According to the new governor of the Reserve Bank of Australia (RBA), Michelle Bullock, most Australian businesses and households are doing fine. Yes, she admitted, the RBA’s rapid rate hikes had hit households very unevenly, causing some “challenges” and creating a lot of noise. However, in Hong Kong recently at a business conference, she said: “Those who are coming off very low fixed rate mortgages, they’re managing quite well. And all the indications from the banks….is these households are doing fine.” However, compare that view with the unwelcome news for the steel industry coming from the Housing Industry Association (HIA). “The RBA’s interest rate increases will suppress home building and spending across the broader economy next year by much more than would have been necessary to get inflation over the line into the RBA’s 2 – 3% target range,” warns the HIA´s senior economist, Tom Devitt. He says Australian home builders had a significant pipeline of work under or awaiting construction when the RBA started increasing rates in May 2022 and that that pipeline has kept Australians employed and the economy going for more than a year. “The pipeline is now shrinking and in 2024

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home builders will be starting construction on fewer new houses than at any time in the last decade,” Devitt concludes. Figures from the Australian Bureau of Statistics (ABS) support his argument. Although October saw a 7.5% increase in total dwellings approved, the trend this financial year has been downward. “In original terms, 55,029 dwellings were approved between July and October in 2023, compared with 65,599 over the same period in 2022,” says Daniel Rossi, ABS head of construction statistics.

The fall in annual inflation from 5.6% in September to 4.9% in October, and the RBA´s decision this week to hold interest rates steady, are both welcome developments for the steel industry. However, the patchy nature of things – the unevenness, as Michelle Bullock might say – is creating a market of contrasts. Indeed, the demand side of the Australian steel market on a regional and state basis lacks consistency. Whilst Victoria and NSW – Sydney in particular – will always take the majority of steel, those two states seem to have higher levels of confidence in their forward order books than the other states. And yet, even within each capital city there are those doing very solidly and those finding it much harder to conclude an underlying base of business. It had been expected the surge in immigration would give developers the confidence to initiate more housing projects. Instead, that desire has been quelled by new home buyers being scared off by rising inflation, house prices and interest rates. Nevertheless, as immigration continues to outpace the availability of dwellings, and as this shortage pushes house prices higher, domestic steel demand and steel prices are unlikely to fall too far. This contrasts with the rest of the developed world which is seeing generally weak demand. As a consequence, import prices are not rising as much as they should be even though scrap prices have risen over the past two months. It also means import prices are likely to remain very competitive with Australian domestic prices. For even the most loyal of domestic distributors, this is a salutary reminder of the wisdom of having more than one iron in the fire.

Finally, congratulations to the Australian wire mesh panel manufacturer, MAKOMESH, which was a finalist in the category of Australia’s Most Innovative Manufacturing Company at the recent 2023 Endeavour Awards, hosted by Manufacturers´ Monthly magazine. At an awards night held in Melbourne on November 30, MAKOMESH was nominated alongside Australia’s most innovative manufacturers, including high-tech aviation and aerospace innovators, and sophisticated engineering and robotic automation integrators. MAKOMESH is an online manufacturer producing high quality pre-galvanised mesh panels, including the market leading MAKOMESH® 358 security mesh panels, at its Milperra production facility in NSW.