Tag: RBA

The RBA’s Third Phase Of Tightening, And What Happens Next…

The Reserve Bank of Australia’s (RBA) Assistant Governor (Financial Markets), Christopher Kent, gave an Address to Bloomberg on Wednesday where he expressed why the RBA is reluctant to lift the official cash rate further.

https://www.rba.gov.au/speeches/2023/sp-ag-2023-10-11.html

The RBA is in its “third phase” of monetary policy tightening as it assesses the impact of interest-rate rises to date, he said. The current stage is “an opportunity to see how the economy and how the data is evolving,’’ he said, reiterating that further rate increases may still be needed.

Much of the presentation concerned the lags as monetary policy takes effect. Basically, the RBA expects further impacts on the economy as the lagged effects of the 4.0% of monetary tightening delivered over the past 18 months flows through.

A ‘built in’ monetary tightening in Australia is one reason why the RBA is reluctant to lift the official cash rate further. Australia’s monetary system will tighten on its own as more pandemic era fixed rate mortgages reset from rates of around 2% to variable rates of more than 6%.

But that means those with big mortgages are being worst hit, while others are still enjoying their savings buffers and will continue to spend.

And the question will be, whether the current settings will crush inflation, or whether more rate hikes are needed. As I discussed the other day, there are significant pressures on the RBA to lift further, and some economists are expecting another one or two hikes into 2024.

Either way, there is little rate relief on the horizon for the next year plus.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Bond Market To RBA: Put Rates Higher!

A surge in long-term bond yields has driven both the Australian dollar and the local sharemarket to an 11-month low earlier in the week, and may force Reserve Bank of Australia governor Michele Bullock to deliver further cash rate rises, economists say.

Adding to expectations that the RBA may deliver one further interest rate rise is an increase in long-dated yields, both locally and abroad.

Long-term US bond yields have galloped higher since July alongside strong economic data and an unexpected increase in planned bond issuance to finance the US government’s yawning budget deficit, which Fitch expects to be 6.3 per cent of GDP this year.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Bond Market To RBA: Put Rates Higher!
Loading
/

The Mortgage Stress Default Disconnect

According to the AFR, Australia’s red-hot jobs market is preventing the country’s most indebted borrowers from falling behind on their home loan, as internal Reserve Bank research reveals nearly one in five borrowers may be in mortgage stress.

While unemployment nationally was 3.7 per cent in August, unemployment among homeowners was likely “almost non-existent”.

But markets ascribe a three-in-five chance the RBA board will deliver one more rate rise by the end of the year, amid concerns about persistently high inflation in the services sector and a stubbornly strong jobs market.

Strong employment growth and nominal wage increases have insulated borrowers from some of the financial pain caused by high interest rates.
About 18 per cent of loans across the country have a high repayment burden, defined as spending more than 30 per cent of household income on paying down a mortgage, according to internal RBA research released under Freedom of Information laws.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Mortgage Stress Default Disconnect
Loading
/

The Mortgage Stress Default Disconnect

According to the AFR, Australia’s red-hot jobs market is preventing the country’s most indebted borrowers from falling behind on their home loan, as internal Reserve Bank research reveals nearly one in five borrowers may be in mortgage stress.

While unemployment nationally was 3.7 per cent in August, unemployment among homeowners was likely “almost non-existent”.

But markets ascribe a three-in-five chance the RBA board will deliver one more rate rise by the end of the year, amid concerns about persistently high inflation in the services sector and a stubbornly strong jobs market.

Strong employment growth and nominal wage increases have insulated borrowers from some of the financial pain caused by high interest rates.
About 18 per cent of loans across the country have a high repayment burden, defined as spending more than 30 per cent of household income on paying down a mortgage, according to internal RBA research released under Freedom of Information laws.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Bond Market To RBA: Put Rates Higher!

A surge in long-term bond yields has driven both the Australian dollar and the local sharemarket to an 11-month low earlier in the week, and may force Reserve Bank of Australia governor Michele Bullock to deliver further cash rate rises, economists say.

Adding to expectations that the RBA may deliver one further interest rate rise is an increase in long-dated yields, both locally and abroad.

Long-term US bond yields have galloped higher since July alongside strong economic data and an unexpected increase in planned bond issuance to finance the US government’s yawning budget deficit, which Fitch expects to be 6.3 per cent of GDP this year.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

DFA Live Q&A HD Replay: Investing Now With Damien Klassen

This is an edited version of a live discussion with Damien Klassen, Head of Investments at Walk The World Funds and Nucleus Wealth. Given the recent movements in bond yields, and the strong US$, markets are in the doldrums, and we will explore the current dynamics in play.

Original version here: https://youtube.com/live/VbBSqRZf3xo

Go to the Walk The World Universe at https://walktheworld.com.au/

Please consider supporting our work via Patreon: https://www.patreon.com/DigitalFinanceAnalytics

Or make a one-off contribution to help cover our costs via PayPal at: https://www.paypal.me/MartinDFA

We also can receive bitcoins at: 13zBL1oRib9VJu8Uc9zUGNhxKDBBgUpDN1

Please share this post to help to spread the word about the state of things….

Caveat Emptor! Note: this is NOT financial or property advice!!

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
DFA Live Q&A HD Replay: Investing Now With Damien Klassen
Loading
/

Well, The RBA Does It Again… With Steve Mickenbecker

I caught up with Steve again following the RBA no change announcement on Tuesday, and we discussed the implications, in the light of new research from Canstar about the state of play of household finances.

Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.

https://www.canstar.com.au/team-members/steve-mickenbecker/

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Well, The RBA Does It Again... With Steve Mickenbecker
Loading
/

The Limitations Of Monetary Policy (And What Lowe Does Next…)

Last week, the departing RBA Central Bank Governor Philip Lowe used his final public comments given at the Anika Foundation to defend his more controversial comments, saying while some of his explanations had “missed the mark” the media also had a responsibility to avoid “clickbait”.

But he also highlighted the limitations of monetary policy and suggested that fiscal and monetary policy could be better connected than today, something which should have been considered by the recent RBA review.

So today we look at what he said, and will also touch on where Central Bank Governors go after they leave their post.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Limitations Of Monetary Policy (And What Lowe Does Next...)
Loading
/

The Limitations Of Monetary Policy (And What Lowe Does Next…)

Last week, the departing RBA Central Bank Governor Philip Lowe used his final public comments given at the Anika Foundation to defend his more controversial comments, saying while some of his explanations had “missed the mark” the media also had a responsibility to avoid “clickbait”.

But he also highlighted the limitations of monetary policy and suggested that fiscal and monetary policy could be better connected than today, something which should have been considered by the recent RBA review.

So today we look at what he said, and will also touch on where Central Bank Governors go after they leave their post.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Elephants In The Room Of Property Prices

Home prices are driven by a combination of demand where population growth thanks to high migration puts upward pressure on prices; supply where more property for sale puts downward pressure on prices, and availability of credit as the catalyst for transactions to occur.

Much of the debate is currently centered on supply side issues. As I discussed last week, Outgoing Governor Phil Lowe, urged governments at all levels to work together to address the problem of housing affordability. Notably, he dismissed rent controls as a short-term fix that would provide immediate relief by reducing the incentive to fix the key problem: supply.
“There aren’t short-term solutions here. The solution has to be putting in place a structure that makes the supply side of the housing market more flexible and that means zoning and planning deregulation and it means state and local governments being part of the solution.”

This means that first time buyer incentives, or rental support just make the problem, worst – something which I have highlighted over the years (and which by the way the Productive Commission also confirmed).

But my fear is that the un-defused credit bomb will be skirted around and as the supply side elephant is paraded through the streets. But it is the credit Elephant in the room which should be addressed, even if it shrinks bank balance sheets and profits. If not, nothing will fundamentally change and prices will remain as out of whack as they currently are.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Elephants In The Room Of Property Prices
Loading
/