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RBA sees ‘risks’ in Trump-China trade deal – 16 September 2019

Australian Financial Review

A US-China trade deal poses “longer-term downside risks” to Australia’s economy, including farmers and gas exporters, so we shouldn’t “get too comfortable” if Donald Trump ends the conflict with China, according to Reserve Bank of Australia correspondence.

As Prime Minister Scott Morrison prepares to fly to Washington this week to ask President Trump to resolve the trade war, the RBA released internal documents paradoxically showing Australia could lose from a US-China trade deal.
The US-China trade war’s impact on the Australian economy is likely to be “small”, shaving about 0.20 of a percentage point off economic growth in …

Cheap money fires up house auctions – 2 September 2019

Australian Financial Review

Residential property sales in Sydney and Melbourne are rebounding to near boom-time peaks as buyers respond to record-low interest rates and cast aside concerns about a sluggish economy.

Sydney recorded a preliminary auction clearance rate of 80 per cent on Saturday and in Melbourne 76 per cent of properties sold under the hammer, in line with sale results recorded during the five-year housing boom that topped out in mid-2017.

It was a very different story this time last year when both markets were in the midst of a downturn and just 49 per cent of properties sold in Sydney and 54 …

Where’s the crisis? Westpac skewers QE talk – 22 August 2019

Australian Financial Review

The chief executive of Westpac’s institutional banking division has questioned the need for further RBA rate cuts given the “economy and a banking system that is far from crisis”.

Speaking at an Australian Business Economists event in Sydney on Wednesday, Westpac Institutional Bank CEO Lyn Cobley said lower rates and the more unconventional monetary policies recently canvassed by the Reserve Bank were unnecessary and would do little to encourage businesses to borrow and invest.

RBA governor Philip Lowe downplayed the chances of quantitative easing (QE) in Parliamentary testimony on August 9. Dr Lowe did, however, say that the bank had examined …

Interest rate cuts working for investor confidence – 15 August 2019

Australian Financial Review

Official interest rate cuts are having the right effect on the economy and investors have confidence monetary policy will steer the economy through shocks, according to Reserve Bank of Australia’s assistant governor Christopher Kent.

Dr Kent said in a speech Tuesday morning to the Finance and Treasury Association that the transmission of monetary policy – which so far has included 50 basis points worth of cash rate cuts in Australia – was working as “usual” with data sets showing reductions in housing loan costs were clearly being passed on.

“The transmission of monetary policy in Australia to financial conditions is working in …

RBA lowers GDP, inflation forecasts – 7 August 2019

Australian Financial Review

The Reserve Bank of Australia has slightly trimmed its economic growth forecast and admitted inflation will undershoot for years after holding interest rates steady at a record low 1 per cent.

The decision by the RBA board on Tuesday to keep rates on hold follows consecutive interest rate reductions in June and July.
RBA governor Philip Lowe said further interest rate cuts were still possible and reiterated  rates would stay low for a lengthy period of time.
The central bank appears less confident that wages will pick up as intended, citing public sector wage caps and noting only that …

Markets doubt RBA can achieve its jobs target – 23 July 2019

Australian Financial Review

Fixed income traders reckon the cash rate will average below 1 per cent over the coming five years, suggesting easier policy will not bring inflation back.

The RBA has moved to explicitly targeting a lower unemployment rate. The problem: markets don’t believe they can do it.

The overnight indexed swaps (OIS) market reveals traders now expect the cash rate to average below 1 per cent over the next five years.

The RBA has moved to explicitly targeting a lower unemployment rate. The problem: markets don’t believe they can do it.

The overnight indexed swaps (OIS) market reveals traders now expect the cash …

Lower rates won’t fuel debt, property prices – July 16 2019

Australian Financial Review

The Reserve Bank has played down fears of rising household debt levels following its decision to cut interest rates a second time to a record low 1 per cent, and the central bank’s latest minutes suggest that “unwelcome borrowing” is unlikely.

Minutes from the Reserve Bank meeting released on Tuesday indicate that while boosting employment and wage growth was a clear focus for the central bank in cutting rates again, it did consider concerns about households taking on more debt and potentially inflating property prices.

“Members also judged that the extent of spare capacity in the economy, and the likely pace at …

Savers ‘staring down the barrel at zero interest rates’ as big banks cut – 12 July 2019

Sydney Morning Herald

Savers ‘staring down the barrel at zero interest rates’ as big banks cut

Two of the nation’s biggest banks have slashed key deposit rates to virtually zero, leaving millions of Australians who depend on the interest from their savings with almost no extra income.

ANZ Bank and National Australia Bank have reduced the rates they are offering on their basic saver accounts, just days after the Reserve Bank of Australia’s most recent cut to official interest rates.

According to financial services research firm Canstar, ANZ has halved its online saver base interest rate to 0.15 per cent. It has kept its …

Commercial property deals hit $42.6b record – 8 July 2019

Australian Financial Review

A series of trades in landmark office towers has helped propel the tally in commercial real estate deals for the 2019 financial year to a record $42.6 billion, a 22 per cent increase in transactions value over the previous year.

The Cushman & Wakefield figures also reveal that deal flow in office property increased by 22.6 per cent to $23.1 billion, accounting for more than half of all commercial property deals.

Driving those office deals are record low vacancy rates in the Sydney and Melbourne office markets, which is underpinning growth in rents, creating upside expectations for for investors.

At the …

No rate cut risk: Investors have ‘learnt lesson’ from GFC – 3 July 2019

Australian Financial Review

Access to cheap money won’t inflate a bubble in Australia’s commercial property market because investors have “learnt their lesson” from the GFC, according to analysts.

Hungry for yield, investment has been surging into the commercial property market and listed property trusts as bond yields and interest rates fall to record lows, prompting some concern of a risk in reflating asset bubbles in shares, property and more speculative investments.

But David Cannington, head of research and strategy for Investa Property Group, said a low interest rate environment – with interest rates now at 1 per cent after two consecutive rate cuts …