Mortgage Industry Braced for Increased Funding Costs (Tuesday, February 26, 2008)
Mortgage businesses expect the cost of funds to rise over 2008, according to last week's Mortgage Business straw poll.
A conclusive 73 per cent of respondents expect the cost of funding to worsen, while 17 per cent believe it will remain the same.
Only seven per cent of straw poll respondents expect an improvement.
Professor of Finance at the UNSW’s Australian School of Business and editor of the Journal of Banking Finance Fariborz Moshirian believes the industry’s expectations are realistic in the current conditions. “Despite a high demand for credit in Australia, our lenders are still linked to the global capital markets and we can probably expect to see the cost of funding increase,” he said.
High Inflation, Slower Growth Flagged (Monday, February 25, 2008)
Elevated inflation and an interest-rate induced slowdown will hit the Australian economy in 2008, a report says.
A slowdown in global growth is tipped to hamper Australia's export performance.
The Melbourne Institute's monthly bulletin of economic trends, released on Friday, predicted annual core inflation would rise to 3.6 per cent by the March quarter and stay at that level for another quarter. This keeps inflation well above the Reserve Bank of Australia's (RBA) two to three per cent target.
"All the data ranging from unemployment, which is quite low, to consumer expectations suggests we'll have underlying inflation which is clearly above the two to three per cent target range," Melbourne Institute research fellow Sam Tsiaplias said.
"Even if there was another interest rate hike it will still take time to curb consumer spending."
The Melbourne Institute forecast comes after the RBA's quarterly monetary policy statement said last week that underlying inflation would rise to 3.75 per cent by June 2008 as headline inflation climbed to 3.5 per cent.
Inflationary fears forced the central bank to raise interest rates to an 11-year high this month, following moves in August and November.
Financial markets are now bracing for another rate climb in March.
NAB Boss Warns against using rate rises to curb inflation (Monday, February 25, 2008)
The head of one of Australia's biggest banks has warned the central bank against over-using interest rates to curb inflation.
The Reserve Bank of Australia (RBA) is tipped to again raise interest rates when it meets on March 4, which would lift the cash rate above 7 per cent for the first time since 1994.
National Australia Bank (NAB) chief executive John Stewart said his bank was forecasting two more rate increases before some relief next year, News Limited newspapers report today.
Mr Stewart said global inflation was a real concern and the RBA was likely to be worried the situation would get out of hand if it curbed its policy, which had resulted in six rate rises in two years.
"The trouble is that Australia is not one economy," he told News Ltd. "WA will keep going gangbusters, but there are pockets of NSW and Victoria that are already hurting, so an interest rate rise will hurt those people much more."
The NAB chief said the RBA could "easily overtighten".
"Interest rates are a blunt instrument, and we have to be ready for the impact as a bank and in a social sense," he said.
Mr Stewart also said the practice of banks putting up rates independent of the RBA was likely to be over.
"I wouldn't rule it out, but it's probably unlikely," he said.
