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Interest Rates
At its meeting on 2 September 2008, the Reserve Bank Board reduced the cash rate target by 25 basis points to 7.00%. Of note in announcing the decision the RBA Governor stated:
Inflation in Australia has been high over the past year in an environment of limited spare capacity and earlier strong growth in demand. In these circumstances, the Board has been seeking to restrain demand in order to reduce inflation over time.
As a result of increases in the cash rate last year and early this year, additional rises in market interest rates and tougher credit standards, financial conditions have been quite tight. Some further tightening has occurred over the past couple of months. Conditions in international financial markets remain difficult, with heightened concerns over credit persisting.
The evidence is that the tight financial conditions, in conjunction with other factors including higher fuel costs and lower asset values, have exerted the needed restraint on demand. Indicators of household spending have recorded subdued outcomes over recent months, and credit expansion to both households and businesses has slowed. Surveys suggest a softening in business activity and growth in production has slowed. Indicators of capacity utilisation, while still high, are declining and there have also been some signs of an easing in labour market conditions.
The rise in Australia's terms of trade that has occurred is working in the opposite direction, adding substantially to national income and ability to spend. Fixed investment spending by businesses continues to be very strong. At the same time, high prices of oil and a range of other commodities have added to global inflationary risks. They are also dampening growth in a number of countries.
Given the opposing forces at work, considerable uncertainty has surrounded the outlook for demand and inflation. On balance, however, it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead. Inflation is likely to remain relatively high in the short term, with the CPI affected by the high global oil prices in mid year and other increases in raw materials prices. But looking further ahead, the outlook for demand suggests that inflation in both CPI and underlying terms is likely to decline over time, provided wages growth remains contained. The Bank's forecast remains that inflation will fall below 3 per cent during 2010.
Weighing up the available domestic and international information, the Board judged that there was now scope for monetary policy to become less restrictive. The Board will continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2-3 per cent target over time.
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Housing Finance July 2008
Source: ABS Cat No 5609.0
On a seasonally adjusted basis the national value of housing loan commitments (owner occupation) in July was $12.474 billion, down by 0.1% on June.
On a state basis, the respective statistics were: NSW $3.971 billion (-1.4%), Victoria, $2.911b (-1.7%), Qld, $2.544b(-1.7%), SA, $0.841b (+0.4%), WA ,$1.585b +0.8%), Tas, $170m (+1.2%), NT, $92m(+9.5%), ACT, $168m (-5.6%).
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Investment Housing - Total
Source: ABS Cat No. 5609.0
The value of investment housing loan commitments ($5.701billion, seasonally adjusted) rose 2.3% on June. The drivers of this result were a rise in the construction of dwellings for rent or resale (+28.2%), a fall in the purchase by individuals of dwellings for rent or resale (-2.8%) but an increase by others (+12.4%).
The total value of housing finance commitments ($18.175b) rose by 0.6% on June.
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First Home Buyer Commitments
First Home Buyer commitments increased from 17.6% (of all owner occupier commitments) in June to 18.6% in July.
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Fixed Rate Loans (2 years or more)
Fixed rate loans were 8.8% of all owner occupier loans, down from 11.7% in June.
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Average Loan
The average loan size rose from $246,900 to $248,400. Average loans in each state/territory were: NSW, $271,600, Vic, $240,500; Qld $249,900; SA, $200,100; WA, $250,300; Tas, $161,900; NT, $256,500; ACT $246,700.
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Re-financing
The value of refinancing of established dwellings amounted to 33.4% of established dwelling loans in July.
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Outstanding Housing Loan Balances
Source: RBA
- End July 2008
Outstanding housing loan balances at end July 2008 were $969.1 billion inc securitised compared to $964.0b inc securitised in June 2008 and $878.7 inc.securitised in July 2007.
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Business Finance - July 2008
Sources: ABS Lending Finance Cat. 5671.0
On a seasonally adjusted basis, the value of Commercial Finance commitments in July 2008 was $32.536b down 1.8% down on June. The value of lease finance ($563m) fell by 5.6% on June.
The break up of the results for July against June (seasonally adjusted) is:
Commercial (fixed loans): $21.075b (-3.2%)
Commercial (revolving credit):$11.461b (+1.1%)
Lease finance: $0.563b (-5.6%)
The category break up in original figures for July 2008 is:
Commercial (fixed): $21.787b
Construction finance $2.896b
Purchase of real property $6.626b
Wholesale finance $1.064b
Purchase of plant and equipment $1.149b
Refinancing $2.054b
Leasing: $579m
Plant and equipment $260m
Motor vehicles $319m
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Credit By Sector
Source: RBA
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APRA Lending Statistics July 2008
Total housing market shares – September 2007, March 2008 and July 2008.
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Housing Lending Growth Rates
- Since September 2007
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Business Lending Market Shares
– September 2007, March 2008 and July 2008
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Business Lending Growth Rates
- Since September 2007
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Consumer Price Index
Year to June 2008: +4.5%.
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Retail Sales
Australian retail sales in July 2008 were up by 3.1 % on June 2007 (trend figures) and the trend estimate for July 2008 showed a 0.1% increase on June 2008.
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Unemployment Rate
Source: ABS
The unemployment rate (seasonally adjusted) for August 2008 was 4.1%, down from 4.3% in July.
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