Interest Rates
The Reserve Bank cash rate will be left stable at 4.5 per cent. Below is the decision by the Reserve Bank.
The global economy grew faster than trend over the year to mid 2010, but will probably ease back to about trend pace over the coming year. Recent information is consistent with a more sustainable, but still strong, pace of growth in China and most of the Asian region. In Europe and the United States, growth prospects appear to be modest in the near term, a legacy of the financial crisis and its impact on private and public finances. Financial markets are still characterised by a degree of uncertainty, and are responding both to differences in growth outlooks between regions and evident strains on public finances and banking systems in several smaller countries in Europe. Most commodity prices have changed little over recent months, and those most important to Australia remain very high.
Information on the Australian economy shows growth around trend over the past year. Public spending was prominent in driving aggregate demand for several quarters but this impact is now lessening, while the prospects for private demand, and in particular business investment, have been improving. This is to be expected given the large rise in Australia’s terms of trade, which is now boosting national income very substantially.
Asset values are not moving notably in either direction, and overall credit growth is quite subdued at this stage, notwithstanding evidence of some greater willingness to lend. Inflation has moderated from the excessive pace of 2008. The effects of the rise in tobacco taxes aside, CPI inflation has been running at around 2¾ per cent over the past year. That looks likely to continue in the near term.
The current stance of monetary policy is delivering interest rates to borrowers close to their average of the past decade. The Board regards this as appropriate for the time being. If economic conditions evolve as the Board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.”
Current Economic Conditions
August boasted good news for the labour market as employment data showed that the national unemployment rate decreased to 5.1 per cent for the month, with the participation rate decreasing slightly from 65.5 per cent to 65.4 per cent. Victorian unemployment remained unchanged for the month at 5.5 per cent, a very positive sign given the increase in the participation rate from 65.4 per cent to 65.9 per cent for the month. The strong employment figures will play a big part in supporting confidence in the housing market leading up to the spring selling season.
The Australian dollar was trading at 0.9657 US dollars at close of business on 1 October 2010, an appreciation of around nine per cent since the start of this year. The Australian dollar also maintained its current pace against the Euro, trading at 0.708 at close of business on 1October. Positive investor sentiment towards economic outlook has lifted the Australian dollar in the past few days.
The Westpac – Melbourne Institute Consumer Sentiment Index decreased by 5.0 per cent in September to 113.2 in seasonally adjusted terms, from 119.2 in August.
All five component indices fell in September, with the largest increase recorded by the component index reflecting economic conditions next 12 months (-7.2%), followed by the component index reflecting family finances next 12 months (-6.1%) and the component index reflecting economic conditions next five years (-6.1%). Overall, the current conditions index decreased by 2.7 per cent, while the expectations index decreased by 6.5 per cent. This month’s index comes on the back of news of the cash rate remaining unchanged for the fourth consecutive month.
The All Groups CPI rose 0.6 per cent in the June quarter 2010 and rose 3.1 per cent through the year. Melbourne’s CPI rose 0.6 per cent for the quarter and 3.1 per cent for the year, following the Australian trend.
The most significant price rises this quarter were for alcohol & tobacco (+5.9%) and health (+2.2%), while the most significant offsetting price falls were for recreation (-1.8%) and food (-0.3%).
National retail turnover increased by 0.7 per cent for the month of July in seasonally adjusted terms, following an increase of 0.4 per cent last month. Victorian turnover increased by 1.7 per cent in the month of July, following last month’s 0.7 per cent increase. In trend terms, both the Victorian and Australian retail sectors posted modest growth of 0.8 per cent and 0.4 per cent respectively.
New motor vehicle sales increased 0.3 per cent during August 2010 in seasonally adjusted terms, following a revised 2.6 per cent decrease last month. The trend estimates have been re-introduced for all new motor vehicle sales. In trend terms, new motor vehicle sales decreased 0.4 per cent for the month, following a revised decrease 0.4 per cent last month.
Housing Market Conditions
The local housing market continues to return consistent outcomes, with a clearance rate of 69 per cent in September. Since May, the clearance rate has been between 67 and 69 per cent. So far 22,696 homes have been auctioned this year, which is more than ever before. Of those, 17,004 have been sold at auction compared to the high of 17,023 in 2007. Record dollar volumes have been recorded, with $23.2B in recorded transactions, compared to $19.5B this time in 2007.
Click here to watch a update on the market from REIV CEO Enzo Raimondo.
Nine suburbs have a clearance rate of 90 per cent or more: Watsonia, Ferntree Gully, Macleod, Hillside, Bellfield, Viewbank, Bendigo, Fairfield and St Kilda East.
The number of total dwelling units approved in Victoria decreased by 1.4 per cent in seasonally adjusted terms for the month of August 2010, following a revised increase of 12.5 per cent in the previous month. The value of total dwelling units approved in Victoria decreased by 12.4 per cent to $1.71B. In trend terms, the number of total units approved in Victoria increased by 0.7 per cent for the month, while the value of total dwelling units approved decreased by 0.7 per cent.
Housing finance figures released for July 2010 show a decrease in first home buyer activity in Victoria, which fell by 4.0 per cent for the month, with the average loan size for first home buyers increasing by 0.1 per cent for the month. Non-first home buyer activity decreased slightly for the month, falling by 0.2 per cent. The total value of loans increased by 1.5 per cent, while the total number of loans decreased by 0.9 per cent for the month. The proportion of first home buyers decreased to 17.6 per cent in July from 18.1 per cent in June 2010.
The total value of owner–occupied housing commitments, excluding alterations and additions, for July 2010 increased 0.3 per cent in trend terms and increased by 2.3 per cent in seasonally adjusted terms. The trend increase comes after 12 consecutive months of decreases. There has been a pickup in the commercial sector, as the total value of commercial finance increased in trend terms by 0.2 per cent and by 8.2 per cent in seasonally adjusted terms.
The REIV market sentiment index decreased to 89.0 per cent in August, down 3.7 per cent from July’s 92.4 per cent. Five of the seven components decreased for the month, with key factors in the decrease in sentiment attributable to large decreases in the components representing number of listings obtained vs. last month (-10.1%) and the component representing number of properties settled vs. previous month (-9.3%).
The Metropolitan Melbourne rental market remained tight in August 2010, with a vacancy rate of 1.7 per cent. There was some movement in different parts of Melbourne, as the inner-Melbourne rate eased to 1.8 per cent from last month’s 1.7 per cent. The middle-Melbourne rate eased slightly to 1.9 per cent from last month’s 1.8 per cent, while the outer-Melbourne rate tightened to 0.8 per cent from 1.3 per cent last month.
If interested in learning more about this update please contact me today!
Tags: australian economy, cent, commodity prices, cpi inflation, growth prospects, index, Inflation, pace, tobacco taxes, trend
 |
As Domain Property Advocates continues to grow I will continue to provide superior service to those choosing to use property as their investment. It is an important choice of who to choose as the one responsible to look after your property. You can be sure that Domain Property Advocates will always strive to be the best. |  |
