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Hedge Clippings | 31 May 2024 Inflation and Trump are both Sticking Around... This week's release of Australia's CPI result was not what anyone wanted to hear - unless you're a retiree wanting a higher yield on your term deposits. And even if you are, don't expect any media headlines about it. With the April inflation number up 0.1% to 3.6% - the second monthly rise in a row - all the focus on expectations for a rate cut can be pushed further out, and possibly even bringing the possibility of another hike before a fall. Even the 3.6% number, which included seasonally volatile components, obscured the underlying figure of 4.1%, which at least held steady since the previous month, albeit higher than February's rate of 3.9%. Drilling down through the numbers housing was up 4.6% as a whole, with rents up 7.5% - hence governments in general getting twitchy. Within the housing bucket, electricity rose 4.2% which doesn't sound too alarming until you factor in the various rebates on offer, without which the number would have been a whopping 13.9%. No wonder Jim Chalmers' budget included further handouts for electricity consumers! The other area sure to make it to the top of the news pile at present is the cost of housing, and as above, the cost of rents. Governments seem to have suddenly woken up to the fact that there aren't enough new dwellings to accommodate the rising population. April's dwelling approval data released by the ABS this week showed just 13,078 new approvals for the month, down from peak of 23,136 in March 2021, and only just higher than the 12,917 in June 2020 at the height of the COVID crisis. Given the population grew by 172,700 in the quarter to September 2023, and 659,800 over 12 months it doesn't take too much to recognise that much of the housing affordability crisis can be attributed to a severe imbalance between supply and demand. That's economics 101. The problem is that the undersupply has been growing for decades, with a current shortage of dwelling completions around 50,000 per year. Even with the current push to build more dwellings, the backlog won't be cleared in the next 5 or possibly 10 years. The issue is not just building approvals and completions. Availability - or lack thereof - of land, infrastructure, and critically a skilled labour force to actually build the dwelling, will all add to the problem. Governments may well like to say they're addressing the problem. The reality is that housing affordability will remain an issue way into the future. On a much shorter time frame, an equally sticky problem faces the US leading up to November's election. Trump's overnight criminal conviction won't change the view of his diehard supporters - if anything it will galvanise both Donald and his legions of MAGA fans. Equally, it will reinforce the opinion of dyed-in-the-wool Democrats that he's not fit for office. Trump's challenge, and Biden's opportunity, (and challenge) are the traditional conservative Republican voters who'll have an issue voting for either of them, and will thus stay at home on November 5th. Our guess is that the turn-out on the day will decide the race to the White House, not the criminal record of one candidate, nor the age of the other. You'd think that with over 333 million people (2022) and counting, either party could have found themselves a more suitable candidate? News & Insights Manager Insights | Skerryvore Asset Management Trip Insights: Asia | 4D Infrastructure April 2024 Performance News Digital Asset Fund (Digital Opportunities Class) Insync Global Capital Aware Fund |
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