December 2017 Edition

In this edition of Wednesday Word, we have provided below some great insight and updates on the financial markets from Moneytech.



The Board of the Reserve Bank of Australia (RBA) has announced the basic cash rate has been retained at 1.5 percent. Nearly every analyst was tipping this outcome as very little has affected our economy recently. They are saying the rate should stay at this record low level to maybe well into next year when the next move could be up. (It has been at 1.5 percent for 16 months.)


Business conditions have hit a new high according to the latest national survey by a leading bank. Confidence is high and is holding steady at an above-average level. This strength is quite broad based across industries and while retail is lagging behind, it did see an improvement in the month. All states are seeing positive conditions and most are at solid levels, even though WA is still on the softer side. Stronger trading conditions and profitability drove the spike in business conditions, but the bank’s indicator of employment conditions is still solid, pointing to adequate jobs growth to further lower the unemployment rate, although the survey’s measure of wage pressures eased back. Overall, results from the survey indicate that the business sector in Australia is very strong, which is having positive spill-overs into the labour market and investment.


Research with nearly 3000 companies reveals many interesting facts about what jobs earn more sooner. It shows that nearly 20 percent of employers say they will not increase salaries for skilled professionals in the next review and just 30 percent say they will give staff a pay rise of less than 3 percent. All this while other employers have little difficulty is raising salaries to keep skilled staff. The big difference is where the skills are on the supply and demand market of employment. IT and telecommunications tops the list of the most generous industries, with 20 percent of employers in the field saying they will award salary increases of 6 percent or more in their next review. Advertising and media employers have also signalled that they have become more generous, with 16 percent expected to increase salaries above 6 percent.


The forecast that kept coming for the past few years is definitely happening. The total value of multi-dwelling development site deals around Australia has suffered a 25 percent decline, according to Knight Frank research. The company says about $7 billion of high density development sites changed hands during the year with overseas buyers buying 46 percent of the property in Sydney, Melbourne, Brisbane, Perth and the Gold Coast; this was down from the previous year when they made up 51 percent of all purchases. The company says the reduction reflects a decline in available sites in key locations and comes as a number of property pundits, including the Reserve Bank of Australia, continue to warn about a glut of apartments. New apartment starts have also declined, indicating a slowdown has started.


Despite the occasional hysteria in the mass media, the Housing Industry Association (HIA) says there is no evidence of an oversupply in the new house building sector. Tim Reardon, HIA’s Principal Economist, says prospects for the sector are better than previously anticipated. “We have revised our forecast for the number of starts in 2018 from 184,000 up to 195,000. New residential building has been moving back from record highs, but the slowdown is very modest.” Reardon said.


This very nice period of prolonged bull market across stocks, bonds and credit could mean some form of correction is likely in the coming year, warns Goldman Sachs. “The longer the run goes on, the more likelihood of a correction. It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring 20s and the Golden 50s. All good things must come to an end and there will be a bear market period eventually,” insists Goldman Sachs International strategists in their latest report looking to what could happen during 2018.


A Deloitte survey has found the use of mobile payment solutions has grown 14 percent over the past year, with over a quarter of respondents now using them. Mobile payment solutions include apps such as Apple Pay, Samsung Pay and Android Pay, which allow users to process payments for online or in-store purchases using the app, without having to punch in their credit card details every time. Most of these apps act as mobile wallets, allowing users to store their card details and authorise payments using either a PIN or biosecurity measure like fingerprint recognition. Reacting to these consumer changes, NAB and CommBank are responding by providing their customers access to a mobile wallet through their company's mobile banking app: customers with Android phones can tap and pay at any terminal where contact-less payments are accepted, whereas iPhone holders have to attach a PayTag sticker to the back of their device first.


With an incredible media frenzy, Amazon is now operating in Australia which means everything from food to electronics can be mail ordered online from the world's biggest retailer. The company has opened its 24,000 square metre centre in Melbourne's Dandenong South while the head office is in Sydney. And now comes the announcement that its second distribution centre will be built in NSW. If Amazon Australia can deliver on product range, price and delivery speed, there is every reason to say it will succeed. Certainly it is causing the biggest ever stir through the retail industry with all manner of predictions floating around. A case of watch this space.

(source: Moneytech)

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