End of irrational housing price exuberance? Savanth Sebastian
The Reserve Bank made mention of the lift in retail petrol margins in the Statement of Monetary Policy last week. CommSec analysis of the raw margin between the retail price and terminal gate price has risen to 12.4 cents in the past fortnight, well above the 5-year average of 9.3 cents. To some degree when oil prices are falling rapidly margins tend to expand as petrol retailers sell higher priced fuel first in petrol station bunkers before selling the cheaper fuel. The situation will bear further scrutiny in coming weeks.
Figures from MotorMouth show that petrol prices have been falling for just over a week in Sydney, Melbourne and Adelaide, although prices in Sydney and Adelaide have been falling a lot sharper than in Melbourne. Meanwhile prices hit the high point (peak) on August 7 in Brisbane and are only just starting to ease. Only Perth operates on a uniform weekly cycle. The bottom line is that prices will continue to slide over the coming week and motorists would be better off waiting a few more days before filling up the family vehicle.
The latest lending statistics show a mild rebound in June, largely driven by the strength in housing finance and in that context it is investor housing in particular that has driven the strength. Overall lending is only just shy of the seven-year highs reached two months ago. However the recent announcements and media commentary on the tighter bank lending standards is likely to start weighing on the sector. While housing activity will continue to be the backbone of the economy over the coming year, it is starting to show signs of cooling – especially when it comes to irrational exuberance.
The main disappointment in the latest lending finance results would be commercial loans. If there is an anticipated pullback in home lending policymakers would be hoping that activity amongst the business sector lifts from here. Commercial loans are up almost 4 per cent on a year ago. Business conditions are healthy, however businesses are still rather tentative about borrowing. The key driver of future lending will be an ongoing improvement in labour market conditions, rise in business hiring intentions and lift in consumer confidence.
- What do the figures show?
- Petrol price:
According to the Australian Institute of Petroleum, the national average Australian price of petrol rose by 0.8 cents per litre to 138.5 cents per litre in the week to August 9. The metropolitan petrol price rose by 1.2 cents to 137.7 cents per litre and the regional price was unchanged at 140.1 cents per litre.
The national average Australian price of diesel petrol fell by 0.5 cents to 133.5 cents per litre in the week to August 9. Last week the metropolitan price fell by 0.6 cents to 131.3 c/l, while the regional average price fell by 0.5 cents to 135.3 c/l.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down 2.1 cents to 136.7 c/l), Melbourne (up 9.0 cents to 142.3 c/l), Brisbane (down 0.6 cents to 135.3 c/l),
Adelaide (down 4.7 cents to 133.8 c/l), Perth (down 1.4 cents to 136.2 c/l), Darwin (down by 0.2 cents to 134.3 c/l), Canberra (down 2.7 cents to 135.9 c/l) and Hobart (down by 0.1 cents to 142.7 c/l).
Today, the national average wholesale (terminal gate) unleaded petrol price stands at a near 3-month low of 123.8 cents a litre, down 1 cent a litre on a week ago but still up from the 6-year low of 100.4 cents per litre set on January 20.
Last week the key Singapore gasoline price fell by US85c or 1.2 per cent to US$71.95 a barrel – a 17-week low. Singapore gasoline previously hit a near 6-year low (lowest since March 2009) of US$52.20 a barrel on January 13. In Australian dollar terms the Singapore gasoline price fell by $2.14 a barrel or 2.2 per cent last week to $97.67 a barrel or 61.42 cents a litre.
Lending finance
Total new lending commitments (housing, personal, commercial and lease finance) rose by 0.8 per cent in June to $74.7 billion after a 4.3 per cent fall in May. New loans are up 3.6 per cent over the year.
Housing finance: The seasonally adjusted measure of construction and new purchases rose by 5.5 per cent in June while alterations & additions rose by 9.3 per cent. Home loans are up 9.7 per cent on a year.
Commercial finance: The seasonally adjusted series for the value of total commercial finance commitments fell by 1 per cent in June. Revolving credit commitments fell by 1.5 per cent while fixed lending
Lease finance: Lending rose by 1.6 per cent in June after rising by 0.8 per cent in May. Lease finance fell by 5.0 per cent over the year.
- What is the importance of the economic data?
Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory's metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
- What are the implications for interest rates and investors?
CommSec expects interest rates to remain on hold over the rest of 2015.
