Markets
- Market Performance – ASX200 dropped 3.7% in September.
- Sector Performance – healthcare was up 0.9%, IT dropped 6.8%, energy was down 11.1%.
- Global – in the US the S&P500 index fell 3.8% in September.
- Gold – dropped further to $1,886.90/oz, a fall of $70.45.
- Iron Ore – dropped $5.00 to $120/ton.
- Oil – fell to US$40.95/bbl down $4.33.
Property
- Housing – dwelling prices dropped 0.4% in August and 0.2% in September. A staggering $229 billion worth of loan repayments have been deferred. No migration into the country will also result in a fall in demand.
- Values –Sydney was down 0.5% for August and 0.7% in September while Melbourne dropped 1.1% in August and 1.20% in September. Melbourne is now down 4.3% from its peak while Sydney is down 2.4%.
- Auction Clearance Rates – in Sydney September saw clearance rates steady at 71%.
- Residential Building Approvals – at 164,000 in August which is a steady trend but not strong.
- Vaucluse House Smashes Reserve – a Vaucluse house has sold for an eye-watering $24.6 million, smashing its reserve by $10.6 million and making it the most expensive house sold at auction in Australia. The five bedroom house at 42 Vaucluse Road attracted 25 registered buyers, of whom only 12 got a chance to bid. The hammer fell at $24.6 million, well above the $14 million reserve.
- Finance – On 25 September, the Morrison government announced their intention to repeal responsible lending obligations from March 2021. This would replace the current practice of “lender beware” with a “borrower responsibility” principle. Bank shares rallied on the news and this move should support property prices going forward.
Economy
- Interest Rates – were left on hold at 0.25% but expectations are that a further cut is imminent.
- Retail Sales – jumped in June by 2.7%m/m and a further 3.3% in July and now 4.2% in August.
- Bond Yield – Australian 10 year government bond yields fell to 0.79% in September.
- Consumer Confidence – Westpac Melbourne Institution consumer sentiment surged 18% in August.
- Exchange Rates – the Australian Dollar fell again against the US Dollar to AUD0.71 cents.
- Unemployment – fell from 7.5% in July to 6.8% in August.
- Chicago Purchasing Managers Index (PMI) – having fallen for 11 straight months to 32.3 in May and jumped to 36.6 in June, the Chicago PMI jumped strongly to 51.9 in July well above the 50 level indicating a growing economy. September has seen a massive jump to 62.4 signifying huge demand growth and a strongly improving economy in the US.
- Chinese Economy – Chinese economic data strengthens with their July trade surplus totalling $62.3 and $58.9 billion in August. These numbers are well above expectations.
- GDP – dropped 7% in June 2020 following a 0.3% decline in the March quarter. Two consecutive negative quarters of growth signal a technical recession ending almost 3 decades of recession-free economic growth in Australia.
- US Employment – September 2020 saw a huge 661,000 jobs created in the US and the unemployment rate dropping 0.5% to 7.9%. This indicates again significant improvement in the economy. This is on top of the 1.37 million jobs created in August which brought the unemployment rate down from 10.2% to 8.4%.
Comment
Castlerock pays record c$57m for Wollongong office
The Melbourne based fund manager has paid more than $57 million on a 5.5 percent passing yield for 45-53 Kembla Street.
The seven year old 6761 square metre building, majority leased to the Australian Taxation Office with smaller spaces to ANZ, Australian Red Cross and a café, includes four storeys of commercial area, ground level retail and a 92-bay basement car park.
It sits on a 2675 sqm parcel.
The deal is the priciest for a Wollongong office since Castlerock collected $50.83m selling 90 Crown Street in late 2018.
Bosses are burning out
Bosses have faced some of their biggest leadership challenges in 2020, but new research reveals just how heavy a toll the coronavirus pandemic has taken, with four in five leaders seeing themselves at risk of burnout.
Three-quarters said they felt pulled in too many directions in their role and 60 per cent were drowning in unnecessary admin or red tape according to the Global Leadership Wellbeing Survey, released recently.
Chief Executive Audrey McGibbon said while many bosses were well aware of their obligations towards looking after their staff during the pandemic, many were feeling unsupported themselves.
In a separate study directly comparing the same group of leaders two in five said they rarely or never unplugged from their work technology an hour before bed and nearly a quarter almost never get enough sleep.
Taxes
Well known economist Saul Eslake has proposed the introduction of an Inheritance Tax at 9% of values exceeding $1million. Death taxes were abolished in Australia over 50 years ago. Prime Minister Scott Morrison also left the door ajar in June when asked about an increase in the GST to help fund state government budgets when he indicated it would only be pursued with strong support from the states. (The GST is collected by the federal government but distributed entirely to the state and territory governments).