mrd

January 31, 2011

Most of us are back at work, but the silly season won’t be over until we get the Queensland floods into perspective. They are a great human tragedy, but they’re not such a big deal for the economy.

It’s not surprising the public has been so excited about such amazing scenes and so much loss of life and property. Nor is it surprising the media devoted so much coverage to the floods when, with most of us at the beach, there’s been so little other news.

It’s not even surprising the Gillard government has been beating up the story, making it out to be the biggest thing since the global financial crisis. At one level this is just the pollies doing their instinctive I-feel-your-pain routine. They could seem heartless if they tried telling people things weren’t as bad as they seemed.

via Floods’ economic pain is greatly exaggerated.

Let me cut straight to the point: “Buy Into Negativity At Your Own Peril”. Self employed most of my working life, rarely has there been a time void of negative press and negative opinions. It’s not what happens that determines your future but your attitude to what happens.

What Are You Hearing?

Please read to this article in its entirety and allow me to challenge and expose the “conventional wisdom” that has influenced our society during the global financial crisis (GFC), deadly bush fires, drought and now devastating floods of the past three years.

Add to that claims that unemployment would bust through 10% as our economy fell into depression with property values losing 40%; like it was all a done deal! Well these didn’t happen, the economy is doing well, property values have strengthened and unemployment is falling sharply. Next were the claims (late last year) by so-called-experts that interest rates would rise in February; again broadcast as an almost given and incorrect!

Back before Christmas I caught up with a mate who is a respected and successful financial adviser. We both agreed that there was a greater chance that the next rate movement would be down rather than up. Guess what, six or seven weeks later and that view is gaining traction. At the time of the last interest rate rise I believed the Reserve Bank (RBA) got it wrong (as in the last two rises in early 2008).

Those who make decisions in reaction to the ever-changing opinion of others are doomed to a life of mediocrity! Why? Because throughout history “the masses” have messed up when it comes to financial security. Sadly this is a fact.

Any Dead Fish Can Swim Downstream

Any dead fish can swim downstream but it takes right knowledge, guts and determination to swim against the tide of popular thinking and opinion.

Laws Are Laws

Read more…

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The best story of the year doesn’t give the proper praise and credit for this painful but understandable story as told by a loving wife…

The pastor asked if anyone in the congregation would like to express praise for answered prayers.

Suzy Smith stood and walked to the podium. She said, “I have a praise report. Two months ago, my husband, Tom had a terrible bike accident and his scrotum was completely crushed. The pain was excruciating and the doctors didn’t know if they could help him.”

You could hear a muffled gasp from the men in the congregation as they imagined the pain that poor Tom must have experienced.

“Tom was unable to hold me or the children,” she went on, “and every move caused him terrible pain. We prayed as the doctors performed a delicate operation, and it turned out they were able to piece together the crushed remnants of Tom’s scrotum, and wrap wire around it to hold it in place.”

Again, the men in the congregation squirmed uncomfortably as they imagined the horrible surgery performed on Tom.

“Now.” she announced in a quivering voice, “thank the Lord, Tom is out of hospital and the doctors say that with time his scrotum should recover completely.”

All the men sighed with unified relief. The pastor rose and tentatively asked if anyone else had something to say.

A man stood up and walked slowly to the podium. He said, “I’m Tom Smith.”

The entire congregation held their breath.

Read more…

The  Queensland flood has sadly led to tragedy, with the loss of several lives and billions of dollars in property damage.

I debated with myself, especially given the awful events in Toowoomba, whether to comment, but too much of the coverage, especially concerning the economy, is overly negative.

These floods, catastrophic as they are, can ultimately have some positive results, setting up not only Queensland, but much of Australia, for an economic boom in the years to come.

This is the circuit-breaker that has been missing – this year’s probable factor X and a key ingredient to restore long-term confidence.

We have been waiting for a GFC-induced Armageddon, which hasn’t arrived; but instead of getting on with our lives, many of us still have our fists clenched ready to fight something, anything even shadows.

But now a fight has arrived and, after it all settles down, the rebound is likely to be very strong.

The stoic nature of those directly involved heightens one’s pride in being Australian and is resonating around the country and overseas. These images, which are being beamed around the globe, will have more impact than any artsy jingle or smart tourism one-liner. Even Oprah Winfrey’s recent visit cannot top this.

Mark my word, tourism Down Under will improve once this calms down; and not by those who want to gawk at the damage but because people travel to places with character.

This event, and the way those affected are handling it, reinforces our image overseas tough, can-do, stoic, mateship and a land of extremes.

Yes, the short-term economic negative impacts will be high but there is a sliver lining.

Flood assistance is costly, but it is generally a one-off, upfront expense.

While inflationary, the good news is these floods are unlikely to influence the RBA’s thinking on interest rates. Global demand for coal remains strong, contract prices are on the rise and once the Queensland mines are pumped dry and the coal is loaded on to ships, it will be worth more, helping to offset any losses. Similar factors are at play for the farming sector.

Yes the floods have destroyed crops, but also increased soil moisture for the future. To a large extent, the effect of the floods on the economy is a timing issue, slowing growth now, but adding to it once rebuilding efforts are under way.

This is a year of two halves – hard over the next six months or so, but much better, economically, as we head into spring.

Sadly, it is breaking our hearts, but it won’t break our will.

via Prosperity could follow Queensland flood | Courier Mail.

A  looming surge in baby-boomer retirees could force superannuation funds to freeze assets and ban withdrawals unless minimum contributions rise from 9 to 15 per cent of wages and salaries.

One of Australia’s leading demographic economists has warned a critical point will be reached in 15 years when there will be more people withdrawing cash from super funds than there are workers contributing to them.

Brian Haratsis, chief executive of MacroPlan Australia, said unless more money is pumped into the system by current workers, many funds may not have enough liquid assets to meet redemptions, forcing them to shut up shop.

“It’s the biggest problem that nobody is talking about,” Mr Haratsis said.

“The number of people retiring is going to double in the next couple of years and unless we take action ahead of time, the only solution will be government intervention and a massive restructure of the superannuation industry.”

He said the Government would never allow the funds to freeze up, but it must act soon by swiftly increasing the super guarantee to 12 per cent. It must then increase to 15 per cent to make sure the funds have enough money to meet the impending “hump” in retiree numbers, he said.

The Government has committed to raising the contribution level to 12 per cent at some time before 2020.

Association of Superannuation Funds of Australia chief executive Pauline Vamos said some funds might have to delay payouts as the retired population increases.

“The law requires funds to meet withdrawals within 30 days so trustees and managers keep a constant eye on their liquidity,” she said. “But there could still be some that have to ask the regulator for permission to delay payments.”

via Boom in retirees is super concern | The Daily Telegraph.

A surge in demand for rental properties is expected in coming months, with some rents expected to rise by as much as $100 per week on homes available for lease.

Thousands of flood-affected homeowners are beginning the search for short-term accommodation as real estate agents are predicted to be inundated with inquiries about rental properties.

Property analyst Michael Matusik believes weekly rents could rise by as much as $100 per week for those looking to sign a new lease.

“Something that is now $400 a week may increase to $500 a week and we are going to see that escalate as people leave friends’ and relatives’ homes,” he said.

Rental Express managing director Chris Rolls said his agency managed 3500 homes and he believed agents should prepare for what “will probably be the single busiest three to six months we have in the next 10 years”.

REIQ managing director Dan Molloy believes Ipswich in particular will have rental supply problems.

via Rents to skyrocket post flood | Courier Mail.

Renters in Brisbane and those trying to sell homes in low lying areas of the city are expected to find it tough in the short term, according to property analysts.

But over the longer term the Queensland floods are not expected to have a major impact on Brisbane’s real estate prices.

RP Data says buyers already know the risks of living in a waterfront location, so those properties overlooking the Brisbane River are unlikely to experience too much price movement in the near term.

“People know that rivers flood and when you live on a river you run the risk of getting some flood damage on your property,” RP Data director Cameron Kusher said.”So I don’t think it’s those properties that will drop in price, I think they’ll probably stagnate and you won’t see too much growth or too much backward movement in prices.”

But the property research firm predicts that over the next five years homes further away from the river in low lying areas could lose as much as 10 per cent of their value.

“You could see some heavy discounting from those looking to sell and the pool of buyers for those properties is likely to be a little bit smaller,” RP Data director Cameron Kusher said.”I’d probably expect that over the next five years, the buzz words will be “flood report” or “Is this property likely to flood?” when anyone is looking to buy a property.”

According to RP Data, the median house price in Brisbane is $432,900, which dipped 0.7 per cent over the course of 2010. RP Data expects that the floods will keep sellers on the sidelines as the clean-up becomes the focus.

Cameron Kusher says he does not expect housing stock to spill on to the market and it is simply a matter of time before the property market returns to normal. “People have a bit of a memory, but it tends to be a short memory. So it will only be a few years, five years at the most, that people will really focus on those flood reports,” he said.

Floods put pressure on rents For renters though, property is set to get a lot more expensive as more people enter the market during the re-building and re-construction phase the city is entering.

RP Data says that pressure, along with higher interest rates, could see rental rates increase in excess of 5 per cent this year. “Particularly in inner city areas where the vacancy rate is already so tight, people will have to start looking for that area five to ten kilometres from the city,” Cameron Kusher said. “There’s not a lot of units or even houses in those areas, they tend to be a lot more owner occupier focused, so it will be a little bit difficult for some people to find rental accommodation.”

via Floods to shake up Brisbane property market – ABC News (Australian Broadcasting Corporation).