September Growth Figures
Just a Pothole in the Road

Growth will continue.

Growth will continue.

Relax, it hasn’t all come to an end.

Sure, the Australian economy may have grown by only 0.2% in the September quarter. And retail sales might have actually fallen by 1.1% for October.

However, the overwhelming consensus is that this is merely an aberration.

And the underlying growth projections remain very favourable — with the full effect of the mining boom having resumed, due to be felt by mid-2011.

So why has there been a general hesitancy over the past 4 to 6 weeks?

First, there was the unsatisfactory conclusion to be Federal election. Then, came the “unexpected” rate increase by the RBA. And for Victorians, the recent state elections — where there was a surprising change of government.

And whenever there is uncertainty … people simply tend to “do nothing” — because that just seems to be the safest option.

However beneath the surface, there is an underlying strength — even though retailers may not be feeling this at the moment.

Over the past 12 months, disposable incomes have risen by 6.5% — in part through higher wages, but mainly due to a fall in unemployment.

Previously, people would have simply spent all of this and more, by borrowing. In other words, we had negative savings as a country.

But recent national accounts show the household savings rate [disposable income — consumption] jumped to 10%, from the beginning of the GFC until now.

As such, Australians remain far better placed to cope with any present or future global crisis. And our economy can also absorb some of the inflationary pressures, as the mining investment boom resumes in earnest.

h2. Bottom Line for Commercial Property

There has been somewhat of a catch up occurring, with many vendors placing their properties onto the market during the second half of 2010. And for all the reasons covered above, buyers have largely been sitting on their hands.

However, all this will change in 2011.

Psychologically, investors simply need to clear the holiday break … in order to put the confusion of 2010 behind them.

And then, they will return to the market again next year — once they realise the full extent of the underlying strength of the economy and (more specifically) the property market itself.

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