2016 The Year of (almost) Certainties...

January 14, 2016
Alan Heath

For almost a decade, the major influences on our economy and hence your interest rate, have come from China, Europe, USA and Japan.

In recent months we have seen the Syrian unrest, commodity prices and volatile stock markets dominating the news.

“Global markets are falling because of a combination of the China slow down, the flood of oil and iron ore leading to lower commodity prices, concerns about the US debt market and Europe’s migration problem (Robert Gottliebson The Australian Tues Jan 12 p 2) 

Syria and the troubles that have arisen in Europe have created substantial loss of economic focus there, as the social issues around waves of refugee migration take centre stage.

The USA is coming out of recession - slowly, off low interest rates, high debt and cheap oil.

China is the surprise with weakening domestic demand after a decade of lower export income. The rest of the world is finally taking its toll even on China.

Commodities are at a stage where large players in iron ore are increasing supply to put pressure on the smaller ones. 

Oil is more political – with Saudi Arabia trying to put pressure on the USA producers, who in turn are trying to put pressure on Russian producers. Iran is also about to re-enter the market further adding to supply and hence cheaper prices. This is especially interesting as it features every major player who can help or hinder in the Syrian unrest. There is a very large game in play with oil.

This year the USA and Australia will focus on elections – with enough hot air to float a blimp… this is a time when politicians create a sense of big problems that only they can solve, which the media then write about … a LOT.

These are large events over which we individually have little influence.  Collectively however, they will add significant uncertainty and ‘sluggishness’ to economic recovery.

It is this UNCERTAINTY that adds CERTAINTY to your own economic life… How??

Certainty 1:  The price of fuel will stay low for the foreseeable future. Fuel impacts on our lives every week!

Certainty 2: We already have our Reserve Bank Governor stating that interest rates will stay low for the next decade. The US Federal Reserve says the same. Interestingly in a very unusual market of supply and demand the US Federal Reserve comments that there are so many savings in the world, that there aren’t enough “buyers” of those savings (borrowers). Australian interest rates will either stay the same or go down in 2016. It is virtually certain they will not go up. 

Another view on 2016:

  • In times of low interest rates – Australians turn to housing.
  • In times of volatile stock markets – Australians turn to housing.
  • In times of a low Australian Dollar – overseas buyers turn to Australian housing because it is cheaper to them in their currency. 

Here’s a piece of trivia – If only one tenth of 1 percent of all the people in China wanted to buy an Australian property that would be 1.5 million houses, or one sixth of all current Australian housing stock. (http://www.abc.net.au/news/2015-05-06/fact-file-housing-in-australia/6442650)

It’s not difficult to see why demand for housing remains strong.

I will write more on this next week as we start what I hope is a very happy and prosperous new year.

As always you can call, text or email me anytime… It’s what I’m here for… 0411 601 459

 

Alan Heath, Mortgage Choice Brisbane CBD

Brisbane's trusted mortgage broker of choice...

Posted in: Home loans

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