Australia 01 (May 08 - Jan 11)

[kennynah]

Building activity in Australia falls in first quarter
7/15/2008 12:44 AM ET

(RTTNews) - The value of construction work in Australia fell sequentially in the first quarter, reflecting a decline in all types of construction activities, a report by the Australian Bureau of Statistics said.

The total value of construction activity declined a seasonally adjusted 1% in the first quarter compared to the previous quarter. Total construction activity was valued at A$16483.5 million in this period.

Construction of new residential buildings fell 0.3% to A$8190.8 million, mainly due to a fall in construction work on other residential buildings along with a fall in alternations and additions made on residential buildings. However, construction work for new houses remained flat in the first quarter.

In the same period, construction of non-residential buildings declined 1.9% to A$6715.2 million.

Year-on-year, construction activity fell 1.2% reflecting mainly a 3.1% fall in construction of new residential buildings. However, construction of other residential buildings increased 0.9% and alternations and additions made on residential buildings grew 1.9%.

[tangoandrew]

the aussie real estate doesn't look very good...but read recently a newspaper report that many singaporeans are investing down under.

no wonder the last few saturdays, there was a lot of ST adverts on aussie properties....they are bringing in to the doorsteps to entice pple to invest...

btw, for detail analysis of whether aussie residential prop are good investments, you can go to this website http://cij.inspiriting.com/?page_id=295.

[winston]

Australia's S&P/ASX 200 Index, currently trading at recession levels, is nearing its bottom, according to strategists at Morgan Stanley.

The Australian benchmark index is valued at about 11.5 times estimated fiscal 2009 profits, about 8 percent below the level appropriate if the economy was in recession, analysts led by Toby Walker said in a strategy note today.

"We do not have much further to fall," the strategists said. "With the market now close to what we think is a recession multiple, the environment is becoming more conducive to looking for contrarian names."

– Bloomberg

[iam802]

Australian Dollar May `Free Fall,' Koukoulas Says: Chart of Day

http://www.bloomberg.com/apps/news?pid= ... refer=home

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July 21 (Bloomberg) -- The Australian dollar could be ``on the cusp of a free fall,'' after reaching a 25-year high and near-parity against its U.S. counterpart last week, TD Securities Ltd. said in a report.

The currency's performance and economic trends are similar to those leading up to Australia's most-recent recession, in 1990-91, Stephen Koukoulas, head of global foreign exchange and fixed income, wrote in the report. The Reserve Bank of Australia will soon respond by cutting its cash target rate for the first time since December 2001, the report said.

``The domestic economy is flirting with recession,'' he wrote in the July 17 report. ``Demand for commodities is clearly waning.''

The chart of the day shows the performances of the Australian dollar against its U.S. counterpart and the Reuters/Jeffries CRB Index of 19 commodities since July 1988. The Australian currency, known as the Aussie, plunged about 20 percent in 1989 as the country moved toward recession and interest rates were cut.

Australia's currency has more than doubled since April 2001, reaching 98.48 on July 16, driven by a surge in commodity prices and a ``very wide'' interest-rate differential, the report said. The Australian dollar could fall ``a good 15 percent in less than a year,'' if the rate-cut cycle is similar to the previous recession period, the report said.

Peak in Prices

Commodities prices have probably peaked for the time being, as economic growth rates in China and the Group of Seven industrialized nations are decelerating, the report said. A decline in the Baltic Dry freight rate index is another sign of slowing demand, wrote Koukoulas, who's based in London.

Australia, home to the world's largest mining company, BHP Billiton Ltd., is the biggest coal exporter and supplies more than a third of all traded iron ore. Australia's $1 trillion economy has recorded 17 consecutive years of growth.

``The Australian economy has hit the wall,'' the report said. ``The RBA is getting closer to acknowledging an imminent abatement of inflation pressure,'' the report said. ``A rate- cutting cycle starting before year's end and then amounting to around 150 basis points or more in 2009 now seems likely.''

The RBA's benchmark cash target rate is 7.25 percent.
==============

[iam802]

NAB shares slump on writedowns

National Australia Bank has announced $830 million in additional provisions, citing the rapid deterioration in US real estate markets.

The provisions come on top of $181 million flagged in March, and go towards covering $1.2 billion in collateralised debt obligations (CDOs) backing American real estate assets, the type of securities whose value has plunged in the wake of the subprime lending crisis.

http://business.smh.com.au/business/nab ... 3kra.html#

[iam802]

ANZ Bank Says Full-Year Profit to Fall Most Since '92

http://www.bloomberg.com/apps/news?pid= ... efer=home#
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July 28 (Bloomberg) -- Australia & New Zealand Banking Group Ltd. forecast the biggest full-year profit drop since 1992 as bad loans swell, sending the stock to its steepest slump in 21 years.

Earnings per share excluding income from derivatives trading will decline 20 percent to 25 percent in the 12 months to Sept. 30, Melbourne-based ANZ said in a statement. Chief Executive Officer Mike Smith, who joined Australia's fourth-largest bank from HSBC Holdings Plc in October, said the company tripled provisions for delinquent loans from a year earlier.

Australia Treasurer Wayne Swan said ANZ's announcement shows the nation's economy isn't immune from turmoil in global financial markets. Australia's five biggest banks have lost a combined A$27.4 billion ($26 billion) of market value since July 25, when National Australia Bank Ltd. said provisions for securities tied to U.S. mortgages jumped more than fivefold.

``Until trust is rebuilt and investors work out who owes what, and who's going to lose what, there's going to be uncertainty,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds about $128 billion of assets.

ANZ fell 9.8 percent to A$16.02 at 2:44 a.m. local time, the lowest since March 2003. The stock has lost 42 percent this year, the worst performer among Australia's seven biggest banks.

Smith, 51, said more Australian companies and consumers are defaulting as the fallout from the collapse of the U.S. housing market pushes up borrowing costs.

`Beyond Disappointing'

Australia's 17-year economic expansion is losing steam as higher interest rates and fuel costs deter spending. Consumer confidence slumped to the lowest level in 16 years in July, and businesses were the most pessimistic since 2001 in June.

(802: I remember while on a trip to Sydney, after tech bubble, Singapore was all gloomy and Australia was recording very good growth back then)

Provisions for bad debts may rise to about A$1.2 billion in the current half from A$980 million in the first six months, ANZ said. The bank has raised its home loan rate by 1.05 percentage points this year, to 9.62 percent.

Increased provisions ``were in response to deteriorating economic conditions and the impact that this is having on our business,'' Smith said on a conference call today. ``Having to announce this sort of provision is beyond disappointing; in fact it probably warrants the kind of language that I've become somewhat renowned for. What is really irritating is that we are having to spend so much time on remedial action.''

Clients Tripped Up

National Australia Bank, the country's largest, on July 25 set aside A$830 million for collateralized debt obligations, triggering the biggest share decline since 1987. The stock fell 2.5 percent today. Commonwealth Bank of Australia, the nation's biggest mortgage lender, dropped 5.3 percent and St.George Bank Ltd., the fifth-largest bank, fell 7.7 percent.

Banks and securities firms have posted about $468 billion in losses and writedowns worldwide since the subprime crisis started last year. Australian companies including Babcock & Brown Ltd. and Centro Properties Group have gotten caught up in the credit market turmoil as their debt costs soared.

``It appears a system-wide slowdown in Australia and New Zealand is under way, with bad debts growth also reflecting this,'' Craig Williams, a Sydney-based analyst at Citigroup Inc., said in a note to clients today. He rates ANZ a ``sell.''

ANZ this month forecast a A$50 million provision against A$260 million of loans to failed margin lender Primebroker Securities Ltd. The bank also funded Australian securities companies Opes Prime Group Ltd. and Tricom, whose margin lending businesses collapsed this year as financial markets tumbled.

ANZ is among lenders to Centro, the Australian trust that struggled to repay as much as A$6.6 billion of debt after a credit-fueled U.S. expansion.

More Damage

ANZ in April posted a 7 percent drop in first-half profit to A$1.96 billion, with Smith setting aside four times as much money to cover bad debts as a year earlier. The company today said it expects a full-year cash profit of more than A$3 billion, compared with A$3.92 billion in the previous fiscal year.

Australian banks raised interest rates independently of the central bank this year for the first time in more than a decade to recoup higher funding costs, helping contribute to a slowdown in the housing market.

``I think we are not at the bottom yet,'' National Australia Bank CEO John Stewart said yesterday on the Australian Broadcasting Corp.'s Inside Business program. ``Things are going to get worse. There are more than 18 million vacant properties for sale in the U.S. just now. That's more than the whole housing stock of Australia.''

Commonwealth Bank of Australia Chief Executive Officer Ralph Norris on July 24 said there are ``clear signs'' Australia's economy is slowing as rising gasoline costs and interest rates erode consumer confidence and spending.

ANZ today maintained its dividend forecast of A$1.36 a share for the full year. The bank said July 25 that A$5.5 million in corporate collateralized debt obligations have no ``material'' impact on earnings.

[winston]

Australia: Where the Beer Is Great and the Bonds Are Better
By Andrew Gordon

So... is there any investment that is truly safe?

There sure is. Australian government bonds have never looked better than they do right now. And this is the perfect time to jump into them...

Not only because Australia has one of the strongest economies in the world. Unemployment is at a 33-year low. And prices of its two big exports - coal and iron ore - are at historical highs. It doesn't hurt that around 66 percent of Australia's exports are commodities.

And not only because Australia is effectively shielded from the problems we're having in the U.S. They trade mostly with fast-growing Asia. In fact, 60 percent of their exports go to Asia.

The biggest reason the timing couldn't be better is because the Aussie government has been raising its key interest rate to stave off inflation. They've raised it all the way to 7.25 percent. They're at or near the top of their rate-raising cycle.

Other interest rates, including bond rates, feed off this basic government rate. If this rate is more than twice as high as the U.S. benchmark interest rate, then most of the other rates will be too - including Australia's government bond rates.

Sure enough, the Queensland 10-year government bond pays a nice 6.99 percent interest. That's not quite twice as high as the equivalent U.S. government bond rate, but it's close.

What's more, you can buy these bonds for a discount. And the discount isn't going to get any better. Here's why...

The Australian government paused its key interest rate hikes three months ago. That means, for now, interest rates have peaked in Australia. The only way they would go higher is if the Reserve Bank of Australia resumed rate hikes. That's possible, but unlikely.

And if you don't want to tie up your money for 10 years? There's another group of Australian bonds that could be perfect for you. I'm talking about corporate bonds, including bonds issued by GE - one of the biggest companies in the world.

These GE bonds are triple-A rated - the highest rating bonds can get - which means they come with very little risk. Usually, the lower the risk the lower the yield. But these highly rated bonds offer high yields of 7.97 percent. (Ask your broker for 8.5 percent coupon February 2011 maturity bonds from GE in Australia.)

Or you might prefer Australian bonds from Nestle, the huge Swiss firm. Its bond is double-A rated and offers a yield of 7.0 percent. (Ask your broker for 7.25 percent coupon January 2011 maturity bonds from Nestle in Australia.)

Because these bonds mature in 2011, they would tie up your money for less than three years. To get in before prices go higher (and yields go lower), you should buy Australian bonds NOW.

Buying international bonds is pretty easy... as long as you go to the right place. You can always go to a full-service brokerage specializing in international bonds. But many of the bigger brokerages are able to trade them, too, so call a few and find out.

[millionairemind]

Australia Facing `Once-in-100-Year' Housing Slump (Update1)
By Jacob Greber

July 31 (Bloomberg) -- Australia may be headed for a housing recession similar to those roiling the U.S. and U.K.

The cause is a combination of rising default rates, the biggest drop in home prices in five years, the highest borrowing costs in a decade and slowing economic growth.

Prices in the property market -- described by the International Monetary Fund in April as one of the world's most ``overvalued'' -- will fall 30 percent by 2010, according to Gerard Minack, senior economist at Morgan Stanley in Sydney. Prices dropped in all of Australia's major cities last month for the first time since just before the Great Depression.

``I panicked'' when the figures came in, said John Edwards, chief executive officer of Residex Ltd., a Sydney company that tracks property prices. ``We've been doing this for 20 years and have data that goes as far back as 1865, and it's really abnormal.''

Prices fell in Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin, Hobart and Canberra by between 0.6 percent and 2.2 percent, according to Residex. The national median house price fell almost 3 percent to A$458,000 ($435,000).

``Australia is headed for a once-in-100-year real-estate slump,'' Edwards said. ``I have never seen the convergence of so many negatives.''

Rising property prices drove a decade-long consumer spending boom that saw Australia's $1 trillion economy weather fallout from the 1997 Asian financial crisis and the collapse of Internet stocks in 2000.

Soaring Prices

Household debt has almost doubled since 1999 to around 160 percent of incomes, a higher ratio than in the U.S. and U.K., according to AMP Capital Investors. The median national house price soared about 140 percent in the same period.

``By every metric I can think of, Australian houses are too expensive,'' Minack said, costing an average of six years' earnings, double what Americans paid before their property market started falling in 2006.

The Washington-based IMF says Australian house prices were overvalued by almost 25 percent in the decade through 2007 when compared with household income and ability to pay debt. Only Ireland, the Netherlands and the U.K. were higher.

A crash would ``result in a significant negative wealth shock'' for Australians, whose spending accounts for about 60 percent of the economy, Minack said.

While growth is expected to continue for a 17th straight year in 2008, the Reserve Bank of Australia forecasts it will slow to 2.25 percent from 3.9 percent in 2007. A government report today showed retail sales fell 1 percent in June, the biggest drop in six years.

Bank Stocks

A housing recession may also trigger losses at lenders including Commonwealth Bank of Australia and Westpac Banking Corp., whose stock has fallen more than 20 percent this year.

The nation's five largest lenders have added an average 105 basis points to mortgage rates so far in 2008 as the global credit squeeze drove up funding costs. They were also reacting to moves by central bank Governor Glenn Stevens, who raised the benchmark lending rate twice this year by a total of 50 basis points to a 12-year high of 7.25 percent to curb inflation. Prices gained 4.5 percent in the second quarter from a year earlier, the fastest pace since 2001.

The increases have added A$250 to monthly payments on an average A$250,000 home loan, according to the Real Estate Institute. Households spent 38 percent of their incomes on mortgage payments in the March quarter, the most in the 22 years the institute has measured affordability.

`Mortgage Stress'

Sydney research company Fujitsu Consulting says 923,000 households will face ``mortgage stress'' by September, up from 171,000 a year earlier who said they were having trouble repaying loans. Australia's population is 21 million, and 6.9 million households have mortgages.

As the pressure mounts, consumers are spending less on televisions, cars and vacations, hurting retailers including department store chain David Jones Ltd.

Ratings agency Standard & Poor's reported July 23 that payments more than 30 days late on so-called prime home loans increased for a sixth month to a record 1.49 percent in May. Some 14.5 percent of subprime loans were 30 days late, with 7.9 percent more than 90 days late.

John McGrath, chief executive officer of McGrath Estate Agents in Sydney, said the number of unsold homes in his market is rising, auction rates are falling and the time it takes to sell properties is up 50 percent from a year ago to 45 days.

``We're not even in the ballpark when it comes to affording a house in Sydney,'' said Anthony Duckworth, 30, a married father of one who works for a catering company.

Commuting Distance
With A$160,000 in savings, he would need a A$600,000 mortgage to buy a family home in Australia's biggest city -- double what he can afford. So he plans to buy north of Sydney and commute.

The central bank says lending grew in May at the slowest annual pace since 1991, when the property market collapsed amid mortgage rates as high as 18 percent. Home-loan approvals dropped by the most in eight years.

``It's like a debt tsunami out there,'' said Sandra Saker, who manages a Salvation Army service for families in Sydney overwhelmed by financial problems. ``Five years ago, the maximum debt people came in with was about A$200,000. Now we see people coming in with over A$1 million.''

[-dol-]

So it seems that Perth property prices are also declining now.

Western Australia has been booming big time - thanks to commodities and China. There was some town in WA whose population dwindled from 13,000 to 3,000 before the boom. Then the subsequent boom ignited migration and it more than tripled to 10,000. And the property prices went through the roof - A$800K for some when it was just 1/10th if it only a few years back!

Some lucky birds I know hit pay dirt - their properties and A$ really took off this past decade - much better than their Singapore assets - and they repartriated some $ and took part in our property boom of the past few years.

An even lucky bird from Sydney could not resist the cheap US$ and properties on show now, and finally bought his New York apartment with his A$ - from some retrenched investment banker.

$ have really been minted the past few years just like that. This is just one example of many happening around the world in those times of plenty. There will be more to come... but I guess it's not unreasonable now to have some drought to clear some excesses.

[helios]

Is Australia heading to recession? let us see how this year will end …

Think of it like this: we are in a car that has been braking sharply as a result of higher interest rates, higher petrol prices, diminishing household wealth and fear of what might lie ahead. Now the car has slowed sharply, the question is whether we, the decision-makers of the economy, keep our foot on the brake, and slow down even further, or release it to keep cruising at our present speed.

The Reserve’s goal was the latter: if Australia’s growth in output slows to about 2.5% — 2% excluding farms and mining — it believes inflation will gradually crawl back within its target zone of 2% to 3%.

Are the decision-makers, the good driver? Not too sure.

Access the full Article from TheAge.com
here's the link: http://www.theage.com.au/national/up-or ... -3olq.html
Article Title: Up or down? Next three months are crucial.