THE
Reserve Bank of Australia (RBA) is likely to spare borrowers an interest rate
rise in April due to uncertainty surrounding the housing lending figures,
economists say.
The minutes of the RBA's March 2 board meeting, released
on Tuesday, reveal the bank raised the cash rate to four per cent in response to
two months of data suggesting the economy might be growing at or close to
trend.
But last week's Australian Bureau of Statistics (ABS) housing
finance figures may concern the RBA after they showed a seasonally adjusted 7.9
per cent fall in home loan commitments in January.
"I think that will be
enough to spook them, certainly it should spook everyone," ICAP economist Adam
Carr said.
"Given the sharp drop in home lending I almost certainly think
they won't move in April."
But he said the rest of the RBA minutes were
bullish on domestic growth, even as question marks hang over the US, UK
economies and Europe's ongoing sovereign debt crisis.
"But they don't
think the issues, particularly the fiscal issues in Europe, warrant a pausing at
this stage because they're of the opinion that we're not going to see a marked
slowing of global growth as a result of those issues," Mr Carr said.
JP
Morgan economist Helen Kevans said the minutes suggested the RBA would keep
rates at four per cent until May, when they would resume lifting toward a five
per cent cash rate by year end.
"It comes across to us that the RBA is
very comfortable with its moves at the moment," she said.
"They suggest
that the early start to their normalisation process has given them time to be
flexible going forward."
The RBA started its current rate hiking cycle in
October 2009, when it lifted the cash rate off a 49-year low of three per cent
to 3.25 per cent.
Two rapid moves in November and December brought the
interest rate to 3.75 per cent.
The bank paused at its first meeting of
2010 in February before lifting again, to four per cent, this
month.
Commonwealth Bank senior economist Michael Workman agreed, adding
that the RBA would take the rate to 5.5 per cent by the end of 2011.
"Our
view is that they'll continue to lift rates gradually for the rest of this
year," he said.
"Most probably not in our view in April, most probably in
May."
He said the downside risks that haunted the Australian economy six
to nine months ago had largely been erased, with December quarter gross domestic
product figures at a robust 0.9 per cent.
"So people should expect
gradual cash rate rises," he said.
The minutes highlighted the growth
prospects that could occur if mining sector investment proceeds.
Mr
Workman said gas projects, like the Gorgon project in WA, would significantly
lift Australia's potential growth rate.
"Of course, that's where the
market sees the risk of the cash rate rising above that normal level," he
said.
"But that's really an issue for late next year when we get more
information."
Most economists believe a "normal" cash rate lies between
4.5 per cent to 5.5 per cent.
This article was published in the Toowoomba
Chronicle on March 16.
APS Growth Co-Founder, Anthony Simon believes that
rates will continue to rise due to inflationary pressures.
"Businesses
and Investors are becoming more confident, hence the increase in investment
loans. Inflation is an investors friend; they gain from assets increasing in
value, rather then staying at the price they paid for the asset"
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Australia
faces a housing affordability ''time bomb'' - primed by a dysfunctional
planning system, a chronic undersupply of homes, and unrealistic expectations
from buyers, according to the chief of one of the nation's largest
homebuilders.
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DEPARTMENT store Myer has staked a claim on the
proposed $1 billion Coomera Town Centre, announcing plans to target the city's
booming north for its third Gold Coast store.
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THE state government is rushing to prepare laws to create a development authority with sweeping powers to compulsorily acquire and rezone privately owned land for resale to developers.
With Sydney's population set to grow 40 per cent to 6 million in the next 25 years, the government has decided it needs a metropolitan development authority to buy privately owned land near rail and bus routes for medium- and high-density housing.
Legislation for the new authority, believed to be the first of its kind in Australia, will be introduced before June in an attempt to increase housing construction rates, which are the lowest on record even though the city's population is growing at the fastest rate since the 1960s.
Cabinet is still fine-tuning details, including the contentious issue of the amount of compensation paid to landowners whose properties are compulsorily acquired by the government for resale.
While government departments such as the Roads and Traffic Authority have the power to compulsorily acquire land, they can do so only when it is used for a public purpose.
In contrast, the metropolitan development authority would allow compulsory acquisition of land for private companies to construct and sell housing for profit.
A spokesman for the Planning Minister, Tony Kelly, said the move was about ''driving urban renewal at key strategic sites throughout Sydney''.
While the proposal is likely to be contentious, developer groups say it is the only practical way to meet the housing construction targets contained in the principal planning document for Sydney, the Metropolitan Strategy.
It says Sydney needs 26,000 new homes a year but only 14,000 are being built, a shortfall developers say is largely due to the difficulty in obtaining suitable sites.
As well as acquiring land, the authority will decide which areas should be included in new areas for housing and employment and then ''partner with councils'' to rezone them.
The plan for the authority follows the release of draft legislation two years ago by the former planning minister Frank Sartor to give the government powers to compulsorily acquire land for urban renewal where there was a ''net public benefit''.
The proposal lapsed after a public backlash, and developer bodies are keen to avoid this happening again.
One lobby group, the Urban Taskforce, wants the government to pass on to landowners the full increase in value that results from rezoning.
''Landholder compensation must be valued based on the rezoned value of the land following the granting of the final development approval in connection with the urban renewal project,'' the taskforce chief executive, Aaron Gadiel, said in a letter to Mr Kelly.
He said the government should look at the British model where, for 10 years after compulsory acquisition, a landowner is entitled to claim compensation for any increased value of the land from rezoning or other planning approval.
A spokesman for Mr Kelly said this was under discussion. "In relation to issues such as the model of compulsory acquisition, consideration will be given to models from other jurisdictions and to submissions from industry.''
The head of the Property Council, Ken Morrison, said the authority was vital if Sydney was going to house its swelling population as the vast tracts of industrial land used in the past for development had largely gone.
''People think we are talking high rise with Chatswood's everywhere. We're not . there will be a few locations like that, but in most cases it will be medium-density form with five or six storeys.''
Stephen Albin, the chief executive of the Urban Development Institute, a developer group, said while landowners should receive some compensation for increased value from rezoning, they should not receive it all.
''Developers are taking the risk . these landowners are not taking risk. Government has decided for the good of the city, for the good of the community, development must occur.
''The rationale behind the authority and the compulsory acquisition provision is community benefit.
''It's the same as acquiring land for a road or a railway.''
Author: MATTHEW MOORE URBAN AFFAIRS EDITOR Date: March 12, 2010
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Outstanding result... I would especially like to thank Ant from APS Growth for his part in having the relationship with the developer and Belle Property. Ant was able to show alternative properties for sale, and brokered the deal at $35,000 less than others were selling for at the same time. We knew we had made money at the time of purchase!
Ant’s knowledge of the northern beaches at that time was invaluable at a time when we were relatively new to Australia and its property markets. Great job Ant!
Jason Pitkeathly - Client and Business Alliance Partner
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The statement by Glenn Stevens, Governor: Monetary Policy Decision was as follows:
At its meeting today, the Board decided to raise the cash rate by 25 basis points to 4.0 per cent, effective 3 March 2010.
The global economy is growing, and world GDP is expected to rise at close to trend pace in 2010 and 2011. The expansion is still hesitant in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity. In Asia, where financial sectors are not impaired, growth has continued to be quite strong. The authorities in some countries are now seeking to reduce the degree of stimulus to their economies.
Global financial markets are functioning much better than they were a year ago and the extraordinary support from governments and central banks is gradually being wound back. Credit conditions remain difficult in some major countries as banks continue to face loan losses associated with the period of economic weakness. Concerns regarding some sovereigns remain elevated.
In Australia, economic conditions in 2009 were stronger than expected, after a mild downturn a year ago. The rate of unemployment appears to have peaked at a much lower level than earlier expected. Labour market data and a range of business surveys suggest growth in the economy may have already been at or close to trend for a few months. There are some signs that the process of business sector de-leveraging is moderating, with the pace of decline in business credit lessening and indications that lenders are starting to become more willing to lend to some borrowers. Investment in the resources sector is very strong. Credit for housing has been expanding at a solid pace, and dwelling prices have risen significantly over the past year. New loan approvals for housing have moderated a little over recent months, however, as interest rates have risen and the impact of large grants to first-home buyers has tailed off.
Inflation has, as expected, declined in underlying terms from its peak in 2008, helped by the fall in commodity prices at the end of 2008, a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand. CPI inflation has risen somewhat recently as temporary factors that had been holding it to unusually low rates are now abating. Inflation is expected to be consistent with the target in 2010.
With the risk of serious economic contraction in Australia having passed, the Board moved late last year to lessen the degree of monetary stimulus that had been put in place when the outlook appeared to be much weaker. Lenders generally raised rates a little more than the cash rate and most loan rates rose by close to a percentage point.
Interest rates to most borrowers nonetheless remain lower than average. The Board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Todays decision is a further step in that process.
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