MONETARY POLICY – AUSTRALIA

Chalmers won’t back the unions on jobless target

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Original article by Greg Brown
The Australian – Page: 4 : 17-Jul-23

Treasurer Jim Chalmers says he will not ‘pre-empt’ the monetary policy decisions that incoming Reserve Bank of Australia governor Michele Bullock might recommend to its board. Chalmers adds that it "remains to be seen" as to whether inflation can be brought under control with higher levels of employment, and he says inflation is the main challenge facing the domestic economy. The ACTU has called for a "reset" of the RBA’s full employment target in the wake of Bullock’s appointment, while Australian Workers Union secretary Paul Farrow said the RBA should redefine full employment as being "understood as zero involuntary unemployment". Bullock had suggested in June that the unemployment rate will have to rise to 4.5 per cent to restore inflation to the target range of 2-3 per cent.

CORPORATES
AUSTRALIA. DEPT OF THE TREASURY, RESERVE BANK OF AUSTRALIA, ACTU, AUSTRALIAN WORKERS’ UNION-FEDERATION OF INDUSTRIAL, MANUFACTURING AND ENGINEERING EMPLOYEES

1.4m borrowers at risk of repayment stress

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Original article by James Eyers
The Australian Financial Review – Page: 16 : 5-Jul-23

The Reserve Bank of Australia has signalled that further interest rate rises may be necessary in order to return inflation to its target range, after leaving the cash rate unchanged at 4.1 per cent on Tuesday. Households will face further financial pressure if there are more rate rises. Home loan borrowers will be particularly vulnerable, with research from Roy Morgan showing that 1.43 million mortgage borrowers are now at risk of mortgage stress; this is an increase of 627,000 in the last year. Roy Morgan estimates that an additional 51,000 borrowers would be at risk of mortgage stress if the cash rate is increased by another 25 basis points. A second rate rise of this size would put another 94,000 borrowers at risk of mortgage stress.

CORPORATES
RESERVE BANK OF AUSTRALIA, ROY MORGAN LIMITED

Housing market on knife edge despite rate pause

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Original article by Nila Sweeney
The Australian Financial Review – Page: 29 & 32 : 5-Jul-23

SQM Research MD Louis Christopher expects sentiment in the housing market to remain cautious in the near-term, despite the Reserve Bank’s latest interest rate pause. He is of the view that sentiment will not improve until there is a longer pause. Shane Oliver from AMP Capital anticipates that any upturn in housing market activity arising from the second interest rate pause since April is likely to be temporary. He adds that further interest rate increases could put renewed downward pressure on house prices.

CORPORATES
RESERVE BANK OF AUSTRALIA, SQM RESEARCH PTY LTD, AMP CAPITAL INVESTORS LIMITED

RBA set to stay tighter for longer

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Original article by Joanne Tran
The Australian Financial Review – Page: 1 & 22 : 3-Jul-23

The consensus of economists polled by the Australian Financial Review is that official interest rates will peak at 4.6 per cent in August. Judo Bank economist Warren Hogan estimates that there is a 35 per cent chance that the cash rate will rise above five per cent, citing factors such as ‘sticky’ inflation. However, Su-Lin Ong of RBC Capital Markets expects the cash rate to peak at 4.35 per cent in July. Meanwhile, most of the 27 economists who participated in the quarterly survey anticipate that the Reserve Bank will not begin easing monetary policy before May 2024, although Carlos Cacho of Jarden expects the first rate cut to occur in November 2024.

CORPORATES
JUDO BANK PTY LTD, RBC CAPITAL MARKETS, RESERVE BANK OF AUSTRALIA, JARDEN AND COMPANY

‘Scary’: Mortgage costs reach critical threshold

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Original article by Nila Sweeney
The Australian Financial Review – Page: 9 : 7-Jun-23

SQM Research’s MD Louis Christopher says the probability of a ‘double dip’ downturn in Australia’s housing market has increased to more than 60 per cent following the Reserve Bank’s decision to increase the cash rate to 4.1 per cent. He notes that SQM’s research in late 2022 found that loan book managers identified a cash rate of about four per cent as the ‘line in the sand’ where many homeowners may be forced to sell. Christopher notes that the number of distressed listings is still quite low, but cautions that this may change as the full impact of the recent rate rises flows through to mortgage holders.

CORPORATES
SQM RESEARCH PTY LTD

Pain, blame and, at this rate, it’s not over

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Original article by Patrick Commins
The Australian – Page: 1 & 4 : 7-Jun-23

Reserve Bank of Australia governor Philip Lowe has defended the decision to increase the case rate by 25 basis points to 4.1 per cent on Tuesday. He says the 12th rate rise since May 2022 was necessary to provide greater confidence that inflation will return to the target range within a reasonable timeframe. He also cautioned that further rate rises may be needed, depending on the outlook for the economy and inflation. The Australian Chamber of Commerce & Industry contends that the recent 5.75 per cent increase in the minimum wage had forced the RBA’s hand. However, Treasurer Jim Chalmers rejects suggestions that the minimum wage increase and the federal government’s 9 May budget were to blame for the latest rate rise. The cash rate is now at its highest level since April 2012.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY, AUSTRALIA. DEPT OF THE TREASURY

Kickstart productivity or be kicked: RBA

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Original article by Patrick Commins, Giuseppe Tauriello
The Australian – Page: 1 & 4 : 17-May-23

The minutes from the Reserve Bank of Australia’s latest board meeting show that the decision to increase the cash rate by 25 basis points in May was a "finely balanced" one. Amongst other things, the board members noted that the nation’s declining productivity since the onset of the COVID-19 pandemic could make it difficult to bring inflation back under control. The RBA has warned that further interest rate increases are likely unless productivity is ‘kickstarted’. Analysts believe that quarterly wage price index data to be released on Wednesday could determine whether the RBA increases the cash rate in June.

CORPORATES
RESERVE BANK OF AUSTRALIA

Budget warning after RBA shock

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Original article by Michael Read, Phillip Coorey
The Australian Financial Review – Page: 1 & 6 : 3-May-23

Treasurer Jim Chalmers says the Reserve Bank of Australia’s decision to increase the cash rate to 3.85 per cent on Tuesday underlines the fact that inflation remains the primary challenge for the domestic economy. Chalmers adds that the latest rate increase highlights the need to ensure that the budget on 9 May does not add to Australia’s inflation outbreak. Amid calls for an increase in welfare payments, Chalmers has stresssed that the budget will include "responsible cost-of-living relief" that does not add to inflation. Meanwhile, RBA governor Philip Lowe has conceded that further interest rate rises may be needed in coming months in order to reduce inflation to the target range of 2-3 per cent; however, he says the RBA does not need to get inflation back to the target straight away, while it also cannot take too long to do so.

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

RBA to get the Lowe-down on jobs

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Original article by Patrick Commins
The Australian – Page: 1 & 4 : 21-Apr-23

The federal government will introduce legislation by the end of the year to amend the Reserve Bank Act after accepting all 51 recommendations of an independent review of the central bank. The RBA’s restructuring will result in responsibility for setting interest rates being transferred to a new monetary policy board, which will have six external members and continue to be chaired by the central bank’s governor. This board will meet eight times per year and it will hold a press conference after each meeting. The RBA will be required to give equal consideration to achieving full employment and controlling inflation in its future interest rate decisions. A separate governance board will assume responsibility for the day-to-day management of the RBA.

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

Twin RBA rate rises may be on horizon

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Original article by Alex Gluyas
The Australian Financial Review – Page: 27 : 19-Apr-23

Morgan Stanley believes that the strength of the domestic economy means that the Reserve Bank of Australia may increase the cash rate by 25 basis points in both August and September. Shares in retail and property-related stocks have risen in recent weeks amid speculation that the RBA’s monetary policy tightening cycle may have ended following the pause in April. However, Morgan Stanley cautions that the rebound may be premature, given that inflation remains high and the official unemployment rate is steady at 3.5 per cent.

CORPORATES
MORGAN STANLEY AUSTRALIA LIMITED, RESERVE BANK OF AUSTRALIA