Australian economy ‘finely poised’ as borrowers feel impact of ‘unnecessary’ rate rises
The latest Deloitte Access Economics report predicts growth to slow to lowest levels since the recession of the early 1990s
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The past two interest rate rises by the RBA were unnecessary, a new report released by Deloitte Access Economics today has said.
Lead author and Deloitte Access Economics Partner Stephen Smith said in the business outlook report that the Australian economy is now ‘finely poised’ as economic growth slows to a trickle this year, the weakest since the recession of the early 1990s, outside pandemic conditions.
“Our view remains unchanged – the additional 50 basis points of increases earlier this year were unnecessary, and have prompted a further downgrade in Australia’s growth outlook,” Smith said. “That downgrade is centred on our households, and a ‘consumer recession’ is now forecast in 2023, with household spending expected to finish the year below where it started.”
While he said many mortgage holders were in a position to weather the interest rate rises, which will mean an increase in payments of $14,000 for a $600,000 when lenders pass on the full increases, a significant group were not. He said as many as 15 percent of variable rate, owner-occupier mortgage holders could be in negative cash flow by the end of 2023.
“On these numbers, at least 300,000 Australian households may currently be experiencing negative cash flow, with mortgage repayments and essential living expenses together exceeding household disposable income,” Smith said. “That should shock all of us.”
Smith said the pressures on the construction will also continue to impact the rental market, with commencement on new dwellings expected to be the lowest in a decade.
“Construction is expected to commence on significantly fewer houses and apartments compared to previous years – in fact, Deloitte Access Economics expects that 2023 will see construction commence on the fewest dwellings in more than a decade and almost 70,000 below the level commencements recorded in 2021,” Smith said.
“On these numbers, new housing supply would just barely keep pace with population growth, let alone ease what is a critical undersupply. In short, we are building far too few dwellings and, with a myriad of supply side challenges unresolved, that is unlikely to change in the near term.”
Deloitte Access Economics has revised expectations for economic growth down to 1.5 percent for this year and just 1.2 percent for 2024.
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Paramount and California’s attorney general are in advanced settlement talks over the company’s proposed $81 billion merger with Warner Bros. Discovery. Potential concessions include investing $1.5 billion in California production, retaining both studio lots and introducing safeguards for CNN’s editorial independence.
3 min
California’s attorney general and Paramount PSKY -3.86%decrease; down pointing triangle have discussed a series of potential concessions as part of advanced settlement negotiations, including a $1.5 billion investment by the company in production in California, according to people familiar with the discussions.
Paramount executives and a coalition of states that sued to block its $81 billion merger with Warner Bros. Discovery WBD -1.56%decrease; down pointing triangle spent the weekend hashing out the details of a possible settlement. Such an agreement would clear the way for a deal that would bring HBO, CBS, CNN, streaming services and famed movie studios under one owner.
Among the concessions the parties have discussed beyond the sizable production investment: a promise not to sell either studio lot and to stay in the state of California, the people said. The company had explored moving out of the state as the deal faced opposition.
The parties have also considered potential penalties if Paramount doesn’t make good on an earlier pledge to make 30 movies a year after the merger, including having to sell its stake in Miramax, known for such classic movies as “No Country for Old Men” and “Pulp Fiction,” the people familiar with the matter said.
Other measures the sides have explored include the sale of some cable channels and the creation of a board to ensure that CNN retains editorial independence, people with knowledge of the talks said. The network has been a political flashpoint throughout Paramount CEO David Ellison’s fight for Warner. Paramount had been discussing creating such an editorial board before the lawsuit.
A final deal hasn’t been reached, and it is unclear what terms the parties may ultimately agree to.
Ellison has spent the past year fighting to buy Warner in a megadeal that would expand his entertainment empire, but that has drawn opposition from some political and Hollywood figures.
A dozen Democratic-led states led by California Attorney General Rob Bonta sued in July to block the deal on antitrust grounds, arguing that the combination of Paramount and Warner would create too much concentration in the markets for theatrical films and cable television channels.
The Writers Guild of America sued over the merger, saying that the deal would eliminate jobs and career opportunities for Hollywood screenwriters.
About two dozen demonstrators gathered in front of the Elihu M. Harris State Office Building in downtown Oakland on Sunday evening to protest a potential settlement. Holding signs reading “Bonta: Don’t You Dare” and “Block the Megamerger,” they took turns giving speeches urging the attorney general to continue pressing the suit.
“Nothing has changed since he filed the case,” said Annie Leonard, co-founder of the nonprofit Committee for the First Amendment, which advocates for free expression. “He needs to stay as strong as he was in filing it.”
The two sides had come under pressure to settle the matter in recent months, including from California Gov. Gavin Newsom, Los Angeles Mayor Karen Bass, gubernatorial candidate Xavier Becerra, movie theater chains and some Hollywood labor unions.
Paramount’s agreement with Warner also included a “ticking fee” with payments to Warner shareholders of roughly $650 million a quarter, or $7 million a day, beginning next month, until the transaction closes.
Paramount had asked a federal judge to require the states and the Writers Guild to put up a nearly $1.9 billion bond for challenging the acquisition, money that would go to the company if it ultimately won the case.
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