RBA board decided to leave the cash rate unchanged at 2.25 per cent.
Statement by Glenn Stevens, Governor: Monetary Policy Decision
Growth in the global economy continued at a moderate pace in 2014. A similar performance is expected by most observers in 2015, with the US economy continuing to strengthen, even as China’s growth slows a little from last year’s outcome.
Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular has fallen significantly. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates.
Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns at all-time lows over recent months. Some risk spreads have widened a little but overall financing costs for creditworthy borrowers remain remarkably low.
In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.
Credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.
The Australian dollar has declined noticeably against a rising US dollar, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.
At today’s meeting the Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings.
I found this article interesting. For 2 reasons. One is foreign investment, and how mis guided the Australian Government are in handling the situation. Secondly, it reminds us the importance of allowing greater immigration into Australia. With 5 million baby boomers retiring the Government have far fewer people paying tax, this hole of 5 million will not be filled with the birth to working age rate, so the only way to maintain the income from taxes the Government is earning is relaxing the immigration into Australia. This leads to the fact that many Australians are in denial if they believe the Government will provide a pension that can support life in 20 years time. The question people should ask themselves if it is not too late is the following…. Do I want to merely exist in retirement until I die, or do I want to live life in retirement??
The Prime Minister’s clamp-down on foreign investors in Australian real estate has been revealed as little more than a revenue-raising exercise. Initially it was proposed as a way to assist first-home buyers, but it has become increasingly clear that curtailing offshore buyers would do nothing to change the situation for first-time buyers. Foreign investors are a very small component of the Australian buying market. Their activity is primarily focused on Top End properties in the prestige suburbs of Sydney and Melbourne, and on high-rise apartments in the inner-city areas of our major cities. They are not competing with local first-time buyers. Restricting foreign buyers won’t change the price on a single house anywhere in Australia. So now Tony Abbott has switched the emphasis of his rhetoric to enforcement of the existing rules. As part of that, big fees will be charged on foreigners applying to buy Australian real estate and on developers seeking to sell to overseas buyers. It will create a small revenue gain for the Federal Government. Beyond that, there will be zero impact on Australian property markets and pricing levels. Terry Ryder
It seems likely that rates will be eased again in April/May
Westpac, whilst I am not a fan of their culture and would never want to work for them, they admittedly have had the best track record for accurately predicting interest rate movements. Their predictions are based on their interpretation of what the RBA’s commentary on rates and analysis of economic trends.
The RBA it is worth noting, has not committed to another rate cut, but according to Alan Mitchell from the Financial Review, it has done the next best thing by incorporating two cuts in the official cash rate in its February forecasts of the Australian Economy.
Glenn Stevens, the RBA’s governor stated “Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target”
The Australian dollar he suggests, will probably have to fall from its current level for the economy to resume balanced growth. This would not be good for travel abroad obviously.
The RBA may just sit though and observe the economy and also the US market. The US market may be travelling closer to a rate rise, while the property market is cooling.
Just under a year ago my book Property Investing Made Simple, was entered into the 2015 International Book Awards. Why not I thought, it was a bit of fun. Little did I know that incredibly, my book was announced as the winner. It was the winner for the ‘Business: Real Estate’ category. Time for a little celebration I think.
This week, I have come across this article which may be of assistance in guiding people within Australia to better growth. Of course, it is best to avoid acting on media hype and property sales companies information. You should first understand why areas have potential, then still avoid people merely selling stuff of stock lists, limited to their own stock lists, promoting stock that makes them more money than other stock, and not disclosing what they make. Shame on them.
Price growth in Australia’s capital city housing markets will continue into 2015, according to Dr Andrew Wilson, Senior Economist at the Domain Group.
“Buyer confidence has been boosted with the Reserve Bank’s recent interest rate cut and we’ve seen a solid start to 2015 in most markets. We are expecting buyer activity to remain solid through the Autumn selling season and then moderate as we head into Spring,”
It seems the national median house price is forecast to increase 5% in 2015. Wilson expects Sydney and Brisbane to grow by 8% and 6% respectively while Melbourne, Adelaide and Hobart are likely to grow between 3 and 5%. Meanwhile, declining local economies spell fairly modest growth of around 2% for Darwin, Canberra and Perth.
Those that sit back on the fence thinking nothing will happen, like they have sat on the fence all their life are yet again expected to be left behind as prices move away from them.
If you had a 400,000 property, and it increases 5%, it is $20,000 you would have made, now imagine you did not have that house, you have now lost $20,000. Consider if you have a portfolio of just 5 properties, each worth 400k, you have lost $100,000 if they all increased 5% this coming year.
What is important though is seek advice, do not buy from a property marketing company (spruiker)! Engage someone to undertake thorough research on your behalf and engage someone to source a type and location and style of property that suits your plan, a plan to suit your goals and risk profile is so important.
Existing laws in Australia prohibit foreigners buying property without Government approval. all foreigners require prior approval to purchase residential real estate, and only temporary residents are permitted to acquire existing properties.
Brian Wilson, the chairman of the Foreign Investment Review Board, has stated ” It’s an existing property, you have to be either a resident or a citizen or a temporary resident. You Can’t be a foreign investor”.
In a forced divestment of a property, the owners have 90 days to sell the property or face being referred to the Commonwealth Director of Public Prosecutions. According to the Financial Review, a parliamentary inquiry recently found there had not been a single prosecution of a foreign investor since 2006 and no divestment orders since 2007. This, in my opinion, makes Mr. Joe Hockey and the Government seem very week. when they spruik comments, as Joe did this week, such as promising new fees and penalties to enforce existing laws. This seems empty rhetoric predicated on a spur of the moment whim, given that the laws have not been enforced, so what is the point of adding more fees to failing laws?
This rhetoric of course has not been enacted upon according to the Financial Review. The concern I have is whether foreign investors are purchasing through a friend or relative residing in Australia. This could be a massive loophole.
How interesting it is that Mr Wilson stated “FIRB does have limited resources and to actually chase down a property in terms of its ultimate owners is quite resource intense”. we all have jobs that can be intensive but we don’t make excuses, we just get on with it, so I wonder has the Government failed to perform its duty by not issuing any divestment orders since 2007? Has there not been one foreigner guilty of breaking the law?
Let’s see how the case goes with the former house of Julia Ross in Point Piper. Let’s see if the FIRB are a toothless tiger, or if they have the resolve and commitment to Australian law.