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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Mar 06 2015

Australian Home Price Prospects

In early February, the Reserve Bank of Australia cut its benchmark interest rate to a record low in an effort to weaken the Australian dollar and to boost growth. While the consensus was surprised by the RBA’s decision to keep rates unchanged this month, it was consistent with recent clues from our Australian indexes. Thus, with regard to Governor Glenn Stevens’ remark that further rate cuts may be needed, that possibility should be assessed within the context of the latest moves in ECRI’s proprietary indexes. In any event, the RBA’s February rate cut had already raised concerns among those that fear Australia is experiencing a housing bubble.

In this context, we examine the Australian home price outlook. Last spring, ECRI’s Australian Leading Home Price Index (AULHPI) correctly predicted that home price growth would ease. Today the AULHPI’s recent performance already provides important information about the trajectory of Australian home prices in the coming months.

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One of 2014’s biggest surprises – falling oil prices – is completely consistent with our timely call on global growth. When made last July, that forecast was opposed to the consensus view. More