Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyers agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"Blog is great - loads of good data and charts. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

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Wednesday, 26 October 2016

Inflationary pressures remain...weak

Apples & bananas

The headline result for inflation was slightly higher than expected by the market (though not me!) at +0.7 per cent in the third quarter.

As I noted here during the week, fruit & veg costs did indeed prove to be one of the key drivers with a massive +19.5 per cent spike in fruit prices following localised flooding, while housing utilities costs also spiked as had been correctly identified by market analysts.

Reported the ABS:

"The rise in fruit and vegetable prices is due to adverse weather conditions, including floods, in major growing areas, impacting supply."

As expected, an offset came from lower communication costs and, for the time being at least, fuel prices.

Soaring fruit prices helped to take annual headline inflation up a bit from +1 per cent to +1.3 per cent.

The pace has quickened a little, then, but of course remains well below the 2 to 3 per cent target range. 

Traders backed this uptick to mean that interest rates will be on hold until next year, with the Aussie dollar jumping.

Core blimey

I tend to agree with market sentiment given the recent rhetoric from the Reserve Bank.

But when you drill in to the underlying inflation figures, the November meeting could still arguably be a marginal call. 

The quarterly core inflation figures were very soft in Q3, with both the trimmed mean (+0.35 per cent) and weighted median (+0.28 per cent) quite a lot weaker than target.

The figures may look a bit more solid when rounded up to +0.4 per cent and +0.3 per cent respectively.

But still, very soft, and even with an upwards revision to the Q2 trimmed mean figure the 6-month annualised core figures also remain below the target range, averaging out as they do at +1.55 per cent. 

In terms of the outlook, annual non-tradables inflation has apparently stabilised at +1.7 per cent, below target for the third quarter in a row, but slightly higher than the +1.6 per cent recorded last quarter. 

This is important because non-tradables inflation is taken to be a reasonable proxy for domestic inflationary pressures, and as the red line shows, there essentially is no such pressure at the moment. 

The wrap

Overall, this was another weak set of inflation numbers which leaves plenty of room for another interest rate cut as and when it is deemed necessary. 

The main reason I don't think that will happen this year is housing. In short, the Reserve Bank probably doesn't want to stoke up the fire in Sydney's property market belly too much. 

And it appears that the new Governor is relatively comfortable with inflation running below target for a while.

Thus, sitting pat until 2017, I think. Jeepers, it could be a close call, though, with such benign numbers. 


Hot auction markets with the combined capital city clearance rate spiking above 80 per cent this week on lower volumes than a year ago. 

Source: CoreLogic

Sydney's Eastern Suburbs recorded an auction clearance rate last week of 93.5 per cent, with most of the inner ring markets in the city recording elevated results. 

Tuesday, 25 October 2016

Fire it up! (Shorts burned again)

Pretty good effort

Lots of talk and misinformation on my Twitter feed and elsewhere about immigration directly causing 'falling' wealth in Australia, when in fact real GDP per capita is at record highs. 

Talk about spin, S. K. Warne would be proud of that one!  

All things considered, Australia's real GDP growth performed remarkably well through the global financial crisis, so I'm not really sure why people are trying to claim otherwise (what am I saying? Of course I am). 

It's true that national income did take a bit of a hit after an extraordinarily strong 17-year run. 

Income boost

And yet, some of Australia's key commodity prices have lately been staging a monumental fightback, and real national income looks like a nailed on certainty to surge to new record highs at some point over the next few quarters.

Dalian iron futures hit "limit up" today, up +6 per cent (follow the links to Business Insider for more details). The spot price rose +4.9 per cent to US$61.60/dry ton.

Fortescue Metals Group (FMG) saw its share price rocket another +6.5 per cent higher, touching a fresh 52-week high of $5.46.

FMG's share price is now up by a lazy +280 per cent since its horrible January nadir (imagine if you'd been shorting that!). 

Not to be outdone, Dalian coking coal futures were also limit up +7 per cent to another new high.

Coal prices really have exploded dramatically in recent months.

Whitehaven Coal (WHC) closed up by +5 per cent in the end the trade at $3.14. Indeed, WHC is getting tantalisingly close to being a tenbagger from its desperate lows of just 35 cents in February!


Across the first three months of 2016-17 Australia's budget deficit was already tracking favourably versus budget forecast to the tune of $1.9 billion. 

Meanwhile, these commodity price numbers suggest that a very tidy windfall may be heading the way of Treasurer Morrison in due course - and potentially a huge windfall if prevailing coal prices persist for any meaningful length of time. 

Amazing news for ScoMo. Better to be lucky than smart, as they say!


Otherwise, a quiet day for news. Stay tuned for tomorrow, though, as the all-important inflation figures are due for release!

London market steadies

Price growth slowing

House price growth across the UK 20 Cities Index was +8.5 per cent over the year to September 2016, according to HomeTrack, with growth slower than it has been, but comfortably faster than the UK national average. 

Price growth across the main cities continues to run at more than three times the rate of growth in earnings, largely thanks to low mortgage rates.  

London's quarterly house price index growth slowed to +0.9 per cent in the third quarter of the calendar year, to a current price of £480,500. 

Annual price in the capital city was down to +10 per cent, and is expected to ease to around +5 per cent by the end of the year. 

I was out and about looking at some stock around London yesterday.

Activity levels are definitely well down, but that said with the pound sterling having declined sharply since the EU referendum, enquiries from non-resident buyers have jumped, particularly in the sub-£1 million price bracket. 

The strongest quarterly price growth was seen in Cambridge (+3 per cent), with annual price growth in Cambridge now a steadier +8 per cent, following some blistering gains. 

A number of regional cities have improved markedly from a low base, after a very poor run since the financial crisis.  

The worst performing UK city market has been oil-exposed Aberdeen where prices have dropped by a punishing -9.5 per cent over the year to September, to an average of £181,300.

Monday, 24 October 2016

Why interest rates are on hold for rest of the year

I'm in London today, so no blogs for you.

On the run a bit, so I recorded a short video for you instead!