MONETARY POLICY – AUSTRALIA

Michele Levine, CEO, Roy Morgan Research, comments on the findings in State of the Nation 25: Spotlight on Financial Risk

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Original article by Roy Morgan Research
Market Research Update – Page: Online : 26-Aug-16

The end of the mining boom in Australia presents the Australian economy with many pressing challenges – and some of the biggest involve the potential for a slowing Australian economy to increase mortgage stress around the country, and also to lead to diminished superannuation balances for Australians heading towards retirement. The casualisation of the Australian work-force with an increasing proportion of Australians working part-time rather than full-time means many Australians are forced to save less for their retirement whilst the ability to pay current bills, including mortgage payments, is also crimped. In addition, the persistently low interest rates in Australia mean the amount required for retirement actually increases as annual returns on investments follow interest rates lower. Follow this link to view the full State of the Nation 25: Spotlight on Financial Risk Powerpoint presentation PDF.

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ROY MORGAN RESEARCH LIMITED

State of the Nation 25: Spotlight on Financial Risk

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Original article by Roy Morgan Research
Market Research Update – Page: Online : 26-Aug-16

Roy Morgan Research CEO Michele Levine this week presented the latest State of the Nation Report in Melbourne and Sydney, with a special Spotlight on Financial Risk including Mortgage debt and stress, Income risks and the adequacy of retirement funding. Key findings of this in-depth industry spotlight include: Home ownership in Australia is likely to continue its downward trend whilst house price increases outpace the increase in household incomes; Mortgage stress levels are likely to remain elevated even with the likelihood of further interest rate reductions by the Reserve Bank of Australia (RBA) over the coming 12-18 months. Official Australian interest rates are already at a record low of 1.5% and likely to converge with the 0% interest rates found in comparable Western economies including the United States, United Kingdom, Canada and the EU; Household debt levels could become a risk for both households and banks should general economic conditions turn down; The reliance on dual incomes for home loans repayments by many Australian families is a risk in itself with the increasing trend towards part-time work throughout much of the economy and with the additional factor of low wages growth and many more. View the full release to see a comprehensive run-down of findings.

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ROY MORGAN RESEARCH LIMITED

Stevens: we’re kidding ourselves

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Original article by Jacob Greber
The Australian Financial Review – Page: 1 & 6 : 11-Aug-16

Glenn Stevens has warned that more investment is needed to stimulate economic growth. The departing governor of the Reserve Bank of Australia (RBA) said on 10 August 2016 that monetary policy cannot revive economic growth on its own, and fiscal reforms are also needed. It is also necessary to curb demand for debt among companies and households. Stevens will leave the RBA in September, and will be succeeded by deputy governor Philip Lowe.

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RESERVE BANK OF AUSTRALIA

NAB forecasts more cuts in interest rates

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Original article by Jacob Greber
The Australian Financial Review – Page: 4 : 10-Aug-16

National Australia Bank expects the Reserve Bank to reduce the cash rate by another 50 basis points in the next 12 months, to a record low of one per cent. The banking major anticipates rate cuts in both May and August 2017. Meanwhile, NAB’s latest monthly survey shows that both business sentiment and business conditions declined in July 2016. Likewise, the ANZ Bank-Roy Morgan consumer sentiment index fell by 2.8 per cent in the first week of August.

CORPORATES
NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, ROY MORGAN RESEARCH LIMITED

Cutting rates to get the $A lower brings risks to the economy

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Original article by Philip Baker
The Australian Financial Review – Page: 28 : 10-Aug-16

The Australian dollar has risen above $US0.76 since the Reserve Bank reduced the cash rate to a record low of 1.5 per cent on 2 August 2016. The currency has benefited from the fact that the local cash rate is still quite high relative to many countries, so further money policy easing may be necessary in order to put sustained downward pressure on the dollar. However, this strategy has economic risks, such as the potential to undermine consumer confidence. Indeed, the ANZ/Roy Morgan consumer confidence rating fell by 2.8 per cent to 114.7 in the first week of August.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, ROY MORGAN RESEARCH LIMITED, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, TD SECURITIES, UNITED STATES. FEDERAL RESERVE BOARD, BANK OF JAPAN, ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

Interest rate cut brings out home buyers

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Original article by Su-Lin Tan
The Australian Financial Review – Page: 3 : 8-Aug-16

Preliminary data from Corelogic shows that Sydney boasted a residential auction clearance rate of more than 80 per cent on the weekend of 6-7 August 2016, compared with 78.3 per cent at the same time in 2015. The clearance rate in Melbourne was 76.1 per cent, down from 78.5 per cent a year ago. The Reserve Bank’s move to reduce the cash rate to a record low of 1.5 per cent prompted renewed activity among first-home buyers, although auctioneer Damien Cooley notes that they are still being edged out by property investors.

CORPORATES
CORELOGIC AUSTRALIA PTY LTD, RESERVE BANK OF AUSTRALIA, GOODYER DONNELLEY REAL ESTATE, BELLE PROPERTY PTY LTD, McGRATH LIMITED – ASX MEA, CBRE PTY LTD, HOCKING STUART PTY LTD, RAY WHITE REAL ESTATE

Banks reject Turnbull demand

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Original article by Phillip Coorey, Jacob Greber
The Australian Financial Review – Page: 1 & 4 : 4-Aug-16

Prime Minister Malcolm Turnbull has criticised the major banks for failing to reduce their interest rates by the full 25 basis point reduction in the cash rate on 2 August 2016. Turnbull says the banks have a "social licence" and their CEOs should explain why the rate cut was not passed on to their customers in full. ANZ Bank CEO Shayne Elliott has conceded that banks should do more to explain their decisions on interest rates, but notes that wholesale funding costs are rising and the banks will be subject to new capital requirements.

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AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY, AUSTRALIAN BANKERS’ ASSOCIATION

Lower rates help stocks but won’t spur growth

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Original article by David Rogers
The Australian – Page: 31 : 4-Aug-16

Australia’s S&P/ASX 200 gained 6.3 per cent in July 2016, but it has shed 2.2 per cent since the Reserve Bank reduced the cash rate to a record low on 2 August. However, equities are likely to benefit from a likely trend for self-managed superannuation funds to reduce their exposure to cash as returns from such investments fall. The outlook for interest rates in Australia and abroad is also likely to ensure that price-earnings ratios remain elevated for some time.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD, CREDIT SUISSE (AUSTRALIA) LIMITED

RBA cuts, dismissing property bubble risk

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Original article by Jacob Greber
The Australian Financial Review – Page: 1 & 6 : 3-Aug-16

Financial markets believe there is a 52 per cent chance that the Reserve Bank will reduce official interest rates to 1.25 per cent by November 2016, after the cash rate was cut by 25 basis points to 1.5 per cent on 2 August. The central bank has now reduced the cash rate by 3.25 per cent during the current monetary policy easing cycle, which began in late 2011. The RBA has warned that inflation is likely to remain low for some time, and noted that a housing price bubble now appears to be unlikely.

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RESERVE BANK OF AUSTRALIA

Post-Brexit rally tipped to continue

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Original article by David Rogers
The Australian Financial Review – Page: 32 : 2-Aug-16

Australia’s S&P/ASX 200 gained 6.3 per cent in July 2016, and it has risen by 11 per cent since falling sharply after the UK voted to leave the European Union. The benchmark index is likely to continue to perform well in August, regardless of whether the Reserve Bank decides to reduce the cash rate. The bourse is benefiting from expectations that interest rates in Australia and overseas will remain low for some time. The latest GDP data in the US has dampened expectations that the Federal Reserve will ease monetary policy in 2016.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD, BANK OF JAPAN