Household debt climbing, but we can take it

Australian households have a well-deserved reputation for taking on large amounts of debt – and recent numbers show why.
Nanjing Night Net

According to the Bureau of Statistics, household debt has now increased to $1.8 trillion, or $79,000 for each person in the country.

After adjusting for inflation, this is higher than it’s been at any time in the last 25 years, despite the global financial crisis causing consumers to be much more cautious.

The ratio of debt to disposable assets has also started to climb again, and is at a three-year high of 148 per cent. Debt to total income is also higher than in a bunch of wealthy countries including the UK, US, Japan, Germany, Canada and France.

What is more, the ratio of debt to assets has been steadily climbing for the last 25 years, nearly doubling to just under 20 per cent at the end of 2013.

Scary stuff, right?

They are certainly big numbers, and Australia’s debt habit shouldn’t be ignored. Some of the more pessimistic investors see it as a serious weak spot in the economy.

But before being carried away, these figures need to be seen in context of whether we can afford the debt. And on this front, things are a bit less worrying then they may seem.

Perhaps most importantly, recent trends suggest Australian households are taking a more conservative approach to borrowed money.

For one, we are no longer increasing our borrowing at a quicker pace than our income as we did between 1993 and 2007 – something which was clearly unsustainable. In the last few years, debt has been growing at 2 per cent per person, which is slower than average pay.

Second, low interest rates make it easier to pay off the bank more quickly. The total amount of interest paid by households has fallen to 7 per cent of disposable income, down from the record high of 12 per cent around the global financial crisis.

Finally, economists reckon that debt would only become a serious concern for the country if people were unable to meet their repayment obligations. The most likely cause of this would be a big rise in unemployment – but that doesn’t look likely.

Indeed, the Reserve Bank last week even floated the prospect of unemployment starting to decline – though that’s far from certain.

All up, we should be alert to the rising debt load but it looks less concerning than it did a few years ago. Further gearing up would be a bad idea, but it seems many of us are getting the message.

This story Administrator ready to work first appeared on Nanjing Night Net.


Bank of Queensland delicately placed

  Photo: Glenn Hunt  
Nanjing Night Net

Bank of Queensland is a significant second-tier bank which, unlike some of its big four cousins, is trading well below its pre-financial crisis highs. This week’s chart, produced by Mark Umansky, a councillor with the Australian Technical Analysts Association and a certified financial technician, plots the progress of BoQ over seven years using monthly intervals.

We see that after an all-time high closing price of $18.10 in October 2007 BoQ, along with the rest of the market, fell almost 64 per cent. It reached a low of $6.55 in February 2009, a price last seen six years earlier. This level then became a support for almost six years and has not been tested for some time.

Institutional investors saw the share price almost double between February 2009 and April 2010, and there were two attempts to breach $12.07, which has emerged as a major resistance level. Since then, BoQ has basically traded in a congestion band bordered by $6.55 and $12.07.

Recently BoQ broke out of the congestion pattern to the upside at point 3 on the price chart. However the breakout was shortlived, with the stock falling back into the congestion band causing what looks at the moment like a failed breakout.

The recent rise on the chart is supported by a series of higher peaks and troughs as the price progressed through points 1, 2 and 3. However, there has been a negative indicator since November 2013 with stochastic oscillator turning down, creating divergence with the share price. A similar divergence occurred in 2009 and 2010, presaging heavy falls in the share price.

The stochastic oscillator expresses the closing price in relation to the high-low range over a set number of periods. It measures the speed or momentum of changes in price.

So BoQ is sitting in a delicate position. Traders wanting to profit from a breakout to the upside could buy in once the stock goes through point 3 on the price chart with a stop loss set at the bottom of the trough formed by the new share price spike.

If the price continues to fall, those with open positions could close them and wait till a new trend emerges. Short sellers could also enter the market with protected positions in case of a turnaround.

Surmising likely scenarios in advance gives investors strategies that can be deployed immediately, preventing loss of opportunity through analysis time lags.

BoQ recently raised $400 million at $10.75 a share to finance its purchase of a loan book and other assets from Investec Australia. However, the daily price was trading well above that, at around $12, at the time of writing.

This column is not investment advice. [email protected]南京夜网, ataa南京夜网.au

This story Administrator ready to work first appeared on Nanjing Night Net.


Little to lean on for Victorians

There was more pain than gain in this budget for Victorians – a fact Premier Denis Napthine will be acutely aware of heading to November’s state election.
Nanjing Night Net

Joe Hockey described us as a ”nation of lifters, not leaners”. Those waiting for a train, visiting a doctor, or finding themselves unemployed will have little to lean on in Victoria.

This was never going to be a great budget for us – we share the pain more evenly than we share the cash from Canberra.

Victoria carries a heavy load with GST, paying more than it gets back. This burden is not reflected in the state’s share of infrastructure spending.

NSW and Queensland had almost twice as much committed for infrastructure investment – western Sydney had its own infrastructure plan with expenditure in the forward estimates of $1.2 billion.

The cuts are heavy in this budget; money will missed from everywhere – local government, health, education.

”Our economic action strategy is not about cutting government spending; it is about spending less on consumption and more on investment so we can keep making decent, compassionate choices in the future,” the Treasurer said.

Some of those compassionate choices are likely to occur in a federal budget closer to the next election.

This was a tough budget, and some of the most vulnerable in society will be hit hardest.

Mr Hockey said ”the age of entitlement is over. It has to be replaced, not with an age of austerity, but with an age of opportunity.”

Those under 30 will have to wait six months before getting unemployment benefits. Does this take away the opportunity for people to eat and have a roof over their heads?

And what will it mean allowing universities to set their own tuition fees? The Treasurer said ”some course fees may rise and some may fall”. Few will fall.

The Abbott government has lived up to its commitment to be a roads government, with billions of dollars for road projects around the country.

What is not clear is the impact of federal funding on projects such as the $14 billion to $18 billion East West Link or the $11 billion WestConnex motorway project in Sydney.

There is little doubt federal cash makes the projects more attractive to investors and speeds up construction – but would roads such as the tolled East West Link have been built anyway given the federal government is providing only about 20 per cent of the expected cost?

Can the same be said for major rail projects that have been snubbed?

There is no money for the Napthine government’s $8.5 billion to $11 billion Melbourne Rail Link from Melbourne Airport to Southern Cross, South Melbourne, Domain and South Yarra.

The state government has committed just $40 million to this project before the election and $830 million in the following years. Can the public have confidence the project will proceed when tens of millions of dollars were spent on planning the now abandoned Metro rail tunnel project?

The last major rail project to get off the ground in Victoria was the Regional Rail Project. It received billions of dollars in federal funding and enjoyed bipartisan support.

It is hard to see where the other $10 billion for the Melbourne Rail Link will come from.

Infrastructure Australia considered the Melbourne Metro rail tunnel beneath Melbourne’s CBD a ”shovel-ready project”.

This time last year the Gillard government was committing $3 billion for the tunnel.

Much changes in a year. Gillard is gone, the money is gone, the project is gone and now the budget papers reveal the Infrastructure Australia Council will be gone, replaced by a new Infrastructure Australia Board.

The budget infrastructure report quoted the Productivity Commission’s draft report on public infrastructure that identified poor project selection and inadequate planning as major constraints on building infrastructure in Australia.

Without a full business case for the East West Link released, it is hard to see how this issue has been tackled by the federal budget.

The one bright light on a grim day was news of a $20 billion medical research future fund. Melbourne must be in the box seat to get a big slice of that funding given its world class medical researchers.

But the good news was swamped by the bad.

Buried deep in the budget papers there was a $215 million saving by ”not proceeding with funding for the General Motors Holden next generation vehicles project following Holden’s decision not to proceed with the project and to cease vehicle manufacturing in Australia by the end of 2017”.

The Cuban cigars will not be burning in Spring Street tonight.

This story Administrator ready to work first appeared on Nanjing Night Net.


Energy disconnections on the rise as gas prices surge

Surging energy prices have pushed electricity disconnections to record levels, with the planned increase in gas prices expected to undermine the longstanding cost advantage of gas over electricity, a forum was told on Tuesday.
Nanjing Night Net

The NSW pricing regulator, the Independent Pricing and Regulatory Tribunal, has flagged price rises for regulated gas users of 17.6 per cent from July 1, although the increase will be less if the carbon tax is removed.

The planned price increase will put more pressure on households, which are already struggling to pay their energy bills, as signalled by a surge in electricity disconnections. As many as 17,051 households were disconnected in the six months to December, according to data from the Australian Energy Regulator. The full year to June figure is set to top 34,000, a senior policy officer with the Energy and Water Ombudsman NSW, Chris Dodds, told the public forum into planned gas price rises on Tuesday.

This is substantially more than the 24,800 disconnections recorded in the year to June 2013. Another 2695 households were cut off from gas supplies in the half.

At the same time 20,798 households received government assistance in paying their bills as of the end of December, the most recent data. Additionally, moves by the government to shift the number of households on to the Newstart allowance from other forms of welfare, will see cuts to their benefits, which will push up the number of households unable to pay their gas and electricity bills, Mr Dodds said.

”These are real and significant price increases,” he said, as domestic gas prices move closer to levels where gas will lose its advantage over electricity for home and water heating.

Pushing gas prices higher is the development of a number of gas export projects in Queensland, which are lifting domestic prices to international levels.

Some lobby groups have called for gas to be set aside, or reserved, for domestic users, which would help to insulate them from the surge in gas prices.

However IPART chairman Peter Boxall said any such policy would not be ”cost-free”.

”If export opportunities arise … if business doesn’t take advantage of that, that’s income forgone,” Dr Boxall told the forum.

”To put in place [a reservation policy] is not cost-free.”

Any such policy decision is for government to make and beyond the powers of the tribunal, he said. ”We cannot solve everything.”

Gas retailers were also told that the surge in prices could lead to a ”death spiral” for the industry if households were forced to move away from using gas as it became less competitive with electricity.

This story Administrator ready to work first appeared on Nanjing Night Net.


Malamay’s Chinese feast back on menu

Amy Tran: “We want everyone to get in there and get messy with the dishes.”
Nanjing Night Net

Lobster tail in aged wine, chicken oil and rice noodles. Photo: Graham Tidy

Malamay restaurant, Barton. Photo: Supplied

Lobster tail in aged wine, chicken oil and rice noodles. Photo: Graham Tidy

It’s designed to be a scene out of a National Geographic special – dozens of villagers gathered in a courtyard, tucking in to noodles and big communal dishes. That’s the premise behind Malamay’s special ”Family Feast” dinner later this month, anyway.

Though instead of a courtyard, the dinner will take place in the slick interior of the restaurant at the Burbury Hotel in Barton and instead of Chinese villagers, it will be the restaurant’s Canberra clientele. Dressing up for the event is strongly encouraged.

It’s a repeat of a similar feast that was held last October at Malamay. That time the Chairman Group, which owns Malamay and Chairman and Yip, flew in a chef from its Hong Kong restaurant, also called the Chairman, to cook for the Canberra crowd. And he’s coming back this year.

Amy Tran, who’s a partner in the business with Josiah Li, says the dinner is meant to evoke a traditional Chinese family banquet. The menu is being developed in the Hong Kong and Canberra kitchens and will include a vegetable plate featuring the four seasons in pickled vegetables. It’ll be followed by ”auspicious” Chinese-style tapas (think wontons). ”Next we’re doing long-life noodles from Chinese banquets and we’re sort of pimping ours out a bit with some lobster and shrimp roe, so very fancy longevity noodles.” And no banquet is complete without servings of pancakes. ”These are do-it-yourself pancakes that will go in the middle [of the table],” Tran says. ”We want everyone to get in there and get messy with the dishes.”

The brains behind the Chairman’s Hong Kong restaurant is Danny Yip (the Yip in Chairman and Yip), who is using the Family Feast dinner as an excuse to pop back to Australia and catch up with his Canberra mates. He says the dinner draws on communal dining. ”In Chinese villages, everyone knows everyone, often somehow related, with the same surname,” he says. ”They work, support, hang around like one big family. They can always find ways to celebrate something, to party and to dine together. Food is designed to share, to pass around, to be playful even, to have fun.”

Yip will be flying in with his Hong Kong chef in late May to put the final touches on the menu and test out the dishes they’ve developed with the Malamay chefs. Tran says the international collaboration is often a test. ”Everyone is always WhatsApping pictures of their dishes to each other.” They’ve been trying out dishes for several months, sending recipes and notes back and forth between Hong Kong and Canberra, and Tran’s looking forward to seeing the results soon – ”everyone in the same room at the same time, tasting the same food”. A bit like a family meal.

Details: The Chairman Family Feast is held from May 29-June 7. Tickets $98.50 in tables of four or more. Bookings 6162 1220, malamay.chairmangroup南京夜网.au

This story Administrator ready to work first appeared on Nanjing Night Net.