Aus macro

Two related series, building approvals, and housing finance data.

Both above expectations, and holding broadly at very high levels.

Expect both to moderate over time, in the interim, good for banks, builders and cyclicals more broadly.

We are fairly close to reporting season, now. If you hear from a company between now and August, it tends to be bad news e.g. “confession” season.

It seems likely that the builders and the banks will have fairly strong results, given these elevated measures, even if the outcome means higher rates (more hawkish RBA) which will eventually weigh on both.

Restating, I think we’ve got an Achillies, it is the combination of overvalued dwelling prices and overly exuberant credit growth, with commodities the wildcard (in our view, set to fall), and that’s where the fragility of our growth comes in.

But for now, most measures are fairly/undeniably solid.

The RBA can/will nix that, of course, by tightening anywhere near close to the level implied by the market.

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