Housing credit angst

The drive time media is full of hue and cry tonight. According to RBA financial aggregate statistics released today, credit for housing grew 2.1 per cent in March and 23.9 per cent annually.

Initial media reaction on radio said that result defied predictions and accordingly put fresh upward pressure on interest rates. The AFR online ran this article which summarises the argument quite well.

The bank’s governor Ian Macfarlane said recently that the slowdown in housing finance in recent months of about 20 per cent had still not been sufficient to bring the growth in lending back down to sustainable levels.

So what levels of lending growth are sustainable? I haven’t looked to Ian Macfarlane’s other comments on this issue.

Let me throw a a handful of flies in the ointment.

The Australian economy is apparantly going like gangbusters and employment rates are high. The stockmarket is alse offering good returns to investors. The deal flow across my desk looking for investors has increased and improved over the last 12 months.

But small business in Australia has no access to significant credit that is not backed by house lending. You can’t get a decent overdraft without offering some bricks and mortar.

I believe some Franshisees are able to get funding backed on the business alone, but I don’t know what hoops they must jomp through or ratios they must abide by.

So how does the RBA classify mortgages that are used for business and investment purposes but structured as a residential real estate loan? Especially if the borrower chooses to retain Consumer Credit Act protections by not signing those rights away through declaring the loan for business purposes.

So small businesses basically borrow against their homes and investment property to grow their businesses or extend their investments. Yet the banking system abandones them to housing credit. Those investments contribute to credit growth yet create upward pressure on rates.

Nasty trap that.


It is good to feel something deeply. It adds perspective to my life and reminds me of the important stuff.

Two external yet personal Iraq events touched me.

I found Bob Zangas’ Journey In Iraq blog over the new year break. It wasn’t a daily read but a good site to check occassionally. I’d seen his site, read his words and seen his pictures, I was getting to know him. Tragically Bob was killed on March 10.

With the blogsphere growing exponentially, and many bloggers around the world in harms way, it was bound to happen eventually. It makes my business and legal woes seem irrelevant.

My prayers are with his family. Bob died doing what he loved and was passionate about.

The second event is more esoteric.

I don’t know if you’re a fan of Doonesbury (the comic strip won a Pulitzer Prize), but I’ve been a fan since at least 1983.

One of the two original characters is BD who’s been stationed in Iraq. Today I got an email saying “BD’s been hit in Iraq” follow the original sequence here and forward for about a week.

Sure BD is a fictional casualty but I’ve followed this strip for over 20 years. Supporting characters have died before. Divorce, AIDS, Destitution have all wreaked havoc on the cast of characters.

So when Gary Trudeau focuses on shattering loss he knows how to make you feel it.

It made me pause to consider a renewed perspective.

While Doonesbury is fiction, Trudeau eloquently says

Whether you think we belong in Iraq or not, we can’t tune it out; we have to remain mindful of the terrible losses that individual soldiers are suffering in our name.

Bexley warehouse

It’s the end of April and I haven’t posted aside from getting the blog functional. Nothing on Psychology of the Deal this month, I’m too tired to be philosophical or insightful.

It’s been a busy month. On March 12 we opened a clearance warehouse in Bexley on a short term lease to clear excess inventory. The building has been sold and settlement is due in a week. We will move out on Monday.

Financially it has been good, not great. We covered overheads, and made a profit for the trading period. We learned about retail systems – warranty claims procedures, goods return policies, dealing with difficult customers. We learned a heap about pricing – we actually increased prices because people didn’t believe we were merely clearing out excess inventory. The next warehouse clearance will have even higher prices. They are still way below original cost but it turns out you can make something too cheap.

One of the strangest things was the pathetic results from our local paper advertising. We didn’t get that right at all. Next location I’ll focus on and fix that. We got better results from leaflet drops, which are normally marginal for us.

The other benefit is Bexley got our wholesale business going again. Our main warehouse is at Ingleburn, 50kms from Sydney CBD. It’s central enough for many, but the end of the earth for some. So we managed to get some customers to go to Bexley (12 kms from the CBD). So another win from the temporary location.

All unsold stock is going to an auction house without reserve. They’ll clear it out of their rooms in two weeks. They’re sending a team of guys to pack and move it out on Monday. The auction prices will be tiny, but I’ve wanted to test auctions for a while. It will end up being about 14 pallets worth of stock, a big enough test without hurting us if it doesn’t work.

Entries restored

I’ve restored the main entries for the blog. Interestingly the corruption appears to have been in the category related to the succession wars.

Comments are not fully restored yet (and may never be).

But at least we’re operational again.

Please advise of anything strange