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AUSTRALIA 
Rate cuts will rekindle home ownership dream
Wednesday, 6 August, 2008
Australian Bureau of Statistics figures show demand for mortgages has shrunk to the lowest level in four years. (AAP)
Economists say interest rate cuts in the next few months will have potential home buyers scrambling back into the housing market.
New data shows that 12-year high interest rates have virtually killed off the Australian dream of home ownership, with demand for new home loans slumping by more than 25 per cent in the first six months of 2008 - the weakest start to a year since 1989.
Reserve Bank of Australia (RBA) Governor Glenn Stevens has signalled the central bank is on the cusp of ending a six-year regime of raising interest rates with clear evidence that domestic demand is slowing, dampening inflation pressures.
Financial markets are already fully pricing in a quarter of a percentage point rate cut at the RBA's next board meeting on September 2, and at least another one before Christmas.
"With the rental market remaining extremely tight, any downward pressure on interest rates is likely to see a surge in people looking to buy their first home," Commonwealth Securities economist Savanth Sebastian said.
"The last time interest rates were cut, new home loans jumped by almost 20 per cent in the space of five months."
Australian Bureau of Statistics figures show demand for mortgages has shrunk to the lowest level in four years.
Only 50,294 mortgages were granted in June, a seasonally-adjusted 3.7 per cent decline since May and the fifth
successive monthly drop.
Tomorrow's jobs numbers for August are unlikely to get in the way of a interest rate cut.
Economists expect a slim 1,300 increase in the number of people employed in July with the unemployment rate ticking up to 4.3 per cent from 4.2 per cent in June.
The RBA's signal follows a series of dire economic readings, including a steep decline in retail spending and a collapse in consumer and business confidence.
The federal government's leading indicator of employment released today also points to a slowdown in jobs growth, falling for a seventh consecutive month.
Opposition treasury spokesman Malcolm Turnbull put the blame for the economic slowdown at the feet of the Prime Minister Kevin Rudd and Treasurer Wayne Swan.
"There is real anxiety about the future of our economy here in Australia and that anxiety is due to the lack of leadership from the Rudd government," Mr Turnbull told ABC Radio.
Mr Turnbull conceded the slowdown was largely due to fallout from the US sub-prime mortgage crisis, but said Mr Rudd and Mr Swan had made the problem worse.
"I pointed to the sub-prime crisis as a gathering storm right at the very beginning of the year, and that's why I begged Wayne Swan to stop talking up inflation and stop talking down the economy," he
said.
But Mr Swan said Mr Turnbull was in no position to point the finger when it came to slowing growth.
"Mr Turnbull and the Liberals seem to think that by ignoring problems you make them go away," Mr Swan said as he released a discussion paper on tax review in Melbourne.
"That's their approach to the economy because there is no factor which is more responsible for the slowing of economic growth in our economy than the 10 interest rate rises that occurred under the Liberal Party."
Source: AAP
New data shows that 12-year high interest rates have virtually killed off the Australian dream of home ownership, with demand for new home loans slumping by more than 25 per cent in the first six months of 2008 - the weakest start to a year since 1989.
Reserve Bank of Australia (RBA) Governor Glenn Stevens has signalled the central bank is on the cusp of ending a six-year regime of raising interest rates with clear evidence that domestic demand is slowing, dampening inflation pressures.
Financial markets are already fully pricing in a quarter of a percentage point rate cut at the RBA's next board meeting on September 2, and at least another one before Christmas.
"With the rental market remaining extremely tight, any downward pressure on interest rates is likely to see a surge in people looking to buy their first home," Commonwealth Securities economist Savanth Sebastian said.
"The last time interest rates were cut, new home loans jumped by almost 20 per cent in the space of five months."
Australian Bureau of Statistics figures show demand for mortgages has shrunk to the lowest level in four years.
Only 50,294 mortgages were granted in June, a seasonally-adjusted 3.7 per cent decline since May and the fifth
successive monthly drop.
Tomorrow's jobs numbers for August are unlikely to get in the way of a interest rate cut.
Economists expect a slim 1,300 increase in the number of people employed in July with the unemployment rate ticking up to 4.3 per cent from 4.2 per cent in June.
The RBA's signal follows a series of dire economic readings, including a steep decline in retail spending and a collapse in consumer and business confidence.
The federal government's leading indicator of employment released today also points to a slowdown in jobs growth, falling for a seventh consecutive month.
Opposition treasury spokesman Malcolm Turnbull put the blame for the economic slowdown at the feet of the Prime Minister Kevin Rudd and Treasurer Wayne Swan.
"There is real anxiety about the future of our economy here in Australia and that anxiety is due to the lack of leadership from the Rudd government," Mr Turnbull told ABC Radio.
Mr Turnbull conceded the slowdown was largely due to fallout from the US sub-prime mortgage crisis, but said Mr Rudd and Mr Swan had made the problem worse.
"I pointed to the sub-prime crisis as a gathering storm right at the very beginning of the year, and that's why I begged Wayne Swan to stop talking up inflation and stop talking down the economy," he
said.
But Mr Swan said Mr Turnbull was in no position to point the finger when it came to slowing growth.
"Mr Turnbull and the Liberals seem to think that by ignoring problems you make them go away," Mr Swan said as he released a discussion paper on tax review in Melbourne.
"That's their approach to the economy because there is no factor which is more responsible for the slowing of economic growth in our economy than the 10 interest rate rises that occurred under the Liberal Party."
Source: AAP
