Feature Story: August Interest Rates
The board of the Reserve Bank of Australia decided to leave the cash rate unchanged at 3.00 per cent at its monetary policy meeting today.
The board of the RBA believes that “with considerable economic stimulus in train around the world, the global economy is stabilising after an earlier sharp contraction in demand. Downside risks to the global outlook have diminished, though they have not disappeared and most observers expect only modest growth overall. There is tentative evidence that the US economy is approaching a turning point, but conditions in Europe are still weakening. Growth in China, in contrast, has been very strong in recent months, which is having an impact on other economies in the region and on commodity markets.”
The board goes on to note that “economic conditions in Australia have been stronger than expected a few months ago, with both consumer spending and exports notable for their resilience. Measures of confidence have recovered a good deal of ground. This suggests that the risk of a severe contraction in the Australian economy has abated. The most likely outcome in the near term is a period of sluggish output, with consumer spending likely to slow somewhat and investment remaining weak. Stronger dwelling activity and public spending will start to provide more support to overall demand soon, and growth is likely to firm into 2010.”
Current Economic Conditions
Economic conditions have stabilized slightly in recent months with positive economic data improving sentiment. Some positive economic data domestically suggests the Australian economy has held up strongly in the recent months, however, unemployment is still expected to continue rising throughout 2009.
The latest ABS employment figures revealed the national unemployment rate increased to 5.8 per cent in June 2009 (a level not witnessed since October 2003), with the Victorian unemployment rate reaching 6.0 per cent for the month. Many market forecasts expect the unemployment rate to reach the 7.5 per cent mark sometime next year; however, this figure has been revised from the expected 8 per cent from earlier in the year.
The All Groups CPI rose 0.5 per cent in the June quarter 2009, compared with a rise of 0.1 per cent in the March quarter 2009 and rose 1.5 per cent through the year to June quarter 2009. The most significant price increases for the year were housing (+5.2%), Health (+5.2%), education (+5.1%), food (+4.8%), and alcohol and tobacco (+4.7%). The most significant offsetting price falls for the year were for financial and insurance services (-6.6%) and transportation (-5.9%). Melbourne's CPI rose 0.3 per cent for the quarter and 1.2 per cent for the year to the June quarter 2009.
The Australian dollar was trading at 0.8281 US dollars at close of business on the 31st of July 2009. The Australian dollar has increased by 3.7 per cent in July against the US dollar. Some currency analysts expect the dollar to continue rising in the coming months as investors see Australia as a safe haven for their assets.
There has been some poor performance in the retail sector in June 2009, with seasonally adjusted data showing total Australian turnover decreasing by 1.4%, and Victorian turnover decreasing by 1.3 per cent for the month. The decrease comes after 3 months of positive and steady retail growth and is only the second month in 2008 to post negative retail growth. Unfortunately trend data not available from the ABS at the moment, as a number of issues related to current economic conditions (including the introduction of that government stimulus package) have made the calculation of the trend data series difficult.
An increase in consumer sentiment combined with some positive economic data has boosted car sales in recent months. Sales of new cars are up 5.7 per cent in June 2009 in seasonally adjusted terms, following a 5.4 per cent increase in May 2009. Car sales have not been up for three consecutive months since November 2007. Trend data was not available for publishing at this time.
Housing Market Conditions
The REIV June quarter medians have revealed that the metropolitan median price of a house has increased 9 per cent from $405,500 to $441,875, just short of the 2008 peak of $450,000. The unit and apartment market has recorded an almost identical increase as houses with the median price increasing by 8.3 per cent over the quarter from $360,000 to $390,000. The improvement can be attributed to low interest rates, confidence in the market, continuing population increases and the financial assistance to first home buyers. These factors have contributed to the July 2009 REIV auction clearance rate reaching 85 per cent. The REIV auction clearance rate has now been at 80 per cent and above for the last four months.
The ABS House Price Index released today confirms the price movements witnessed in the REIV June Quarter median prices. The house price index for the weighted average of the eight capital cities increased by 4.2 per cent in the June quarter 2009. All capital city indexes rose over the quarter with the largest increases in Melbourne (+5.2%), Sydney (+4.9%), Canberra (+3.6%) and Adelaide (+3.4%). Over the year to the June quarter, indexes in all capital cities fell, except for Darwin (+11.0%), Adelaide (+2.7%) and Hobart (+0.1%).
Building approvals showed some promise in June. The number of total dwelling units approved in Victoria increased by 17.4 per cent in seasonally adjusted terms for the month of June 2009, following a revised decrease of 7.8 per cent in previous month. The value of total dwellings approved in Victoria increased by 59.7 per cent to $2.03 billion dollars. In trend terms, the number of total units approved in Victoria increased by 0.2 per cent for the month while the value of total dwelling units approved increased by 1.3 per cent for the month.
Housing finance statistics also exhibited a positive note. In Victoria, the number of dwellings financed by first home buyers increased by 16.2 per cent in May 2009, as uncertainty about a possible extension of the boost saw many buyers trying to get in the market before the 30 June 2009 deadline. Dwellings financed by non-first home buyers increased by 12.3 during the month. The average loan size for first home buyers decreased by 1 per cent for the month, while the average loan size for non-first home buyers increased by 2.8 per cent. The total number of loans increased by 13.5 per cent for the month, while the total value of the loans increased by 15.4 per cent.
Lending conditions have also improved slightly as the total value of owner occupied housing commitments excluding alterations and additions for May 2009 increased in both trend terms (up 3.0%) and seasonally adjusted terms (up 2.3%). The total value of commercial finance increased in trend terms (up 0.4%) and in seasonally adjusted terms (up 4.0%). The value of total personal finance commitments decreased in both trend terms (down 0.9%) and in seasonally adjusted terms (down 2.9%).
The Metropolitan Melbourne rental market eased slightly in June 2009 with a vacancy rate of 1.4 per cent. The outer and middle Melbourne vacancy rates both eased to 1.0 per cent from 1.6 per cent respectively. The inner Melbourne vacancy rate remained unchanged at 1.4 per cent.
Thanks to the REIV
The board of the Reserve Bank of Australia decided to leave the cash rate unchanged at 3.00 per cent at its monetary policy meeting today.
The board of the RBA believes that “with considerable economic stimulus in train around the world, the global economy is stabilising after an earlier sharp contraction in demand. Downside risks to the global outlook have diminished, though they have not disappeared and most observers expect only modest growth overall. There is tentative evidence that the US economy is approaching a turning point, but conditions in Europe are still weakening. Growth in China, in contrast, has been very strong in recent months, which is having an impact on other economies in the region and on commodity markets.”
The board goes on to note that “economic conditions in Australia have been stronger than expected a few months ago, with both consumer spending and exports notable for their resilience. Measures of confidence have recovered a good deal of ground. This suggests that the risk of a severe contraction in the Australian economy has abated. The most likely outcome in the near term is a period of sluggish output, with consumer spending likely to slow somewhat and investment remaining weak. Stronger dwelling activity and public spending will start to provide more support to overall demand soon, and growth is likely to firm into 2010.”
Current Economic Conditions
Economic conditions have stabilized slightly in recent months with positive economic data improving sentiment. Some positive economic data domestically suggests the Australian economy has held up strongly in the recent months, however, unemployment is still expected to continue rising throughout 2009.
The latest ABS employment figures revealed the national unemployment rate increased to 5.8 per cent in June 2009 (a level not witnessed since October 2003), with the Victorian unemployment rate reaching 6.0 per cent for the month. Many market forecasts expect the unemployment rate to reach the 7.5 per cent mark sometime next year; however, this figure has been revised from the expected 8 per cent from earlier in the year.
The All Groups CPI rose 0.5 per cent in the June quarter 2009, compared with a rise of 0.1 per cent in the March quarter 2009 and rose 1.5 per cent through the year to June quarter 2009. The most significant price increases for the year were housing (+5.2%), Health (+5.2%), education (+5.1%), food (+4.8%), and alcohol and tobacco (+4.7%). The most significant offsetting price falls for the year were for financial and insurance services (-6.6%) and transportation (-5.9%). Melbourne's CPI rose 0.3 per cent for the quarter and 1.2 per cent for the year to the June quarter 2009.
The Australian dollar was trading at 0.8281 US dollars at close of business on the 31st of July 2009. The Australian dollar has increased by 3.7 per cent in July against the US dollar. Some currency analysts expect the dollar to continue rising in the coming months as investors see Australia as a safe haven for their assets.
There has been some poor performance in the retail sector in June 2009, with seasonally adjusted data showing total Australian turnover decreasing by 1.4%, and Victorian turnover decreasing by 1.3 per cent for the month. The decrease comes after 3 months of positive and steady retail growth and is only the second month in 2008 to post negative retail growth. Unfortunately trend data not available from the ABS at the moment, as a number of issues related to current economic conditions (including the introduction of that government stimulus package) have made the calculation of the trend data series difficult.
An increase in consumer sentiment combined with some positive economic data has boosted car sales in recent months. Sales of new cars are up 5.7 per cent in June 2009 in seasonally adjusted terms, following a 5.4 per cent increase in May 2009. Car sales have not been up for three consecutive months since November 2007. Trend data was not available for publishing at this time.
Housing Market Conditions
The REIV June quarter medians have revealed that the metropolitan median price of a house has increased 9 per cent from $405,500 to $441,875, just short of the 2008 peak of $450,000. The unit and apartment market has recorded an almost identical increase as houses with the median price increasing by 8.3 per cent over the quarter from $360,000 to $390,000. The improvement can be attributed to low interest rates, confidence in the market, continuing population increases and the financial assistance to first home buyers. These factors have contributed to the July 2009 REIV auction clearance rate reaching 85 per cent. The REIV auction clearance rate has now been at 80 per cent and above for the last four months.
The ABS House Price Index released today confirms the price movements witnessed in the REIV June Quarter median prices. The house price index for the weighted average of the eight capital cities increased by 4.2 per cent in the June quarter 2009. All capital city indexes rose over the quarter with the largest increases in Melbourne (+5.2%), Sydney (+4.9%), Canberra (+3.6%) and Adelaide (+3.4%). Over the year to the June quarter, indexes in all capital cities fell, except for Darwin (+11.0%), Adelaide (+2.7%) and Hobart (+0.1%).
Building approvals showed some promise in June. The number of total dwelling units approved in Victoria increased by 17.4 per cent in seasonally adjusted terms for the month of June 2009, following a revised decrease of 7.8 per cent in previous month. The value of total dwellings approved in Victoria increased by 59.7 per cent to $2.03 billion dollars. In trend terms, the number of total units approved in Victoria increased by 0.2 per cent for the month while the value of total dwelling units approved increased by 1.3 per cent for the month.
Housing finance statistics also exhibited a positive note. In Victoria, the number of dwellings financed by first home buyers increased by 16.2 per cent in May 2009, as uncertainty about a possible extension of the boost saw many buyers trying to get in the market before the 30 June 2009 deadline. Dwellings financed by non-first home buyers increased by 12.3 during the month. The average loan size for first home buyers decreased by 1 per cent for the month, while the average loan size for non-first home buyers increased by 2.8 per cent. The total number of loans increased by 13.5 per cent for the month, while the total value of the loans increased by 15.4 per cent.
Lending conditions have also improved slightly as the total value of owner occupied housing commitments excluding alterations and additions for May 2009 increased in both trend terms (up 3.0%) and seasonally adjusted terms (up 2.3%). The total value of commercial finance increased in trend terms (up 0.4%) and in seasonally adjusted terms (up 4.0%). The value of total personal finance commitments decreased in both trend terms (down 0.9%) and in seasonally adjusted terms (down 2.9%).
The Metropolitan Melbourne rental market eased slightly in June 2009 with a vacancy rate of 1.4 per cent. The outer and middle Melbourne vacancy rates both eased to 1.0 per cent from 1.6 per cent respectively. The inner Melbourne vacancy rate remained unchanged at 1.4 per cent.
Thanks to the REIV
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