Inflation is the 2022 boogeyman | Property Insiders [Video]

Last year the boogeyman the media kept scaring us with was coronavirus.

Then earlier this year it was the war in Ukraine and the floods.

Now that those matters don’t seem to scare us as much, the media keeps pulling out the inflation boogeyman and at the moment, inflation seems to be the monster that everyone’s afraid of.

Well, inflation and rising interest rates are the Reserve Bank’s way of dampening inflation

But moving forward we’ll get a different more time look at what’s happening to inflation and that’s one of the topics I’d like to discuss in this week’s Property Insider chat with Dr Andrew Wilson, chief economist of My Housing Market.

A different way of looking at inflation

Households and the Reserve Bank will get a much closer look into when soaring inflation peaks later this year as the ABS plans to publish monthly inflation data from October.

While noting that the quarterly CPI figures would remain Australia’s key measure of inflation, Australian statistician Dr David Gruen said the indicator would become an important tool for policymakers, academics and businesses.

Andrew, I know the monthly data hopes to help produce more accurate forecasts, what are your thoughts?

Australia remains one of the few advanced economies to report CPI data on a quarterly basis, with the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England all reporting the key inflation indicator monthly.

Indeed, the Reserve Bank of Australia relies on the quarterly CPI data (among other measures) to set interest rates and has been criticised this past year for its shifting forecasts.

“The monthly CPI Indicator has been made feasible by using new data sources to reduce data collection costs, particularly scanner data and web-scraping techniques to provide high-frequency data at lower cost,” Dr Gruen stated.

“The use of new data sources has seen the ABS generate a range of timely new insights across the economy without asking more of Australian businesses and households.

The information paper will show how the monthly CPI Indicator can provide an earlier guide to inflation developments, particularly in times of significant change,” Dr Gruen said.

“One important point of distinction with the monthly Indicator is that, while it will include prices for all the items in the CPI basket, not all these prices will be updated each month.”

Despite rising interest rates, discretionary spending is holding up

We know the Reserve Bank is trying to slow inflation by raising interest rates.

But will this really work?

For almost a decade the RBA has been trying to increase inflation to within its preferred band of 2-3% with low-interest rates but that didn't work, did it?

And now, despite rising rates and falling consumer confidence, it seems Aussies are still happy spending, rather than stashing their cash.

Now, this is a worry as rising rates are not doing what the RBA was hoping for.

• ANZ Bank observed that spending was steady in early August and seems to be following a similar seasonal pattern as in previous years.
• Encouragingly, discretionary categories that involve larger-scale purchases, which could be the first to go under any retreat by consumers, are resilient.
• Spending on smaller-scale discretionary items was also stable, though there was weakness in entertainment and accommodation spending in early August.
• ANZ does not expect any immediate cliff in household spending due to interest rate rises.

Have job ads topped out – and what does it mean?

SEEK new job ads declined for the second consecutive month in July.

Declines were broad‑based with 24 out of 30 sub-sectors seeing consecutive monthly falls.

There is a lot of uncertainty in how to read this development given the tight labour market and still very positive business conditions.

Are employers giving up advertising? Does it reflect a peak in demand for particular industries? Or could more migrants be coming across the border?

Watch this week’s Property Insiders chat as Dr Andrew Wilson and I discuss this.

Some labour market tightness is due to a slower resumption of migration.

Some signs that this may improve with student visas granted back to pre-pandemic levels. China's zero-COVID policy is a key uncertainty here given that Chinese students comprised around 30% of all foreign students pre-pandemic.

Sydney & Melbourne auction clearance rates surge

Watch this week’s Property Insider video as Dr Andrew Wilson explains how higher auction listing numbers suggest that vendors are comfortable putting their properties on the market, while higher auction clearance rates are a sign that buyers are active and not waiting for the property values to fall further.

Dr Andrew Wilson of My Housing Market reported a national auction market clearance rate of 58.3% at the weekend which was lower than the 60.9% reported last weekend and still well below the 78.2% recorded over the same weekend last year

Dr Andrew Wilson reported the following auction preliminary clearance rates for Saturday 6th August:

• Adelaide auction clearance rate - 85.9%
• Brisbane auction clearance rate - 40.6%
• Canberra auction clearance rate - 33.8%
• Melbourne auction clearance rate - 65.7%
• Sydney auction clearance rate- 65.7 %

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au