Housing slowdown lands 'with a vengeance'
"Sydney Morning Herald" -- April 6, 2004 - 4:47PM
smh.com.au
The housing market slowdown has arrived "with a vengeance", Westpac chief executive David Morgan said today. But he said interest rates were still set to rise because of strong economic conditions in Australia and abroad.
"The long-awaited slowdown in housing has finally arrived, and with a vengeance," Dr Morgan told a Trans-Tasman Business Circle lunch.
"We have seen a 20 per cent decline in dwelling finance approvals over the last quarter, and we're getting a lot of anecdotal evidence around auction clearance rates."
He had a "high degree of confidence" the slowdown would be a "gradual adjustment rather than a hard landing".
But he expected all Australian banks, including Westpac, would show evidence of the cooling housing market in their next financial results.
"I think for all the banks you'll see that coming through at the time that they next report," he later told reporters.
"We closed our books for the first half just a couple of days ago and, as I say, those are industrywide trends that are well underway."
Westpac, National Australia Bank Ltd, ANZ Banking Group Ltd and St George Bank Ltd all report half-year results in the next month.
Dr Morgan said the slowdown appeared to be broadly based, but was likely to be more pronounced for property investors than owner-occupiers.
As well, he said there was evidence of sharper pricing adjustments in property hotspots, such as inner Melbourne and Sydney.
Nevertheless, Dr Morgan told the lunch further interest rate rises were likely down the track, even though most economists expect the Reserve Bank of Australia will keep the official rate unchanged after its monthly meeting today.
He said the world economy was enjoying its highest "synchronised output" in at least five years.
"That's feeding into a very robust domestic economy, unemployment close to 20-year lows, non-tradeable goods inflation relatively high, official interest rates at the lower end of the neutral zone," he said.
"My best guess is, putting all that in the hopper, that we haven't seen the end of this round of tightening yet.
"We will see one more notch before that's through."
Dr Morgan would not comment specifically on the NAB currency trading scandal that generated $360 million in pre-tax losses and led to the departure of many top-level staff.
However, he said: "I am confident that had something like that occurred at Westpac it would have come to light very early".
"No bank, certainly not ours and no bank in the world, can avoid errors and can avoid fraud. The greatest protection is to have an open culture."
Westpac shares rose eight cents to $17.68.
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