Economic conditions remain tough both domestically and internationally. Domestically, unemployment has risen to 4.8 per cent nationally in January 2009, the largest monthly increase since October 2001. The total labour force increased in January 2009 to 11.28 million people, while the Victorian unemployment rate remained unchanged at 4.6 per cent. Strong employment will be vital to maintaining stability in the property market.
Another important factor to the stability of the property market, consumer sentiment, fell 4.6 per cent in February 2009 to 85.8. Sentiment regarding current conditions increased slightly while sentiment regarding future expectations decreased significantly. The large negative sentiment comes from expectations for “economic conditions next 5 years.”
The Australian dollar has depreciated by 18.7 per cent over the last year to 27 February 2009, ending at $0.6454 US at close of business. The dollar has fallen on the back of falls in commodity prices over the last year and on recession worries which has pushed investors to safer investments, like the US dollar. Inflation pressures have eased in recent months as the national inflation rate fell to 3.7 per cent in the December quarter 2008. Victorian inflation also decreased over the quarter, falling to 3.2 per cent.
The retail sector has felt the effects of the current economic downturn and despite the stronger than expected month of December 2008, has been fairly flat the remainder of the year. National retail trade increased by 3.8 per cent in December in seasonally adjusted terms, compared to 1.8 per cent for the remainder of the year. National retail turnover was 5.7 per cent for 2008, compared to 8.3 per cent in 2007. Victorian retail turnover increased by 6.9 per cent for the year in seasonally adjusted terms, slightly better than 2007’s 6.7 per cent increase.
The automobile industry has also been hit as the trend estimate for total new motor vehicle sales has been decreasing for over a year. The January 2009 trend estimate decreased by 0.8 per cent for the month to 75,937 and by 16.5 per cent for the year. The seasonally adjusted estimate for total new motor vehicle sales has decreased by 1.1 per cent for the month and decreased by 16.9 per cent for the year.
With economic conditions expected to worsen over 2009 many countries are considering tariffs to protect domestic markets. Such protectionist policies will further deteriorate eonomic conditions in Australia, by decreasing demand for the Australian dollar and by putting upward pressure on prices; countering an inflation rate that has just started to decrease back towards the RBA’s target range of 2 to 3 per cent. The best hope for countering downward economic pressures will be for companies to retain employees, for further monetary policy initiatives from the Reserve Bank, and for further fiscal stimulus from the Rudd Government.
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