23 out of 27 Economists can't be wrong - could they?
The Aussie dollar's brief resurgence above 80 US cents this week would not have pleased the RBA governor Glenn Stevens. Or maybe it would have pleased him, given that he will have one more justification to cut rates at the bank's next board meeting.
He is not alone in thinking that the A$ is too high, and it seems that 23 out of 27 economists surveyed by Bloomberg this week (that's an increase of one since the previous survey) are of the view that a 25 bps cut to just 2% is in store at 2:30 on Tuesday. The consensus is that the only thing preventing the rate cut is the red-hot property market, particularly in Sydney, where the median house price is now over $900,000.
That is over 12 times the annual average full time wage of $74,724 so no wonder there is concern over housing affordability. Granted there are regional differences both in property prices and wages, but housing prices in Sydney have risen 16% over the past 12 months to the point where just over 35% of a Sydneysider's income is spent on mortgage repayments.
Other statistics this week indicated that a significant proportion of the housing push, particularly in Sydney, is coming from overseas buyers, particularly from Asia. The reality of course is that overseas buyers have been pushing the price of real estate up in Australia, since the First Fleet landed in 1788 with only the occasional pause for a recession, and there hasn't been one of those for close to 20 years.
However it does mean that for a significant portion of the population the great Aussie dream of a house on a quarter acre block will remain just that - a dream.
While most of the focus on the effect of a rate cut next week will be on housing affordability and mortgage rates, spare a thought for the number of people dependent on term deposits for their income. As Philip Carden from the Supervised High Yield Fund pointed out this week, the current one-year bank term deposit is 2.65%, and one can safely assume that that will fall below 2.5% if or when the RBA moves. Meanwhile ten-year Australian Treasury Bonds are already yielding less than this at 2.25%.
With the current debate over superannuation and concerns about "wealthy" retirees with million-dollar lump-sum payouts, consider that the income on $1 million in the bank doesn't provide income equivalent to the aged pension.
Therein lies part of the Treasurer's challenge when he hands down his second budget in a couple of week's time. Joe Hockey and the government are between a rock and a hard place, albeit much of their own making given they failed to grasp the nettle this time last year.
Specific results received this week include the following MARCH PERFORMANCE UPDATES:
Allard Investment Fund increased 0.90% during March, to bring the Fund's last twelve month performance to 25.22%.
Over the quarter to the end of March, Cor Capital Fund returned 4.20%, bringing the Fund's 12-month return to 7.70%.
The Insync Global Titans Fund decreased 0.50% in March bringing the Fund's prior 12 month performance to 18.55%.
The Paragon Fund returned 2.10% (ASX 200 Accum -0.09%). The Fund's annual return since inception has been 21.54% p.a. versus the Index's 11.95% p.a.
FUND REVIEWS released this week, with the potential for earning CPD points: Optimal Australi Absolute Trust; Bennelong Kardinia Absolute Return; Morphic Global Opportunities Fund; Aurora Fortitude Absolute Return
25-27 May 2015 - Digital Marketing for Banking and Financial Services Summit
15 September 2015 - AIMA Australia Hedge Fund Forum 2015
Sometimes finding something interesting for something that's completely different is a challenge, so here's a bit of somewhat morbid trivia:
May 1 has been a tough day for Pope's, amongst others, with a number of them dying, including Marcellus II in 1555, and Pius V in 1572. Some less illustrious characters also passed on, including Hitler and his mistress (actually on April 30, 1945), rapidly followed by Joseph Goebells and his wife the following day. Finally Osama bin Laden, who died four years ago tomorrow.
Next week we will try looking on the brighter side of life, but after all it is called And Now for Something Completely Different. On that note, I hope you have a happy and safe week-end.
Kind regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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