The Big Picture – Economic trends and influences for 2022, with Pete Wargent

Australia’s economy and our property markets don’t operate in isolation, so I believe it’s good to regularly have a look at the big picture, the macroeconomic factors affecting not just Australia’s economy, but the world economy to help us understand what’s ahead for us.

I do this once a month in these Big Picture Podcasts with Pete Wargent.

For our first Big Picture podcast for the year, Pete and I will briefly review what happened over the last year and our thoughts on the significant issues that will influence the world economy, Australia’s economy, and our property markets.

February’s Big Picture

It wasn't that long ago that we celebrated the beginning of a new year - 2020 - with anticipation of another decade of the roaring 20s.

But instead, COVID-19 dominated the news, economic landscape, and our lives.

At one point, it almost looked like Australia was on track to become ‘Covid free.’ And then came Delta, and the economy changed again.

Looking back to this time last year, we thought we were over it, and then came Delta, and everything changed, and the southern states and particularly Melbourne was, once again locked down.

And when we eventually thought we had this coronavirus thingy licked, along came Omicron. Despite this, our economy flourished, unemployment fell, and our property markets delivered a once-in-a-generation boom.

Despite a wall of worry with coronavirus, 2021 was an excellent year for investors, so what’s ahead for us? What will 2022 bring? What will be the significant issues that will influence our economy and housing markets this year?

Six things that went wrong in 2021

1. Several coronavirus waves disrupted economic activity.
2. Inflation took off as coronavirus boosted spending on goods and disrupted production.
3. Some key central banks started to remove monetary stimulus earlier than expected.
4. Bond yields surged.
5. Chinese growth slowed sharply.
6. Geopolitical tensions with China, Russia & Iran stayed high.

Seven reasons for optimism about economic growth

1. Coronavirus could finally be moving from a pandemic to being endemic – more on this below.
2. Excess savings will provide an ongoing boost to spending.
3. While Fed and likely RBA monetary policy will tighten this year, it will still be easy.
4. Inventories are low and will need to be rebuilt, which will boost production.
5. Positive wealth effects from the rise in share and home prices will help boost consumer spending.
6. China is likely to ease policy to boost growth.
7. While business surveys are down from their highs, they remain strong and consistent.

Economic growth

• Omicron shouldn’t slow Australia’s economic recovery through 2022
• The Australian economy is tipped to grow by 3.6% through 2022, driven by growth in NSW and the NT.
• 2021 recorded the fastest growth in the Australian economy since 2007, making it the second-fastest growth seen in the past two decades
• Shoppers have tightened their purse strings and locked themselves down through January, as consumer confidence tallies its worst post-Christmas performance in 30 years.

Interest rates

• Most banks believe interest rates are going to go start increasing in 2022 and the financial markets have priced in an interest rate hike
• Banks have increased their 3- 5-year fixed rates

Six things to watch out for in 2022

1. Coronavirus – new variants could set back the recovery.
2. Inflation – if it continues to rise and long-term inflation expectations rise, central banks will have to tighten aggressively.
3. US politics – political polarisation is likely to return to the fore in the US.
4. China's issues are likely to continue – with the main risks around its property sector and Taiwan.
5. Russia – a Ukraine invasion could add to EU energy issues.
6. The Australian election – but if the policy differences remain minor, a change in government would have little impact.

Outlook for the property markets

• Continues growth but slower
• Strong rental growth
• More choices so a flight to quality
• Return to form for regional Australia

Links and Resources:

Metropole’s Strategic Property Plan – to help both beginning and experienced investors

Join us at Wealth Retreat 2022

Pete Wargent’s new Podcast

Shownotes plus more here: The Big Picture – Economic trends and influences for 2022, with Pete Wargent

Some of our favourite quotes from the show:

“None of those cliffs the naysayers warned us about ever eventuated.” – Michael Yardney

“I bet you there’s going to be a few packages that’s going to stimulate the economy with an election coming up.” – Michael Yardney

“You don’t have to be the same after today, ever.” – Michael Yardney

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