The most recent demographic data released by the Australian Bureau of Statistics (ABS) for September 2010 shows that nationally, population growth is slowing, largely fuelled by a slowdown in net overseas migration.

On an annual basis between September 1981 and September 2010, Australia’s population has increased by almost 252,000 persons annually. Given this and despite the slowdown in migrant numbers, the current rate of population growth is still 37% above the long-term average however, it has clearly slowed markedly in recent times.

In percentage terms, Western Australia has been the fastest growing state over the year with the population increasing by 2.1%. Growth in Queensland (1.9%) and the Australian Capital Territory (1.7%) was also quite strong.

The other component of population growth, natural increase (simply births minus deaths) remains strong. During the year, almost 160,000 more children were born than persons passed which is just shy of recent highs. Natural increase has accounted for 46.2% of the country’s population growth over the last year which was its largest proportion since June 2005 (46.6%). The rate of natural increase is currently 24% higher than the long-term average.

The Federal Government’s current target for migration during the 2010-11 financial year is 168,700 persons according to the Department of Immigration and Citizenship. This indicates that migration levels are likely to remain at fairly similar levels to that which have been recorded over the past two financial years. Importantly, net overseas migration also takes into account Australian national’s who have left Australia long-term returning and Australian citizens that leave Australia whereas migration targets do not include expats that return home. It is important to also note that New Zealander’s are not included in the migration statistics and are virtually free to come and go as they please. During 2009-10, the greatest number of migrants were coming from: United Kingdom (25,738), China (24,768) and India (23,164).

Given the ongoing softening of population growth and the fact that Australian consumers are continuing to save despite the fact that the unemployment rate is low (5%) and wages are growing at a rate faster than inflation, we expect that pressure will start to mount from businesses to increase our migration intake. Not only to fill skills shortages but also to support those baby boomers approaching retirement age that have not received superannuation contributions throughout their entire working life.

These retirees will in some form or another rely on Government pensions which are funded by taxes.

The implications of a population which continues to grow is increasing demand for affordable housing and infrastructure such as: public transport, roads, schools, shopping centres and hospitals. Surely the Federal, State and Local Government’s need to start taking appropriate action to support a growing population. Although a Federal Population Minister has been appointed, to date there has been little action. 

Source: 

8 April 2011 Weekly Property Pulse Professional Edition

www.rpdata.com.au

And it’s not just food prices that have been soaring, textile prices have risen sharply over the past five months with cotton doubling in price to record highs and wool hitting the highest levels in 23 years. Higher prices for agricultural commodities is positive for producers in emerging and developing nations as well as farmers in Australia, but poorer workers, especially in manufacturing and tertiary sectors, are faced with higher living costs. 

But many advanced nations must wonder what all the fuss is about. In the US, inflation stands at just 1.5 per cent while in Australia underlying inflation is at decade lows. But as economies in the US and Europe continue to recover, inflation will become a more pressing concern. China has lifted interest rates three times since October last year and we can expect a progression of other central banks to tighten policy over coming months.

Stephen Karpin

Managing Director Comsec Research Insight Issue 195 10 February 2011 (4.30pm)

www.comsec.com.au

Mobile phone applications are becoming more sophisticated with developers coming up with new ways to help you work better from your mobile. Here are five of the best applications for business owners.

1) Business Card Reader by Shape Services (available on iPhone and BlackBerry)

This popular application allows your phone to instantly recognise business cards for quick and easy storage into your contact library. In a review of the best business applications, the Sydney Morning Herald gives the Business Card Reader the thumbs up: “Some useful features include the correct recognition of work, mobile and fax numbers, a LinkedIn button to automatically add a contact’s profile and the option to merge with existing contacts”.

2) Quickoffice Connect Mobile Suite by Quickoffice (available on iPhone, BlackBerry, Symbian and PalmOS)

This award-winning application allows Windows-incompatible mobiles to use Microsoft Office apps with additional access to on-the-go services such as GoogleDocs and MobileMe. You can create, view and edit Microsoft files (for example Word or Excel) and also open and view attachments (such as PDF or JPEG) on your mobile allowing you to work efficiently on the fly. As the SMH points out: “If you must use Windows at work, this allows you to combine it with (iPhone) pleasure”.

3) LinkedIn Mobile (available on iPhone and BlackBerry)

The LinkedIn application allows you to keep in contact with other advisers and clients on the go while continuing to grow your professional network.

iPhone modules include search (for profiles including photos), research (for common contacts) and invite (for the people you meet at events).

The BlackBerry version modules are slightly different. They include invitations, messages and reconnect, which LinkedIn says “brings suggestions for new connections to you any time”. LinkedIn promises new additions soon: “The BlackBerry platform is a top priority for the LinkedIn mobile team, so expect regular enhancements and additions to the application through 2010.”

4) Bloomberg Mobile (available on iPhone and BlackBerry)

If you need to know which way the market’s heading wherever you are, Bloomberg Mobile is for you. Money website Mint.com gushes over this application, describing it as a “beautifully designed app that provides up-to-the-minute news, stock quotes, company descriptions, and price chart and market trend analysis”.

5) Cashflow Pro by 10X (available on iPhone)

Have you got business owners among your client base? This is a great application to be able to recommend to them – as well as to use for your own business. You can get an instant snapshot of a business’s net variable cashflow with Cashflow Pro.

It also gives tips and provides strategies to help you improve your financial position.

10X CEO Nic Clark points out: “Any business owner can now afford access to a proven cashflow management plan.”

14 September 2010 Investment Insightz: Zurich Financial Services Ltd

At the heart of the issue are the divided views on the economy. Some believe that the US economy will slip back into recession – the so-called ‘double-dip’ recession.

Others just believe that the economy is taking time to find its feet again after the biggest downturn since the Second World War.

Of course many would ask what that has to do with Australia. Our economy is in good shape, we’re more dependent on China, rather than the US, and Aussie company balance sheets are in good shape.

But at the end of the day Australian shares represent around 2-3% of world sharemarket capitalisation and over 40% of our shares are held offshore, so global trends will always be important for our market.

If you want to know the winner of the bulls versus bears battle watch the US job market – that will prove fundamental to the ‘double dip’ debate.

Stephen Karpin

Managing Director

CommSec Research Insight – 2 September 2010

It’s bemusing to see an idea take root and flourish in economic commentary when it doesn’t necessarily agree with the facts – the web has a lot to answer thanks to the ability to search, copy and paste.

Most often, it’s not economic “commentary” that’s to blame, but economic “barrow pushing” or simply mad and doctrinaire raving that latches onto an idea and then pursues it by ignoring evidence to the contrary and searching out and bending any factoids that support it.

The hardcore gold bug brigade are an easy example – they’re so keen to push the idea that the global financial system is doomed and that gold is only thing in the world worth having that they twist and ignore facts with wild abandon.

Doom and gloom

There are other less obvious cases though that seep into the collective memory unless challenged. For example, the idea that there is a lethal housing bubble in Australia and China that spells doom for our economy. These are important ideas to understand, so please bear with me as I deal with both of them by stealing the hard work of others.

There have been some credible and high-profile proponents of the Australian bubble argument – and some less credible. In my opinion, Dr Steve Keen falls into the latter category – he’s the fella who predicted Australian housing prices would collapse by 40 per cent and that we’d have 20 per cent unemployment.

That probably made him Australia’s most famous economist for a little while during the GFC when he was given uncritical free runs on the likes of 60 Minutes and the 7.30 Report. He was also demonstrably wrong.

Easy headlines

In the former category can be found the Economist magazine and, perhaps, British fund manager Jeremy Grantham who visited Australia last month and picked up some easy headlines by declaring a local housing bubble. The Economist made its case a few years ago, based on the idea of housing affordability, that Australian houses cost a higher multiple of disposable income than most other countries.

I suspect Grantham had picked up the Economist idea and run with it, but the situation isn’t nearly as simple as that – particularly if you get the facts wrong in the first case.

There are two essential parts to the question of whether Australia is suffering an unsustainable housing bubble. One is a simple matter of supply and demand – have we over-built housing thanks to a speculative investment boom the way housing was overbuilt in the US, Ireland, Spain et al?

Over-gearing

The answer to that is easy: no. We have a shortage of housing, we’ve underbuilt. Our investment in housing, as a percentage of GDP, has been pretty much flat for the past six years despite record population growth. That’s the main reason housing prices have risen.

The second part is the more complex issue of affordability, the bit the Economist and Grantham latched onto. The question there is whether Australian households are over-geared and thus riding for a fall.

And the good news there is that the over-gearing argument was comprehensively debunked by the Reserve Bank deputy Governor, Ric Battellino, in a speech last month. You can read the whole thing on the RBA web site here and then you won’t be easily fooled by headline-seeking alarmists.

Can we handle what we owe?

The RBA wouldn’t like us to gear up much more, but the Martin Place mandarins are pretty confident we can handle what we owe the banks now.

Grantham’s claim copped particular attention from Christopher Joye, managing director of Rismark International – a pro-housing investment research house – in a piece he had published in Business Spectator recently. Joye took some joy (sorry, I couldn’t resist it) is showing Grantham’s base figures were simply wrong, as well has quoting Battellino’s paper.

But Joye’s slap at Grantham was just a sidebar – his real target was the persistent allegation of a housing bubble busting in China. You’ve no doubt seen the stories or at least heard mention of dramatic collapses in Chinese residential real estate prices with the Doomsday Brigade using that as an excuse to forecast a crash in the Chinese economy that would flow through to Australia via commodity prices being smashed.

The Australian perspective

Turns out that isn’t quite the case. It’s symptomatic of the poor understanding of China that some people think China is Shanghai and Beijing. No, there’s a great deal more to it than that, as Joye makes plain.

More specifically from an Australian perspective, South Africa’s StandardBank commodities researchers have had a good look at China’s housing from the point of view of demand for commodities. StandardBank’s Walter de Wet finds some concern about the eventual sustainability of China’s rising house prices as prices are rising faster than the growth in median incomes (but not average incomes).

But that unsustainability fear is at the higher end of the housing market – not the base load that reflects China’s continuing urbanisation and industrialisation. De Wet puts it thus:

Onwards and upwards

“From a metal demand perspective, we look at Chinese housing market from a different angle than the US housing market. Prices fall for two reasons: either demand must decline, or supply must rise. Short-term demand may slow due to government measures to cool property speculation in China. But unlike many developed markets, urbanisation continues rapidly in China.

“Therefore, total demand for housing in China’s cities will remain healthy; especially lower income housing. If demand grows, then supply must rise (especially lower income houses). This is bullish for metal demand.

“We acknowledge for existing home owners (likely to be high income earners), there could be a negative wealth effect if house prices fall. In our view, this would affect final consumption expenditure more than primary metal demand.”

The bottom line

So don’t believe all the simplistic scary headlines you might read – the real story, as backed by the RBA and Treasury, is that China’s fundamental demand for bulk commodities remains in place for some years yet.

China’s housing keeps housing us by Michael Pascoe posted on Jul 09 08:27am

http://au.pfinance.yahoo.com/b/michael-pascoe/1112/chinas-housing-keeps-housing-us

Economic growth surpassed expectations in most countries across South East Asia late last year and early this year and, amid a broad based improvement in both external and internal demand, we are already seeing upward revisions to first quarter data.

The improving picture has already led China to take steps to reign back price appreciation in its property market by increasing the reserve requirement for banks on several occasions and Malaysia has also raised interest rates sooner than expected – as did Australia.

Of course, while all of this has been going on, the troubles facing the eurozone have also unnerved investors, as have proposals to tighten regulation of the financial sector.  Now we have rising tensions in the Korean peninsula encouraging investors to exit risk assets.

But while there will be volatility in markets as these events work their way towards a conclusion, the fact remains that the secular growth trends seen across South East Asia should keep the region on a healthy growth path.

Today’s volatility can create a good opportunity to become involved in the long-term growth stories to be found across South East Asia, growth opportunities that have led the region to command a greater proportion of global GDP.

Share of global GDP

Source: International Monetary Fund, World Economic Outlook Database, October 2009

Infrastructure investment is one of those major long term themes worth exploring.  The development of new infrastructure is necessary as the region grows if it is to sustain its rate of expansion.  For example, China needs to invest more in its railways and highways as 350 million people migrate to its cities over the next two decades. A massive rail and highway network is being built to connect the cities to rural areas.  Installed power capacity in terms of megawatts per person is also very low in China, as it is in other emerging Asian countries. There are many large scale projects underway to build new power plants across the South East Asian region.

This investment in infrastructure not only adds to current demand for capital goods but, in turn, fuels job creation, increases household incomes and, ultimately, boosts consumption.  In addition, healthy population growth, together with low household debt levels and high savings rates, also highlight the potential that remains to tap into a new consumer boom.

There is still much wealth creation taking place across the growing middle class in the region but, further down the income scale, most of Beijing’s consumer stimulus plans have also carried into this year, with focus likely to remain on raising household incomes and boosting consumption. The benefits of this will spill over into other countries in the region, like Taiwan, Korea, Hong Kong and Indonesia, which all export to China.

Among all the volatility at present, investors should not ignore the fact that there is much disparity in the region. Before the recent correction, some sectors and stocks had rallied strongly while others had lagged.  As a result, stock selection is likely to be more important this year than last.  Choosing the right stocks can offer a rich investment opportunity as Asia’s economic fundamentals remain stronger than those found elsewhere in the world.

Source

Written by Investment Management Friday, 18 June 2010 12:25

David Urquart is portfolio manager of the Fidelity Asia Fund

http://www.professionalplanner.com.au/investment-management/growth-and-opportunity-remain-in-asia.html

The larger-than-expected 110 billion euros (A$160 billion) austerity package for Greece, the eurozone bailout package of more than a $1 trillion and a commitment by the European Central Bank (ECB) to buy European sovereign bonds certainly reduce the danger for now. But investors are still concerned about other eurozone economies under similar fiscal pressures to Greece.

On balance, they probably shouldn’t fret so much. Greece, a country of only 11 million, is a basket case worthy of junk status that may succumb to its problems because of structural weaknesses; namely working practices, retirement laws, political stability and the size of the state. And while there were clarifications on how large the government debt of Greece is, there has been little new information on government finances in peripheral European economies that explained the market action leading up to the bailout package for the eurozone, which encompasses 16 EU countries that are home to about 330 million people.

The upward pressure on Irish government bond yields and CDS spreads before the package was announced (to above 250 basis points in early May from about 150 basis points in January) is particularly interesting. This is because Ireland was widely applauded by bond investors for tackling its deficit and outlining a credible restructuring plan. This suggests the market behaviour before the latest rescue package was more sentiment driven.

The fact that increases in Greek, Portugese and Irish credit-default swap spreads, which represent the cost of insuring against default in the underlying bonds, exceeded jumps in corresponding bond yields suggests speculative money was behind much of the recent market action before the eurozone packaged was announced.

However, investors are right to be cautious. Many commentators suggest the whole eurozone experiment is still shaky longer term and another country could become unstuck.

Might we see a domino effect?
But while the most likely sources of trouble, namely Portugal, Ireland or Spain, have problems, none are as sick as Greece.

Spain certainly doesn’t appear to be. While the economy suffers from high unemployment and the government needs to undertake fiscal tightening, a recovery is emerging. The bleak debt environment seems to have been priced into stock markets; however Spain’s potential to gain from the rapid growth of Latin America appears to have been underestimated on the basis of current valuations.

Portugal, at first glance, has similarities with Greece. The European Commission believes government assumptions of positive growth this year and next are over-optimistic. But like Spain, Portugal is not Greece. Its 9.4% 2009 budget deficit is more than 3 percentage points lower than Greece’s 13.6% shortfall and, crucially, the country has successfully cut its debt before.

Ireland’s 2009 budget deficit is actually higher than Greece’s. In terms of the total stock of public debt, however, Ireland’s is estimated to be a manageable 65% of output while Greece’s is a ruinous 110%.

No banking crisis appears imminent. European banks, overall, have a limited exposure to this potential crisis in comparison with sub-prime mortgages. The Bank of International Settlements estimates that European banks’ exposure to Greek, Spanish and Portuguese debt represents only 5% of total bank assets. So, the idea of persistent contagion seems unlikely given the relatively better economic and corporate situation in the other peripheral economies, the better credibility of their governments and the lack of exposure among the European banking sector in general.

Changed days call for changed tactics
Still, financial markets wanted swift, decisive, and aggressive action from the eurozone authorities to ease their concerns about Greece and other countries. And, they got it. Markets rallied strongly as details of the eurozone rescue package emerged, and it became clear to investors that the eurozone and global financial authorities were prepared to pull out all the stops to avoid any escalation of the Greek debt crisis.

The immediate reaction saw equity markets surge and risk spreads tighten, while the gold price fell and the euro strengthened. But the success of the rescue measures will be judged over longer time horizons. Investors must assess the short-, medium- and long-term impact of the overall package, its durability and the potential for unintended consequences.

The package makes an individual country issue into a European issue, and it gives the pressurised economies space to get their finances in shape. What is most clear is that European policymakers have risen to the challenge set by the markets, broken with tradition and boldly expanded the limits of their policy response. The market and the authorities are now in agreement: uncharted waters call for uncharted policies. As a result, investors suddenly have more confidence the turmoil can be navigated.

The ECB has historically taken a hard line on inflation, with little or no consideration given to economic growth. The commitment to buy sovereign bonds is therefore something of a watershed moment for a central bank that has been reluctant to consider anything but inflation targeting policies. While the markets have welcomed the new flexibility, inflation remains the enemy above all others and it should be noted that the monetary impacts of bond purchases will be sterilised or, in other words, offset via liquidity operations to avoid inflation risks.

Still, the fact is that a two-tier eurozone economy appears to be developing, as high debt levels and austerity measures make growth prospects gloomy for peripheral Europe. This is a big concern because of the implications for monetary union.

Recovery still intact
So what else can we say of the future? Global economic growth remains robust. Corporate earnings are healthy. The recovery in stock and credit markets is unlikely to be materially derailed by the recent events in Greece, which was always going to need a bail-out. That is not to say that other countries such as Spain, Portugal and the UK do not have tough choices to make. It’s just that they have more scope to make them.

We know there are pockets of slower growth in the eurozone, but the area will benefit from healthy global and emerging-market growth. Developing economies are contributing significantly to global growth and the eurozone is one of their key sources of machine goods, commodities, services and finished products.

In this light, European stock markets could offer excellent opportunities for investors looking for relative value. Another net positive for many European companies is that the weakness in the euro makes their products more competitive.

The midst of a crisis often presents attractive, valuation-based opportunities for astute investors prepared to take a medium-term view. Fidelity’s equity managers are united in their thoughts that there is significant medium- to long-term value to be found among this volatility in European equities. Many European shares are overlooked and under-valued and our portfolio managers are finding interesting ideas across the continent’s equity markets that have more capacity than most to surprise positively.

Actual and expected government budget deficits (as a % of GDP)

Datastream for 2008-09 figures. The Economist for 2010 figures based on forecasts by The Economist Intelligence Unit

Important information
Commentary on market activity and sector trends are subject to change and should not be taken as financial advice.

Fidelity International May 2010