Whats up about interest rates ?

Given the Reserve bank has raised rates again, whats likely in the future? Lets read the RBA summary, basically they are increasing optimistic into the future. Let us remember its an election year. There are many key state elections before a federal election. Thus the temporary Government stimulus is only  going to be withdrawn gradually.
More of the same unfortunately, with  coking coal agreements up 80% on last year and the “spot” market for iron ore up 300% , on last year. The iron ore agreements are not yet released. The steaming coal agreements are also likely to be up strongly.  It is increasingly looking like a two speed economy, stronger for the mining areas and flat for the rest. Minerals and coal are Australia’s key exports, both in value and rising volume terms.

The futures markets give probably the best indication for interest rates, expecting a rise of around 100 basis (1%) points over this year. The interest rates risks might be seen as upside, especially if the USA economy starts to recover! There is even early talk of potentially an “overheating ” effect in the Australian economy within three years.What would a prudent man do? Potentially fix a portion of loans and keep a portion variable. This way if interest rates soar one is slightly protected. If rates fall and one has a windfall gain, one can pay off a portion of the loan without penalty.
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Where is the Home Market going right now?

Well talk about confusion!
Never seen so much smoke and mirrors:plenty of countervailing currents here. Many reports say a home in Sydney and Melbourne are amongst the worlds most unaffordable compared to income. Interest rates are on the rise. More land is released on the fringes of Melbourne. Some of the First Home grant incentives are being wound back.
Mark Armstong, CEO of Property Planning Instiute says, The use of Median figures, as indicators of affordability greatly over simplifies the property market. A Sydney home  appparently ranks second most unaffordable compared to incomes right behind Vancouver.
AMP’s Economist, Oliver says continued “under building” of around 45,000 to 50,000 homes a year. ANZ Bank is also very optimistic, for the home market. What can it all mean?

Lets keep it simple. I argue, if Australia is raising interest rates this will be only be after careful consideration of the world economic data. We simply cannot afford a slowdown or recession in an election year. In the USA, current data and reports suggest onterest rates will remain low for the foreseeable short term future. Thus I say interest rates are a likely laggard. If Australia continues to grow as seems likely, there will be more numbers of people employed and for longer hours, thus leading to higher family incomes. latest figures show some extra 160,000 employed in the last 6 months. I prefer to see the home market as “prices up side risk”.
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Cooperative Banking, or the Vietnamese Banking model?

Some 20 years ago, I happened to be driving through the inner city suburb of Burnley, in Inner Melbourne. I noticed about 25 Asian men  leaving a small terrace in the early morning.  I wondered, What is going on here?
This seems like a large number of men in  just one small house.
After some enquiries. I discovered that in the Vietnamese world. If the men don’t have jobs and the banks aren’t keen to lend.
The men work a cooperative banking system. This is where they pool their social security payments each week. Then “Jackpot ” it once a year. The winner is required to employ one of the contributors in a business that he buys, say a hot bread business. Then each year the  pooling of contributions and the “Jackpot” is continued, until they all have a business.

In this manner they are running their own bank.
What has this got to do with  easy home renovating? Well, it just highlights the ability of some people to cooperate to achieve their goals. In Australia, after this latest banking crisis, Banks will be demanding tighter credit criteria. Options still exist like the “Shared Equity “Home Loan fron the Bendigo Bank.
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Government Intergenerational Report

This is a policy recommendation report from the Australian Treasury Department, so their emphasis is on tax and government spending effects.
Today, the government publishes this report. It goes to the tax and spending needs, as the population ages. Critically, it will harbour on savings and health care needs. I expect there to be major new incentives announced to increase savings. Thus the recommended Super Guarantee Levy might be raised from current of 9 % , aiming for 15% overtime. Currently, Australians are perceived as better spenders than savers. This, I argue, is largely due to their historical view of inflation and taxation.  A careful analysis might reveal that Australians are saving plenty: but most of this is inputed into home stock. It has the best tax advantages.
While, most of us don”t save enough in superannuation.  This is due to the preservation effects and perverse taxes which had superannuation benefits limited to a multiple of final salary.
Let hope, there are some very excellent ideas in this report. The critical  thing will be, what gets implemented, as distinct from what gets just recommended. I.G.R. projects health spending to rise trom 7.5% of GDP to 12.6 % by 2050, as the proportion of population ages, example the over 65 s to rise from 3 M to 8 M. Australia’s population is expected to rise from 22M to 36M over the next forty years.
Much of this comes down to political preferences.
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Help for First Home Buyers!!!

I suggest one research the property market through websites including www.rpdata.com.au  gives one valuation data,

www.businessmall.com.au where you can read about lots of books on the property market,
www.residex.com.au where one can study property sales data and predictions,

www.apimagazine.com.auInvestor where one can read Case Studies, property reviews, suburb reviews, just heaps and heaps of good stuff.
For First Home Buyers , try www.firsthome.gov.au where you can read all about various government incentive plans for you.There are grants from both the Federal and state governments, plus Stamp Duty concessions , well worth checking these out, closely.

In the Finance area, I suggest www.infochoice.com.au   or www.cannex.com.au to research interest rates

.www.bid myloan.com.au A website where lenders can bid for your home loan, business.
www.yourmortgage.com.au

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