Hartcher writes that while Australia enjoys unprecedented prosperity, security and freedom, this has very little to do with luck, but rather, what transformed Australia from the world’s biggest prison into one of the most desirable countries in which to live was courageous and prudent governance.

Research by mortgage broker Loan Market shows that internet searches containing ‘‘no deposit loans’’ have increased 28 per cent since the start of the year.

An examination of web traffic by Experian Hitwise, a global online competitive intelligence service, shows that such inquiries were up 57 per cent this month.

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His books have been a fixture on the Business Week best seller list for more than six years, and have been translated into 29 languages. His work has been featured in Fortune, The Wall Street Journal, Business Week, Harvard Business Review, and Fast Company.

So what is the article all about? Most of us have at least attended one management workshop where the executive team labour over mission statements, vision statements, purpose statements and the like only to find a year later  the process starts all over again. In most cases there is no measurement of the companies success in meeting these values until the next year when the process starts all over again.

Jim clearly defines the word ‘vision’ ( an organisations fundamental reason for existence,  timeless & unchanging core values and aspirations for the future) but goes on to explain that the big difference between an organisation with a vision statement and a truly visionary organisation is the process of creating alignment. When alignment occurs a company’s core values and reason for existence are reinforced but there is an environment that continually stimulates progress towards its aspirations.

Jim states the alignment process comes in two parts – identifying and correcting misalignments and creating new alignments . Identifying misalignments involves a company asking itself what obstacles are getting in the way to achieving its fundamental reason for existence and undermining its core values. Creating new alignments looks at  ways the company can ensure your core values are supported and encouraged and that organisational policies  and practices don’t hinder your very reason the organisation is in business!

I found this article really aligned with the values where hold here at Culture Marketing – its pragmatic, real and usable advice and I recommend a quick read by all regardless of your discipline in the workplace.

Even in the big scheme of things, an unemployment rate of 5.1% at the national level is very close to the accepted benchmark of full employment (of 5%), below which inflationary pressures start to build.

Both full and part-time employment rose during the month. The increase in full-time employment 18,000 suggesting companies remain confident of the sustainability of the economic recovery.

Clearly, the further tightening of the labour market will increase the upwards pressure on interest rates. This will dampen the demand for dwellings. However, pulling in the opposite direction, low unemployment and a strengthening labour will raise the demand for housing, especially if perceptions of permanent income increase as a consequence.

The recovery in the labour market is likely to continue, as job ads, business survey and the ending of the standoff between the mining companies and the Government all point to further strong employment growth.

So, even though the current resources boom is not in full swing, the demand for labour remains strong, and likely to remain so. This suggests efforts to reduce the current heady rate of population growth will have a limited success. Indeed, any success in limiting the rate of population growth (which looks set to increase and not decrease) will only result in even tighter labour market conditions and higher interest rates as a consequence.

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Bang in line with the overwhelming consensus, the cash rate was left unchanged at 4.5%.

The Bank remains positive on the global outlook, but far less upbeat than recent pronouncements. Indeed, only in the Asian and Latin American region is growth strong, with China “now starting to moderate to a more sustainable rate”, thereby reducing the chance of the boom/bust scenario. As for the rest of the global economy, the risk is perceived to be skewed on the downside. The outlook for Europe is clouded “given the budgetary constraints”, while “US growth has looked stronger in the first half of 2010 but the pace of labour market improvement is slow”.

On the domestic front, the Bank views the resources boom to be sufficient to compensate for the ending of the various fiscal stimuli, with the economy expected to grow around its trend rate. However, the underlying rate of inflation was still “likely to be in the upper half of the target zone over the next year”. Unusually, for recent statements, there was no commentary from the Bank regarding either house prices or volumes.

Clearly, it is the downside risks to global growth which is holding back the bank from raising domestic rates. Indeed, the market was pricing in a small chance of a rate cut this month. Ultimately, however, it will be the performance of the domestic economy which will ultimately determine the level of domestic rates, both absolutely and relative to the rest of the world. Even though the timing (and extent) of the next rate move is less certain, given the global externalities and the increasing likelihood of a Federal election campaign, a further rate increase still seems the most likely outcome.

Main Points

1.       Consensus expectation was for no change to approvals in May.

2.       House approvals rose 1.7% during the month and are 9.2% higher than a year earlier.

3.       Non-house approvals (apartments) fell 18.8% in May and are 86.1% higher than a year earlier.

Property Insights

Last month (April) dwelling approval saw a large drop in approvals for houses. This month apartment approvals declined sharply (by nearly 20%), while house approvals rose marginally (1.7%). Consequently, overall dwelling approvals, which declined by over 10% in April, fell a further 6.6% in May.

Clearly captured in the softening of housing finance, the ending of the first home owners boost and higher interest rates is having the expected effect of crimping housing demand. Even so, the upturn in dwelling construction to date has been weaker than suggested by dwelling approvals. It is both too early and too difficult to gauge how much dwelling construction has been held back due to resources being diverted to the Government’s $16 bn schools (and university) spending program. However, now this is being run down, the level of underlying dwelling construction should become more apparent.

Even though dwelling approvals have probably reached their cyclical peak, conditions remains favourable. Population growth remains rapid and, despite political pronouncements to the contrary , is likely to remain so. By comparison, residential construction has been weak for a number of years, giving rise to a significant shortfall. In addition, the supply-side measures introduced in NSW Budget should boost housing construction output in this (historically underperforming) state.

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Main Points:

1.       Owner occupier finance rose 1.9% in April; down 17.2% yoy.

2.       Investor finance increased by 1.3% during April, up 26% yoy.

3.       The volume of owner occupier loans fell 1.8% in April, down 25.3% on a year earlier.

4.       The annual growth in loan size increased for both first home and repeat buyers.

5.       The share of first home buyers nudged up from 25.9% to 16.3%.

6.       Investors account for 43% of housing finance, virtually unchanged from March.

7.       Commitments for construction of new dwellings dropped by 4.8% while for the purchase of new dwellings increased by 6.3%.

Property Insights

The headline message is clearly the decline in the number of loans. These have now fallen for the past seven months and are 25% down on a year earlier. However, the composition of finance (by value) shows a significant divergence between owner-occupier and investor demand.

Finance demand by owner occupiers rose (by 1.9%) in April. This was the first rise in seven months and was due exclusively to a  (2.9%) jump in finance for established properties. Even so, total owner occupier finance is 17.2% lower than a year earlier.

Owner occupier demand for new properties continues to dwindle, falling for the sixth consecutive month, to be 6.7% lower than a year earlier.

While owner occupier demand has fallen away, so investor demand has picked up, rising for eight of the past nine months. However, the improvement in investor demand has extensively been for established, rather than new housing.  Placed in perspective, investor finance for new dwellings is 6.7% lower than a year earlier, while for established dwellings it is some 25.8% higher.

So, while investor demand has compensated for the falloff in owner occupier demand, this has pronominally been for established (rather than new) dwellings. Consequently, finance commitments for construction of new dwellings fell by 4.8% in April.

Irrespective of the fall away finance demand, the loan size taken out by both first home and repeat buyers increased in April (by 1.8% and 2% respectively). Consequently, the annual rate of increase of loan size for repeat buyers is 10.3% higher than a year earlier, and 2% higher for first home buyers. This helps to account for the stickiness of property prices, particularly for established properties.

The composition of housing finance shows the supply response is easing, while the strength of demand, particularly for established properties, is keeping the pressure on property prices. Even though the rate of house price inflation looks set to ease, the significant housing shortfall and strong underlying demand will continue to place a floor under property price inflation.

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1.      For the next two years from July 1:

a.       Stamp duty cut to zero for those buying a home or apartment worth under $600,000 off the plan, thereby saving $22,490.

b.      For a new home already under construction, or newly completed, and worth up to $600,000 duty cut of 25%, thereby saving $5623.

c.       To assist/encourage downsizing by retirees, no stamp duty will be payable for the over 65s who buys a newly built home worth up to $600,000.

2.      A cut in the payroll tax from 5.65% to 5.5% cent, brought forward to July 1 2010 from January 2011. A further cut to 5.45% will be implemented from January 1 in 2011.

3.      Economic growth in 2009-10 is estimated to be 2½%, with employment increasing by 1%.

4.       Economic growth in 2010-11 and 2011-12 is forecast to increase further to 3 and 3½ per cent respectively.

Year average per cent change, unless otherwise indicated

(a)    Year average, per cent

(b)    Per cent change through-the-year to June quarter

The NSW Treasury are forecasting national and NSW output increasing at an above-trend rate in both 2010-11 and 2011-12.  Indeed, while NSW “is expected to grow strongly, resource-based states may grow even more rapidly”.  Clearly, such an outcome would imply a tightening in economic policy to ensure economic activity does not grow beyond its productive potential.

The NSW Treasury is forecasting dwelling investment growing strongly in 2010-11, with the recovery is expected to continue in 2011-12.  The factors supporting housing demand include low rental vacancy rates, rising rents, strong population growth and low unemployment.  Additionally, “a recovery in multi-unit dwellings which was delayed due to past tight credit conditions for financing of property developments”.

Property Insights

Even though there are signs of the cyclical demand for housing starting to ease, the underlying fundamentals underpinning the NSW housing market remain compelling; the rapid rate of population growth and historical undersupply. Furthermore, the fiscal measures, introduced in the State Budget, are aimed at boosting the demand for new housing. These cyclical and structural demand forces, in conjunction with the announced cap on the amount councils can charge developers on new developments to $20,000, should lead to a meaningful boost to supply. Just as importantly, the Budget measures are directed towards boosting housing supply, rather than demand, and hence prices.

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Following three consecutive monthly increases of 25 basis points, the RBA board, and clearly influenced by events emanating from the PIIGS (Portugal, Ireland, Italy, Greece and Spain), the RBA decided to leave rates on hold.

However, from the tone of the text from the RBA, this is likely to be a temporary measure.  The high level of the terms of trade means “output growth over the year ahead is likely to be about trend” , while “Inflation appears likely to be in the upper half of the target zone over the next year”. Furthermore, while there has been a “significant adjustment from the very expansionary settings reached a year ago… the Board views this setting of monetary policy as appropriate for the near term.

From this, it would seem, all the while there is (downside) uncertainty attached to the European economies and equity markets are under significant pressure, rates are on hold.

Clearly, should the proposed mining super profit tax crimp mining investment (and, consequently, the growth dichotomy between the resource rich and resource starved states) the pressure on rate increases will be alleviated.

Main Points:

1.       Consensus expectation was for a modest decline of 5% in April.

2.       House approvals declined 13.5% in April; up 4.7% compared to a year earlier.

3.       Other dwellings (apartments) declined 5.4% during April, but remain 42.3% higher than a year earlier.

4.       Declines in house approvals posted in all the major states during April; Victoria -23.8%, NSW -9.4%, Queensland -6.6%, WA -2.5%.

Property Insights

Last month’s jump in approvals, by 1886, (extensively apartments) is increasingly looking like a blip on the property radar screen. Total approvals have now declined in three of the past four months to be 807 dwellings lower. Stripping out the lumpier approvals for apartments, house approvals are now only 4.5% higher than a year earlier. Clearly higher interest rates, let alone the winding back of the first home owners’ boost is having an impact.

Even allowing for the monthly blips, the trend among the states shows a significant weakening. House approvals are down by 0.6% since the start of the year in WA, down by 6.2% in Queensland, down 11.2% in NSW and down by 22.1% in, the previously resilient, Victoria.

Furthermore, the gap between housing finance for construction and dwelling approvals has virtually closed,  suggesting the peak in approvals is very close at hand, if it hasn’t already passed. This creates a conundrum, in that while the demand for accommodation is starting to slip, taking the pressure off of property prices, dwelling supply is also moderating.

However, the lag between approvals and construction suggests dwelling starts should exceed 170,000 for 2010. While this is a significant uplift on 2009 housing starts, the rapid rate of population growth, should ensure the housing shortfall will increase further.

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