family and friends about our newsletter. As always, contact us via email and don't forget to sign up for this newsletter here if you haven't already!

Todayā€™s reading time is 6 minutes. - Miko Santos

šŸ‘‡ Santos Unfiltered is a podcast that uses the best journalism to find the answers to the biggest questions.

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šŸ›Žļø AFTER THE BELL

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Data is provided by Market Index AU. Stock data as of market close

šŸ„ ANZ
September 2024: Job Ads in Australia Drop 15.3% Amid Labor Changes

anz

Image : ANZ bank

As per ANZ-Indeed Australian Job Ads, there was a 15.3% decrease in the country's job market in September 2024.

Details: This follows a revised 2.7% month-to-month fall in July, and the series was down 2.2% month on month. Off their peak in November 2022, the ANZ-Indeed Australian Job Ads have fallen 29.8% but remain 11.4% above pre-pandemic levels.

Job ads are falling due to an increase in the number of workers finding jobs, evidenced by labor supply increasing. Actually, the labor supply is on the rise, as evidenced by a record 67.1 percent participation rate last July, with workforce participation steeply climbing by gender with female participation reaching 63.2 percent, while male participation reached 71.2 percent. Taken together, these two pieces of information arguably point to a balance in labour supply and demand dynamics.

Zoom In: The month of August saw most states record declines in job ads. The largest declines were recorded in Western Australia, Victoria, and Queensland. Meanwhile, South Australia and Tasmania defied the trend as both states witnessed increases in job ads despite overall declines posted in other states. That 22.9% drop was concentrated for the most part in New South Wales and Victoria, while the remaining states recorded more minor falls. But job advertisements did rise in the essential sectors of retail trade, education, and preparation of food, particularly as retail trade and education start to begin their Christmas hiring season.

Overview: The ANZ-Indeed Australian Job Ads report is down 15.3% in September 2024. Employment growth has increased by 318k in 2024, with the six-month average of employment growth running at its strongest pace since late 2022. Slowing job ads and an increasing unemployment rate are indicative that labour supply and demand are balancing out.

Why this matters: The general trend, therefore could be observed in these data that though overall there is encouraging growth in some of the industries but on the other hand, some have reached the overall declined trend. For a balanced and sustained labour market, these trends have to be kept in mind by businesses and policy makers.

Bottomline: Businesses and policymakers have to adjust their strategies accordingly so that they can prepare for any shift in the labor market.

Full report below šŸ‘‡

ANZ - INDEED 2024 REPORT400.65 KB ā€¢ PDF File

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šŸŒ‹BIG PICTURE

šŸšØNEW ZEALAND
Consultation Begins for Open Banking and Electricity in NZ

Commerce and Consumer Affairs Minister Andrew Bayly and Energy Minister Simeon Brown are taking the next steps in consulting on open banking and open electricity to help boost more competition and better prices for Kiwi consumers.

Why : A few large, profitable firms dominate the key sectors, with limited competition, and consumers are deprived of having innovative new products and services. The Government is backing open banking and open electricity to create a level playing field between established companies and start-ups.

What Next : The second stage would be the implementation of the Customer and Product Data Bill to set a sound and complete legislative framework for the safe sharing of data within an economy. The next step is to formulate rules that will create laws to govern how a consumer data right regime would work for various sectors. First, there's banking - and a view on what 'open banking' might look and feel like at the end of 2025, which is well in advance of the target set by the Commerce Commission banking market study.

Why it matters: The initiative stimulates market competition, innovation, and consumer choice because allowing startups to have the same access to data as incumbent companies promotes the entry of new players with innovative proposals. It also opens up consumers' control over their data and allows them to easily switch between providers.

Bottomline: Open banking will unleash real competition in the sector, realizing far superior consumer choice and services. Higher transparency and accessibility is bound to bring positive change in the overall improvement of services.

šŸŒGLOBAL MARKETS

WORLD MAP
  1. TenableĀ®, Inc. found over 26,500 internet-facing assets in South-east Asia's top BFSI companies by market capitalisation. Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam are covered.

  2. TymeBank, the South African digital bank with R4 billion ($222 million) in deposits, will also expand into Indonesia no later than 2024, making the country its third South-east Asia market after launches in the Philippines last October and Vietnam in January this year.

  3. The weak manufacturing activity in China for August came in through the official Manufacturing PMI that was released on Saturday and yesterday's Caixin Manufacturing PMI. Official PMI fell to 49.1pts, a fourth straight month of contraction. Bloomberg cited high local government debt as making hard to achieve an expansionary budget in March. Bad weather did not help either. The Caixin PMI returned to expansionary territory yesterday, but falling selling prices indicate sector headwinds. Many analysts insist more policy support is needed if China is to meet its target growth of 'around 5%'.

  4. Hong Kong-listed CSC Holdings, led by the former chief executive of Hang Seng Bank Raymond Or Ching-fai, will acquire a stake in Citystate Savings Bank CS Bank of the Philippines for 736 million pesos and make its first foray into South-east Asia's financial markets.




šŸˆŗHOUSING
Rise in Solo Home Buyers: CommBank Reports 40% Increase in 2024

CommBank stated that for many Australians, owning a property remains a primary goal. More first-time home buyers were going it alone when they took that first step onto the property ladder.

The Details: In the first half of 2024, 40 per cent of first home buyers purchased in their name alone, up from 35 per cent in 2019. First home buyers are also using government-funded guarantees increasingly, with a 45 per cent surge between FY21 and FY24.

Expert says: Executive General Manager Home Buying at CBA, Dr. Michael Baumann said, "With property prices rising consistently and under the current cost of living pressures it is not surprising to see first home buyers looking at all of the options available to themā€”whether via innovative loan types, loan policy or government grants and incentivesā€”to get into their first home.". CommBank participates actively in various Government guarantee schemes and their network of lenders is suitably positioned to guide first home buyers through the maze of home buying and application for relevant grants.

Zoom in: The national average first home buyer home loan size - for those who had commenced repaying their loan - was $497,692 in FY24. The average size for metro first home buyers stands at $529,642, while that for regionally based first home buyers stands at $403,203. While the average loan sizes are lower for regionally based first-time buyers compared to their city-based counterparts, their average LVRs were higher.

Why it matters: Making available the average size of loans and LVRs across different regions for first home buyers can give an insight into housing market trends and housing affordability challenges that may inform buyers and other players. This will be very helpful for policymakers, lenders, and potential buyers in order to make more informed decisions with respect to addressing disparities so as to work toward better access to homeownership opportunities.

Bottomline: By observing such trends, the stakeholders can always identify the areas that need specific attention through intervention programs; this will enable first-home buyers to realize their dreams of home ownership. The stakeholders can work toward reducing the loan size and LVR gaps to achieve more accessible and equitable housing markets for all types of buyers.

šŸ›ø ECONOMY
The RBA is making confusion about inflation and the cost of living even worse  

Andrey_Popov/Shutterstock
By John Quiggin, The University of Queensland

Thereā€™s a paradox about the way we respond to threats to the cost of living.

On one hand, governments put in place subsidies for things such as rent and electricity, as the federal government did in this yearā€™s budget.

On the other hand, we get told these subsidies are inflationary because they put more free cash in the hands of consumers.

At the same time, when the cost of living climbs enough to push inflation beyond the Reserve Bankā€™s target, the bank pushes up interest rates in an attempt to drive measured inflation down.

For mortgage holders, this often pushes up payments. which arenā€™t included in the standard measure of inflation but nevertheless add to their cost of living.

By themselves, higher prices arenā€™t a problem

Although we often talk about the cost of living as a problem, by itself it shouldnā€™t bother us much.

The cost of living, as measured by the amount needed to meet basic needs, has been climbing steadily for at least a century.

In the famous Harvester judgment of 1907, Justice Henry Higgins determined that a ā€œliving wageā€ for a family of five was 42 shillings ($4.20) per week.

So much has the cost of living climbed that these days that can barely buy a cup of coffee.

A loaf of bread cost four pennies then, and these days costs 100 times as much.

Yet no one doubts that the typical family is better off today even though the cost of living has climbed.

The reason, of course, is that incomes have climbed faster than prices for most of the past century.

Average weekly ordinary time earnings are now nearly $2,000 a week, 500 times higher than in 1907.

What matters is not prices, but the purchasing power of our disposable incomes (which are incomes after the payment of taxes, interest and unavoidable costs).

Just recently, and unusually, wage growth has been lagging behind price growth. In 2022, the year in which inflation peaked, consumer prices climbed 7.8% while wages grew 3.3%.

The 2022 increase in prices wasnā€™t at all extreme by historical standards. Prices climbed faster in the 1970s and 1980s without producing a ā€œcost of living crisisā€.

But back then, during much of the 1970s and 1980s, wages were indexed to prices, meaning they kept pace. As a result, increases in the cost of living didnā€™t worry us as much.

Sharp interest rate increases are a problem

The response of the Reserve Bank and other central banks to the inflation shock of 2022 was to rapidly and repeatedly lift the interest rates they influence, the so-called cash rate in Australiaā€™s case, in order to drive inflation back to target.

It is important to observe that no theoretical rationale for Australiaā€™s inflation target has ever been put forward.

Both the idea of targeting consumer price inflation and the choice of the 2ā€“3% target band are arbitrary. They were inherited from the very different circumstances of the early 1990s and the judgment call of a right-wing New Zealand finance minister.

The recent review of the Reserve Bank acknowledged the challenges to this orthodoxy but didnā€™t consider them.

A more fundamental problem, which hasnā€™t been properly analysed, is the relationship between high rates and the purchasing power of disposable incomes.

Higher rates benefit some, hurt others

Interest payments are a deduction from disposable income for households with mortgage debt (mostly, but not exclusively, young) and a source of income for those with net financial wealth (mostly, but not exclusively, old).

The result is a largely random redistribution of the effects of increasing interest rates. Itā€™s perceived by the losers as an increase in the cost of living, and by the winners as a windfall gain, enabling some luxury spending.

I made this point about the limitations of using interest rates to contain inflation at a Reserve Bank conference in the late 1990s, but it had little impact at the time.

Since interest rates remained largely stable around a slowly declining trend for the following two decades, the point was mostly of academic interest.

Until now. The increase of about four percentage points in the Reserve Bankā€™s cash rate from 2022 is the first really large increase since the inflation target was adopted in the early 1990s.



We are now seeing the consequences of using interest rates to target inflation, even if they are poorly understood.

Fitting in with familiar narratives, the distributional consequences are framed in terms of intergenerational conflicts (Boomers versus Millennials) rather than the product of misconceived economic policy.

If sharp increases in interest rates arenā€™t the right tool to control inflation, what is? The experience of the 1980s provides an idea.

The best idea is to avoid income shocks

Rather than seeking a rapid return of inflation to an arbitrary target band, we should instead focus on avoiding large income shocks while bringing about a gradual decline in inflation.

That would mean indexing wages to prices, and avoiding sharp shocks like the interest rate hikes in the late 1980s that gave us the ā€œrecession we had to haveā€.

Thatā€™s unlikely to happen soon. In the meantime, itā€™s a good idea to try to avoid the traps inherent in talking about the ā€œcost of livingā€, and be aware that in a world in which the actual cost of living includes interest rates, sharp increases in rates do little for many who are finding it hard to keep up.The Conversation

John Quiggin, Professor, School of Economics, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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