INTEREST RATES – AUSTRALIA

Squeeze on banks a risk to economy

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Original article by Jemima Whyte, Jonathan Shapiro, Aleks Vickovich, Matthew Cranston
The Australian Financial Review – Page: 1 & 4 : 4-Oct-19

The ANZ Bank’s chief economist Warren Hogan has rejected claims by Prime Minister Scott Morrison that the nation’s major banks are ‘profiteering’ by failing to pass on the latest official interest rate cut in full to their home loan customers. He says the banks are merely seeking to protect their margins. Meanwhile, the Australian Banking Association has stressed the importance of ‘strong, stable and profitable banks’ to economic growth and the free flow of credit.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, AUSTRALIAN BANKING ASSOCIATION, RESERVE BANK OF AUSTRALIA, UNIVERSITY OF TECHNOLOGY, SYDNEY, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, HYPERION ASSET MANAGEMENT LIMITED, UNISUPER LIMITED, IFM INVESTORS PTY LTD, EVANS AND PARTNERS PTY LTD, MORGAN STANLEY AUSTRALIA LIMITED, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

RBA inflation goal requires negative rates

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Original article by David Rogers
The Australian – Page: 27 : 3-Oct-19

Andrew Boak, the chief economist at Goldman Sachs, says there is a material risk that the Reserve Bank of Australia will reduce the cash rate to less than 0.5 per cent and implement a quantitative easing program. Boak adds that the central bank’s own macroeconomic model suggests that a negative cash rate would be needed to deliver on its inflation and employment targets over the next 2-3 years. Boak expects the cash rate to be cut by another 25 basis points in November, while financial markets have fully priced in a rate cut by February.

CORPORATES
GOLDMAN SACHS AUSTRALIA PTY LTD, RESERVE BANK OF AUSTRALIA, MORGAN STANLEY AUSTRALIA LIMITED, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AUSTRALIA. DEPT OF THE TREASURY

Banks blasted for holding back on cuts

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Original article by Joyce Moullakis
The Australian – Page: 17 & 20 : 3-Oct-19

Westpac has reduced its mortgage interest rates by 15 basis points in response to the latest official interest rate cut, while the ANZ Bank has cut its rates by 14 basis points. Prime Minister Scott Morrison and Treasurer Josh Frydenberg have criticised the four major banks for failing to reduce their mortgage rates in line with the 25 basis point reduction in the cash rate. Meanwhile, analysts warn that the banks’ margins will come under pressure due to official interest rate cuts.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, RESERVE BANK OF AUSTRALIA, AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, AUSTRALIA. DEPT OF THE TREASURY, REGAL FUNDS MANAGEMENT PTY LTD, MORGAN STANLEY AUSTRALIA LIMITED, UBS HOLDINGS PTY LTD, SUNCORP BANK, MACQUARIE BANK LIMITED – ASX MBL, ATHENA HOME LOANS PTY LTD, RATECITY PTY LTD

RBA one step away from QE

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Original article by Matthew Cranston, John Kehoe, Aleks Vickovich
The Australian Financial Review – Page: 1 & 4 : 2-Oct-19

The Australian dollar reached an intra-day low of $US66.94 in local trading on 1 October, after the Reserve Bank of Australia reduced the cash rate to 0.75 per cent. RBA governor Philip Lowe signalled that the central bank is prepared to further ease monetary policy if necessary. The third rate cut in 2019 has heightened expectations that the cash rate will fall to 0.5 per cent in November. Andrew Boak of Goldman Sachs warns that this may be insufficient to lift inflation to within the RBA’s target range over the next several years. He adds that this in turn could necessitate further rate cuts, as well as the potential for quantitative easing.

CORPORATES
RESERVE BANK OF AUSTRALIA, JP MORGAN AUSTRALIA LIMITED, UBS HOLDINGS PTY LTD, CITIGROUP PTY LTD, MORGAN STANLEY AUSTRALIA LIMITED, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

Profit-taking possible even with interest rate cut

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Original article by David Rogers
The Australian – Page: 28 : 1-Oct-19

Most economists expect the Reserve Bank of Australia to reduce the cash rate to 0.75 per cent on 1 October, and there is widespread expectation that it will fall to 0.5 per cent by February. Financial markets have priced in an 80 per cent chance of a rate cut in October. Although a rate cut is by no means certain, the Australian dollar could rally if the RBA opts to leave rates on hold, and subsequent profit-taking could see the local sharemarket retreat in the near-term. However, the RBA could potentially hold off on easing monetary policy until the outcome of the upcoming US-China trade talks.

CORPORATES
RESERVE BANK OF AUSTRALIA

RBA to cut twice more to 0.5pc, say economists

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Original article by Sarah Turner
The Australian Financial Review – Page: 1 & 22 : 30-Sep-19

A quarterly survey of economists shows that there is general consensus that the Reserve Bank of Australia will reduce the cash rate to 0.5 per cent by mid-2020. Most of the respondents expect official interests to be cut by 25 basis points before the end of 2019, followed by another cut by June. However, Shane Oliver of AMP Capital and Alan Oster of National Australia Bank expect a cash of 0.5 per cent at the end of 2019. Futures markets have priced in a 76 per cent chance of a rate cut on 1 October, and fully priced in a rate cut in November.

CORPORATES
RESERVE BANK OF AUSTRALIA, AMP CAPITAL INVESTORS LIMITED, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

Savings rate hit as banks brace for interest pain

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Original article by Samantha Bailey
The Australian – Page: 17 & 27 : 26-Sep-19

Data from RateCity shows that ANZ, Westpac and ING are among the banks that have reduced their savings rates by up to 25 basis points in the last fortnight. RateCity also notes that the average savings rate is now 1.1 per cent; this compares with 1.57 per cent in May, prior to the Reserve Bank’s back-to-back official interest rate cuts. With the central bank widely tipped to ease monetary policy again in October, Credit Suisse estimates that banks’ at-call deposit rates would have to fall by about 51 basis points to offset the earnings impact of passing the full cash rate cut on to mortgage borrowers.

CORPORATES
RATECITY PTY LTD, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, WESTPAC BANKING CORPORATION – ASX WBC, ING BANK (AUSTRALIA) LIMITED, AMP BANK LIMITED, RESERVE BANK OF AUSTRALIA, CREDIT SUISSE (AUSTRALIA) LIMITED, MYSTATE LIMITED – ASX MYS, BANK OF QUEENSLAND LIMITED – ASX BOQ

Economists raise chances of QE

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Original article by David Rogers
The Australian – Page: 17 & 27 : 26-Sep-19

UBS’s chief economist George Tharenou says there is a growing possibility that the Reserve Bank of Australia will have to resort to unconventional monetary policy options. He says the US Federal Reserve is likely to reduce official interest rates by another one per cent over the next year, as US economic growth slows due to the latest round of tariff hikes. This in turn will put pressure on the RBA to further ease monetary policy, and potentially resort to measures such as quantitative easing. Tharenou expects the RBA to reduce the cash rate to just 0.25 per cent by May 2020.

CORPORATES
RESERVE BANK OF AUSTRALIA, UBS HOLDINGS PTY LTD, UNITED STATES. FEDERAL RESERVE BOARD, UNITED STATES. EXECUTIVE OFFICE OF THE PRESIDENT

Low rates to push older people into casual work

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Original article by Robert Gottliebsen
The Australian – Page: 25 : 25-Sep-19

Record low interest rates are having a direct impact on the Australian labour market, by forcing older people to delay retirement and remain in full-time work for longer than they had intended. This is in turn reducing the employment opportunities for younger Australians, forcing many of them to take up casual roles or jobs in the ‘gig’ economy. Economist Callam Pickering notes that the proportion of younger workers who are underemployed has increased from about 11 per cent in 2008 to nearly 18 per cent. The trend for older people to continue working full-time is also dampening wages growth, as their priority is continuity of income rather than pay rises.

CORPORATES
RESERVE BANK OF AUSTRALIA

RBA chief ready to cut rates again

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Original article by Adam Creighton
The Australian – Page: 1 & 6 : 25-Sep-19

Reserve Bank of Australia governor Philip Lowe has signalled that the central bank is prepared to further reduce the cash rate if necessary. He has cited factors such as the downward trend in global interest rates and a ‘surprise’ slowdown in the domestic economy, which grew by just 1.4 per cent in the year to June. Lowe’s speech in regional New South Wales has heightened speculation that the RBA will reduce the cash rate to a new low of 0.75 per cent in October. George Tharenou of UBS expects the cash rate to fall to just 0.25 per cent by May.

CORPORATES
RESERVE BANK OF AUSTRALIA, UBS HOLDINGS PTY LTD, ARMIDALE BUSINESS CHAMBER, UNITED STATES. FEDERAL RESERVE BOARD, EUROPEAN CENTRAL BANK, AUSTRALIAN LABOR PARTY