An economic and property snapshot reveals the Australian economy is still volatile but there are some positive trends for the future.
Figures published in PRDnationwide's Quarterly Economic & Property Report showed consumer sentiment remained lacklustre, except for Western Australia, and a slip in business confidence and migrant numbers. But it reported modest increases in new dwellings and housing finance.
“Although Australia has proved to be insulated and economically robust from the troubles overseas, there is no doubt that the volatility has affected sentiment and confidence over the year,” said PRDnationwide research director Aaron Maskrey.
“The long-term Australian Consumer Sentiment Index of a six month moving average has decreased by 15.7 points from December 2010 to register 98.3 points,” the report said.
“Not since the Global Financial Crisis of 2008 have pessimists outweighed optimists in the Index. It appears that the prolonged period of households living under the uncertain future of interest rates and the volatile international economic environment have taken their toll on Australian sentiment.
“On a monthly basis the Australian Consumer Sentiment Index surprisingly increased slightly by 7.3 points over the month of September 2011, to record a score of 96.9 points.
“Out of the five states measured for the Index, sentiment is highest in Western Australia at 108 points, which experienced a further monthly increase of 20.7 per cent (on from a 26 per cent increase on the previous month).
“South Australia recorded the lowest Index score at 93.4 points, followed by New South Wales at 94.6 points. Queensland experienced the smallest increase in sentiment of 1.9 per cent to reach an Index score of 96.8 points.”
The report analysed sixteen indicators, including consumer sentiment, population change, retail spending and unemployment.
The report said new dwelling starts in Australia were up by 2.2 per cent compared to last quarter - but 17.5 cent down on a year ago.
Housing finance was up 3.5 per cent on the year before, the report said.
“The gross spend on housing finance was $20.8 billion during the month of August 2011 – equating to an increase of $700 Million,” Mr Maskrey said.
The report author said unemployment had risen to 5.2 per cent which was on par with the five year average.
Home loan affordability has declined after a short reprieve in the March 2011 quarter.
“On average, Australian households now need approximately 34.6 per cent of the family income to service their home loan,” said Mr Maskrey.
And while the report highlighted a study by Deutsche Bank, which concluded that Australian banks were one of the best placed in 22 economies studied to deal with any shocks from the sovereign debt crisis, the RBA has found that higher loan-to-value ratios (LVRs) have become more popular as mortgage lending competition intensifies.
“After 2009 lending criteria tightened with fewer loans being written with a LVR above 90 per cent. However, due to recent lending competition this trend has changed. Contrary to this, a recent report by ratings agency Fitch stated that mortgage strain on borrowers had eased due to the prolonged period of steady interest rates,” the report said.
Over the September 2011 quarter, the Time to Buy a Dwelling Index increased in four of the five measured states.
“House prices have experienced no rapid crash, but more of a prolonged softening over the year, with the most optimistic expectations of market to pick up again in late 2012,” Mr Maskrey said.
“Buyers wanting bargains should be taking advantage of current market conditions.”