MONETARY POLICY – AUSTRALIA

RBA holds rates firm, defying global trend

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Original article by Adam Creighton
The Australian – Page: 19 & 27 : 4-Jul-18

Financial markets have priced in little chance of monetary policy tightening by April 2019 after the Reserve Bank of Australia left the cash rate unchanged at 1.5 per cent on 3 July. Economists note that the wording of the statement issued by governor Philip Lowe was largely similar to the previous month. Lowe reiterated that progress in reducing the unemployment rate and lifting inflation to the RBA’s target range of 2-3 per cent is likely to be gradual. He also noted the potential for a trade war to impact on global economic growth

CORPORATES
RESERVE BANK OF AUSTRALIA, BANK FOR INTERNATIONAL SETTLEMENTS, AUSTRALIAN BUREAU OF STATISTICS, HSBC AUSTRALIA HOLDINGS PTY LTD, WESTPAC BANKING CORPORATION – ASX WBC

Property fall tipped to soften RBA

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Original article by Jacob Greber
The Australian Financial Review – Page: 3 : 3-Jul-18

The Reserve Bank of Australia is widely tipped to leave official interest rates unchanged at 1.5 per cent on 3 July. However, the central bank’s so-called "shadow board" believes that there is a strong case for the cash rate to be increased immediately, given factors such as low wages growth, low unemployment and an inflation rate that is within the RBA’s target range. Meanwhile, new data shows that there was an 0.3 per cent decline in house prices in major cities during June.

CORPORATES
RESERVE BANK OF AUSTRALIA, CORELOGIC AUSTRALIA PTY LTD, NOMURA AUSTRALIA LIMITED, AUSTRALIAN NATIONAL UNIVERSITY, MONASH UNIVERSITY, UNIVERSITY OF SYDNEY, MACQUARIE UNIVERSITY

No RBA rate hikes for a year

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Original article by Vesna Poljak, Sarah Turner
The Australian Financial Review – Page: 1 & 20 : 2-Jul-18

A quarterly survey of economists shows that the general consensus is that the Reserve Bank of Australia will leave interest rates on hold at 1.5 per cent until June 2019. The cash rate is now expected to reach two per cent by the end of 2019. However, former ANZ Bank chief economist Warren Hogan expects one rate increase by mid-2019, arguing that the RBA needs to begin the process of normalising monetary policy. Matthew Peter of QIC also expects one rate rise in the next 12 months.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, QIC LIMITED, UNIVERSITY OF TECHNOLOGY, SYDNEY, BANK FOR INTERNATIONAL SETTLEMENTS, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, UNITED STATES. FEDERAL RESERVE BOARD, IFM INVESTORS PTY LTD, MARKET ECONOMICS PTY LTD, LAMINAR CAPITAL, CAPITAL ECONOMICS LIMITED, WESTPAC BANKING CORPORATION – ASX WBC, EUROPEAN CENTRAL BANK

RBA sidelined as cost of money rises

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Original article by Jacob Greber
The Australian Financial Review – Page: 3 : 28-Jun-18

Futures market pricing suggests that investors expect the Reserve Bank of Australia to keep official interest rates on hold until late 2019. However, the gap between the cash rate and the bank bill swap rate has increased to 61 basis points, compared with an average of 18 basis points for much of the last decade. The rise in the BBSW may eventually prompt Australia’s major banks to increase their mortgage interest rates independently of the RBA, with several of the nation’s smaller lenders having already done so.

CORPORATES
RESERVE BANK OF AUSTRALIA, BANK OF QUEENSLAND LIMITED – ASX BOQ, ME BANK, AMP BANK LIMITED, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, IFM INVESTORS PTY LTD

Plea to end unhealthy RBA cash rate

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Original article by Jacob Greber
The Australian Financial Review – Page: 5 : 26-Jun-18

Economists James Morley from the University of Sydney and Mark Crosby of Monash University say the Reserve Bank of Australia needs to increase official interest rates. Crosby says the cash rate is at an "unhealthy level" at just 1.5 per cent and it is safe to begin tightening monetary policy. Morley argues that there is scope for at least two rate rises without having any adverse impact on the economy. Former RBA board member Warwick McKibbin has called for an increase in the cash rate.

CORPORATES
RESERVE BANK OF AUSTRALIA, UNIVERSITY OF SYDNEY, MONASH UNIVERSITY, AUSTRALIAN NATIONAL UNIVERSITY, GOLDMAN SACHS AUSTRALIA PTY LTD, UNITED STATES. FEDERAL RESERVE BOARD

RBA’s Lowe urged to raise rates

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Original article by Jacob Greber
The Australian Financial Review – Page: 1 & 6 : 25-Jun-18

The general consensus of market economists is that the Reserve Bank of Australia should leave official rates on hold at 1.5 per cent for the rest of 2018 and most of 2019. However, former RBA board member Warwick McKibbin says the central bank should increase the cash rate by at least 25 basis points, as interest rates are beginning to rise globally. He also argues that the RBA should gradually shift its focus from an inflation target of 2-3 per cent toward a nominal income target.

CORPORATES
RESERVE BANK OF AUSTRALIA, BANK OF ENGLAND, UNITED STATES. FEDERAL RESERVE BOARD, FEDERAL RESERVE BANK OF NEW YORK, EUROPEAN CENTRAL BANK, AUSTRALIAN NATIONAL UNIVERSITY, THE BROOKINGS INSTITUTION

RBA to keep interest rates on hold until 2020: Macquarie

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Original article by Patrick Commins
The Australian Financial Review – Page: 31 : 22-Jun-18

Macquarie Group economists Ric Deverell and Justin Fabo forecast that Australia’s unemployment rate will not fall below five per cent until 2020. They warn that "persistent" spare capacity in the economy will ensure that wages growth remains subdued in the near-term. As a result, they do not expect the Reserve Bank to tighten monetary policy until at least 2020. However, they note that a number of domestic and international factors could affect the timing of an interest rate rise.

CORPORATES
RESERVE BANK OF AUSTRALIA, MACQUARIE GROUP LIMITED – ASX MQG

Housing outlook dims amid forecasts of falling prices

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Original article by Robyn Ironside
The Australian – Page: 19 & 23 : 20-Jun-18

The ANZ Bank expects house prices in Melbourne and Sydney to fall around 10 per cent by the end of 2019. Senior economist Daniel Gradwell adds that a fall of about four per cent nationally is now expected in 2018, followed by a two per cent decline in 2019. He notes that ANZ had previously forecast a modest rise in house prices in both years. Gradwell also says the Reserve Bank is likely to leave the cash rate on hold until the second half of 2019 due to the outlook for the housing market.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, RESERVE BANK OF AUSTRALIA, MACQUARIE GROUP LIMITED – ASX MQG

Fed hikes put squeeze on banks

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Original article by Karen Maley
The Australian Financial Review – Page: 1 & 28 : 15-Jun-18

The US Federal Reserve has signalled that two more interest rate increases are likely in 2018, following its second rate rise for the year. The new target range for the federal funds rate is between 1.75% and 2%, while the Reserve Bank of Australia has kept its cash rate at 1.5% for almost two years. The divergence in monetary policy has coincided with rising wholesale borrowing costs for Australia’s major banks, as well as a recent spike in the bank bill swap rate. Shane Oliver of AMP says local banks could potentially respond by increasing their mortgage rates on investment and interest-only loans.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF AUSTRALIA, AMP LIMITED – ASX AMP, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, FINANCIAL STABILITY BOARD, DEUTSCHE BANK AG, SOCIETE GENERALE SA, BNP PARIBAS SA, GRUPO SANTANDER

Exports revive wage hope

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Original article by Jacob Greber
The Australian Financial Review – Page: 1 : 7-Jun-18

The latest GDP data shows that the Australian economy expanded by one per cent in the March quarter and 3.1 per cent year-on-year. The economy recorded nominal growth of 2.2 per cent for the quarter, while real net national disposable income per capita rose by 1.5 per cent. Despite the better-than-expected GDP data, the Reserve Bank is still widely tipped to leave the cash rate on hold until at least late 2019, although growth in wages may be a key factor in the timing of any change in monetary policy.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY, MACQUARIE UNIVERSITY