MONETARY POLICY – AUSTRALIA

Trade surplus hasn’t hushed rate cut talk

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Original article by Matthew Cranston
The Australian Financial Review – Page: 7 : 4-Jul-19

Australia’s trade surplus rose to a record $5.7bn in May, eclipsing the previous high of $4.8bn in April. The big trade surplus was driven by strong growth in iron ore export volumes and the price of the steel input. Kaixin Owyong of National Australia Bank says the record trade surplus could put the nation on track to achieve a current account surplus for the first time in decades. Meanwhile, some economists have flagged the potential for another official interest rate cut in August.

CORPORATES
NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, RESERVE BANK OF AUSTRALIA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, UBS HOLDINGS PTY LTD

Lowe leaves door open for more

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Original article by Andrew White
The Australian – Page: 17 & 25 : 3-Jul-19

Reserve Bank of Australia governor Philip Lowe has signalled the potential for further easing of monetary policy after the cash rate was reduced to a record low of one per cent on 2 July. Lowe says there is still a lot of spare capacity in the economy, and it should be possible to reduce both the unemployment and underemployment rate. It was the first time the RBA had cut official interest rates in two consecutive months since 2012, and Paul Bloxham of HSBC says this suggests that the central bank is worried about economic growth.

CORPORATES
RESERVE BANK OF AUSTRALIA, HSBC AUSTRALIA HOLDINGS PTY LTD, BUSINESS COUNCIL OF AUSTRALIA

RBA to cut twice more, say economists

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Original article by Patrick Commins
The Australian Financial Review – Page: 1 & 18 : 1-Jul-19

A quarterly survey of economists shows that there is a widely held expectation that the Reserve Bank of Australia will reduce official interest rates two more times during 2019. This would reduce the cash rate to 0.75 per cent, but David Plank of the ANZ Banks says further rate cuts could be necessary, depending on the outlook for the global economy and the Australian dollar. David Bassanese of BetaShares says the RBA would be unlikely to take the cash rate below 0.5 per cent, and it would probably opt for quantitative easing instead. Many economists expect a rate cut on 2 July.

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RESERVE BANK OF AUSTRALIA, BETASHARES CAPITAL LIMITED, ST GEORGE BANK LIMITED, BIS OXFORD ECONOMICS PTY LTD, AMP CAPITAL INVESTORS LIMITED, MOODY’S ANALYTICS AUSTRALIA PTY LTD, RBC CAPITAL MARKETS, DEUTSCHE BANK AG, INDUSTRY SUPER AUSTRALIA PTY LTD

History suggests rate cut in July unlikely

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Original article by Matthew Cranston
The Australian Financial Review – Page: 12 : 28-Jun-19

Financial markets have priced in a 72 per cent chance that the Reserve Bank of Australia will reduce the cash rate by 25 basis points in July. However, analysis shows that the central bank has reduced the cash rate in two consecutive months on just 12 of the 46 occasions on which it has eased monetary policy since 1990. The RBA has not reduced the cash rate in two consecutive months since 1992, when there were concerns about the outlook for the global economy. Chris Read of Morgan Stanley says an easing pause in July would enable the RBA to pursue a gradual cutting cycle.

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

RBA signals more rate cuts needed

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Original article by David Rogers
The Australian – Page: 17 & 24 : 19-Jun-19

The minutes from the Reserve Bank of Australia’s monthly board meeting show that it expects to further reduce official interest rates in coming months. Gareth Aird of the Commonwealth Bank anticipates rate cuts in August and November, when the central bank updates the economic forecasts in its quarterly monetary policy statements. Tom Kennedy of JP Morgan also expects a rate cut in August, although he says July remains a possibility.

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RESERVE BANK OF AUSTRALIA, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, JP MORGAN AUSTRALIA LIMITED, UBS HOLDINGS PTY LTD, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, STANDARD AND POOR’S ASX 200 INDEX, STANDARD AND POOR’S ASX ALL ORDINARIES INDEX, STANDARD AND POOR’S 500 INDEX, MSCI WORLD INDEX, UNITED STATES. FEDERAL RESERVE BOARD

Australian government bonds forecast to fall below 1pc

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Original article by Sarah Turner
The Australian Financial Review – Page: 13 & 16 : 18-Jun-19

The yield on 10-year Australian government bonds recovered slightly to 1.39 per cent on 17 June, after falling to a record low of 1.37 per cent in the previous week. Concern about the global economic outlook is weighing on bond yields worldwide, and Sally Auld of JP Morgan says the current bearish environment could see Australia’s 10-year bond yield fall below one per cent by the end of 2019. Steve Miller of Grant Samuel Funds Management says the expectation of further official interest cuts is putting downward pressure on local bond yields.

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JP MORGAN AUSTRALIA LIMITED, GRANT SAMUEL FUNDS MANAGEMENT PTY LTD, ARDEA INVESTMENT MANAGEMENT PTY LTD, RESERVE BANK OF AUSTRALIA

Rate cut may lead to riskier investing

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Original article by Sarah Turner
The Australian Financial Review – Page: 31 : 13-Jun-19

Anthony Doyle of Fidelity International says Australian savers are likely to seek out higher-yielding and higher-risk investments following the Reserve Bank’s decision to reduce the cash rate to a new low of 1.25 per cent. He notes that there was a similar trend in the UK following the global financial crisis, with Britain’s cash rate reaching a low of just 25 basis points. Doyle also expects the search for yield to bolster Australia’s corporate bond market.

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FIDELITY INTERNATIONAL PTY LTD, RESERVE BANK OF AUSTRALIA, M&G INVESTMENT MANAGEMENT LIMITED

RBA warns rates may go lower to drive jobs

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Original article by Michael Roddan
The Australian – Page: 2 : 13-Jun-19

The Reserve Bank of Australia recently downwardly revised its estimate of full employment from 5.25 per cent to 4.5 per cent. Assistant governor Luci Ellis has indicated that the non-accelerating inflation rate of unemployment may in fact be as low as 3.5 per cent, adding that the central bank may have to keep reducing the cash rate until the unemployment rate reaches this level. Australia’s official unemployment rate is currently about five per cent.

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RESERVE BANK OF AUSTRALIA

Banks not passing on cut nothing new: Treasury

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Original article by Matthew Cranston, James Eyers
The Australian Financial Review – Page: 4 : 7-Jun-19

Westpac and ANZ have been criticised for withholding part of the Reserve Bank’s official interest rate cut. The central bank has cut the cash rate a total of 19 times since 2008, and analysis by the Treasury shows that there have been 13 occasions when at least one of the four major banks failed to pass on the full rate. The banks have also reduced their rates by a higher margin than the official interest rate cut on several occasions since the global financial crisis.

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RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIA. DEPT OF THE TREASURY

Rate cut to spur ASX to even greater heights

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Original article by Sarah Turner
The Australian Financial Review – Page: 17 & 30 : 7-Jun-19

Australia’s benchmark S&P/ASX 200 has gained more than12 per cent so far in 2019, including a one per cent gain since the Reserve Bank reduced the cash rate on 4 June. The first interest rate cut in almost three years may provide the catalyst for further sharemarket gains, particularly given the higher yields at present from equities than bonds and cash products such as term deposits. There is also growing expectations of further monetary policy easing before the end of 2019.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, RESERVE BANK OF AUSTRALIA, AMP CAPITAL INVESTORS LIMITED, JP MORGAN AUSTRALIA LIMITED