With interest rates on the rise, the question on everyone’s minds is where will the Reserve Bank stop? Rates have now risen for three consecutive months and the Reserve Bank is giving few hints that it is ready to pause. 

It’s always important to keep in mind that it is the level of interest rates that matter for the economy, not the change in rates. While some borrowers may have been disappointed that rates were lifted again this month, the cash rate is still super low at 3.75 per cent. Before the global financial crisis the lowest that rates had ever fallen was 4.25 per cent. So even with the latest move, the cash rate remains below previous lows. 

And the latest rate hike is hardly causing significant pain for Aussie households. The latest information from the Commonwealth Bank, is that over 90 per cent of home loan customers are still ahead in their loan repayments. If any recent borrower is facing hardship with the cash rate at 3.75 per cent, it suggests that they probably shouldn’t have taken out a loan in the first place.

So where will the Reserve Bank stop? The low point for the cash rate in the last interest rate cycle was 4.25 per cent, so the Reserve Bank will probably feel a little more comfortable when rates get to that level. The last thing the Reserve Bank wants is a repeat of the US experience where interest rates stayed too low for too long, resulting in risky lending practices and an ensuing financial crisis. 

The generally assumed target for the cash rate is 5 per cent – the supposed ‘neutral’ level of interest rates – a rate that the RBA believes isn’t either stimulating the economy or serving to slow it down. But while 5 per cent may have been an appropriate neutral setting in the past, it is probably too high in the current circumstances.

There are two reasons why the ‘neutral’ rate is closer to 4.5 per cent than 5 per cent. One is the Aussie dollar, currently near US93 cents rather than the long-term average of US70 cents. The stronger dollar is working to slow tourism, manufacturing and export sectors while keeping a cap on inflation. The other reason is interest rate margins. On average over the past 10-15 years the variable housing rate has been around 2 percentage points above the cash rate. Currently that gap is around 2.8 percentage points. If the housing rate rises another 75 basis points it will be back at the decade average. But the cash rate would need to rise another 150 basis points to return to its decade average.

The bottom line is that while interest rates may have still some way to go to get back to normal, the Reserve Bank may be a lot closer to that level than many think.

Hello Friends here we come up with our another write up on “SMC Gyan Series”.

Topic is ECONOMIC INDICATORS… “Leading the World”.

Here, we would go through the Brief of like what are Economic Events & Indicators and important sources of data provider for calculating & determining economic indicators.

 

ECONOMIC INDICATORS… “Leading the World”

..

Economic Events & Indicators are statistics that precede an economic event.

The goal is to track the economy & derive a forecast for future performance.

Economic indicators have tremendous potential to generate volume and to move prices of commodities futures as well as the financial markets including Forex.

Tools of Construction: This would include separate sections of statistical methods including

- Calculating indices and re-basing them,

- Differences between arithmetic and geometric averages,

- Standard deviations,

- Regression analysis,

- Correlation and causation,

- Margins of error in statistics calculations and

- What this means for interpretation, subsequent revisions and why they happen.

Economic indicators include various indices, earnings reports, and economic summaries.

Examples : unemployment rate,  housing starts,  Consumer Price Index (a measure for inflation),  Consumer Leverage Ratio,  industrial production,  bankruptcies,  Gross Domestic Product,  broadband internet penetration,  retail sales,  stock market prices,  money supply changes etc;

The important sources of data provider for calculating & determining economic indicators are like:

- Bureau of Labor Statistics,

- Census of Construction Industries,

- Bureau of Economic Analysis &

- Reserve Bank.

The value of the indicator data is considered important if it presents new information, or is instrumental to drawing conclusions which couldn’t be drawn under other reports or data.

Each indicator is marked with “H”-”M”-”L” (High-Medium-Low), according to its level of importance, as commonly considered.

Next Blog we would try to know about the classified categories of Economic indicators in details and what is Time Era.

Stay Tuned for more and more on this

However For More latest Industry,Stock Market and Economy News Updates, Click Here

Real Estate agents’ phone have been busy since Fonterra announced an increase in its forecast milk payout.

Some calls have been from would-be buyers and a few have been from vendors wanting to take their farms off the market.

They’d been under pressure from banks but the increase in the payout has given them some respite.

The sharp drop in the payout last season provided a wake up call for farmers who had borrowed heavily and many will use the increased payout to reduce debt.

However, the increase might not be enough for everyone.  The Reserve Bank’s financial stability report says some farms are carrying too much debt and will be forced to sell some or all of their operations.

Very few farms have sold in the last few months because buyers have been holding back but that changed this week.

No-one rings a bell at the bottom of the market, but the number of calls real estate agents are fielding suggests dairy farms, and their prices, might be about to move again.

New boom ‘could last for years’, says a bullish RBA. AUSTRALIA is rapidly emerging from the downturn into an economic boom the Reserve Bank believes could last for years, powered by the resource industry and rapid population growth. The bank’s quarterly review of the economy, published yesterday, has sharply upgraded its short-term economic forecasts and presented a radical rethink of Australia’s growth potential.

World hits Rudd over boat people stand-off. THE Federal Government’s tough stance on asylum seekers is attracting international media attention – most of it critical and likely to damage Australia’s standing. .

Out of the Woods: state’s tourism links to golf’s El Dorado. HE’S not so much a golfer as a phenomenon, one of the greatest athletes of our age, a multicultural role model and cash register on legs. And as Eldrick ”Tiger” Woods paces around Kingston Heath this week during his first Australian visit in 11 years, in addition to any personal aspirations he might harbour, he’ll be carrying the hopes of the state’s tourism and events industries on those powerful shoulders.

I wish more of you were here. TOURISM QUEENSLAND hailed it as the ”most successful tourism campaign ever”, a $2.5 million strategy that returned $390 million in global publicity. But the Best Job in the World campaign has failed to lure foreigners. Official figures show the number of international holidaymakers travelling to Queensland dropped by 8 per cent in the 2008-09 financial year. The total number of international visitors – which also includes people travelling on business and for other reasons – fell 5 per cent.

Dollar’s up, so we’re nicking off. Australians are leaving the country as never before. The soaring Aussie dollar and low international airfares pushed the number of Australians taking holidays overseas up above 600,000 in September with the number leaving in the past year hitting a record 6 million.

DIAC: Australians need to travel to assist with Working Holiday program. More Australians must travel overseas to assist with the influx of international working holiday makers visiting Australia, the Department of Immigration And Citizenship (DIAC) has said. DIAC director of working holiday section, Deirdre Russack told delegates at the Adventure and Backpacker Industry Conference (ABiC) today that many more UK citizens are visiting Australia than the other way around and was also the case in other markets where Australia has reciprocal visa arrangements.

‘Brand Australia’ knocked off top spot in Country Brand Index. Australia has been knocked off top spot as the world’s best country brand, in the 2009 FutureBrand Country Brand Index (CBI). After three years as the most popular country brand, Australia has slipped to third position and was overtaken by the USA in first place and Canada second. New Zealand came in at fourth spot.

We are not British – that’s why a republic is so important. Independence is about taking pride in our unique culture. THE 10th anniversary of the referendum reminded me that I should dust off the old ”Young Australians for a Republic” banner in the shed and drop it off at the national archives.

Hello Friends, last month we witnessed loads of action with the RBI’s monetary policy being laid down.

However here we bring more on the RBI policies and projections.

RBI policies and projections

The Reserve Bank of India (RBI) laid the groundwork on Tuesday i.e. on 27th Oct in its monetary policy for a rise in interest rates by tightening credit to the commercial property sector, lifting its inflation forecast and warning of the threat of asset price bubbles.

The RBI had injected in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis.

For now, the Reserve Bank has decided to keep the policy repo rate unchanged at 4.75 per cent, the reverse repo rate unchanged at 3.25 per cent and the (Cash Reserve Ratio) CRR of banks unchanged at 5 per cent of their (NDTL).

The following measures constitute the first phase of ‘exit’:

- The Statutory Liquidity Ratio (SLR), which has earlier been reduced from 25 per cent of NDTL to 24 per cent, is being restored to 25 per cent.

-The limit for export credit refinance facility, which was raised to 50 per cent of eligible outstanding export credit, is being returned to the pre-crisis level of 15 per cent.

-The two unconventional refinance facilities:

(i) special refinance facility for scheduled commercial banks; and

(ii) special term repo facility for scheduled commercial banks [for funding to Mutual Funds (MFs), Non-banking Financial Companies (NBFCs), and Housing Finance Companies (HFCs)] are being discontinued with immediate effect.

Further, the liabilities of scheduled banks arising from transactions in Collateralized Borrowing and Lending Obligations (CBLO) with Clearing Corporation of India Ltd. (CCIL) would now be subject to the maintenance of the CRR.

Stay Tuned for more on this in our coming blogs.

We would cover Monetary Projections of RBI and Economy scenario and indicators at the moment.

The Reserve Bank has lifted its key interest rate for a second month in a row as it attempts to keep Australia’s economy on track for sustained growth.

Today’s widely tipped 25-basis-point increase raises the central bank’s cash rate to 3.5 per cent, marking the first back-to-back monthly increase by the RBA board since March last year when rates peaked at 7.25 per cent.

The quarter-point increase will add about $45 to the average monthly payment for a typical 25-year, $300,000 mortgage if it is passed on in full by commercial banks – as looks likely.

 The ANZ, Commonwealth and NAB, announced their standard variable mortgage rate would rise by 25 basis points in coming days. Westpac said its rates are under review.

Federal Treasurer Wayne Swan said the rate rise will be tough on families and businesses, but rates could not stay at emergency lows for ever.

“Because the economy is recovering we’ll see changes to rates from time to time,’’ Mr Swan said

But the Treasurer warned banks on lifting mortgage rates by more than the RBA’s rise.

‘‘I don’t believe that any bank should have any justification to increase interest rates over and above the increase in the cash rate delivered by the Reserve Bank today,’’ he said.

The RBA’s accompanying statement echoed much of the wording of the October rate decision, which saw rates rise for the first time since March 2008.

”With the risk of serious economic contraction in Australia now having passed, the Board’s view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,” RBA Governor Glenn Stevens said in the statement.

”The adjustments at the October and November meetings will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead,” he said.

The statement ”just confirms the RBA is rather open-minded about pausing in December before probably hiking in February,” said Macquarie interest rate strategist Rory Robertson. The RBA board is not scheduled to meet during January.

The language of the RBA’s statement also underscores its policy of “gradual” rate movements, Mr Robertson said, with “gradual” likely a code for hiking by a quarter percentage point regularly but not at every meeting.

Investors responded to the rate rise by selling the Australian dollar, sending it more than one-third of a US cent lower to 90.34 US cents in recent trading.

Unexpected strength

”Economic conditions in Australia have been stronger than expected and measures of confidence have recovered,” Mr Stevens said.

Slightly modified in the statement, though, were Mr Stevens’ comments about inflation, one of the key reasons why the RBA has decided to start to tighten monetary controls.

”In underlying terms, inflation should continue to moderate in the near term, but now will probably not fall as far as earlier thought,” Mr Stevens said. ”Headline CPI inflation on a year-ended basis has been unusually low because of temporary factors, and will probably rise somewhat over the coming year.”

Last week’s headline CPI came in at its lowest in about a decade. The RBA’s preferred measured of inflation, though, remained at 3.5 per cent for the September quarter, year on year, above its 2-3 per cent target range.

More to come

Today’s interest rate rise is likely to be followed by many more over the coming year, if financial markets have it right.

While the RBA may hold off another increase when its board meets next month, ComSec’s Craig James says the pause may only be temporary.

”Clearly the Reserve Bank did not want to frighten the horses by lifting interest rates by half of one per cent at this time,” Mr James told Reuters.

”The question now comes to the December meeting: are we going to see a rate hike in December or not? It’s interesting that the Reserve Bank in its history has never lifted interest rates for three consecutive meetings.

”We believe that the Reserve Bank will hold fire in December, come back in February after it has time to assess the impact of the rate hikes on the economy, and perhaps when it comes back in February we will be lifting rates by 50 basis points at that time.”

China-fuelled

The RBA said the economy’s expansion is ”likely to continue during 2010,” with Australia set to benefit from its relatively large exposure to the faster growing Asian economies.

”Growth in China has been very strong, which is having a significant impact on other economies in the region and on commodity markets,” Mr Stevens noted in his comments.

Private investment, while still constrained by fall-out from the global financial turmoil over the past year, ”will not be as weak as earlier expected.” Spending on housing and public funding of infrastructure are also helping to bolster the economy, he said.

Mr Stevens also noted the recent run-up of residential real estate prices. ”Housing credit growth has been solid and dwelling prices have risen appreciably this year,” he said.

Dollar wary

On financial markets, the dollar’s dip came in part as traders digested the RBA’s comments indicating the central bank will monitor its recent strengthening closely.

The Aussie has risen 33 per cent against the US dollar over the past year, including 7.4 per cent in the past three months, making it the top performing major currency in the 12 months.

The RBA’s statement said: “The Board noted that the rise in the exchange rate is likely to constrain output in the tradeables sector and dampen price pressures.”

”They’re telling us they’re keeping a close eye on the currency,” said New York-based GFT currency specialist Kathy Lien.

The RBA is doing what the Bank of Canada has done recently, Ms Lien said, basically criticising the strength of the local currency in order to ease some of the momentum.

”If the acceleration of the currency gets too rapid, they might begin to express some concern,” she said.

Revised growth

Fresh data out in coming days may reveal the health of the economy. Retail sales for September may have risen 0.5 per cent for the month, figures out tomorrow may show, according to a survey by Bloomberg.

Building approvals may have accelerated to an annual growth rate of 8.2 per cent, and 2.3 per cent for September alone, in data also due out tomorrow. The trade balance, though, may blow out to a deficit of 2.15 billion for the month when figures are released on Thursday.

The Australian economy’s unexpectedly strong performance during the global financial crisis was fueled in part by record-low interest rates that the RBA is now nudging higher to prevent inflation picking up. The central bank has singled out a run-up in housing prices – which jumped an average 4.2 per cent in eight capital cities in the September quarter alone – as one area of concern.

Yesterday, the Federal Government upgraded growth expectations for the Australian economy, forecasting growth of 1.5 per cent in the 2009-10 year, up from a forecast of a 0.5 per cent contraction made in the May budget.

The Government also slashed its projections for the unemployment rate, which is now expected to be 6.75 per cent by next June, down from the 8.25 per cent forecast in the budget. The jobless rate is currently at 5.7 per cent.

The Reserve Bank of Australia has increase the cash rate by 0.25 percentage points for a second consecutive month to bring a total of 3.5%. This is the highest that Australia’s official interest rate has been since December of 2008. Most of the big banks have already increased their home loan rates which will mean an additional $46 dollars per month on a $300,000 mortgage.

Although it may be hard on businesses and families, Federal Treasurer, Mr Swan, has warned that more changes are on the horizon due to the recovering Australian economy. Reserve Bank Governor, Glenn Stevens, stated that this growth is likely to continue.

As part of the Public Policy Breakfast Forum at the John Curtain Institute of Public Policy, Glenn Stevens, Governor of the Reserve Bank of Australia, shared his thoughts about the current economic climate we are experiencing. As home owners, buyers, and investors, we have all been interested to know what the global financial crisis means for Australia. Glenn Stevens offered some hope on the economic situation.

According to Mr Stevens, the economy is probably past its weakest point, and excluding any great international setbacks, it is likely to continue to improve into 2010. He does however mention that we need to encourage a sustainable and responsible amount of growth.

To read the full address, download RBA – The Conduct of Monetary Policy in Crisis and Recovery

What are your thoughts on this topic? Has Australia managed to be relatively unscathed by the recent economic turmoil? Or are we simply lagging behind and are yet to feel any real economic pain?

Sensex to Seek Direction from RBI's Monetary Policy Review

Dalal Street will closely track the Reserve Bank’s monetary policy review this week to seek direction, as weak global and domestic cues may continue to dampen sentiments in opening trade on Monday, experts say.

Besides, the expiry of the futures and option contracts this week is expected to keep the market volatile.

With global markets deteriorating and shares of Reliance Industries acting as a drag, market may open weak on Monday.

Marketmen said as valuations are overstretched, investors are now booking profit even at the slightest bad news.

Also, liquidity crunch is keeping frontline stocks under pressure.

On Friday, RIL scrips declined by 4.5 per cent.

“RIL, which is already reeling under uncertainty over the ongoing court case, would face further pressure. The scrip would be a dampener on the already weak market sentiment,” SMC Global Vice President Rajesh Jain said.

The Bombay Stock Exchange barometer Sensex lost three per cent, its biggest weekly fall in 11 weeks, to 16,810.81 points.

The index is up over 74 per cent so far in 2009, aided by foreign fund flows of over $14 billion.

BANKS have confirmed homeowners’ worst fears: they will increase mortgage rates by more than the official Reserve Bank rises in the coming months.

The Big Four banks claim they will be forced to lift interest rates beyond the official RBA cash rate increases because they are facing higher costs of raising money in the wholesale markets.

Full story  :  http://www.news.com.au/business/money/story/0,28323,26194165-5013952,00.html

By Erin the Employer

We have been given 5 minutes of economic sunshine, and they are at it again!

The RBA want to slow the economy while the world economy is still in recession, inflation is at only 1.5% and the Rudd Government is trying to speed the economy up, via  billions of dollars of stimulus monies spent on infrastructure (remember how during driving lessons we were told never to apply the brake and the accelerator at the same time – obviously Glenn Stevens and Wayne Swan went to a different driving school from me!).

The RBA have “form” in terms of their overcorrections, their previous snafu being increasing rates in early 2008, when the sharemarket had fallen away and we all knew well and truly about sub-prime, and then reducing them early this year to a point where the banks refused to follow suit and a rise sooner rather than later was inevitable.

Let’s hope (perhaps vainly) that the banks do not pass this rise on.

The Reserve Bank has raised its key interest rate, making Australia the first developed nation to reverse the cycle of cuts triggered by the global financial crisis. Analysts say more increases are on the way.

Today’s 25-basis-point rise pushes the central bank’s cash rate to 3.25 per cent in a move that will add $40 to the average monthly payment for a typical $300,000 mortgage if it is passed on by commercial banks. The extra cost may stretch household budgets at a time when unemployment remains on the rise.

All four of the big banks – Commonwealth Bank, Westpac, National Australia Bank and ANZ – said they have placed their variable interest rates under review.

Source  :  www.watoday.com.au

By Edmund Tadros

news.com.au

October 06, 2009 02:30pm

Australia’s Reserve Bank governor Glenn Stevens was reported to have told a Senate Committee that the recession was over and tipped of a rise in interest rates.

Is the recession really over?

Although job ads in Australia are reported to have increased recently, still unemployment in the US increased again to 9.8 percent in September with 263,000 jobs reportedly lost. Unemployment in EU also increased in August to 9.1 percent.

Meanwhile, it would be interesting to see how the banks will respond to the RBA assessment. It was not very long time ago when the major banks raised rates on borrowings.

Updated 6 Oct 2009, 5:00pm - The RBA lifted interest rates by 0.25 percentage points which pushed the cash rate to 3.25%. If the commercial banks do not absorb the rate increase, this will add about $45 to monthly repayment on a $300,000 mortgage.

by Press Trust of India at Business Standard, September 25, 2009.

Capital market watchdog Securities and Exchange Board of India (Sebi) today called for ‘meaningful’ dialogue between various regulators and market players to ensure better corporate governance practices.

The Sebi will watch corporate governance trends of companies and will discuss with other regulatory agencies to seek ways to improve the environmental, social and governance (ESG) standards of companies, its Chairman C B Bhave said at a conference here.

“We want to have dialogue with other regulatory agencies (to improve ESG standards of companies). We are happy to discuss this with the Reserve Bank, the government and other agencies…,” Bhave said.

As and when a consensus emerges on the matter among market participants, the country’s exchanges can also contemplate the idea of categorising companies in terms of ESG compliance, he said.

Noting that ESG values cannot be imposed on the market by mere regulation, Bhave said the initiatives should come from companies themselves…(continue reading)

Since the beginning of the Global Financial Crisis it has become customary for the government officials to rally against the corporate fat cats driven by sheer GREED. The benevolent government agencies were meanwhile painted as our saviours.

But while the corporate world was tightening its belts, the big government has been lavishing its commissars with big pay rises. It has been revealed that senior Reserve Bank managers received a massive 28.8 per cent increase in their total remuneration over the past year, at the same time as the Rudd government was lashing out at corporate “fat cats”.

Is this simply another case of “all animals are equal but some are more equal than others” or “two legs bad, four legs good”?

Business Day – PAUL McBETH

New Zealand house prices edged higher and properties were sold in a shorter amount of time last month as strong demand amid rising net migration and low interest rates continue to show signs of stabilisation in the property market. The median house price rose to $346,750 in August from $340,000 a month earlier, according to Real Estate Institute data. The volume of sales slipped to 5,878 from 6,014 in July, while the length of time it took to sell a house fell to 34 days from 37 days over the period. “Recent stabilisation in the housing market is likely to tempt potential sellers back into the market restoring the balance between supply and demand,” said Jane Turner, economist at ASB. “We continue to expect house price inflation will remain subdued over the next few years, with appetite for housing tempered by rising interest rates, low affordability and rising unemployment.” Last week central bank Governor Alan Bollard said the house market was helping prop up the economic recovery, but said the current resurgence in property was probably a temporary phenomenon that was artificially supported by an unusually low number of dwellings on offer over the past four months. New Zealand property values marked their fourth consecutive improvement according to QV Valuations data. “The RBNZ are on edge watching the recent recovery in house prices, warning that further gains will prolong the rebalancing process at the expense of future growth,” Turner said. “However, the RBNZ expect that the recent lift in house prices is likely to be temporary, to which we agree.” REINZ president Mike Elford said the further improvements in the property market were pleasing after a “disastrous” 2008, but that he was still “cautious in drawing conclusions from these trends.” The REINZ Monthly Housing Price Index rose 1.2 percent to 3172.7 in August. The index uses stratification, in which an average of for sale prices is taken across common groups of housing at a suburb level, to provide a more accurate measure of prices for the body, and was designed by the Reserve Bank. The base value of 1000 is taken from prices in January 1992. Northland median house prices slipped to $295,000 from $315,000 in July, according to today’s REINZ report, with the number of houses sold dropping to 126 from 149. The median house price in Auckland climbed to $450,000 from $440,000 the previous month, with 2,067 houses sold, up from 2,024in July. In Waikato/Bay of Plenty/Gisborne the median price dropped to $317,000 from $320,000. Hawkes Bay prices slid to $253,000 from $271,500. In Taranaki, prices edged higher to $287,500 from $280,100. Manawatu/Wanganui’s median price declined to $210,000 from $224,250. Wellington’s median price advanced to $395,500 from $370,000 in July, with sales climbing to 622 from 618 the previous month. In Nelson and Marlborough, the median price decreased to $325,000 from $328,000. Canterbury/Westland sales fell to 885 from 905, while the median price slipped to $295,000 from $297,000. In Central Otago Lakes, which includes Queenstown, sales increased to 87 from 84 in July, while the median price jumped to $435,000 from $411,000. Otago sales increased to 275 from 229, while the median price rose to $236,000 from $223,000 in the previous month. In Southland the median price rose to $200,000 from $190,000. -BUSINESSWIRE

http://www.stuff.co.nz/business/personal-finance/2862095/House-prices-rise/

INTEREST rates are on hold again as the Reserve Bank says Australia’s economy is stronger than expected.

For a fifth straight month the central bank left the cash rate at a 49-year low of 3.0 per cent, as widely expected by economists.

In a statement, RBA governor Glenn Stevens said the “accommodative setting” of monetary policy was appropriate for the time being.

“The board will continue to adjust monetary policy so as to foster sustainable growth in economic activity and inflation consistent with the target,” Mr Stevens said.

The rate decision comes the day before official data is expected to show the economy grew modestly in the June quarter, but building on the slim 0.4 per cent growth record in the three months to March.

“Economic conditions in Australia have been stronger than expected, with consumer spending, exports and business investment notable for their resilience,” the RBA said.

“Measures of confidence have recovered.

“With considerable economic policy stimulus in train around the world, the global economy is resuming growth.”

The RBA said growth in China had been very strong and was said to be having a significant impact on other economies in the region and on commodity markets.

“The major economies appear to be approaching a turning point.

“Most observers still expect only modest growth in the world economy in 2010, due to the continuing legacy of the financial crisis, though forecasts have been revised up recently.”

Sentiment in global financial markets has continued to improve, the RBA said.

“But the effects of economic weakness on the balance sheets of financial institutions will still be coming through for a while.

“This constitutes one of the main remaining risks to the global expansion.

“For the recovery to be durable, continued progress in restoring balance sheets is essential.”

The central bank says economic conditions in Australia have been stronger than expected, with consumer spending, exports and business investment notable for their resilience.

Some spending has probably been brought forward by the various policy initiatives; in those areas demand may soften in the near term.

Higher dwelling activity and public demand will also start to provide more support to spending soon and, hence, growth is likely to firm going into 2010, the central bank said.

“Unemployment has not, to this point, risen as far as had been expected.

“Weaker demand for labour, evident in a decline in hours worked, nonetheless has seen a moderation in labour costs.

“Helped by this and the earlier fall in energy and commodity prices, inflation has been declining, though measures of underlying inflation remained higher than the target on the latest reading.”

The RBA said underlying inflation should continue to moderate in the near term “but the likelihood of inflation being persistently below the target now looks low”.

Credit growth overall remains quite modest, housing credit has been solid and dwelling prices have risen.

But business borrowing has been declining, as companies sought to reduce leverage in an environment of tighter lending standards.

The bank said large firms have had good access to equity capital and access to debt markets appears to be improving, helped by the better than expected economic conditions and increased willingness on the part of investors to accept risk.

“The board will continue to adjust monetary policy so as to foster sustainable growth in economic activity and inflation consistent with the target.”

*Article sourced from www.news.com.au

By PAUL McBETH – BUSINESSWIRE

Fairfax Media

 

POSITIVE SIGN: The number of consents for new dwellings lifted strongly last month, particularly when apartment numbers were excluded.

 

Home-building consents rebounded in July from a weak June figure, suggesting the residential construction industry is closer to a revival as demand for housing recovers.

Building permits rose a seasonally adjusted 5 percent in July, according to Statistics New Zealand. Approvals were granted for 1,214 units including 55 new apartments. In June, consents tumbled 9.6 percent. Core consents for residential property, excluding apartments, surged 11 percent.  

“Today’s consent issuance suggests the construction industry is close to reaching a turning point,” said Jane Turner, economist at ASB. “Ex-apartment consent issuance now looks to have made a tentative recovery, following the pick-up in demand evident in house sales.” 

Property demand and prices have stabilized after last year’s slump in an economy that may be in its sixth and possibly final quarter of recession. Record low interest rates and rising net migration are helping bolster demand. A net 14,500 people entered the country in the 12 months ended July 31, according to government figures. 

“Demand for new housing will be underpinned by the recent increase in net migration,” Turner said. Still, “rising unemployment and slow wage growth will moderate the increase in demand as households remain slightly cautious.” 

Property prices have stabilised this year with the median price unchanged at $340,000 last month, according to recent data from the Real Estate Institute, and economists are betting Reserve Bank Governor Alan Bollard won’t cut the official cash rate below 2.5 percent for fear of reigniting a housing bubble.  The value of commercial property rose to $331 million from $301 million a month earlier, but was down 3.2 percent from July 2008.  

“The impact of the recession is evident in some areas with consent issuance for shops, factories, storage and farms down on year-ago levels,” Turner said.  The total value of consents for all buildings fell 10 percent to $813 million in July from a year earlier.  

-BUSINESSWIRE

http://www.stuff.co.nz/business/industries/2811321/Strong-lift-in-building-consents

AAP

Homeowners are unlikely to gain any benefit from another cut in the official cash rate, and may even face higher mortgage rates, a mortgage broker has warned.

The Reserve Bank of Australia (RBA) left the cash rate unchanged at a 49-year low of 3.0 per cent for a third straight month after last week’s monthly board meeting.

However, RBA Governor Glenn Stevens reiterated there is scope to cut the cash rate further, if needed, with inflation in decline.

But Loan Market Group executive director John Kolenda says that while there are predictions of a further easing by the RBA, there is evidence that major banks will no longer be moving in line with any changes.

“There is … a strong likelihood banks will not pass on part or all of any future RBA rate cuts,” he said in a statement.

There is a risk that because of the increased cost of wholesale funds, it may force retail banks to consider lifting their standard variable home loan rates, independent of any move by the RBA, Mr Kolenda said.

The Commonwealth Bank of Australia broke ranks last month by raising its variable rate by 10 basis points because of increased funding costs.

So far, there has not been a great deal of demand to switch to fixed rates, indicating the majority of home owners believe they would be better off sticking to variable rates while the economy remains in decline, Mr Kolenda said.

Retail banks have already raised their fixed mortgage rates by more than one per cent in the past few months.

“Even though the fixed rates are higher now with the major banks offering 6.39 per cent to 6.59 per cent over three years, there’s a strong possibility variable rates could rise above that over the next three to five years,” he said.

*Article Sourced from http://www.realestate.com.au

The Daily Telegraph

Homeowners are rushing to lock in their mortgage rates with fixed-rate loan deals, in the fear interest rates have bottomed and will rise.

Mortgage brokers and comparison websites have been inundated with fixed-rate mortgage inquiries in recent weeks – most notably after the Commonwealth Bank raised its variable rate by 0.1 per cent.

That surprise rise last Monday, the first variable rate rise from a major lender since March last year, was followed by a collective raising of bank fixed rates that alarmed many new buyers and homeowners looking to convert to a fixed rate.

For the second consecutive month, broker Mortgage Choice noted a sharp increase in fixed-rate home loan applications in May, a trend that has continued into June.

“It’s interesting to see new borrowers locking in rates, despite the fact fixed loans are priced higher than variable loans,” Mortgage Choice spokeswoman Kristy Sheppard said.

In just a week, comparative website Help Me Choose had a dramatic turnaround in lines of inquiry that suggest variable mortgages were being shunned.

The website, which receives several thousand hits a day, claimed 50 per cent of all mortgage inquiries focused on fixed-rate products, compared with 15 per cent for variable products.

Less than two months ago, borrowers who shopped around could lock in a three-year fixed interest rate of 4.99 per cent.

Yesterday, the cheapest three-year fixed rate on offer was 5.35 per cent from Satisfac Credit Union. While the lowest variable rate of the major banks remained at 5.74 per cent, their three-year fixed rates have shot out as high as 6.69 per cent.

New Glebe homeowner Lorraine Pereria is locked in a fixed rate in recent weeks.

On the advice of family members, the doctor opted for a split fixed/variable loan, featuring a three-year component fixed at 4.99 per cent.

“Just before I signed up, we began to think the market might start to trend up, so we ended up fixing 50 per cent and kept 50 per cent variable. It is safe. I’m not a gambler,” she said.

“Depending on how the market goes, I could convert the rest to a fixed rate later on.”

*Article Sourced from http://www.realestate.com.au

The Australian – By Bridget Carter

The property market is showing signs of strong activity, spurred on mainly by bargain hunters and first-home buyers.

The number of properties to sell at auction is expected to spike this weekend as prices are slashed by up to 30 per cent and buyer interest is reignited by this week’s 100 basis point rate cut by the Reserve Bank.

The banks’ subsequent mortgage rate cut appears to be adding to the momentum generated by the increase in the first-home buyers grant from last October.

Online rate comparison company helpmechoose.com.au said there had been a big increase in expressions of interest from first-home buyers and those wanting to refinance an existing loan in the 48 hours after Tuesday’s RBA rate announcement. The biggest spike was in Queensland.

On the Gold Coast yesterday, half the 12 properties sold at a Surfers Paradise auction were under $500,000, a sharp discount on their asking price.

One Surfers Paradise apartment sold for $195,000, $55,000 less than its original price tag.

Andrew Bell of Ray White Surfers Paradise said: “Some of the properties had as many as seven registered bidders.”

Mr Bell said residential developers were unable to keep up with the demand from aspiring first-home owners.

Major residential developer Australand, which revealed an 83per cent drop in its annual net profit this week, and Lend Lease’s residential development arm said the number of first-home buyer inquiries had doubled in the three months to January.

Most large residential developers want the Government to extend beyond June the current first-home buyers grant of $21,000 for a new property.

Reserve Bank governor Glenn Stevens said in his latest statement that government grants and interest rate cuts should boost prospects for the year ahead.

“A recent pick-up in housing loan approvals and in reported display home traffic suggests these factors are now starting to add to housing demand,” he said.

LJ Hooker chief executive Warren McCarthy said there was a lot more interest in the past month than at the end of last year, particularly in the $200,000-$500,000 bracket.

“First-home buyers are driving some sort of revival,” Mr McCarthy said.

In Sydney’s west, the national market’s worst-hit region, demand was strong as more properties went on mortgagee sale and prices fell sharply.

A near-new three-bedroom home at St Helens in the city’s southwest was under contract for $290,000, $10,000 less than the owner paid six years ago. The property would rent for about $300 per week.

Some properties with four bedrooms and swimming pools were selling in Sydney’s mortgage belt for less than $300,000.

Garth Makowski, of Dougmal Real Estate at Campbelltown in Sydney’s southwestern suburbs, said inquiries had nearly doubled to about 600 a month, while the time it took to sell a property had fallen from up to 100 days to as little as one week.

“That happened for us back in October. As soon as the grants came in, then bang, it just went through the roof,” Mr Makowski said yesterday.

“The inquiries have been so strong that we’ve had to hire extra staff.”

*Article Sourced from http://www.theaustralian.news.com.au