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Interest Rates
At its meeting on 7 October 2008, the Reserve Bank Board reduced the
cash rate target by 100 basis points to 6%. Of note in announcing the
decision the RBA Governor stated:
Conditions in
international financial markets took a significant turn for the worse
in September. Large-scale financial failures in several major countries
were accompanied by serious dislocation in interbank markets and
heightened instability in other markets, including sharp falls in share
prices. Official actions in a number of countries have been aimed at
restoring stability, by adding to short-term liquidity and laying a
foundation for longer-term recovery in the health of balance sheets.
Nonetheless, financing is likely to be difficult around the world for
some time ahead. This is also affecting Australia, albeit by less than
in many other countries, given the relative strength of the local
banking system.
Economic activity in the major countries is also
weakening, and evidence is accumulating of a significant moderation in
growth in Australia’s trading partners in Asia. The expansionary
effects of the recent surge in Australia’s terms of trade are still
coming through, but some decline in the terms of trade now looks likely
over the coming year, with many commodity prices having declined from
their peaks. This, combined with the likelihood of below-trend growth
in the global economy, suggests that global inflation will moderate in
2009.
Thus far, the overall path of economic activity in
Australia appears to have been close to what the Board had expected,
with the needed moderation in demand occurring. The next CPI is likely
to show an increase of around 5 per cent over the four quarters to
September, but the Bank remains of the view that inflation will start
to decline in 2009.
The recent deterioration in prospects for
global growth, together with much more difficult market conditions even
for creditworthy borrowers, now present the risk that demand and output
could be significantly weaker than earlier expected. Should that occur,
inflation would most likely fall faster than earlier forecast.
Given
that background, the Board judged that a material change to the balance
of risks surrounding the outlook had occurred, requiring a
significantly less restrictive stance of monetary policy. The Board
also took careful note of movements in funding costs in wholesale
markets. Having weighed these considerations, the Board decided that,
on this occasion, an unusually large movement in the cash rate was
appropriate in order to bring about a significant reduction in costs to
borrowers. The Board does not, however, regard that movement as
establishing a pattern for future decisions.
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 August 2008
Source: ABS Cat No 5609.0
On a seasonally adjusted basis the national value of housing loan
commitments (owner occupation) in August was $12.123 billion, down by
2.1% on July.
On
a state basis, the respective statistics were: NSW $3.970 billion (nc)
Victoria, $2.763b (-4.3%), Qld, $2.470b (-1.8%), SA, $0.847b (+0.6%),
WA ,$1.563b (-1.3%), Tas, $169m (-1.7%), NT, $82m (-11.1%), ACT, $182m
(+6.4%).
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Investment Housing - Total
Source: ABS Cat No. 5609.0
The value of investment housing loan commitments
($5.390billion, seasonally adjusted) fell by 5.0% on July. The drivers
of this result were a fall in the construction of dwellings for rent or
resale (-21.5%), a rise in the purchase by individuals of dwellings for
rent or resale (+1.2%) but a fall by others (-23.5%)
The total value of housing finance commitments ($17.513b) fell by 3.0% on July.
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First Home Buyer Commitments
First Home Buyer commitments (of all owner occupier commitments) remained unchanged at 18.6%.
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Fixed Rate Loans (2 years or more)
Fixed rate loans were 4.6% of all owner occupier loans, down from 8.8% in July.
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Average Loan
The average loan size rose from $248,400 to $249,200. Average loans in
each state/territory were: NSW, $271,900, Vic, $237,800; Qld $254,300;
SA, $205,100; WA, $249,200; Tas, $175,400; NT, $238,400; ACT $264,700.
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Re-financing
The value of refinancing of established dwellings amounted to 33.3% of established dwelling loans in August.
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Outstanding Housing Loan Balances
Source: RBA
- End August 2008
Outstanding
housing loan balances at end August 2008 were $973.5 billion inc
securitised compared to $969.0b inc securitised in July 2008 and $886.6
inc.securitised in August 2007.
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Business Finance - August 2008
Sources: ABS Lending Finance Cat. 5671.0
On a seasonally adjusted basis, the value of Commercial Finance
commitments in August 2008 was $29.571b down 7.9% down on July. The
value of lease finance ($541m) fell by 3.2% on July.
The break up of the results for August against July (seasonally adjusted) is:
Commercial (fixed loans): $17.594b (-14.6%)
Commercial (revolving credit): $11.976b (+4.2%)
Lease finance: $0.563b (-3.2%)
The category break up in original figures for August 2008 is:
Commercial (fixed): $17.679b
Construction finance $2.031b
Purchase of real property $6.399b
Wholesale finance $1.005b
Purchase of plant and equipment $1.097b
Refinancing $1.166b
Leasing: $525m
Plant and equipment $258m
Motor vehicles $267m
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Credit By Sector
Source: RBA
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APRA Lending Statistics August 2008
Total housing market shares –September 2007, March 2008 and August 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 August 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 August 2008 were up by 3.2 % on August 2007
(trend figures) and the trend estimate for August 2008 showed a 0.3%
increase on July 2008.
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Unemployment Rate
Source: ABS
The unemployment rate (seasonally adjusted) for September 2008 was 4.3%, up from 4.1% in August.
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