Reserve Bank of Australia left rates unchanged at 3.25%

Australian Dollar Rate Outlook

RBA: The Reserve Bank of Australia left rates unchanged at 3.25% Tuesday call.

Comments from RBA Governor Stevens:

"Demand has not weakened as much as in other countries and, on the basis of currently available information, the Australian economy has not experienced the sort of large contraction seen elsewhere. The Australian financial system remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers. Nonetheless, economic conditions are clearly weak, and given the speed and scale of the global economic deterioration and its effect on confidence, weak conditions are likely to continue in the near term. Inflation is likely to decline over time.... There has already been a major change in both monetary and fiscal policy.... Together with the substantial fiscal initiatives, the cumulative decline in interest rates will provide significant support to domestic demand over the period ahead....The Board will consider the position again at its next meeting"

The Australian Dollar exchange rate was the main winner on the robust nature of Gov Stevens comments and RBA's and desision and was up more than 2% across the board.

Pounds to Australian Dollars = 2.2218
Euros To Australian Dollars = 1.9600
Australian Dollars to US Dollars = 06445
Australian Dollars to New Zealand Dollars = 1.2900

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Interest rates set to hit record low tomorrow

Australian Dollar Rate Outlook

Australian interest rates are tipped to fall to record lows tomorrow, as the effects of the global downturn threaten to hit our economy hard. Thirteen of 16 economists surveyed expect the Reserve Bank of Australia to cut the official cash rate at its monthly board meeting tomorrow.

The median forecast was for a 50-basis-point rate cut.

That would take the cash interest rate to a record low of 2.75 per cent.

A further 50-basis-point cut, if passed on in full by lenders, would knock another $77.96 a month off the average mortgage of $249,645 and would send the cash rate under the record low monthly average rate of 2.89 per cent seen in January, 1960. While domestic business data is still strong, many economists say deteriorating conditions among Australia's key trading partners will weigh on the domestic economy.

More optimistic analysts said the run of rate cuts and $52 billion in Federal Government stimulus programs would support local demand. shane of sydney RBC Capital Markets senior economist Su-Lin Ong said a 50-basis-point rate cut in March was a close call, with the Reserve near the end of its easing cycle.

"It's pretty clear they are very reluctant to cut any more but the reason we think a move is justified is the global downturn has worsened since the last board meeting," she said.

UBS senior economist George Tharenou said the prospect of a technical recession - measured by two consecutive quarters of negative economic growth - in the first half of this year justified the need for a 50-basis-point cut this week.

ANZ economist Riki Polygenis, however, said the economy is yet to feel the full effects of the large Reserve rate cuts since September. That reinforced the case for a 25-basis-point rate cut this month.

For the full story visit http://www.news.com.au/business/money/story/0,28323,25125462-5016110,00.html

Pounds to Australian Dollars = 2.2218

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First home buyers boost Australian new home sales

Australian Dollar Rate Outlook

NEW Australian home sales surged by almost 9 per cent per cent in January thanks to increased activity by new home buyers, a survey shows.

The Housing Industry Association (HIA) said the best home affordability conditions in five years and a boost to the first home owners grant had propelled the sale of new detached houses.
Detached home sales increased by 9.8 per cent in the month and were up by 3 per cent for the three-months to January.

But pre-contract sales of apartments and home units declined for the fourth consecutive month, indicating a continued softness in rental investor activity.
"A better start to 2009 for new home sales is an encouraging result,'' HIA chief economist Harley Dale said.

"But a sustained recovery in new home construction will rely on trade-up buyers and investors returning to the market, and the timely procurement of the planned 20,000 new public and community housing dwellings.''

Dr Dale said the unlocking of many of the private dwelling projects caught up in the credit crunch would go a long way to ensuring a broad-based private sector housing recovery.

For the full story visit http://www.news.com.au

Pounds to Australian Dollars = 2.2230

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Australian Dollar Rate Outlook - Australian economy continues to surprise

Australian Dollar Rate Outlook

The Australian economy continues to surprise to the upside and Governor Stevens comments last Friday suggest that the Reserve Bank of Australian not to cut Australian mortgage rates when they meet next week. This is against the Foreign exchange markets current view of a 0.50% interest rate cut. If the RBA doesn't cut rates we expect that the that the Australian dollar will rally against the pound, us dollar, euro and New Zealand dollar. (this is a view shared by UBS that have stated that they favor the AUDNZD to target 1.3300 from its current level of 1.2720.)

So how does that effect you if you need to buy Australian dollars?

We suggest that Prudence is needed if you are migrating to Australia and we have suggested our clients lock in 2.2000 plus in regards to the pounds to Australian dollar exchange rate as this rate could easily fall back below 2.1400 in the coming days.

Continued bad news from the UK cant be ignored much longer and foreign exchange traders tend to behave like sheep and we switch their views much quicker than many realise and I wouldn't be surprised to see an exchange rate of 2.1000 within 48hrs.

If you want to talk through your options and a free quote please call us at IMS Foreign Exchange on +44 207 183 2790

Pounds to Australian Dollars Exchange rate = 2.22028
Euros to Australian Dollars Exchange rate = 1.9800
US Dollars to Australian Dollars Exchange rate = 0.6348
New Zealand Dollars to Australian Dollars Exchange rate = 1.2730

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Australian Homes most affordable in five years at Australian Mortgage Rates Fall

Australian Mortgages update

THE Australian dream of owning a home is more affordable now than it has been for five years following lower interest rates and greater Government subsidies, a report says.

The Housing Industry Association and Commonwealth Bank First Home Buyer Affordability index improved by 39.2 per cent to 153.6 points in the December quarter from 110.3 index points for the September quarter.

First home buyers last had housing this affordable in the March quarter 2003, according to the index. HIA chief executive Chris Lamont said lower mortgage rates and the boost to the first home owners scheme made it easier to buy a house.

"For would be first home buyers, conditions have improved significantly and clearly many Australians are taking up the opportunity to get into home ownership," Mr Lamont said in a statement."Cuts with interest rates and the first home owners grant have made a large impact.''

The Reserve Bank of Australia (RBA) lowered the cash rate by three percentage points to a six-year-low of 4.25 per cent in the last four months of 2008.
And the central bank cut the cash rate another one percentage point to a 45-year-low of 3.25 per cent on February 3 in a bid to cushion the domestic economy from a possible recession.
Commercial banks have lowered their standard variable mortgage rates by an average 3.75 percent points in response since September last year.

Repayments on an average home loan fell by 26 per cent to $2,056 a month by the end of the December, from $2796 the previous quarter.

In mid-October, the Federal Government doubled the first home owners grant to $14,000 for established dwellings and tripled it to $21,000 for newly built homes until June 30.
Households would need an income around $70,000 to buy a modest home, the report said.

"Previously, a household would have to be earning in the order of $85,000 to afford a modestly priced home without going into severe mortgage stress,'' Mr Lamont said.

"The improvement in housing affordability means those on a more modest income can now contemplate a home of their own.''

Buying a home was more affordable in all capital cities and regional areas during the December quarter, the report said, with the largest improvement occurring in Perth, Brisbane and regional Western Australia.

For the full story visit www.news.com.au

Pounds to Australian Dollars = 2.2230

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Australian Dollar - one Senator in Australia’s Parliament derailed the A$42 billion stimulus package

Foreign Exchange - Australian Dollar Outlook

In a shocking development - almost as shocking as the news that the wildfires were the result of arson - one Senator in Australia’s Parliament derailed the A$42 billion stimulus package because it neglected to contain provision for the Murray-Darling River system. To be fair, this area produces half of Australia’s farm products, although the focus of the plan was more on
social spending with a little infrastructure spending.

The bill will be amended and re-introduced for a vote as soon as tomorrow.

Pounds to Australian Dollars exchange rate currently 2.1983

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Barbara Rockefeller
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fiscal stimulus would help Australia avoid recession

Foreign Exchange - Australian Dollar Outlook :

The Australian Dollar was firm yesterday, rising off the early low of 6245 to an intraday high of 6357 on expectations of a rate cut and stimulus plan to be annoucned overnight. We expected a "buy on the rumor" effect and got it to a high of 6421 (or a 38% retracement of the previous downmove). But then the "sell on the news" effect kicked in, and the A$ sank back to 6334. The move may not be over now that the US dollar is in an overall corrective mode. We imagine the corrective move could reach as high as 6550 before it fizzles out. This is the channel top on the hourly chart and near the 62% retracement. But probably more important is the Australian Dollar vs Japanese Yen, which we don’t usually follow. It got a minor bit of support from
the announcement but its still headed for a test of the lowest-ever low of 55.08 from last October.

The hard news is that the Reserve Bank cut rates by a full 1% to 3.25%, the lowest since 1964, and announced a new stimulus package of A$42 billion, to be focussed on infrastructure with some payments to consumers. Bloomberg says the packkage includes A$12.7 billion in grants to families and low-income earners and A$28.8 billion for infrastructure. It will help send the nation’s budget into an A$22.5 billion deficit, the first shortfall since fiscal 2001-02. The earlier Oct stimulus of about AUD $ 10 billion went mostly to low-income sectors like pensioners.

Treasurer Swan said “The weight of the global recession is now bearing down on the Australian economy. Economic growth is slowing and employment will weaken.” Unemployment will probably rise from 4.5% in Dec to 7% by the middle of next year, and growth will be lucky to hit 1% at the end of the fiscla year in June. The FT reports “Mr Swan said the fiscal stimulus would help Australia avoid recession by boosting growth by 0.5 per cent in 2008-09, rising to 0.75 to 1 per cent the following year. The International Monetary Fund at the weekend forecast Australia’s economy would contract by 0.2 per cent in calendar 2009.”

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Barbara Rockefeller
Forex Trading Reports

Pounds to Australian Dollars exchange rate currently 2.2250

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