The Economic News Thread

[Omicron]

A 13% rise! Impressive.

[skyliner]

Looking for a little solid reading on our economy - try this quick read http://www.southaustralia.biz/Publications.aspx and link to 'economic statement' Enjoy.
(Report from March 2009)If you have a predilection for graphs then this is the site. V comprehensive.

SA - STATE ON THE MOVE

[Brando]

In response from this thread.
http://www.sensational-adelaide.com/for ... ead#unread

Yeah you would have to be crazy to by a house now just for the home owners grant.

It is widely thought that this grant is creating a rush of demand and inflating house prices. Once the grant has gone there is a big risk house prices will fall substanitally despite a 'housing shortage'.

Then people will be stuck making payments well above what the house is worth with the risk of loosing their jobs or getting reduced hours during a recession just so they could get that grant. Some people are just asking for trouble, after all this is what caused this mess in the first place in the USA. People who couldn't afford debt getting into too much of it.

I'm a believer in this too but instead it applies to at least the last 5 years, and possibly to a smaller extent the last 30 years.

Certainly anyone who bought their first home in the last 3 years, and possibly 5 years, will be significantly underwater.

I have purchased my first investment property in the past 12 months and firmly beleive that here in Adelaide we are in a much better position to ride out the storm. We still have the lowest house prices of the mainland states, still so much untapped potential and projects on the horizon.
We have already seen values fall and stagnate in certain areas. While the FHOG may have slightly inflated prices, investors had been left on the outer to a degree. If demand does fall from first home buyers, then investors are waiting. Competive housing prices will still remain as home buyers will buy with there hearts and will often pay more.

An interesting article in the Australian by respected property researcher Terry Ryder. Good general news he feels for the Adelaide market.

http://www.theaustralian.news.com.au/bu ... public_rss

Big-ticket construction underpins city's housing market

I FEEL better about Adelaide's market than most others amid the downturn. It is taking some bodyblows, like everywhere else, but has defences that will deflect at least some of them.

Where there's life there's hope, and most of the life in the national property market is being engendered by first-home buyers. That's a positive for Adelaide, because it has the cheapest houses among the mainland capital cities, with typical houses in the mid-$300,000s and typical units in the high $200,000s. Only Hobart among the capital cities has cheaper homes.

This is one reason Adelaide bucked the national trend in 2008, showing (minor) growth in its house price index, while all other capital cities except Darwin showed a decline.

I expect Adelaide to have a relatively strong market at the lower end throughout 2009. It has prospects for investors beyond affordability. Adelaide has the cheapest residential rents among the capital cities and recorded only minor growth in 2008.

With its vacancy rate consistently between 1 and 2 per cent, there's scope for further rent rises and improving yields.

The major speed bump is fear of job losses. South Australia's unemployment rate is already climbing quite quickly, but there are projects happening that will soften the impact.

Infrastructure spending by government can breathe life into a struggling economy, and Adelaide has plenty in the pipeline, including a $1.4 billion desalination plant, the $1.6 billion Marjorie Jackson-Nelson Hospital, the Lyell McEwin Hospital upgrade, the $550 million Northern Expressway and an upgrade of the Adelaide-Gawler rail link.

There are also big industrial projects happening in Adelaide such as the $6 billion air warfare destroyer project. The first personnel for the project have moved to Techport Australia at Osborne, where the ships will be built, with more staff to relocate in June.

The air warfare project involves construction of three destroyers. The project currently employs about 650 people but will eventually have jobs for 1800.

Also under way is a major expansion of the Edinburgh military precinct in Adelaide's north. About 1200 new jobs are expected to be created this year as construction work intensifies on the development of a new army base. The cost of the new base plus housing for military families is about $700 million.

Plans to build a new small car at the Holden plant will provide a significant boost next year. Production of the four-cylinder model is to start in the third quarter of the year. Holden says this will ensure the long-term viability of its Elizabeth manufacturing plant in Adelaide's north.

The state is kicking some goals in the education sector, with a record 30,000 international students by the end of 2009. Enrolments in SA universities are outstripping the national rate.

Adelaide hopes to become a centre for renewable energy policy and research with the opening of a new campus focused on energy and resources.

Construction will begin this year on a $340 million wind farm in South Australia, creating more than 100 jobs. AGL Energy is developing the Hallet 4 wind farm near Jamestown, 220km north of Adelaide. It will have 63 turbines and produce 132 megawatts of power. Hallet 2, a 34-turbine project costing $160 million, is under construction.

Adelaide geothermal energy firm Petratherm is bidding for part of the federal Government's $435 million renewable energy demonstration program, seeking up to a third of the cost ($200million) of its Paralana project in the northern Flinders Ranges. The project includes network connection to the nearby Beverley uranium mine.

Geodynamics' geothermal pilot plant in the Cooper Basin is almost complete. The pilot plant, which received a $560,000 government grant to connect it to Innamincka, should start supplying Innamincka with free renewable energy by mid-year.

Developers have some big plans for Adelaide. Delfin Lend Lease will convert 219ha near Gawler into 4000 houses, while the state Government is considering plans for a housing development five times bigger than Mawson Lakes. It would be built on the Bolivar wastewater treatment works site in Adelaide's north, and would create 48,000 homes.

Longer-term, I believe the future for SA is bright, once the world kicks into recovery. While the resources sector has been at full throttle in Western Australia and Queensland recently, it's only been picking up speed in SA.

There is enormous potential that is only now beginning to be tapped. The multi-billion-dollar Olympic Dam expansion will happen eventually, and the emerging prospects (including mineral sands, gold and uranium) in the Ceduna region will be developed. Work at the Honeymoon uranium mine will restart.

Mineral explorers last year spent triple the target set in the state's strategic plan. South Australia remains a trusted jurisdiction for exploration spending.

For these kinds of reasons, early in 2007 I labelled Adelaide "the new Perth". It showed signs of attaining that status in 2007 and 2008, but has a lot of potential. Developers and investors should keep a close watch.

[Howie]

Thanks for the article mate.

I think if you look at real estate historically, you'll find that there really wasn't a 'good' or 'bad' time to buy property. Whether it's for your primary residence or as an IP. Housing affordability if anything would be tougher now than it was for our parents, grandparents etc. That trend will continue into the future. In Jan Somer's book Wealth Through Property, Jan writes that it's not timing of the market but time in the market. Property values despite all the contractions and corrections have pretty much doubled every 7-10 years. She argues that it's less important to look for 'good times' to buy than it is to look at your current situation and buy when you can afford it regardless of what the market is doing. Sure it's probably harder for property investors to get in with tightening lending criteria and the first home owners rushing onto the market, but in the long run the effect will be negligible if you intend on holding property long enough. Our population will continue to grow, land can't be 'created', and for as long as can remember a third of our population still rent. I don't think the sky will fall anytime soon.

[skyliner]

Most of us should have by now noticed a distinct lack of reports about things falling over in SA in finance and construction whilst the focus in these things has been instead WA QLD and NSW. Eg Coal exports in some places down to 1/5th of last year as indicated by shipping numbers. I concur with what Howie stated and what Brando reported. I have made it my business to focus on these aspects of the SA economy for 6 months. Even Protavia is still going ahead in the SE despite Timbercorp folding over.

It's A GREAT STATE with the future just opening up for us.

SA - STATE ON THE MOVE

[AtD]

For those who are too lazy to read, International enrolments were up 21% year on year in Jan and Adelaide Uni is being swamped by mid-year applications. I feel the economic impact of our foreign student boom is missed by most mainstream press - think of them as tourists who stay for four years!

[adam_stuckey]

I would say that these are probably some of the only "tourists" Adelaide are going to get!

[AtD]

I'm sure many of you by now have heard that Australia narrowly avoided a technical recession in the March Qtr, recording unexpected GDP growth of +0.4% seasonally adjusted, when most "forecasters" just a few days ago were tipping a number around -0.5% or worse.

Also in today's data were State Final Demand figures, which looks at the demand for goods and services in the economy as a partial measure of total activity. It is the only state data relating to GDP that is published quarterly. SA lead the way as the only state or territory to record growth in demand in seasonally adjusted terms.

NSW: -0.2
VIC: -2.1
QLD: -3.1
SA: +2.0
WA: -2.3
TAS: -2.5
NT: -9.2
ACT: 0.0
AUST: -1.0

This was due to SA being the only state or territory to record an increase in Private Fixed Capital Formation - which in English means business investment in things such as buildings, plant and machinery. All other states saw a fall, some a very dramatic fall.
Go Us!

http://abs.gov.au/ausstats/[email protected]/mf/ ... enDocument

[Norman]

Our Agriculture sector also must have helped, as that sector had the highest increase of activity compared to the other sectors.

[Will]

I heard on the news that Australia is the only developed country to record positive economic growth at the moment, and thus commentators are saying that Australia has the most robust economy in the world. And thus judging from the individual state economic indicators, would this not eman that SA has the most robust economy in the world at the moment!?

[AtD]

Not quite, Will.

SA is the driest state on the driest continent in the world, but that doesn't make it the driest place in the world.

[Norman]

Good news, the Unemployment rate dropped in South Australia from 5.5% to 5.4% from April to May, defying the other states.

From ABC News Online:

South Australia has defied the national unemployment trend by recording a decline in the number of jobless.

SA's unemployment rate fell by 0.1 per cent to 5.4 per cent in May.

The number of people looking for work also fell.

SA Premier Mike Rann says the figures show the Government's investments in mining, defence and infrastructure are working despite the wider economic downturn.

"No-one is pretending that we are out of the woods but the terrific news today is that we've actually seen the number of people in jobs in this state hit the all time record in South Australia's history," he said.

Business SA says the South Australian economy is proving resilient.

Chief executive Peter Vaughan says there are still challenges in SA to boost consumer and business confidence.

"It will probably get worse before it gets better, but nowhere do I believe now are we better positioned to weather that storm and come out the other side than in South Australia and in Australia as a nation compared to the rest of the world," he said.

[adam_stuckey]

I hate listening to someone from an invested background talking about their area of business. Its always a positive spin

Business SA - "business is SA is looking good, don't flee!"
Real estate agents - "real estate is looking up, buy real estate!"
State Government - "Investment in SA is looking up, vote for us!"
Kochie - "Stock markets on the rebound, invest invest!"

I think we need to listen to independent analysts more and think why is someone telling me that Business or Real estate is on the up what do they have to gain out of this? Because in the end they wouldn’t be saying it if they weren’t going to profit from it.

[muzzamo]

http://www.news.com.au/adelaidenow/stor ... 01,00.html
An absolute gem in the advertiser today:

Australian economy 10 times stronger than rest
Article from: The Advertiser

June 25, 2009 12:01am

FEWER Australians are likely to lose their jobs over the next year than previously thought, as the economy performs 10 times better than other advanced countries.

The positive news in last night's Organisation for Economic Co-operation and Development World Economic Outlook report comes as new workplace figures show South Australia has a lower rate of people applying for unemployment benefits compared to other mainland states.

While the OECD forecasts global unemployment will reach nearly 10 per cent next year, world growth will swing from the red to the black by 4.5 per cent overall – from a low this year of 2.2 per cent negative to an estimated 2.3 per cent positive in 2010.

Within the OECD, the combined advanced economies will contract by 4.1 per cent this year – down from the previous 4.3 per cent.

Australia's economy, however, will contract by just one tenth of that rate at 0.4 per cent.

The report forecasts a 7.9 per cent unemployment rate next year, more than half a percentage point lower than the May Budget forecast of 8.5 per cent by July 2010.

Economists generally regard the unemployment rate as a lagging indicator, meaning the job market may keep deteriorating for a time even after economic recovery.

The Federal Government is likely to pounce on the report, which takes into account its controversial stimulus packages that included more than $20 billion in cash hand-outs and nearly $15 billion for school building projects.

The report states: "The infrastructure development program announced in the 2009-10 Budget is welcome and should strengthen fiscal policy impact."

At Centrelink in SA, 700 people applied for unemployment benefits in May – a 2.3 per cent rise compared with a nationwide increase of 3.3 per cent.

Centrelink's Berri agency reported the largest rise in applications at 10.6 per cent for the month.

Economist John Spoehr said there were signs SA was faring better than in previous recessions because of its commitment to mining, defence and civil construction.

"We appear to be more resilient and are likely to be more resilient because of very substantial investments in the pipeline," he said.

In January, 3095 South Australians applied for unemployment benefits, 11.3 per cent up from the previous month.

Because elsewhere growth is ~ -4.0% and ours is -0.4%, apparently we are performing 10x better than the rest!

So does that mean that if our growth was -0.04%, we would be performing 100x better than the rest?

How about 0.004%, would that mean 1000x better than the rest?

What about zero, that would mean we are infinity better than the rest wouldn't it?

The advertisers agenda here is clearly to make people continue paying bubble prices for houses and to go out and buy cars (their #1 and #2 sponsors respectively)

[Brando]

I hate listening to someone from an invested background talking about their area of business. Its always a positive spin

Business SA - "business is SA is looking good, don't flee!"
Real estate agents - "real estate is looking up, buy real estate!"
State Government - "Investment in SA is looking up, vote for us!"
Kochie - "Stock markets on the rebound, invest invest!"

I think we need to listen to independent analysts more and think why is someone telling me that Business or Real estate is on the up what do they have to gain out of this? Because in the end they wouldn’t be saying it if they weren’t going to profit from it.

I know what your saying mate, but the media do a good enough job preaching the doom and gloom, so the above examples you mentioned, still need to try and get a positive message out there.

Investors need to know their product, self educate, listen to advice (not all), networking is a huge bonus and learn from mistakes of others. Listen to whomever you like, just do your own research and take into account your risk tolerance.

I am pretty sure SA will bounce back pretty quickly, the shift away from relying on the manufacturing sector has helped with our dependancy on consumer confidence.