CENTRAL – AUSTRALIA

Fed cut lifts pressure on RBA board

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Original article by John Kehoe
The Australian Financial Review – Page: 1 & 4 : 1-Aug-19

Economists suggest that better-than-expected inflation data for the June quarter will prompt the Reserve Bank of Australia to leave official interest rates on hold in August. The consumer price index rose 0.6 per cent during the quarter and 1.6 per cent year-on-year. However, inflation remains well below the RBA’s target range of 2-3 per cent, and further monetary policy easing is possible later in 2019 if the unemployment rate does not fall. The US Federal Reserve’s August interest rate cut may also force the RBA to act before the end of the year.

CORPORATES
RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD

RBA could cut cash rate as soon as August

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Original article by William McInnes
The Australian Financial Review – Page: 24 : 30-Jul-19

The futures market has priced in a 20 per cent chance that the Reserve Bank of Australia will reduce the cash rate for a third consecutive month in August. Inflation data to be released on 31 July may influence the timing of any rate cut; market expectations are for a CPI of 1.5 per cent for the June quarter, below the RBA’s forecast of 1.6 per cent. National Australia Bank economist Tapas Strickland says the CPI reading would probably need to be around 1.3 per cent or 1.4 per cent for the central bank to reduce the cash rate in August.

CORPORATES
RESERVE BANK OF AUSTRALIA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, IFM INVESTORS PTY LTD, UNITED STATES. FEDERAL RESERVE BOARD, EUROPEAN CENTRAL BANK

Inflation data set to drift further from RBA target

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Original article by Patrick Commins
The Australian Financial Review – Page: 21 : 29-Jul-19

The consensus of economists polled by Bloomberg is that Australia’s underlying inflation rate eased from 1.6 per cent to 1.5 per cent in the June quarter. The CPI data to be released by the Australian Bureau of Statistics on 31 July is likely to heighten expectations that the Reserve Bank will further ease monetary policy by October, while it might also boost the local sharemarket.

CORPORATES
AUSTRALIAN BUREAU OF STATISTICS, RESERVE BANK OF AUSTRALIA, AMP CAPITAL INVESTORS LIMITED, STANDARD AND POOR’S ASX 200 INDEX

RBA targets lower for longer rates

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Original article by David Rogers
The Australian – Page: 21 & 29 : 26-Jul-19

Financial markets have priced in a 93 per cent chance of an official interest rate cut in October, after Reserve Bank of Australia governor Philip Lowe indicated that the cash rate will remain low for some time. He also reiterated the central bank’s commitment to inflation targeting, and said the cash rate is unlikely to rise until the RBA is confident that inflation will return to around the midpoint of the target range of 2-3 per cent. The Australian dollar fell to a two-week low in response to Lowe’s comments, while the yield on 10-year bonds reached a record low.

CORPORATES
RESERVE BANK OF AUSTRALIA, STANDARD AND POOR’S ASX 200 INDEX, STANDARD AND POOR’S ASX ALL ORDINARIES INDEX, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

Lack of confidence to force RBA rate cut

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Original article by Michael Roddan
The Australian – Page: 2 : 25-Jul-19

Westpac’s chief economist Bill Evans now expects official interest rates to fall to a record low of 0.5 per cent by February. Evans had previously forecast that the cash rate would reach a low of 0.75 per cent in the current monetary policy easing cycle. His revised forecast was prompted by factors such as a decline in consumer confidence in the wake of the rate cuts in June and July.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, RESERVE BANK OF AUSTRALIA, AUSTRALIAN BUREAU OF STATISTICS, UBS HOLDINGS PTY LTD, COMMONWEALTH SECURITIES LIMITED, SEEK LIMITED – ASX SEK, AUSTRALIA. DEPT OF JOBS AND SMALL BUSINESS

Greedy banks inhibit stimulus

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Original article by Michael Roddan
The Australian – Page: 17 & 21 : 23-Jul-19

Jonathan Mott of UBS has questioned whether the return on equity targets of Australia’s four major banks are "justifiable or sustainable". He argues that these targets could undermine the Reserve Bank’s efforts to stimulate the economy via interest rate cuts, as they reduce banks’ incentive to cut their own interest rates due to the impact on their net interest margins. The differential between the cash rate and banks’ lending rates has widened from less than two per cent prior to the global financial crisis to almost four per cent.

CORPORATES
UBS HOLDINGS PTY LTD, RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, CANSTAR PTY LTD

Job data puts rate cut expectations on hold

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Original article by David Rogers
The Australian – Page: 27 : 19-Jul-19

The chances of an interest rate cut in August have lengthened following the release of data showing that Australia’s official unemployment rate was steady at 5.2 per cent in June. Analysis by Westpac suggests that financial markets are pricing in a 15 per cent chance of a rate cut in August, although the Reserve Bank is still widely tipped to ease monetary policy by the end of the year. The jobless rate rose from 5.19 per cent to 5.24 per cent in unrounded terms in June, while the underemployment rate fell to 8.2 per cent.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, AMP CAPITAL INVESTORS LIMITED

RBA flags another rate cut if jobs market deteriorates

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Original article by David Rogers
The Australian – Page: 2 : 17-Jul-19

The Reserve Bank of Australia indicated in the minutes of its monthly board meeting that there is likely to be spare capacity in the labour market for some time, while jobs growth is likely to ‘moderate’. Labour market data for June will be released on 18 July, and the official unemployment rate is expected to be steady at 5.2 per cent. The employment and inflation outlook is likely to influence the timing of further interest rate cuts; some economists say the RBA may wait to gauge the impact of the cuts in June and July before further easing monetary policy.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, UBS HOLDINGS PTY LTD

Labor decries Coalition complacency on economy

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Original article by Joe Kelly
The Australian – Page: 4 : 16-Jul-19

Deloitte Access Economics partner Chris Richardson contends that a slowdown in the economy is not the main reason why the Reserve Bank of Australia has cut interest rates in two consecutive months. Rather, he suggests that it is because the RBA has changed its view on how many new jobs need to be created in order to stimulate wage growth. Labor’s treasury spokesman Jim Chalmers says the opinion expressed in the latest Deloitte Business Outlook report is "just one opinion in a range of opinions". Chalmers claims that the Australian economy has gotten worse since the federal election, but that the Coalition still has its feet up.

CORPORATES
DELOITTE ACCESS ECONOMICS PTY LTD, RESERVE BANK OF AUSTRALIA, AUSTRALIAN LABOR PARTY

RBA could weigh cheap cash to banks if rates fall: analysts

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Original article by Jonathan Shapiro
The Australian Financial Review – Page: 17 : 15-Jul-19

Observers expect the Reserve Bank of Australia to cut the cash rate again by the end of 2019. However, analysts estimate that bank earnings would be reduced by seven per cent if they were to pass on the next interest rate cut in full, meaning only a partial cut in mortgage rates is likely. Credit Suisse has suggested that the RBA might offer cheap funding to banks that offer to pass on the next rate cut in full under a scheme similar to that adopted by the Bank of England after it cut interest rates following the Brexit vote in 2016.

CORPORATES
RESERVE BANK OF AUSTRALIA, CREDIT SUISSE (AUSTRALIA) LIMITED, BANK OF ENGLAND, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB