RBA chief hints rates could rise soon. source AAP
| Australia's central bank chief has hinted interest rates could rise before an expected peak in unemployment next year, suggesting the federal government is more likely to face voters as home borrowing costs climb. |
Reserve Bank of Australia (RBA) governor Glenn Stevens also said Australia's economic downturn would not turn out to be the most severe since World War II, signalling a belief that the worst of the global recession may be over.
Financial markets expect interest rates, at a half-century low of three per cent, to rise to four per cent by the second half of 2010.
Mr Stevens told a lunch in Sydney that the central bank would necessarily wait until unemployment peaked before moving on rates.
The RBA began cutting rates in September last year as the global financial crisis hit but is expected to reverse course in the second half of 2010 to head off inflationary pressures as the economy recovers.
The government expects unemployment to peak at 8.5 per cent in the second half of 2010, up from 5.8 per cent at present.
"I've never seen it written down or I have never heard in discussions ... some rule of thumb that we wait until unemployment has peaked before lifting rates," Mr Stevens told the Australian Business Economists luncheon on Tuesday.
The comments are significant in that they reveal a possible policy shift, as did Mr Stevens' comments at the same venue a year ago when he said rates would be cut before inflation moderated.
Two months later, the RBA began an aggressive series of rate cuts.
JP Morgan chief economist Stephen Walters said the comments were a sign interest rates would rise in 2010, even as unemployment rose, to prevent an inflation breakout in 2011 and 2012.
"Politically that's going to be quite tough for the government," Mr Walters told AAP on Tuesday.
"It will be a tough one to sell, but the (RBA) governor did not rule out that scenario."
The next federal election must be held by early 2011.
Mr Stevens also appears more upbeat than Prime Minister Kevin Rudd, who regularly asserts that Australia is exposed to the worst global uncertainty since The Great Depression.
"It appears at this stage ... that the downturn we are having may turn out not to be one of the more serious ones of the post-war era, in contrast to the experiences of so many other countries," Mr Stevens said.
The central bank boss signalled that the worst of the downturn for Australia could be over.
"It is becoming more common for Australians to see the glass as half full than as half empty," he said.
"Put another way, we can more easily imagine upside risks to the outlook, to balance the downside ones, than was the case six months ago."
In another sign the economy could be on the mend, a National Australia Bank survey, released on Tuesday, showed business confidence recovered in the June quarter to its best levels since the start of the global financial crisis in September 2008.
However, in a report released on Tuesday, leading economic forecaster Access Economics said it expected business investment to continue to fall over the next 12 months.
The report said private investment had fallen to a record low in the June quarter and was only propped up by state and federal stimulus programs.
The Buying Process: Insider Information!
CENTURY 21 Helps First Home Buyers with some tips from the experts
The process involved in searching for your first property to buy is somewhat daunting to say the least! With a market full of first home buyers mistakes are inevitable. With so many aspects involved in a highly complex purchase, first home buyers can be left dazed and confused by the experience.
Having an agent who is happy to take the time to walk you through each step and address your queries is half the battle won when it comes to buying your first home. CENTURY 21 Wentworth Falls place a great deal of emphasis on ensuring buyers are comfortable with the experience and fully aware of the options available to them.
“Our experience with first home buyers is always pleasant due to our open communication policy that welcomes them voice any confusion no matter how trivial it may seem,” says Bianca Brown.
Preparation is paramount when it comes to buying your first home. Simple handy tips such as taking notes on inspections will assist when it finally comes to making your biggest purchase yet! “In addition to general advice, we like to ensure the purchaser is aware of the legal implications of their purchase and contract,” added Bianca Brown. “It is essential to have a good solicitor who is happy to cover any legal jargon you don’t understand.”
First home buyers are encouraged to commission independent inspections. There are many professional contractors available to provide this service, however on your first inspection of the property Bianca Brown says it’s a good idea to give the property a general once over yourself. “Not all houses are going to be in excellent condition. But it is important to understand the extent of any structural faults, infestations, etc before you commit to the purchase.”
A few areas easy to check yourself include looking for gaps between the floor and skirting boards as well as checking their stability; signs of rising damp which are indicated through rotting carpet and mould on the walls or ceiling; test water pressure in both hot and cold taps. Once outside things to look for include, fences and gates identifying stability and rot; condition of eaves; broken tiles on the roof and anything else that may seem amiss.
A better understanding of this process will guarantee a good purchase.
Who will pay the most for your home? by Richard Armstrong
| Emotion pays a bit part in how much certain buyers will pay for a property. Are your buyers owner-occupiers or investors? Knowing the answer to this can improve your odds of achieving the best price. |
It pays for vendors to remember that some buyers from particular groups or ‘markets’ are prepared to pay more for a property than others.
I know of a recent auction at which three bidders came from two vastly different buyer groups.
The first bidder, an investor, was seeking an investment property. She’d clearly done her homework about what she was prepared to pay. She’d studied comparable properties for rent in the area and what capital growth prospects the property might have.
Having done all this research, she seemed to exhibit a calm exterior in the heat of battle that I almost envied.
The other two bidders, intending to live in the property, had also done their research. Both loved the area and the vibrancy of the local shopping strip. The location was close to the city and there were a couple of parks nearby.
Separately, they had been to many auctions and understood values in the local area.
As the auction progressed beyond $400,000 the auctioneer knew the property would be sold. It was just a matter of how strong the price would be.
The investor was prepared to go to $405,000, while the first owner-occupier had finance approved to $440,000, the second to $430,000.
Bids had slowed to $1000 increments and, knowing she was near her limit, the investor tried a ‘knockout bid’ of $405,000.
The auctioneer allowed himself an understated grin.
The hearts of the other two bidders began to race. They’d both been looking for so long and this place was perfect. Both could afford more. Both wanted to buy it. Both had fallen in love with the property.
After a flurry of exhausting and emotional bids between the two remaining bidders, the property eventually sold for $431,000.
As the hammer fell, the investor was already walking to her car to make sure she got to the next auction in time. She was sure she’d only be competing against other investors for that one.
The moral of the story is that buyers who intend to occupy are more likely to get caught up in the emotion of buying a house. They envisage themselves living there and decide they just have to have it. On the other hand, investors, developers or ‘flippers’ are more likely to work to financial criteria that place a lower ceiling on their bids.