Australian House Prices Continue to Fall

Australian Capital city house prices have declined by the sharpest rate in more than three years, inflicting further pain on home owners faced with 12-year high interest rates.

The Australian Bureau of Statistics house price index - which calculates the average for the country's eight capitals - fell 0.3 per cent in the June quarter.

This left the annual rate at its slowest pace in two years at 8.2 per cent, compared with 13.2 per cent growth in year to March.

Economists had expected a fall of 1.0 per cent for the June quarter.

The report adds to a slew of other data showing the economy is slowing sharply, raising speculation the Reserve Bank of Australia (RBA) will cut interest rates before the end of the year.

The RBA holds its monthly board meeting tomorrow, but economists expect it to keep its key cash rate unchanged for a fifth straight month.

Perth suffered the biggest drop in house prices, falling 2.4 per cent in the June quarter, and are now dropping at an annual rate of 0.9 per cent. Hobart reported a 2.0 per cent decline and Canberra 1.4 per cent fall. Darwin saw the biggest increase with a rise of 1.9 per cent, while the country's largest housing market - Sydney - rose 0.3 per cent.

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Pounds to Australian Dollars currently 2.1100

NATIONAL Australia Bank increases home loan interest rates

NAB increases home loan interest rates

NATIONAL Australia Bank has become the latest bank to turn the screws on homeowners, hiking its standard variable rate by 15 basis points to 9.61 per cent.

The new rate, which takes effect from tomorrow, will add just over $7 to the weekly repayments on a $300,000 mortgage taken out over 30 years.

NAB is playing catch-up to other major lenders who have already pushed through rate hikes.

On Friday the Commonwealth Bank of Australia lifted its rates by 14 basis points, pushing up its standard variable rate home loan to 9.58 per cent per annum and its basic variable rate to 9.07 per cent.

ANZ also pushed through a sneaky 15 basis point rate rise late on Friday afternoon, after the share market closed. ANZ’s new standard variable rate of 9.62 per cent came into effect today.

St George Bank was the first major lender to move in this latest bout of rate hikes, raising its standard variable rate by 20 basis point to 9.67 per cent on July 4.

Meanwhile, AMP Bank also said it would increase its standard variable home loan interest rate for existing customers by 0.20 per cent, to 9.67 per cent. The standard variable rate for new customers will increase by 0.11 per cent to 9.67 per cent per annum. The changes take effect this week.

The banks have once again moved independently of the Reserve Bank of Australia, which opted to keep official rates steady at a 12-year high of 7.25 per cent when it met on July 2.

The banks have all cited higher borrowing costs as the main reason for raising rates. Banks are finding it more expensive to source money for borrowers.The sub-prime crisis - which was sparked when US lenders lost billions of dollars on bad loans - means banks have pay more for the money they borrow to lend to consumers.

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Australian Home sales jump in June

Home sales jump in June

Australian Home Sales posted strong growth in June but activity in the first half of 2008 was still weak as borrowers battled high interest rates, new data shows.

A Housing Industry Association (HIA) survey of the nation's 100 biggest builders and developers found that house and unit sales rose by 4 per cent last month. Detached house sales increased by 2.6 per cent while volatile multi-unit sales jumped 15.5 per cent in June. But home sales rose by just 0.4 per cent in the first half of 2008.HIA chief economist Harley Dale said momentum had fallen during 2008.

"The soft result for new home sales will actually prove to be a slightly better outcome than evident for building approvals or new home lending figures, both of which will show a fall over the first half of 2008," he said."

Australia is seeing strong demand for housing fuelled by record year on year immigration.

"Clearly production of new housing needs to at least capture this demand."

In June, New South Wales posted the strongest Australian Home Sales Growth of 20.2 per cent, outpacing the resources-driven Western Australia's increase of 16 per cent.The story was different in Queensland where sales fell 9.8 per cent and Victoria, which suffered a 3.7 per cent decline.

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Remember, when the pound moves down, it does it in great leaps and bounds.

The US Dollar also has some support against the pound and Canadian dollar, but is exceptionally weak against the Mexican peso and the Australian dollar.

Bottom line—as is usually the case, it’s a mistake to talk about the US Dollar as a single thing.

While the varying performance against different currencies makes it hard to trade, it’s a healthy development for the dollar. It means not everyone is on one side and also that events in other countries deserve attention and not just the US. We would single out the pound, where we have a slew of hideously negative stories this morning.

Remember, when the pound moves down, it does it in great leaps and bounds.

Lehman recommends selling the Australian Dollar!

Bloomberg reports the Lehman Brothers recommends selling the Australian Dollar against the Japanese Yen since Australia may be seeing interest rate cuts next, which will narrow the current 5.6% spread in favor of the Australian Dollar. Besides, commodity prices could fall. Poppycock! We seldom see such nonsense in print. For one thing, the Credit Suisse interest rate swap version of interest rate forecasts indicates the RBA may cut rates by as much as 11 points in the next 12 months. This is up from 2 points on Monday, but still—11 points? The benchmark rate in Australia is 7.5% and the equivalent rate in Japan is 0.5%. There is no case for a significant rise in the yen against the Australian Dollar on this basis, even if Japan were to hike by 25 bp, which we say doesn’t come until next March, if then. And falling commodity prices?

Okay, very likely a correction in Australian export goods but certainly not a reversal.

Reag more at Rockefeller Treasury

RBA sees the Australian Economy cooling but not facing the same challenges as the US and UK

Reserve Bank of Australia's Stevens: Clear some key parts of demand are slowing. Likely that inflation will go higher before coming down again. Financial conditions are tight and have tightened further in last month. Doesn't expect Australian Economy to face same challenges as US and the UK economies.
The chances of keeping Australia's inflation rate low over the medium term are good as the highest borrowing costs in 12 years cool the economy. ``This outlook does involve a period of significantly slower growth in demand in Australia." "But controlling inflation has always involved being prepared to slow'' the economy.

Australian Dollar to Pounds last at 2.0500

Australian Dollars to US Dollars last at 0.9771

Australian Dollars to Euros last at 0.6135

Australian Dollars to New Zealand Dollars last at 1.2662

RBA July minutes - Australian Dollars

RBA July minutes: borrowing costs at a 12-year high is restraining the economy and will slow inflation, suggesting interest rates will be left unchanged this year. Evidence is tightening is working to restrain demand, credit expansion has weakened significantly, some tentative signs of easing in the labour market. The rise in Australia's terms of trade that is currently occurring will work in the opposite direction. It will add substantially to national income and ability to spend, even with the slowing in global growth to below-trend pace that the Australian Banks is assuming. At the same time, rising prices of oil and a range of other commodities are adding to global inflationary risks.

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Pounds to Australian Dollars last at 2.0465

HOME loan repayments and rent in Australia are hurting much more than high petrol prices

HOME loan repayments and rent in Australia are hurting much more than high petrol prices, data from Australia's largest privately owned debt collection agency shows.

Unleaded fuel prices were approaching $1.70 in Adelaide, Melbourne, Sydney and Canberra yesterday even before crude oil prices reached a record 145 US Dollars a barrel.

Yet less than 2 per cent of consumers nominated high petrol prices as their primary reason for failing to pay an overdue bill, an email survey of Prushka's 80 debt collectors taken in June found.

Mortgage repayments were the number one reason why 19 per cent of borrowers broke a default arrangement, entered into when a bill was 60 days overdue.

Australian Bank St George hikes Home Loan Rates by and extra 20 points

ST George Bank has lifted its standard variable Home Loan Rate by 20 basis points to 9.67 per cent, independently of the central bank. Australia's fifth largest bank attributed the rise to the continuing high cost of funds it sources for itself.

St George chief financial officer Michael Cameron said all the banks had been absorbing a significant increase in funding costs.

The price of money has risen due to the impact of the US sub-prime lending crisis on global liquidity and wholesale funding markets since August last year. "While we have already completed our wholesale funding requirements for this financial year, the spread between cash rates and 90 day rates in particular remains significantly higher for the industry than a year ago," he said.

St George group executive retail bank Les Matheson said that even after today's rate hike, the lender would not be "fully recovering all of our increased funding costs for this financial year". "St George maintains its commitment that if funding costs were to reduce for a sustained period of time, we would then look to adjust our rates."

The Reserve Bank left official interest rates unchanged at a 12-year high of 7.25 per cent this week.

It had raised rates in February and March, prompting moves by the major banks to match those increases, while adding more hikes of their own. The ANZ's standard variable rate is 9.47 per cent, the Commonwealth Bank of Australia's rate is 9.44 per cent, Westpac's rate is 9.47 per cent and the National Australia Bank's is 9.46 per cent.

St George has also increased a range of special deposit rates by an average of 50 basis points.

Australian Dollar still doing well aganist the Pound

The Reserve Bank of Australia choose not to hike interest rates this week saying that previous hikes are working only for the next day Retail Sales Data for the month of May showed that Australian continue to spend like crazy and now analyst believe that next month the RBA might not be as kind.



Added to this the Australian Banks have stated they believe that the RBA's forecast for growth may also be off, and that the Australian Economy growth will outperform the rest of the western countries like the UK.



So for the time being there seems no reason to Buy Pounds and actually could be a good time to buy Australian Dollars as it chases parity against the US Dollar and 2 to 1 against the Pound.

Pounds to Australian Dollars last at 2.0660

Swan talks up inflation challenge

Australian Federal Treasurer Wayne Swan has told a Labor Party conference in Perth that inflation is his government's biggest challenge, ABC news online reported at the weekend. Swan praised the State government's handling of the Varanus Island gas explosion and predicted that the crisis would impact on the September national accounts.

Pounds to Australian Dollars last at 2.0638