by Craig James
 
In the last financial year, 2012/13, the Foreign Investment Review Board approved investment proposals totalling $135.7 billion, down 20.6 per cent or $35.1 billion on 2011/12, which in turn was 7.9 per cent or $14.7 billion down on the previous year.

Interestingly the FIRB considered 13,322 applications for investment in 2012/13, up from 11,420 the previous year with 12,731 applications approved (decided). Of the 12,731 applications decided, 12,025 were in the real estate sector at a total of $51.91 billion, down from $59.1 billion the previous year. Next highest sector by value was Mineral exploration & development ($45.14 billion) and Services (notably Communications) ($25.91 billion). Approved investment in Agriculture totalled just $2.86 billion.

Of the $51.91 billion in investments in real estate, $17.16 billion was in residential property (down from $19.7 billion in 2011/12) with the remainder in commercial property.

Within residential property, investment in “new dwellings” (includes vacant land, “off the plan” purchases) was $8.64 billion in 2012/13 with $6.36 billion in “developed” property (largely existing dwellings).

In terms of total foreign investment of $135.7 billion in 2012/13, US was the number one source at $20.6 billion (15.2 per cent), followed by Switzerland $18.4 billion (13.5 per cent) and China $$15.8 billion (11.6 per cent).

Within the real estate sector investment of $51.9 billion, the number one source of funds was China at $5.9 billion (11.4 cent), followed by Canada at $4.9 billion (9.5 per cent) and the US at $4.4 billion (8.5 per cent).

Switzerland was the number one source of foreign investment in Mineral exploration & development, Canada was number one in Services, and the US was number one in Agriculture, Finance and Manufacturing.

Unfortunately the FIRB only provides data on an annual basis. Greater value would be provided if the figures were compiled and published on a quarterly basis.

The week ahead

In Australia over the coming week, the “Autumn Avalanche” continues with another half a dozen key indicators due for release. In China the process of economic data starts on Saturday and Sunday and continues on Thursday. Meanwhile it is relatively quiet in the US.

In Australia, the week kicks off on Tuesday when the Australian Bureau of Statistics (ABS) releases the Overseas Departures and Arrivals publication. This publication doesn’t include data on tourist movements, but also longer-term “people movements”. Inward migration is creeping higher – no doubt because the desired skills can’t be found in Australia’s unemployed workers.

Also on Tuesday the NAB business survey is released. Business conditions are at 34-month highs, and if the upward trend continues, then fewer economists will be holding out for the now feint chance of another rate cut.

On Wednesday the monthly consumer sentiment data is released by the Melbourne Institute. However Roy Morgan does issue a weekly series with the same survey sample.

Also on Wednesday the January data on new home loans is issued. Based on data from the Bankers Association, the number of home loans to non-investors (owner occupiers) may have fallen by 1 per cent in the month, highlighting a cooling of demand for established homes.

And also on Wednesday, Reserve Bank Deputy Governor Philip Lowe delivers a speech.

On Thursday the ABS releases the monthly employment data. The indicator to watch is the number of hours worked. This tends to rise first in economic recoveries followed by the hiring of part-time and full-time staff. Hours worked and job ads are both rising. We expect the jobless rate to be unchanged at 6 per cent.

And on Friday the broad lending finance figures are issued. The data covers housing, personal, commercial and lease loans. And recent data shows that lending is indeed lifting in line with improved consumer and business sales.

Turning attention overseas, the week kicks off on Saturday (actually a day before the traditional start of this weekly preview publication) with Chinese trade (exports and imports) data for February. In January, data showed an expansion of the trade surplus to US$31.86 billion. But the timing of the Lunar holidays may have distorted the data.

And those Lunar holidays will be in focus on Sunday when the Chinese producer and consumer price data is released as well as on Thursday with figures on retail spending, investment and production. Still, while the figures may have been compromised by yearly changes in the timing of the Lunar holidays, they still move markets.

In the US, the week starts on Tuesday with the usual weekly data on chain store sales as well as wholesale sales and inventories and a survey of small businesses.

On Wednesday the usual weekly data on home purchase and refinancing is issued with February figures on the Federal Budget.

On Thursday, data on export and import prices is issued with retail sales and the usual weekly data on claims for unemployment insurance, Retail sales are tipped to have lifted 0.2 per cent in February after a 0.4 per cent fall in January.

And on Friday, the preliminary estimate of consumer sentiment is issued with the producer price index (PPI). The core PPI (excludes food and energy) probably rose 0.2 per cent in February.

Sharemarket, interest rates, currencies & commodities

At both the November and December interest rate decisions the Reserve Bank noted: “The Australian dollar, while below its level earlier in the year, is still uncomfortably high.” The Aussie was sitting at US94-96c just ahead of the November meeting, had held US93-95c over most of early-to-mid November and was at US91-92 cents just ahead of the December Board meeting.

Just ahead of the February 2014 interest rate decision, the Aussie dollar had come down to US87-88 cents, and the correction appeared to be implicitly supported by the Reserve Bank Board. Gone was the reference to the Aussie dollar being “uncomfortably high” and instead the central bank noted: “The exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.”

Before the March interest rate decision the Aussie dollar had crept up to US88-90 cents and again the Reserve Bank decided to slightly modify its views, saying: “The decline in the exchange rate seen to date will assist in achieving balanced growth in the economy, though the exchange rate remains high by historical standards.”

Is US90 cents the “line in the sand”? Perhaps. The Reserve Bank appears happy with the Aussie dollar between US85-90 cents, seemingly preferring the lower end of the target band. But it is also worth noting in the February and March interest rate statements, the Reserve Bank said commodity prices “in historical terms remain high” similar to its observations on the currency. Clearly it is important to keep in mind the trends for both.

Upcoming economic and financial market events

Australia

  • March 11 - Tourist arrivals (January) - Covers tourist as well as other longer-term “people” movements
  • March 11 - NAB business survey (February) - Business conditions are at 34-month highs
  • March 12 - Housing finance (January) - Data suggests that higher home prices are choking off demand
  • March 12 - Consumer sentiment (March) - Little change is expected
  • March 13 - Employment/unemployment (February) - Jobless rate was probably steady at 6.0%
  • March 13 - Modellers’ Database (December quarter) - Enables investors to gain extra insights on the economy
  • March 14 - Lending finance (January) - Covers housing, personal, commercial & lease loans

 
Overseas

  • March 8 - China Trade (February) - A narrowing of the trade surplus is tipped
  • March 9 - China Inflation (February) - Covers producer & consumer prices
  • March 13 - China Monthly activity (February) - Includes production, investment & retail sales
  • March 13 - US Retail sales (February) - Will be distorted by severe winter weather
  • March 14 - US Producer prices (February) - Annual business inflation is at 1.2-1.3%
  • March 14 - US Consumer sentiment (March) - Preliminary reading from University of Michigan