It’s time for Australia to put the pedal to the metal and shake off the global economic flu as 170,000 new jobs are dangled on the horizon, according to THG senior economist Richard Katter.
Yesterday’s cash rate paralysis signalled Australia’s uncertainty of which way to move as the Aussie dollar drops, yet the nation experiences increasing terms of trade and rising new home building approvals, but perspective needs to be applied as the BHP job cards are dealt across the nation and housing needs to be delivered, said Katter.
The unchanged cash rate also demonstrates Australia’s stability, he said.
“One thing that hasn’t been stable though is Australia’s greatest excuse, the Australian Dollar,” said Katter.
“The problem is as our economy strengthens and the US continues its painful fall from grace the Aussie (dollar) becomes less exotic and will not be as responsive to changes in the global economic outlook. This will mean that the RBA (Reserve Bank of Australia) may need to be more responsive to changes in the global economy.”
In the background of yesterday’s cash rate announcement, the Australian Bureau of Statistics delivered its August new home approval figures, reporting an 11.4 per cent increase nationwide, and according to the Urban Taskforce’s Aaron Gadiel, New South Wales new home approvals accounted for 83 per cent of the national increase.
But Gadiel said the reality isn’t as crash hot as the data describes, as “these monthly figures are highly volatile and can be disproportionately influenced by small spikes in the number of multi-dwelling approvals issued in a single month”.
“Policy makers shouldn’t let the potentially one-off surge in higher density approvals in NSW blind them to the systemic housing supply problems in the state,” he said.
Katter said the global volatility is unlikely to reduce the “strong medium and very strong long-term outlook” for Australia, particularly with big job promises like BHP’s 170,000-job forecast ahead.
Crude perspective needs to be applied when considering the potential job numbers and housing shortage to accommodate workers, said Katter.
“Let’s say of the 170,000 jobs needed in the resources sector, as predicted by BHP, Queensland gets 70,000. This could conservatively mean an increase in demand for housing in Queensland of around 30,000 houses in the next five years as our labour market is nearly at full capacity and if these jobs are going to be filled we will need to see a massive increase in migration to our state.” said Katter.
“If the demand for housing is split evenly between each of the five years, this will equate to 6000 additional houses per year. At the moment we’re seeing building approval numbers for the state at around 12,000 annually. If these conservative estimates come to fruition we could see an increase in development activity of 50 per cent. Does Queensland have our ducks lined up to ensure we can do this and to ensure we don’t miss our opportunity?”
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