3.85 million new housing loans since the last rate hike

Wed, 11 Apr 2018  |  

The RBA Governor, Phillip Lowe, suggested that when interest rates do increase, it “will come as a shock to some people”.

On this, Lowe is spot on.

It has been 7 and a half years since the last interest rate rise from the RBA which means that those who have taken on debt since November 2010 have only see their interest rate stay the same or move lower.

There are a few fun facts with this development.

Since the last interest rate hike, there have been 3,853,110 new loans written for housing. To be sure, there is some (a lot?) of double counting for people who have refinanced, bought and sold a few times and the like, but that is a large number of loans written in a flat or falling interest rate climate.

Since the last interest rate hike, the value of loans outstanding for owner-occupiers has risen by $366 billion to a total of $1.15 trillion. 1 percentage point extra in interest rate costs on that would pack some punch.

For investors in dwellings, the rise in debt outstanding since the last hike has been $214 billion to $589 billion. That is a lot of debt accumulated under the falling interest rate envoironment.

But it doesn’t end there. Business borrowing has increased by $217 billion to $905 billion which means there is a lot of business debt that will be hit by any interest rate hike.

 

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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

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Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

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What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.