Interest rates - everyone is an expert

Which ones?
How are these funded? as state coffers on back of stamp duty, new land release honey pot is shrinking fast.

Are they major job generators enough to suck in those who may be relieved due to RE slowdown not just from pure development project but also related periphery sectors which will be soon impacted due to spending impact of not paper feeling rich.

 

There is a lot of money in Sydney and I would say a combination of both - home buyers who still have plenty of equity and want to upgrade their units (for example) or their house size as well as investors who simply believe the party will never stop in Sydney in the long term. Current interest rates are still making even low yield properties quite affordable for someone earning over $200,000 and little to no mortgage debt.

 

The real money players are now pricing in a rate cut! Fully-priced 25bps by Feb'20. #DéjàVu

 

RBA never go single 25 bps they will only move if the move overall is 50bps+

Close your ears to the noise. Bill Evans Westpac for me is the economist rate caller we want to observe.

With these revised forecasts, the RBA is clearly less comfortable with its previous positive outlook. Its growth forecasts remain significantly above Westpac’s own view. With our forecasts of 2.6% growth in 2019 and 2020, it still seems that the more likely outcome will be for steady rates, even if as we expect, the RBA will eventually have to adopt growth forecasts much closer to Westpac’s current view. Westpac confirms its long-held forecast that the RBA cash rate will remain on hold in 2019 and 2020.

 

I agree. Media has way overblown the comments. If you actually listen to the speech he was pretty happy with unemployment and house price “adjustments”. Not overly excited about the global environment. Neutral on economy.

RBA said they can raise if inflation shoots up or reduce if economy slows down or stay put if nothing changes. They are confident APRA will handle property market with sufficient skill and expertise. And it’s not their remit to look at that. Their remit is whole of Australia economy. And so far it is ok.

 

I can see you're living in Utopia.

 

Yep. I’m also pragmatic. All the forecasters can forecast whatever they want. They know as much about what would happen as anyone else.

 

Interesting to hear that the RBA wasn't rulilng out that the next movement may be down. Is this a ploy to help out the banks? Cost of funding is going up, AUD vs USD is decreasing, OS indicators are China and other trading partners are slowing etc. Sooooo. If the RBA's rate widens the gap between OS and local funding rates, will banks hold their margins (increasing their profits) or will they reduce their rates too under pressure from the govt?

 

I doubt it. Even if the rates do go down, it is highly unlikely the banks would actually pass it to customers. They would blame OS funding, compliance costs, the devil, whatever it takes. You are right though. This could potentially boost their margins significantly.

That said, I don't believe the rates will go down. Not unless we see significant weakening in our economy. Something along negative or zero growth for a quarter. Australia still outperforms a whole host of developed countries.

 

**fixed**

 

"Interest rates - everyone is an expert"

I'm not.

 

well the funding costs just went down overnight after Lowe's speech!

@work we can borrow money now at approx 10bps cheaper than last month. the real money market is signalling they believe a rate cut might happen. the yield curve is showing this.

 

Iv'e also got a lot of respect for Bill Evans. But if he's right it will mean Phillip Lowe will have been a full four years into the job by 2020 and done.....well....absolutely nothing. The ultimate public servant Lol.

 

and it could be my most-liked PC post ever!

 

19 of the last 20 movements have been 25 bps?...

https://www.rba.gov.au/statistics/cash-rate/

 

The post meant combined back to back rate cuts or increases during a spell of moves by RBA.

 

It's obviously common knowledge that the RBA doesn't move single 25bps. The Interbank Cash Rate Futures Implied Yield Curve doesn't move in 25bps increments, as there are opposing market players in place, but it does give a good market indicator of future rate movements.

Edited!
Well your Westpac friend just joined the rate cut party!
The Money Market sensed the rate cut already even before Billy Boy changed his mind today.

Bill Evans breaks: RBA to cut, cut, cut!

From Bill Evans of Westpac, 21/2/2019:

 

Bill Evans was kidding himself. Economy is cooked

 

Zero-Bound For The Win!
Negative rates and Quantitative Easing here we go!