If you believe the financial markets, there is a 90% probability that the Reserve Bank of Australia will increase out the cash rate from 6.5 per cent to 6.75 per cent.
But unlike other Board Meetings, there has been a gap of about a fortnight between the releases of the CPI figures and when it actually does meet on 8 November. And much can happen over that period.
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Australia wide, the level of Retail construction was up by some 17% for the 12-month period to June 2007.
In the main, this involved extensions to existing suburban Shopping Centres; plus some new construction in many of the growth corridors.
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There has been much written over the past few weeks about the likely fallout from what’s been occurring in the United States. And some economists even feel it might be on the brink of recession.
The week, their Federal Reserve sought to address the immediate affects of the housing slump and the sub-prime crisis — by reducing US interest rates by 50 basis points.
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In an “earlier posting”:https://commercialpropertymadeeasy.com/2007/06/26/family-finances-are-being-stretched/, I raised concern over the dramatic increase in household debt — to the point where it now sits at over 150% of household disposable incomes.
As you can appreciate, the major concern has been as to how rising home-mortgage interest rates might cause a flow-on effect for Commercial investors. And this is because a fall in residential prices could adversely impact upon the security for any line-of-credit you may have against your home.
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As the government spending and tax cuts add to consumer demand, you’ll see the Australian economy continue to grow strongly.
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The recent stock market instability has been more related to investor panic, than to any logic or reason. And you’re not about to see a stock market collapse — which has now been confirmed by Monday’s rebound, following 0.5% rate reduction by the US Federal Reserve.
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The chances of any further rate rises (by the Reserve Bank of Australia) before the federal election have now diminished, following the recent evidence of wage growth having been contained.
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There has been so much written in the media lately on both political parties. And everyday, you read predictions of a loss by the Coalition, come the election in November/December this year.
However, I recall reading earlier in the year about a study done on elections all around the world, during the past 30 or 40 years. As a result of this study (and despite the present media hype), these various election outcomes have apparently hinged upon three key performance indicators (KPI).
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With house prices solid or rising everywhere except in Sydney, household debt is now almost out of control.
In the late 1980s and early 1990s, you saw the highly-geared Business sector collapse as interest rates rose. But now, you’re finding it is households with the high levels of debt.
In 1990, households had (on average) borrowed only 65% of their disposable income. By 2005, that figure had rocketed to 155% of their annual disposable income. And today, it stands at nearly 170%.
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You have seen strong growth and investor activity over the past 12 months; but neither of these have been very consistent — whether you look across the nation, or within each of the Commercial sectors.
Let’s take a quick look at each sector; and also consider the likely impact that further interest rate rises may have on your Investment Strategy.
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