Archive for the ‘Inflation’ Category
Friday, May 18th, 2012
Consumer sentiment is flat, despite a 50 basis point cut from the Reserve Bank. The Westpac Melbourne Institute Index of Consumer Sentiment increased by 0.8 per cent in May from 94.5 in April. Westpac’s Chief Economist, Bill Evans, said the results were surprisingly low and fell well below expectations. Its is a disappointing result. It follows a surprise 0.5 per cent cut in the official cash rate by the Reserve Bank and extensive media coverage that the unemployment rate had fallen from 5.2 per cent to 4.9 per cent.
However, other factors appear to have offset these positives. Firstly there might have been a degree of disappointment amongst households that the standard variable mortgage rate was reduced by an average of 0.37 per cent. The results show that sentiment is two per cent lower now, than when the cash rate was, 100 basis points higher last October at 4.75 per cent.
The lower than expected sentiment could give the Reserve Bank reason to cut the cash rate again in the coming months. Westpac’s current view that the Bank will wait until July before it cuts again but developments overseas along with today’s evidence that the recent cut has had little impact on Confidence could easily see the Bank bring that decision forward to the next Board meeting in June.
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Friday, May 11th, 2012
Multiple bathrooms are rated as number one on a wish list of features that buyers look for in a new home.
The results of a national pool of 114 real estate agents have uncovered some surprising research about what buyers want. The survey, commissioned by Turf Australia, found that 42 per cent seek more than one bathroom and 41 per cent desire a quiet street. A decent sized backyard was the next most sought out by 34% of buyers, followed by being close to a bus route or shops (20%) and off-street parking (13%).
It seems that it is not any old backyard that buyers want, but one with grass – the survey found that nationally a lawn could add 18 per cent, or just over $75,000 in value on the average $420,000 home. Three quarters of real estate agents said buyers want a safe playing area for their kids while a third believe a lawn adds to the look and feel of a home.
A lawn was shown to add the most value in Victoria (19%), followed by NSW (16%), Queensland and South Australia (12%) and WA (9%).
As a seller, the key message is that it pays to put some time into making sure your backyard – particularly the lawn – is in tip top condition!
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Posted in Financial goals, House prices, Inflation, Wealth | Comments Off
Tuesday, May 8th, 2012
The Reserve Bank is expected to cut the official cash rate by a further 75 basis points before the end of the year, after new research revealed job advertisements slumped yet again. According to the latest ANZ Job Advertisement Series, the number of job advertisements on the internet and in newspapers fell 3.1 per cent in April. Overall advertisements are now approximately 1.7 per cent below the level of April 2011.
Sustained uncertainty by consumers and businesses and an expectation that fiscal policy will subtract from growth in the year ahead as the Government returns the budget to surplus in 2012/13, has forced ANZ to forecast further 0.75 per cent drop in official interest rates by the end of 2012. In addition, expect to see the unemployment rate rise slightly to 5.3 per cent this month.
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Thursday, May 3rd, 2012
The Commonwealth Bank of Australia has cut its standard variable rate and thrown down the gauntlet to ANZ and Westpac. This morning, CBA announced it would cut 40 basis points from its standard variable rate, taking it to 7.01 per cent – 0.02 per cent higher than National Australia Bank.
Yesterday, NAB announced it would cut 32 basis points from its borrowing rates, taking its standard variable rate to 6.99 per cent. CBA’s rate decision now puts pressure on Westpac and ANZ. It is very unlikely that any lender would look to pass on the rate cut in full to their borrowers. I expected all of the lenders to withhold 10 to 15 basis points of the 0.5 per cent rate cut.
It is just a sign of the market at the moment. It looks like Australia’s second tier lenders will withhold even more. Last night, ING DIRECT announced it would decrease the interest on its variable rate mortgages by 0.3 per cent.
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Posted in Bank Profits, Enconomy, Finance News, Financial goals, Home loan product, Inflation, Wealth | Comments Off
Wednesday, May 2nd, 2012
Australia’s major banks are unlikely to pass on the full 50 basis point rate cut to borrowers. Yesterday, the Reserve Bank cut the cash rate by 50 basis points to 3.75 per cent the biggest drop since the peak of the Global Financial Crisis and the lowest level since December 2009.
Within hours of yesterday’s announcement The Bank of Queensland confirmed that it would pass on 35 basis points of the rate cut to its borrowers.However, at close of business yesterday, all of the majors were yet to make announcements around their mortgage rates.
I expect the big banks to follow the lead of BoQ and hold back some of the rate reduction. This is a very big move from the Reserve Bank and it will help thousands of households, with people on a $300,000 mortgage potentially saving around $1,000 per year.
But it’s unlikely that all lenders will pass on the full 50 basis point rate cut. The signals from the big four banks suggest that they will try to hold on to part of this rate cut, remember that of the 50 basis point cash rate reduction from the RBA since November, the big four banks have only passed on around 40 basis points to variable rate home loan customers.
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Tuesday, May 1st, 2012
The Reserve Bank of Australia (RBA) has cut the official cash rate in its May Board meeting today, following weaker than expected inflation data. The Board thought it was prudent to cut the official cash rate 50 basis points to 3.75 per cent, after headline inflation turned out to be significantly lower than the RBA’s target range of 2 to 3 per cent.
The rate cut failed to shock industry analysts, with many forecasting a rate cut last week. The RBA’s decision was the right one, as the economy was in serious need of a boost. We have seen a lot of softness in the economy of late. House prices are down on where they were, retail activity has slumped and headline inflation was just 1.6 per cent for the year. There is no doubt the economy is doing it tough at the moment and hopefully this rate cut will help ignite consumer spending once again.
Minutes from the meeting today show the RBA took inflation results onboard was making the rate cut decision. Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over two per cent over the latest four quarters.
In considering the appropriate size of adjustment to the cash rate at today’s meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.
With the RBA slashing rates, all eyes will now be on Australia’s lenders to see if they pass on the full rate cut to borrowers.
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Thursday, April 26th, 2012
The Reserve Bank of Australia is all but certain to cut rates in May, with new CPI data weaker than expected. CPI rose by 0.1 per cent in the March quarter of 2012.
The Housing Industry Association said the CPI result was weak enough to warrant a 50 basis point rate cut at next week’s Board meeting. The wider Australian economy needs a further 75 basis points of interest rate cuts and there is nothing standing in the way of a 50 basis point move to get the ball rolling next Tuesday.
50 points would be a bold move for the RBA, but it would be entirely appropriate given the pulse of the Australian economy.
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Thursday, April 19th, 2012
ABS figures released today confirm a very weak quarter for new housing in December 2011. New residential building work fell by 1.7 per cent in the December 2011 quarter to be down by 7.7 per cent when compared to the year before. Meanwhile, the value of major alterations and additions work done, which accounts for around 20 per cent of total renovations activity, fell by 2.1 per cent over the quarter. The overall value of work done in total over the 2011 calendar year was down by almost 10 per cent.
Things are just getting worse for both new housing and major alterations and additions activity. In the December 2011 quarter, seasonally adjusted residential building work done fell for a third consecutive period, declining by 1.8 per cent to an annualised level of $44.5 billion.
The situation is very clear – interest rates are too high, the short term focus on a return to budget surplus badly timed, and housing policy reform
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Tuesday, April 10th, 2012
Pressure is mounting on the Reserve Bank of Australia (RBA) to cut the cash rate in May after unexpected hurdles slow the nation’s growth. The increasing cost of living may spark the RBA to drop rates, with average petrol prices over the long-weekend over $1.50 according to the Australian Institute of Petroleum.
The latest RP Data statistics also show a flat market with house prices, with no improvement seen over the first quarter of the year. Poor results are expected in the housing finance and employment results which will be released by the Australian Bureau of Statistics later this week.
International news is also making its mark on Australia with a slowing growth rate in China also causing damage at home. Spain conceded its debts will balloon this year to their highest level for two decades. The Spanish government announced that the debt-to-GDP ratio will leap to 79.8 per cent in 2012 from 68.5 per cent last year.
Also, news of tension between the US and China over the holiday may cause the Australian market to suffer according to the Australian Financial Review, despite the US government playing down the fears of confrontation.The industry will be keeping a close eye on the release of vital indicators in the coming week including consumer sentiment, employment figures and housing finance.
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Tuesday, March 6th, 2012
The Reserve Bank of Australia has left the official cash rate on hold for the second consecutive month. In the minutes of the Monetary Board Meeting, the Board said that “the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring. Most information on the Australian economy continues to suggest growth close to trend overall, with differences between sectors and considerable structural change. Labour market conditions softened during 2011 and the unemployment rate increased slightly in mid year, though it has been steady over recent months. CPI inflation has declined as expected and will fall further over the next quarter or two.”
“Interest rates for borrowers have generally risen slightly since the Board’s previous meeting, but remain close to their medium-term average. Credit growth remains modest. Housing prices have shown some sign of stabilising recently, after having declined for most of 2011, but generally the housing market remains soft.”
The decision was largely expected, with most economists now expecting rates to stay on hold until mid-year.
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