Australia’s great recession escapes


A trio of recession escapes

Australia has escaped a technical recession three times during a 29-year run of growth and avoided it 20 times since GDP figures were first tracked in 1960.

A technical recession, defined as two consecutive quarters of negative economic growth, is being forecast by all the big four bank economists, who have factored in a negative June quarter from the COVID-19 restrictions.

However, there are some who expect Australia can replicate the luck – or good economic management – it had in December 2000, during the dotcom crash; December 2008, during the global financial crisis; and March 2011, as a result of the Queensland floods.

Deutsche Bank chief economist Philip O’donaghoe is expecting a 0.1 per cent growth figure in the March quarter, which would bring up Australia’s 21st escape from technical recession.

“I don’t think the 20 times we escaped recession is just luck,” he said. “It’s good economic management and governments and banks being in a good financial position.”

The last negative quarter in 2011 was due to the weather, but avoiding a recession during the financial crisis was purely down to economic management.

“The stimulus package in the first quarter of 2009 after a negative quarter in December 2008 was entirely designed to ensure a positive March quarter,” Mr O’donaghoe said.

He said the Morrison government has had less time to respond to the shock of COVID-19 than the Rudd government had for the GFC.

In 2000, the shock of the dotcom crash and the introduction of the GST sent economic growth in the September quarter slumping to just 0.2 per cent, before the December quarter registered -0.4 per cent.

But before that there hadn’t been a negative quarter of growth since the country’s last recession of 1991, where the June and September quarters took a -1.3 per cent and -0.1 per cent hit respectively.

During the 1980s, there was a smattering of negative quarters – in 1989 there was a one-off -0.3 per cent hit in the December quarter, while in 1985 the December quarter took a -0.3 per cent hit, and in June 1986 a -0.2 per cent hit. But none of them ended up in recession.

In March 1974 – widely regarded as the end of the oil embargo, which led to oil prices rising 400 per cent – Australia’s March quarter flatlined at 0.0 per cent, and was followed up with a 0.2 per cent decline in the June quarter. But at 0.0 per cent economists do not consider that part of a technical recession.

“If we get a zero in the March quarter this time, we will be saying we have avoided a technical recession,” Mr O’donoghoe said.

Bank of America is another of the five economists – out of 24 – forecasting a positive number in March.

Source: AuatralianFinancialReview

‘New home boost’: $50k to home builders proposed

Buyers of freshly built homes would get a $50,000 cheque from the Morrison government under a $2.5 billion plan from the Property Council to kickstart the economy amid Reserve Bank warnings the housing sector faces an extended period of pain.

The council also wants the abolition of stamp duty, the broadening of the GST and a “welcome migration” campaign aimed at luring foreigners to Australia. On Wednesday, the group said without change the residential sector would weigh on the economy in the wake of the coronavirus pandemic.


The Property Council believes a $50,000 grant to people buying a new home would help kickstart construction and the broader economy.
The Property Council believes a $50,000 grant to people buying a new home would help kickstart construction and the broader economy.CREDIT:ERIN JONASSON

Prevention of the spread

Homebuilders have already reported contract cancellation rates of more than 30 per cent since the shutdown of key parts of the economy to prevent the spread of the virus, while the construction sector, which employs more than 1.1 million people, has shed at least 5 per cent of its workforce since March.

Council chief executive Ken Morrison said bold policies were needed to get the economy, expected to shrink by 10 per cent in the June quarter, re-started with the housing sector a key element of the recovery.

Australia’s biggest employer which contributes over 13 per cent of GDP, the property industry can be a powerhouse behind economic recovery and growth with the right policy settings and market incentives from the federal, state and territory governments,” he said.

At the heart of its proposals is a $50,000 “new home boost” for buyers of new housing, which the council estimates would stimulate the construction of 50,000 dwellings and support 200,000 jobs.

It would dwarf the $21,000 in grants that were available to first time home owners who bought new buildings during the global financial crisis under the Rudd government’s stimulus program.

The program would run for 12 months and be limited to 50,000 properties, while there would be no cap on the value of the home.

The council is also calling for major tax changes to support the sector, including the removal of state stamp duty and its replacement through a broadening of the GST base. Only four large areas, including fresh food, education and health, are excluded from the GST.

The Morrison government is expecting net migration numbers to collapse this financial year and next due in large part to the restrictions on global border movements.

Minutes of the RBA's latest meeting show continuing concern about falling activity in the property sector.
Minutes of the RBA’s latest meeting show continuing concern about falling activity in the property sector.CREDIT:AAP

Council plans

The council wants a “Welcome to Australia” migration plan that would include a major advertising campaign to promote the country as a safe and healthy destination. It argues the current points system for skilled migration should be temporarily lowered and people encouraged to live in major capitals as well as regional centres.

Housing construction and the property sector is growing as an issue for the Reserve Bank, which noted in the minutes of its most recent meeting that a drop in employment, incomes and wealth will have a direct impact on general consumer spending.

The minutes, released on Tuesday, show building companies are already reporting a drop in demand for new and established housing while cash-strapped Australians are moving back in with their parents or share-houses.

“Lower incomes and confidence, as well as lower expected population growth, were expected to affect demand for new housing for an extended period,” the minutes showed.

There are also concerns about the commercial property sector, with rents in major capitals expected to fall with many businesses having staff working from home rather than CBDs.

Source: SMH

Are banks freezing home loans?

A lot has happened this past week, and it can be a lot to process.

Are banks freezing home loans?

The big four banks have all announced that their customers will be able to pause mortgage payments.

Some banks explicitly state only customers affected by coronavirus will be eligible to pause their repayments.

But whether you need to provide proof (such as a doctor’s note or severance form) to verify you have been affected by coronavirus depends on which bank you’re with.

Source: ABC


Perth’s top 10 suburbs for house price growth

PERTH’S property market is starting to show signs of improvement, and nowhere more so than these 10 suburbs.

Here’s REIWA’s list of Perth’s top 10 suburbs for median house price growth in the 12 months to December 2019, filtered for suburbs with more than 28 properties sold.

10. Fremantle

Kicking off the top 10 Perth suburbs for median house price growth is the historical and well-known suburb of Fremantle. Busy, energetic and always alive, Fremantle is arguably the second-busiest city sector of Western Australia, so investors will be happy to hear that its median house price increased 3.5 per cent in the year to December 2019. With a median house price of $812,500, Fremantle offers residents relaxed beachside living with a copious selection of things to do and places to go. During the 12 months to December 2019, 74 houses sold in Fremantle.

9. Hilton

Hilton recorded a 3.8 per cent rise to its median house price in the year to December 2019 which now sits at $550,000. Hilton is located within the city of Fremantle, approximately 15km south of Perth. Known for its mixture of weatherboard, fibro and brick dwellings, Hilton features a variety of smaller shopping centres, a community garden and two primary schools. During the 12 months to December, 61 houses sold in Hilton.

8. Safety Bay

Situated walking distance from the beach, Safety Bay is a suburb within the locality of Rockingham, 35km south of Perth. Its median house price increased four per cent in the year to December 2019, taking the figure to $395,000. Safety Bay is the most affordable suburb to buy a house in on this list, with 120 house sales sold during that time.

7. Karrinyup

In the year to December 2019, Karrinyup’s median house price increased 5.4 per cent, taking the figure to $816,500. Karrinyup is located 15km north of Perth close to the coast. Karrinyup features plenty of recreational facilities and amenities to service both residents and visitors, making it a popular suburb. During the 12 months to December 2019, 142 houses sold in Karrinyup.

6. South Perth

South Perth is the most expensive suburb on the list, with a median house price of $1.35 million for the year to December 2019 – a 5.5 per cent increase. South Perth is positioned ideally along the river, boasting amazing views of Perth city. South Perth’s desirable lifestyle makes it a hotspot for buyers and investors, with many attractions like Perth Zoo making it a popular suburb. During the 12 months to December 2019, 63 houses sold in South Perth.

Sir James Mitchell Park in South Perth.

5. Carlisle

Rounding out the top five Perth suburbs for median house price growth is Carlisle. In the 12 months to December 2019, the median house price in Carlisle experience a 6.3 per cent increase taking the figure to $510,000. Located just eight kilometres from Perth CBD, Carlisle features four major parks, a train line, several schools and a TAFE. During the 12 months to December 2019, 83 houses sold in Carlisle.

4. Attadale

The median house price in Attadale is $1.1 million, which represents a 6.4 per cent growth in the year to December 2019. Attadale is an affluent riverside suburb approximately nine kilometres south of Perth’s CBD. Scenic and family orientated, Attadale’s prime location makes it extremely convenient for residents and investors alike. During the 12 months to December 2019, 71 houses sold in the area.

3. Munster

In the 12 months to December 2019, the median house price in Munster increased 6.8 per cent to $550,000, making it Perth’s third suburb for price growth. Munster is located just 10 minutes from Cockburn Central Shopping Centre and Cockburn train station and is only a short drive away from Coogee Beach making it an ideal location for prospective buyers and investors. During the 12 months to December 2019, 53 houses sold in Munster.

2. Mullaloo

Mullaloo is a coastal suburb located 25km north of Perth CBD. As Perth’s second suburb for median house price growth, it experienced an 8.5 per cent increase during the 12 months to December 2019 – taking the figure to $700,000. Mullaloo offers residents a suburban relaxed lifestyle along the coast, and features two primary schools, a shopping centre and easy access to public transport – ticking all boxes for investment potential. During the 12 months to December 2019, 86 houses sold in Mullaloo.

The observation tower at Mullaloo Beach.

1. Wembley Downs

Perth’s top suburb for median house price growth is Wembley Downs. The median house price in Wembley Downs increased 8.6 per cent in the year to December 2019, taking it to $1.1 million. Wembley Downs is located 10km north-west of the Perth CBD and is only a short minute drive from Perth’s coast, making it an ideal investment hotspot. The suburb is home to the aspirational boy’s college Hale School, as well as numerous sporting facilities. During the 12 months to December 2019, there 94 houses sold in Wembley Downs.




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