The latest RBA bulletin, just released, contained a couple of significant articles relating to mortgage arrears and serviceability. The first, “Recent Drivers of Housing Loan Arrears” shows that Housing loan arrears rates have increased from low levels since late 2022, with banks expecting them to rise a bit further from here. High LVR and DTI loans are most at risk. No surprise there.
The second, “How the RBA Uses the Securitisation Dataset to Assess Financial Stability Risks from Mortgage Lending” makes the point that the data used relating to around one third of loans, contains lags of up to 2 years especially for highly leverage loans, which limits the usefulness of that dataset.
Securitisation data collected by the RBA, forming the Securitisation Dataset, on residential mortgage-backed securities (RMBS) as a condition for eligibility as collateral in repurchase agreements with the RBA. These loan-level data are provided monthly, and are both timely and granular. The data provide detailed information about each loan that can be used to help form a view of financial health among mortgagors. As lenders can face incentives to select certain types of loans for securitisation or ensure the performance of loans after issuance, the data may not be fully representative of all mortgages in the Australian market. In other words, the loans are hand-picked for securitisation.
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The ABS released the latest employment data today, and in response, investors have bumped up their bets on an August interest rate rise after the jobs market recorded another month of strong employment gains in June.
As always there is a degree of numberwanging here, and the numbers are being flattered by the still strong migration, but the seasonally adjusted unemployment rate rose by less than 0.1 percentage point to 4.1 per cent in June, With employment rising by around 50,200 people and the number of unemployed growing by 10,000 people, the unemployment rate rose slightly to 4.1 per cent, and the participation rate rose to 66.9 per cent.
The employment growth figures were better than market expectations for gains of 20,000 and highlighted the continuing resilience of the local jobs market in the face of the fastest interest rate tightening cycle in decades.
“The participation rate in June was only 0.1 percentage point lower than the historical high of 67.0 per cent in November 2023. The employment-to-population ratio rose by 0.1 percentage point to 64.2 per cent, which was also close to its historical high of 64.4 per cent in November 2023.
This increase in employment was not enough to stop the jobless rate from rising to 4.1 per cent last month from 4 per cent in May, as a continuing surge in foreign arrivals helped push the participation rate to a near-record high of 66.9 per cent.
With inflationary pressures remaining uncomfortably strong, investors now ascribe a one-in-five chance the RBA board will increase the cash rate from 4.35 per cent to 4.6 per cent when it next meets on August 6, up from a 14 per cent chance before the jobs data. They are also pricing a 28 per cent chance of a move higher by September, up from 17 per cent on Wednesday.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The ABS released the latest employment data today, and in response, investors have bumped up their bets on an August interest rate rise after the jobs market recorded another month of strong employment gains in June.
As always there is a degree of numberwanging here, and the numbers are being flattered by the still strong migration, but the seasonally adjusted unemployment rate rose by less than 0.1 percentage point to 4.1 per cent in June, With employment rising by around 50,200 people and the number of unemployed growing by 10,000 people, the unemployment rate rose slightly to 4.1 per cent, and the participation rate rose to 66.9 per cent.
The employment growth figures were better than market expectations for gains of 20,000 and highlighted the continuing resilience of the local jobs market in the face of the fastest interest rate tightening cycle in decades.
“The participation rate in June was only 0.1 percentage point lower than the historical high of 67.0 per cent in November 2023. The employment-to-population ratio rose by 0.1 percentage point to 64.2 per cent, which was also close to its historical high of 64.4 per cent in November 2023.
This increase in employment was not enough to stop the jobless rate from rising to 4.1 per cent last month from 4 per cent in May, as a continuing surge in foreign arrivals helped push the participation rate to a near-record high of 66.9 per cent.
With inflationary pressures remaining uncomfortably strong, investors now ascribe a one-in-five chance the RBA board will increase the cash rate from 4.35 per cent to 4.6 per cent when it next meets on August 6, up from a 14 per cent chance before the jobs data. They are also pricing a 28 per cent chance of a move higher by September, up from 17 per cent on Wednesday.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
The Narrow Path Says Rate Hikes Are Coming In Australia!
The New Deputy Governor at the RBA said last week, that when it comes to a rate decision, they look at many different measures, apart from the recently released monthly series which showed a lift to 4% last time around in May.
So now, in May, so before any tax cuts or other Government help has hit, Australian retail sales rose by more than expected with spending largely driven by discounts in the face of elevated borrowing costs, an outcome that further strengthens the case for an interest rate hike this year.
As a result, yields on policy-sensitive two-year bonds rose to 4.289% as rates traders boosted the odds for an interest rate hike this year. Stocks pared gains, with the ASX 200 closing still in the green, at 7,739.90.
Australian retail turnover rose 0.6 per cent in May 2024, according to seasonally adjusted figures released today by the Australian Bureau of Statistics (ABS), making it the biggest increase in four months, The outcome, which was double the pace that analysts forecast, follows a 0.1% gain in April and a 0.4 per cent fall in March 2024.
We should highlight that with population growth of around 600,000 in the past year, and inflation running circa 4%, we should absolutely be expecting to see retail turnover lifting, as people pay more the things they buy, and more people buy them.
All up, to me while there is a better tone to this numbers, many consumers remain under intense pressure, while strong population growth is working its “magic” in cushioning retailers from the worst impacts and are allowing them to retain and build margin. Other data suggests more vehicle sales slowed into the financial year end. The tax cuts might well given a further boost to sales, but potentially also to inflation.
The ASX Rate tracker is now seeing a high of 4.47% in November, and back to 4.35% in June next year. The bottom line is I think markets are correct in reading this as a reinforcing sign that rates may need to go higher to snuff out inflation. But is not definitive, yet as there is more data water to go under the bridge.
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.
The New Deputy Governor at the RBA said last week, that when it comes to a rate decision, they look at many different measures, apart from the recently released monthly series which showed a lift to 4% last time around in May. So now, in May, so before any tax cuts or other Government help has hit, Australian retail sales rose by more than expected with spending largely driven by discounts in the face of elevated borrowing costs, an outcome that further strengthens the case for an interest rate hike this year.
As a result, yields on policy-sensitive two-year bonds rose to 4.289% as rates traders boosted the odds for an interest rate hike this year. Stocks pared gains, with the ASX 200 closing still in the green, at 7,739.90.
Australian retail turnover rose 0.6 per cent in May 2024, according to seasonally adjusted figures released today by the Australian Bureau of Statistics (ABS), making it the biggest increase in four months, The outcome, which was double the pace that analysts forecast, follows a 0.1% gain in April and a 0.4 per cent fall in March 2024.
We should highlight that with population growth of around 600,000 in the past year, and inflation running circa 4%, we should absolutely be expecting to see retail turnover lifting, as people pay more the things they buy, and more people buy them.
All up, to me while there is a better tone to this numbers, many consumers remain under intense pressure, while strong population growth is working its “magic” in cushioning retailers from the worst impacts and are allowing them to retain and build margin. Other data suggests more vehicle sales slowed into the financial year end. The tax cuts might well given a further boost to sales, but potentially also to inflation.
The ASX Rate tracker is now seeing a high of 4.47% in November, and back to 4.35% in June next year. The bottom line is I think markets are correct in reading this as a reinforcing sign that rates may need to go higher to snuff out inflation. But is not definitive, yet as there is more data water to go under the bridge.
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.
The ABS released the latest monthly CPI data today, and it reports that Inflation is still sticky in Australia, and accelerated faster than expected for a third straight month in May, sending the currency higher as traders boosted bets that the Reserve Bank will resume raising interest rates at its next meeting. The report comes after RBA Governor Michele Bullock restated last week that the rate-setting board isn’t ruling out a rate hike after leaving the benchmark at a 12-year high of 4.35%.
Wednesday’s figures suggest inflation is running ahead of the RBA’s forecast for underlying inflation to ease to 3.8 per cent in the June quarter. That said, the monthly numbers are at best partial, compared with the more complete quarterly data which provides a fuller picture of inflation.
In truth, for many households real inflation is much higher than the statistics suggest, with continued massive lifts in insurance costs for example, but Warren Hogan may end up being right, with further rate hikes a clear threat if the Q2 quarterly inflation print confirms the uptrend.
This is a mess, created by taking rates too low in the first place, saying they would stay low into 2024, then not returning them to normal rates soon enough, meantime luring many into property are extended prices and big loans. The route out of the years of policy failure will be difficult for many, though somehow policy makers and politicians seem to be able to find someone else to blame. How about some real accountability?
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.
The ABS released the latest monthly CPI data today, and it reports that Inflation is still sticky in Australia, and accelerated faster than expected for a third straight month in May, sending the currency higher as traders boosted bets that the Reserve Bank will resume raising interest rates at its next meeting. The report comes after RBA Governor Michele Bullock restated last week that the rate-setting board isn’t ruling out a rate hike after leaving the benchmark at a 12-year high of 4.35%.
Wednesday’s figures suggest inflation is running ahead of the RBA’s forecast for underlying inflation to ease to 3.8 per cent in the June quarter. That said, the monthly numbers are at best partial, compared with the more complete quarterly data which provides a fuller picture of inflation.
In truth, for many households real inflation is much higher than the statistics suggest, with continued massive lifts in insurance costs for example, but Warren Hogan may end up being right, with further rate hikes a clear threat if the Q2 quarterly inflation print confirms the uptrend.
This is a mess, created by taking rates too low in the first place, saying they would stay low into 2024, then not returning them to normal rates soon enough, meantime luring many into property are extended prices and big loans. The route out of the years of policy failure will be difficult for many, though somehow policy makers and politicians seem to be able to find someone else to blame. How about some real accountability?
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.
As I discussed on my live show, on Tuesday night with Leith van Onselen, the RBA decided to hold the cash rate at 4.35%, but there were signs of a more hawkish tone from the meeting notes, and the subsequent press conference (which I might add is becoming less useful each time thanks to weak questions supporting weak answers, come on MSM do your job….).
Bullock was clear, we need more data, there are risks to the upside from sticky inflation, but employment is also an important factor, given their dual mandate.
Just remember folks, the RBA at 4.35% is significantly below several other Central Banks, including the Bank of England, which held rates on Thursday at 5.25%, despite inflation falling to 2% last month, Bank of Canada which cut rates by 0.25% to 4.75% and New Zealand’s Reserve Bank holding rates at 5.5%, despite driving the economy there into recession.
Which begs the question, has the RBA done enough on rates to squeeze inflation out of the economy in Australia, despite being lower the peers, mainly because in Australia a greater proportion of mortgages are linked to variable rates than other countries. Economists are divided, with Leith still holding the next cut will be down, as unemployment rises.
But writing on Monday, before the RBA decided to hold rates on Tuesday, Economist Warren Hogan, at the more bullish end of commentators on RBA rates, wrote in the AFR that the flow of data since the last meeting in early May made it a very close call to hold off on further tightening.
The narrow path is still attainable, but it increasingly looks like we will need to get rates up closer to 5 per cent to stay on it.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
As I discussed on my live show, on Tuesday night with Leith van Onselen, the RBA decided to hold the cash rate at 4.35%, but there were signs of a more hawkish tone from the meeting notes, and the subsequent press conference (which I might add is becoming less useful each time thanks to weak questions supporting weak answers, come on MSM do your job….) Bullock was clear, we need more data, there are risks to the upside from sticky inflation, but employment is also an important factor, given their dual mandate.
Just remember folks, the RBA at 4.35% is significantly below several other Central Banks, including the Bank of England, which held rates on Thursday at 5.25%, despite inflation falling to 2% last month, Bank of Canada which cut rates by 0.25% to 4.75% and New Zealand’s Reserve Bank holding rates at 5.5%, despite driving the economy there into recession.
Which begs the question, has the RBA done enough on rates to squeeze inflation out of the economy in Australia, despite being lower the peers, mainly because in Australia a greater proportion of mortgages are linked to variable rates than other countries. Economists are divided, with Leith still holding the next cut will be down, as unemployment rises.
But writing on Monday, before the RBA decided to hold rates on Tuesday, Economist Warren Hogan, at the more bullish end of commentators on RBA rates, wrote in the AFR that the flow of data since the last meeting in early May made it a very close call to hold off on further tightening.
The narrow path is still attainable, but it increasingly looks like we will need to get rates up closer to 5 per cent to stay on it.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
In this week’s market review, as usual we will start in the US, cross to Europe, then Asia, and end in Australia, and in passing we cover commodities and crypto.
I have been highlighting how the data driven approach by Central Banks is a problem, because as new data lands, markets try to respond, making swings in sentiment a core feature of every day.
On Wednesday we got a rate cut from the Bank of Canada, who became the first major central bank among the Group of Seven countries to cut interest rates by a quarter of a percentage point to 4.75 per cent, with governor Tiff Macklem saying if inflation continues to ease, and our confidence that inflation is headed sustainably to the 2 per cent target continues to increase, it is reasonable to expect further cuts to our policy interest rate. Inflation in Canada has slowed this year to hit a three-year low of 2.7 per cent in April. While inflation has stayed below 3 per cent for four straight months, it is still above the central bank’s 2 per cent target.
The BoC joins Sweden’s Riksbank and the Swiss National Bank in bringing down rates and more central banks are weighing rate cuts.
And on Thursday the European Central Bank made a widely expected decision to cut its deposit rate from a record 4% to 3.75% even though inflation remains above its 2 per cent target and recently ticked up. So, the ECB was prepared to cut despite inflation clearly remaining sticky, despite persistent wage pressures and despite some signs the European economy might be improving.
Not only is it one of the very few times that the ECB makes a turn on monetary policy before the Fed, it is also the first time the ECB starts cutting rates after a tightening cycle without facing a recession or crisis. But what’s less clear is what Lagarde does next. Having delivered the historic first cut, she was very reluctant to give many clues on when the next one would be. Watch the data, she said.
And in fact, global stocks pulled back from an all-time high on Friday after surprisingly strong U.S. monthly jobs data dimmed hopes that the Federal Reserve would soon follow euro zone and Canadian interest rate cuts, causing Treasury yields to shoot higher.
So the big question is, with the Bank of Canada cutting on Wednesday night, and Lagarde going on Thursday night, does this give the RBA any more room to deliver the rate cut many Australian households and investors crave? The short answer is no!
The RBA is expected to be among the last central banks to cut rates because the Australian inflation pace is above most major economies. At 3.6 per cent, CPI remains well above the RBA’s 2.5 per cent target and a reason why money markets are only fully priced for an easing in one year’s time.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Markets Discombobulated By Rate Cuts And Mixed Rear View Mirror Data, But Still Bets On AI Growth!
