Digital Finance Analytics (DFA) Blog – Page 515

Final Auction Results Up(ish)

CoreLogic’s final auction results are out for last Saturday. Higher than last week, but significantly lower than last year at this time.

Last week, the final auction clearance rate increased across the combined capital cities, returning a 63.7 per cent clearance rate across almost double the volume of auctions week-on-week (1,470).

Over the week prior, a clearance rate of 62.0 per cent was recorded across 790 auctions. Both auction clearance rate and volumes were lower than what was seen one year ago, when a 73.2 per cent clearance was recorded across 1,591 auctions.

Opinions Differ On The Australian Interest Rate Outlook

We heard from both Westpac and NAB on the outlook for interest rates both here and in the US. There is consensus that rates will rise in the US, but not in Australia.

Alan Oster, NAB Chief Economist says:

The RBA has indicated that it is in no rush to raise rates in lock-step with global central bank counterparts. However, lower unemployment, and evidence of wages growth moving upwards — even gradually — should be enough to give the RBA confidence that inflation will eventually lift above the bottom of the band. We continue to forecast two 25 basis point rate hikes in August and November, although acknowledge the risks are that these hikes could be delayed.

Whereas Bill Evans, Westpac’s Chief Economist sees no change in the RBA cash rate this year or next.

This raises an interesting question. How far can the “elastic stretch” between Australian and US rates? Bill Evans says “with two more Fed hikes expected in 2019, we now anticipate that the differential will reach negative 112 basis points by June 2019”.

That is uncharted territory with the previous record being negative 50 basis points in the late 1990s.

This suggests the Australian dollar will be lower, towards 70 cents, compared with its current rate of close to 80 cents relative to the US dollar.

CBA Blocks Credit Card Purchases of Bitcoin Etc.

CBA has said that due to the unregulated and highly volatile nature of virtual currencies, customers will no longer be able to use their CommBank credit cards to buy virtual currencies. This came into effect as of 14 February 2018.

Our customers can continue to buy and sell virtual currencies using other CommBank transaction accounts, and their debit cards.

We have made this decision because we believe virtual currencies do not meet a minimum standard of regulation, reliability, and reputation when compared to currencies that we offer to our customers. Given the dynamic, volatile nature of virtual currency markets, this position is regularly reviewed.

The restriction on credit card usage for virtual currencies will also apply to Bankwest credit cards.

Q&A

Why are we making this change?

Virtual currencies are unregulated and, as has been made clear in recent months, highly volatile. Effective 14 February, we will no longer authorise credit card purchases for these currencies.

How can I buy virtual currencies?

You can still buy and sell virtual currencies using other CommBank transaction accounts, and debit cards, as long as you comply with our terms and conditions and all relevant legal obligations.

I recently tried to purchase virtual currencies using my debit card and it was declined. Why did this happen?

We are aware of some instances where customers found that their attempts to buy or sell virtual currencies did not work. This can be due to a number of reasons, including:

The virtual currency exchange the customer is using has been blocked by our security systems. A currency exchange will be blocked if a number of the transactions it has previously processed are found to have been fraudulent, inconsistent with our policies or outside of the Group’s risk tolerance.

The payment method the customer uses is no longer accepted by the currency exchange. Some exchanges have recently stopped accepting certain payment methods.

The virtual currency exchange’s bank blocks the transaction for security reasons.

Can I still get credits from virtual currency exchanges paid to my credit card?

Yes, credits will continue to be authorised by the Bank onto credit cards.

US Inflation Up 0.5% In January

More evidence of inflation lurking in the US economy, as the headline rate for January was higher than expected. This gives more support to the view the FED will indeed lift interest rates.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.

The seasonally adjusted increase in the all items index was broad-based, with increases in the indexes for gasoline, shelter, apparel, medical care, and food all contributing. The energy index rose 3.0 percent in January, with the increase in the gasoline index more than offsetting declines in other energy component indexes. The food index rose 0.2 percent with the indexes for food at home and food away from home both rising.

The index for all items less food and energy increased 0.3 percent in January. Along with shelter, apparel, and medical care, the indexes for motor vehicle insurance, personal care, and used cars and trucks also rose in January. The indexes for airline fares and new vehicles were among those that declined over the month.

The all items index rose 2.1 percent for the 12 months ending January, the same increase as for the 12 months ending December. The index for all items less food and energy rose 1.8 percent over the past year, while the energy index increased 5.5 percent and the food index advanced 1.7 percent.

ASIC welcomes establishment of the Australian Financial Complaints Authority

ASIC welcomes the passage through Parliament of the Bill to establish the Australian Financial Complaints Authority (AFCA).

AFCA will be the culmination of more than 20 months of public consultation and inquiry, commencing with the review of the dispute resolution framework by an independent panel led by Melbourne Law School’s Professor Ian Ramsay.

ASIC Deputy Chair Peter Kell said, ‘Fair, timely and effective dispute resolution is a cornerstone of the financial services consumer protection framework. The combination of firms’ internal dispute resolution procedures and access to a free independent external scheme currently provides redress for many tens of thousands of Australians each year. Strengthening these dispute resolution requirements will help deliver higher standards and better outcomes in the financial services market.’

‘The establishment of a single scheme for all financial services and superannuation complaints is a very positive development, building on the outcomes achieved over many years by the existing three schemes: the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal.’

Higher monetary limits and compensation caps, including for primary production businesses, will give more consumers and small businesses access to a free and independent forum to resolve their complaints.

ASIC will work with Government and scheme stakeholders to ensure that the transition to the commencement of AFCA is as smooth as possible. In the interim, ASIC will retain direct oversight of the two ASIC-approved schemes – FOS and CIO – which will continue to provide high levels of service to consumers and firms. Separate arrangements are in place for the ongoing operation of the SCT to enable it to deal with existing complaints.

Important information about transition

AFCA will start accepting complaints no later than 1 November 2018

The operator of the scheme will be authorised by the Minister, and the scheme will be subject to ongoing oversight by ASIC.

In order to maintain access to external dispute resolution for consumers in the lead up to commencement of AFCA, ASIC will monitor member compliance with existing EDR scheme requirements as well as the effectiveness of scheme operations.

Members of each of CIO and FOS – including licensees and credit representatives – must continue to maintain their EDR membership through this period, including paying membership and other scheme fees in full as required. ASIC has asked the two schemes to report any failure of members to do so.

A memorandum of understanding between CIO and FOS will prevent members inappropriately moving between the schemes in the transition period.

ASIC will be consulting soon on updated Regulatory Guide 139 (REG 139), which will set out details of ASIC’s oversight of AFCA. This will be finalised and published when AFCA commences operations.

ASIC will also publicly consult on new IDR standards and the mandatory IDR reporting requirements that are also contained in the AFCA Bill – but this consultation will not take place until afterAFCA commencement.

Current legislative IDR requirements for superannuation trustees and retirement savings account providers (including 90-day timeframes and requirements for written reasons) will continue to apply in their current form until ASIC consults on and then issues updated IDR policy (RG 165).

ANZ comments on APRA capital discussion paper

ANZ today noted the release of the Australian Prudential Regulation Authority’s (APRA) discussion paper on revisions to capital requirements and confirmed ANZ’s APRA CET1 position of 10.8% as at December 2017 is already in compliance with APRA’s existing Unquestionably Strong requirements.

The paper outlines proposed changes to the capital framework following the finalisation of the Basel III reforms in December 2017 and changes to its risk framework, with APRA’s implementation timetable extending to 2021.

ANZ will continue to consult with APRA to fully understand the impact of the proposed changes. APRA has confirmed that if the proposed changes result in an overall increase in risk weighted assets, it will reduce the capital ratio benchmark of 10.5% flagged in July 2017.

ANZ’s current capital ratio of 10.8% includes the proceeds of the sale of Shanghai Rural Commercial Bank and a small benefit of the sale of its Asian retail and wealth businesses. Further benefits will be achieved following completion of other asset sales, including the sale of the Australian wealth businesses.

APRA has also proposed a minimum leverage ratio requirement of 4% for Internal Ratings-Based (IRB) banks and changes to the leverage ratio exposure measure calculations for implementation by 1 July 2019. ANZ’s leverage ratio at December 2017 is 5.5%.

ANZ’s previously announced buy-back up to $1.5 billion of shares on-market relating to the sale of ANZ’s 20% stake in Shanghai Rural Commercial Bank remains ongoing.

ANZ Chief Financial Officer Michelle Jablko said: “The divestment of non-core businesses should continue to provide ANZ with the flexibility to consider further capital management initiatives in the future. Further initiatives will be considered once we receive the proceeds of our announced sales and will remain subject to business conditions and regulatory approval.”

Royal Commission updates online form

From The Adviser.

Following an article in The Adviser highlighting a ‘major flaw’ in the online form for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the commission has now updated the form to better reflect channel choice.

On Wednesday, The Adviser ran a story in which Queensland-based broker Nicki McDavitt warned that the figures cited by the initial hearing of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry could be wrong, after she identified what she called a “major flaw” in the commission’s online form.

The form asks users to identify the “nature of the dealings” in which misconduct took place.

However, the only option specifically relating to home loans fell under the category ‘mortgage broker’. Ms McDavitt therefore said that the commission’s figures on mortgage broker-related misconduct could be “false” as they may include information relating to bank branch home loans (and therefore be miscategorised).

However, the royal commission has today (14 February) updated the form to allow users to select ‘home loan/mortgage’ under the ‘personal finance’ option (see below). The mortgage broker option has also been updated to read ‘entity that arrange homed loan/mortgage’

Speaking to The Adviser following the change, Ms McDavitt said: “I’m absolutely thrilled. I’m thrilled that I was listened to and I’m thrilled that it has been changed.”

Ms McDavitt said the Royal Commission thanked her for bringing it to their attention as they had “not even realised that it was not even there” and brought it up with the web designers who changed it today (14 February).

“I said to [the contact]: ‘It does mean that those statistics that you have been flouting will be wrong’ and she acknowledged that it could be a risk, but said: ‘Thankfully we’ve caught it early’. And I said ‘yes’.”

The Adviser had asked the commission yesterday (13 February) for a comment on the issue and whether it would be changing the form, and received the following response: “The online submission process is working well and based on the number of submissions received to date, we are confident that those using the form have been able to identify correctly the nature of their dealings, including to identify home loans taken out with banks.

“We are also reviewing submissions as they come in to ensure that they are appropriately categorised.

“We are committed to ensuring that the information on our website is clear and easy to understand, so we will continue to review and improve the website going forward.”

The heads of both the mortgage broker associations had spoken to The Adviser this morning, both highlighting that they would be raising this issue of the online form error with the royal commission.

Speaking to The Adviser after the change, the executive director of the FBAA, Peter White, welcomed the change, but added that he believed the bank branches “still get off lightly, as the grouping/sections for arranging loans is highlighted separately for brokers, whereas the bank branches are not identified separately but rather in the cluster titled ‘Personal Financial’”.

He added: “This should read as ‘Personal Banking’ or the like, and then have the itemisation in brackets following it.”

Regional Insolvencies Higher than Capital Cities

The latest data from The Australian Financial Security Authority (AFSA), regional personal insolvency statistics for the December quarter 2017, shows that on a relative basis more are in distress in the regions than in the major centres.

That said, there were 7,687 debtors who entered a new personal insolvency in the December quarter 2017 in Australia. Of these, 4,785 debtors or 62.2% were located in greater capital cities.

New South Wales – There were 1,320 debtors who entered a new personal insolvency in Greater Sydney in the December quarter 2017. The regions with the highest number of debtors were Campbelltown (NSW) (91), Wyong (80) and Gosford (74). There were 913 debtors who entered a new personal insolvency in rest of New South Wales in the December quarter 2017. The regions with the highest number of debtors were Newcastle (51), Lower Hunter (41) and Wagga Wagga (40).

Victoria – There were 1,064 debtors who entered new personal insolvencies in Greater Melbourne in the December quarter 2017. The regions with the highest number of debtors were Wyndham (72), Tullamarine – Broadmeadows (65) and Casey – South (63). There were 367 debtors who entered a new personal insolvency in rest of Victoria in the December quarter 2017. The regions with the highest number of debtors were Geelong (54), Bendigo (33) and Ballarat (29).

Queensland – There were 1,021 debtors who entered a new personal insolvency in Greater Brisbane in the December quarter 2017. The regions with the highest number of debtors were Springfield – Redbank (77), Ipswich Inner (60) and North Lakes (54). There were 1,141 debtors who entered a new personal insolvency in rest of Queensland in the December quarter 2017. The regions with the highest number of debtors were Ormeau – Oxenford (102), Townsville (101), Rockhampton (64) and Toowoomba (64).

South Australia – There were 347 debtors who entered a new personal insolvency in Greater Adelaide in the December quarter 2017. The regions with the highest number of debtors were Salisbury (54), Onkaparinga (41) and Playford (40). There were 106 debtors who entered a new personal insolvency in rest of South Australia in the December quarter 2017. The regions with the highest number of debtors were Eyre Peninsula and South West (20), Murray and Mallee (18) and Barossa (16).

Western Australia – There were 776 debtors who entered a new personal insolvency in Greater Perth in the December quarter 2017. The regions with the highest number of debtors were Wanneroo (114), Rockingham (81) and Swan (81). There were 199 debtors who entered a new personal insolvency in rest of Western Australia in the December quarter 2017. The regions with the highest number of debtors were Bunbury (38), Mid West (27) and Goldfields (25).

Tasmania – There were 89 debtors who entered a new personal insolvency in Greater Hobart in the December quarter 2017. The regions with the highest number of debtors were Hobart – North West (30), Hobart Inner (16) and Brighton (13). There were 110 debtors who entered a new personal insolvency in rest of Tasmania in the December quarter 2017. The regions with the highest number of debtors were Launceston (32), Devonport (25) and Burnie – Ulverstone (20).

Northern Territory – There were 55 debtors who entered a new personal insolvency in Greater Darwin in the December quarter 2017. The regions with the highest number of debtors were Darwin Suburbs (19), Palmerston (14) and Litchfield (12). There were 26 debtors who entered a new personal insolvency in rest of Northern Territory in the December quarter 2017. The regions with the highest number of debtors were Alice Springs (12) and Katherine (8).

Australian Capital Territory – In the December quarter 2017, there were 113 debtors who entered a new personal insolvency in the Australian Capital Territory. The regions with the highest number of debtors were Belconnen (32), Gungahlin (32) and Tuggeranong (30).

Residential land prices hit another new high

The latest HIA-CoreLogic Residential Land Report shows that the median vacant residential land lot price rose nationally by 6.5 per cent during the September 2017 quarter to reach $267,368.

“Yet again, the price of residential land in Sydney and Melbourne has touched fresh all-time highs.

“Transactions on the land market continue to drop, indicating that supply is simply not matching demand sufficiently.

“The high cost of new residential land is at the heart of Australia’s housing affordability crisis.

“The housing industry’s ability to ramp up the supply of new dwellings as demand dictates is hampered by the inconsistency of the land supply pipeline. The time it takes for land to be made available to builders is unnecessarily long,” concluded HIA Senior Economist Shane Garrett.

According to Eliza Owen, CoreLogic’s Commercial Research Analyst, “The 6.5 per cent acceleration in vacant residential land prices suggests strong demand, even in the context of our largest residential markets passing peak growth rates for the current cycle. The CoreLogic Hedonic Home value index is showing a 1 per cent quarterly decline in capital city dwellings in the three months to January, led by the Sydney market which saw a 2.5 per cent decline.

“Despite the softening in capital growth, land prices were driven higher by long term confidence in some Australian metropolitan markets. Indeed, developers may act counter-cyclically to secure vacant land on the fringe of metropolitan areas before the next upswing. This is reflected in Melbourne, which saw over one in five of the 14,704 vacant land transactions in the year to September.

“In Victoria, CoreLogic development data indicates that 48.6 per cent of residential subdivisions in 2017 commenced on the fringes of Melbourne, such as in Hume, Whittlesea and Wyndham. This further demonstrates the high levels of demand for housing that is connected to the facilities and employment opportunities of major cities,” concluded Eliza Owen.