Speculation Mounts Over RBA October Meeting
As the RBA heads towards it October meeting, there are a number of important issues on the agenda. The price of iron ore which was one of the major topics of the September meeting have now seen a 26% resurgence in price and the world’s fourth biggest exporter of iron ore, Fortescu Metals, has announced that its US$4.5-billion debt deal will now enable it to refinance any outstanding deals. The central banks in Europe and the United States have announced their intentions to fight off inflation and stimulate asset prices by printing unlimited money while China will be contributing a $150-billion package to the mix.
Despite international uncertainties Australia’s unemployment rate of only 5.1% continues to impress. One pressing issue on the itinerary will be the country’s exchange rate which has topped itself at 104 US cents, but sceptics question whether there is anything the RBA can do to a currency that has been stubbornly unresponsive to the 125 basis point cuts to date.
The housing market is being looked to as one realistic benchmark of what’s really happening in the economy and September data has indicated that, despite criticisms, the 75 basis point cut that was extended in May and June is indeed having a positive effect on markets.
Australia’s five capital cities have seen house prices inflate by 1.9% between 01 June and 19 September. And the biggest performers appear to be Sydney and Melbourne where home values have increased by 2.5% and 2.4%. Furthermore, the value of homes has increased by 0.7% in Adelaide, 0.9% in Perth and 1.3% in Brisbane since the beginning of June. This is combined with better performances from auction clearance rates, which are also starting to climb again. As Australia’s unemployment rate remains low and home loan default rates are on the [Read more...]