RBA chief has confidence in consumers

Original article by David Rogers, James Glynn
The Australian – Page: 23 : 11-Dec-19

George Tharenou of UBS says the Reserve Bank of Australia is likely to reduce the cash rate twice in the first half of 2020, to a record low of 0.25 per cent. He adds that the federal government’s mid-year Budget update is unlikely to include any "material" fiscal stimulus. Meanwhile, RBA governor Philip Lowe concedes that it is taking longer than usual for consumers to spend the extra cash from the three interest rate cuts in 2019 and the federal government’s income tax offset. However, he expects consumer spending to increase.

CORPORATES
RESERVE BANK OF AUSTRALIA, UBS HOLDINGS PTY LTD

Low interest rates aren’t enough to boost wages growth: Economists

Original article by Euan Black
The New Daily – Page: Online : 4-Dec-19

With official interest rates left unchanged at 0.75 per cent on 3 December, some economists contend that further rate cuts are necessary for the Reserve Bank to deliver on its employment and inflation targets. However, others argue that interest rates are already so low that further cuts will not do not much to stimulate the economy. Instead, they contend that wage increases are needed, and this in turn requires measures to boost labour productivity. Growth in productivity has averaged 1.1 per cent annually over the last five years, and Treasurer Josh Frydenberg has estimated that lifting it to 1.5 per cent would boost incomes by $3,000 a year.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIA. DEPT OF THE TREASURY

Economists push out QE timing after Lowe speech

Original article by Matthew Cranston
The Australian Financial Review – Page: 8 : 28-Nov-19

Westpac’s chief economist Bill Evans now expects the Reserve Bank of Australia to pursue quantitative easing in June 2020, having previously forecast that it would commence a bond-buying program in February. Other economists have also revised their timetables for QE after RBA governor Philip Lowe signalled that this option is unlikely to be pursued unless the cash rate falls to 0.25 per cent. Citigroup’s Josh Williamson has ruled out any move to QE in 2020.

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

Two cuts left in RBA arsenal

Original article by Patrick Commins
The Australian – Page: 1 & 6 : 27-Nov-19

Reserve Bank of Australia governor Philip Lowe has used a speech in Sydney to state that conventional monetary policy remains effective and the central bank is unlikely to consider quantitative easing unless the cash rate falls to 0.25 per cent. He indicated that the RBA would buy government bonds if it opted for QE. Lowe also described negative interest rates as the only monetary policy tool that is "truly unconventional", and emphasised that negatives rates are unlikely in Australia.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIAN LABOR PARTY

Minutes show Reserve Bank was close to November cut

Original article by Matthew Cranston
The Australian Financial Review – Page: 8 : 20-Nov-19

The minutes of the Reserve Bank of Australia’s board meeting on 5 November show that the central bank gave serious consideration to reducing the cash rate to 0.5 per cent. However, board members took into account factors such as the likely effect of further monetary policy easing on savers and consumer confidence. The board ultimately concluded that the best course of action would be to wait until the impact of previous interest rate cuts became clear.

CORPORATES
RESERVE BANK OF AUSTRALIA, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, CITIGROUP PTY LTD

QE coming next year: JPMorgan

Original article by David Rogers
The Australian – Page: 17 & 28 : 12-Nov-19

JPMorgan Australia’s chief economist Sally Auld expects the Reserve Bank to implement unconventional monetary policy measures in the December 2020 quarter. Auld still anticipates another official interest rate cut in February, but warns that this will be insufficient to stimulate the economy, prompting the central bank to reduce the cash rate to 0.25 per cent and commence a quantitative easing program in late 2020. However, Auld says quantitative easing is unlikely to be necessary if the federal government’s May 2020 Budget includes ‘meaningful’ fiscal stimulus.

CORPORATES
RESERVE BANK OF AUSTRALIA, JP MORGAN AUSTRALIA LIMITED, MORGAN STANLEY AUSTRALIA LIMITED, WESTPAC BANKING CORPORATION – ASX WBC

Optimistic Reserve Bank holds rates steady for now

Original article by David Rogers, Patrick Commins
The Australian – Page: 19 & 27 : 6-Nov-19

Reserve Bank of Australia governor Philip Lowe has reiterated that the cash rate is likely to remain low for some time, after it was left unchanged at 0.75 per cent on 5 November. However, he also stressed that the central bank is open to further rate cuts if necessary to achieve its inflation and full employment targets. Su-Lin Ong of RBC Capital Markets now expects another rate cut in February, rather than December. Bill Evans of Westpac also expects a rate cut in February, which he says will be the last one in the current easing cycle.

CORPORATES
RESERVE BANK OF AUSTRALIA, RBC CAPITAL MARKETS, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. DEPT OF THE TREASURY

Recovery in doubt as Aussie dollar surges

Original article by David Rogers
The Australian – Page: 17 & 27 : 1-Nov-19

The Australian dollar reached a three-month high of $US0.693 in local trading on 31 October, in the wake of the US Federal Reserve’s third interest rate cut in 2019. Financial markets have in turn downgraded the chances of the Reserve Bank of Australia reducing the cash rate again before the end of the year. The Australian dollar gained 3.3 per cent in October, including a gain of 1.6 per cent in the last five trading sessions. RBA board member Ian Harper argues that a strong currency is not desirable at present, given weak economic growth and less than full employment.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF AUSTRALIA, AMP CAPITAL INVESTORS LIMITED, MORGAN STANLEY AUSTRALIA LIMITED

CPI cools further rate cut chances

Original article by Matthew Cranston
The Australian Financial Review – Page: 1 & 6 : 31-Oct-19

Official data shows that the consumer price index rose 0.5 per cent during the September quarter and 1.7 per cent year-on-year. Trimmed mean inflation was 0.4 per cent during the quarter and 1.6 per cent for the year to September. With the inflation rate remaining below the Reserve Bank’s target range of 2-3 per cent for a 15th consecutive quarter, the cash rate now seems likely to stay unchanged at 0.75 per cent for the rest of the year. Craig James of CommSec says the three interest rate cuts in 2019 have spooked consumers.

CORPORATES
RESERVE BANK OF AUSTRALIA, COMMONWEALTH SECURITIES LIMITED, CITIGROUP PTY LTD, ERNST AND YOUNG, BIS OXFORD ECONOMICS PTY LTD, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN BUREAU OF STATISTICS, AUSTRALIA. DEPT OF THE ENVIRONMENT AND ENERGY

RBA urges boards: cut hurdle rates

Original article by Matthew Cranston
The Australian Financial Review – Page: 1 & 6 : 30-Oct-19

Reserve Bank of Australia governor Philip Lowe has used a speech in Canberra to argue that businesses should reduce their return hurdle rates on new investments in response to historically low interest rates. He contends that many business investments that did not make sense commercially when interest rates were much higher should now proceed. Lowe also emphasised that negative interest rates are unlikely in Australia.

CORPORATES
RESERVE BANK OF AUSTRALIA