13 reasons to feel positive about property in 2013

At the beginning of a New Year it’s customary for commentators to give forecasts for what’s ahead.


In a recent article in The Australian Craig Emerson is the Minister for Trade and Competitiveness gave 13 reasons for optimism for 2013 and beyond.


While Emerson is talking about the economy in general, this list is also critical for anyone interested in property investment as our real estate markets don’t function in isolation. Their health is of course affected by the strength of our economy, so let’s look at Emerson 13 ‘s  reasons to feel positive…

1.     Our economy withstood the deepest global recession since the Great Depression.

At a time when 11 million jobs were lost in Europe and North America, 400,000 new jobs were created in Australia. Recessions leave deep scars: retrenched older workers who may never find work again, bankrupted businesses and decimated local communities. Through good policy and co-operation between businesses and their employees in reducing hours worked without cutting jobs, we avoided the worst calamities.


2.     Australia’s inflation rate is low.

While many Australians are struggling to make ends meet, a big part of the explanation is that they are saving more and seeking to buy what they used to with less. A low official inflation rate gives the Reserve Bank room to keep interest rates low or contemplate reducing them further.


3. The cut in the Reserve Bank’s key interest rate from 6.75 per cent at the end of the previous government to just 3 per cent

… is saving an average mortgage-holder about $5000 a year. Having bottomed, house prices are slowly rising – a trend forecast to continue this year.


4. National savings have returned to more sustainable levels.

The period of the mid-2000s – when households spent more than they earned – was abnormal. Now the household savings ratio has returned to its normal average of about 10 per cent. Some retailers might yearn for the era of consumers maxing out their credit cards, but that period was not good for Australia. Cheap credit for risky borrowers and a US housing bubble led to the global financial crisis.


5. Unemployment is a little more than 5 per cent.

And an increasing proportion of Australians, as reported in The Australian on December 31, see the economy as being the same or better this year. This more positive outlook is good for confidence, good for consumption, good for investment and good for job creation.


6. The federal budget is in good repair.

Whether or not it returns to surplus in 2012-13, in the aftermath of the GFC this is the fastest fiscal consolidation in Australia’s history, and faster than that of any major advanced economy.


Net debt is expected to peak at 10 per cent of GDP, compared with 95 per cent for the major advanced economies. And at no time under the previous Coalition government was taxation as a share of GDP lower than it is now. If it were now at the same level as in the last year of the previous government, the budget surplus would be more than $20 billion.


7. Through its strong economic management…

… and integration with the rapidly growing economies of Asia, Australia is one of only a handful of countries that is rated Triple A and stable by all three international ratings agencies – the first time in our history this has been achieved.


8. China’s economy is resuming its rapid expansion

…its manufacturing output growing at its fastest rate in 19 months.


9. The US fiscal cliff of sharp tax rises and spending cuts has been averted.

Which will do no harm to an Australian stock market that last year recorded its biggest gains since 2009.


10. The bad news out of Europe has subsided.

While the management of southern European debt will need vigilance, the European Central Bank seems to have stabilised the situation compared with the crisis 12 months ago.


11. Investment in Australia is at 50-year highs.

While the mineral price peak has passed, the prices of iron ore and coking coal have recovered some of their 2012 losses as China’s economy expands at a faster rate than last year. Australia’s mining investment is about to peak but that is done for a purpose – to expand production and exports. Australia’s minerals and energy production peak is a long way into the future.


12. Australia has already put a price on carbon and is making the transition to a lower-carbon future.

Global warming is proving to be at the upper end of, or beyond, the range of scenarios previously considered likely. In the face of these findings, the world will take stronger action to limit carbon emissions. Australia has already put in place an emissions trading scheme without major economic dislocation.


13. Productivity growth, the only sustainable source of job creation and economic growth over the long term, is rising after a decade in the doldrums.

At 3.3 per cent, productivity growth in the most recent 12 months is comparable with that achieved during the productivity boom of the second half of the 1990s. We’ve a lot of work to do to sustain this upswing, but it’s an encouraging start.



The main risks confronting the Australian economy are the gloomsters seeking political gain from talking it down. There have been no unimaginable price increases from the carbon price, no wrecking ball, and entire communities have not been wiped out.


Australians are optimistic by nature and their increasing optimism about the economy is soundly based.


Source: An article by Craig Emerson is the Minister for Trade and Competitiveness in The Australian.