Better Business Loans News

Tricky lenders fooling borrowers
AFTER the latest interest rate rise, potential borrowers are being warned about some of the tricks used by some lenders to win business. Some lenders regularly delayed their rate increases by a month or so, leading borrowers to think they were getting a better deal. However, because of the time it takes to finalise a loan, by the time the loan is ready to be settled, the lender's rate had moved up. Even though a lender intends to increase their rate, they are not required to advertise it in the headline or comparison rate until they actually change the rate. Borrowers usually find out too late and are locked in by heavy exit penalties. Unlike variable loans, fixed rates are not subject to decisions by the Reserve Bank, and rise and fall at the whim of the lender.
Sat, 16 February 2008
Centro gets two months to pay up
THE beleaguered property group Centro is believed to have been given an additional two-month lifeline by its bankers yesterday to repay its $3.9 billion of debt without forcing a fire sale of its assets.

Brokers said the restructuring package is likely to include a combination of asset sales and an injection of fresh equity through a new cornerstone investor, rather than a straight sale of the business.

"Finding a buyer for the assets doesn't seem to be the problem; how hard a deal can be driven by Centro management in maintaining some semblance of control over their own destiny is more likely the issue," Pat Trotter, of Goldman Sachs JBWere, said.

The group requested a trading halt yesterday morning, pending discussions with its main US and Australian bankers, which had given the group until close of business yesterday to organise refinancing.

Centro, the country's second-largest shopping centre owner and landlord, and which has about 700 malls in the US, was the victim of the global credit crunch and a very complex corporate structure. Its shares had plunged 89 per cent, cutting Centro's market capitalisation to $515 million from its peak value of $8.5 billion in May.

Its troubles began when it paid close to $6 billion for the US-based New Plan Excel Realty business in May 2007. Despite its assurances to investors, the credit crunch left it unable to repay close to $4 billion of debt by late December.

Its main bankers include ANZ, Commonwealth and National Australia Bank, which are owed $500 million between them.

The aim of the financing lifeline is to give the new chief executive, Glenn Rufrano, more time to extract better offers for the group's assets and to unwind certain joint-venture arrangements concerning the ownership and management of dozens of regional shopping malls, most of them in the US.

He also has to untangle the complex links between the main parent company, Centro Properties Group, and its unlisted direct real estate funds and syndicates.

As part of the initial deal, Centro declared it planned to sell its interest in the two unlisted funds, Centro Australia Wholesale Fund, with $2.6 billion of funds under management, and Centro America Fund, which has $1.1 billion.

Centro opened a data room three weeks ago and it was understood that the average bid price for the funds is a yield of about 6 per cent, implying a high price, given the quality of some of the portfolio.

Fund managers said the high asking price would limit potential buyers to just the unlisted and direct property funds such as the Industry Superannuation Property Trust, Colonial First State, AMP Capital Investors and the Macquarie direct property stable.

The debt crisis led to the resignation of Centro's founder and chief executive, Andrew Scott, after a dramatic collapse in the company's share price and in investor confidence in his management.

Mr Scott was replaced four weeks ago by Mr Rufrano, a US property executive.



Tue, 18 March 2008
Empty shelves costing business: research
Empty shelves in Australian supermarkets are the result of staff shortages and are costing business and consumers money and causing inconvenience, new research shows.

One in four Australian supermarkets are experiencing major issues with shelves completely empty of staple food and grocery items, a study by Australian sales and marketing company The Bailey Group has found.

"The 'out of stock' situation is the biggest issue affecting the supermarket business today," The Bailey Group chief Stewart Bailey said in a statement.

"It's a worldwide issue that is costing in excess of $100 billion per year.

"Simply put, the customer who can't buy what they want will be forced to either go without or trial a competitor product. The worst part is, the product may be available in the supermarket; it's just out the back or high up in the capping above the shelves.

"With retailer margins being tighter than ever, staff simply cannot replenish supplies like they used to."

The findings are based on research by 256 supermarket auditors employed by The Bailey Group between February 26 and March 4.

Mr Bailey said the absence of goods on shelves is enough to make consumers shop at a different supermarket outlet and that the problem must be addressed.

"If their favourite brand is regularly out of stock with one retailer, they will simply switch to the retailer that has a plentiful supply," he said of shoppers.

"It may only be one item in a shopping trolley of 100, but if it is integral to that person's life, the supermarket will lose all profits and sales from these other 99 items as well."

Researchers recommend a greater focus on the part of retailers to ensure more effective stock replenishment processes and systems.

In addition, agents should be employed by manufacturers to visit supermarkets and ensure the shelves are stocked with their client's product.

"Unfortunately manufacturers cannot rely on retail staff to ensure the shelves are always full of their product," Mr Bailey said.

"Some retailers are better than others, but there are too many supermarkets in Australia where staff levels are being cut back, products are falling through the cracks and businesses are suffering as a result."



Sun, 30 March 2008
Australia PM urges openness on financial crisis
CANBERRA, March 27 (Reuters) - Australian Prime Minister Kevin Rudd promised not to retreat into a new era of protectionism on Thursday in response to the global financial crisis, and urged other governments to hold their nerve.

Rudd said governments feeling the impact of the financial crisis would be tempted to blame globalisation and respond by putting up new barriers and regulation to their domestic financial markets.

But he said governments should hold firm on policies that would promote ongoing economic stability.

"Global economic problems require global solutions," Rudd said in a speech to an economics conference.

"As financial markets become more global, and assets are traded more quickly between nations, so too must regulation and supervision become more global."

He said better international rules on transparency of risk exposures, valuations and leverage were needed to rebuild confidence after the crisis, sparked by the collapse in the subprime mortgage market in the United States.

Rudd said Australia's central bank would continue to monitor international liquidity needs and take part in any coordinated central bank action, if needed.

He said the Reserve Bank of Australia would also monitor and maintain appropriate support for domestic liquidity needs.

Rudd cautioned against any push for more domestic protection for financial markets.



Fri, 04 April 2008
Rents to rise by 50 per cent: report
There are more predictions of skyrocketing rents across Australia, with 50 per cent rises predicted by a property monitoring group.

The latest quarterly report on rents from Australian Property Monitors says median asking rents in the major cities have already risen at double-digit rates over the past 12 months.

It expects a further 50 per cent increase in most capitals over the next four years.

It says strong migration levels are outpacing residential construction, while renters are being discouraged from moving into home ownership by rising mortgage interest rates.

Sat, 03 May 2008
$A, rates, surpluses up for years
A RENEWED surge in commodity export prices is set to keep the economy bubbling along, interest rates high, the dollar strong and federal budget surpluses fat "for years to come", analysts say.

The Reserve Bank's commodity price index yesterday posted a 10.2 per cent increase in the month of April alone, resulting from jumps in contract prices for coking coal, iron ore and thermal coal.

And the index is almost certain to surge further as the RBA said that only about one-third of the latest "large increases" in commodity contract prices had been accounted for in April.

Commonwealth Bank chief currency strategist Richard Grace said the flow-on effects from the surge in commodity prices, including a tripling of coal prices at the last contract negotiations, would cement the economy's strength, pushing the dollar higher and delivering budget surpluses.

"I can't see the budget surplus disappearing for years to come," Mr Grace said yesterday. "Because the income is going to come in and that's going to mean increased company profits which means increased company tax, which goes to the government," he said.

"We've still got a labour shortage in this country so unemployment is not going to rise and plenty of people are also going to be paying income tax to the government."

The lag effect of the mining boom would also mean higher interest rates would be around for some time, despite the signs of a slowing economy.

"The government, with all that money, delivers income tax into the economy but what tends to happen with this virtuous circle is it puts upward pressure on inflation and then pressure on interest rates," Mr Grace said.

"Because this (price spike) will last for years, this is why interest rates are likely to remain high for years and hence why the Aussie is going to remain strong for years."

Mr Grace estimates that the stimulus from the commodity price surge was equivalent to about 2 per cent of GDP.

"And that's a massive income injection and this is the main reason why the government is running such large budget surpluses," Mr Grace said.

NAB Capital economist David de Garis said the commodity price index spike would significantly boost Australia's national income.

"The tripling in coking coal prices would alone mean that export receipts would jump from $15.5 billion up to $45 or $50 billion, so that's another $30 billion plus rise on coking coal receipts alone -- so that alone is 2.5-to-3 per cent of GDP," Mr de Garis said.

"And because of the greater exports out of Australia, that will mean a lot more corporate income and more wage rises and more government revenue."



Tue, 03 June 2008
Property crash not likely


Despite continuing gloom overseas, there's good news for owners here.

Rapid increases in interest rates have slammed Australian home owners with a mortgage to a point where they are now making the highest repayments in the developed world. Thankfully, one consolation is that generally house values are holding up.

I know there is a big increase in home repossessions and loan defaults, and property values are relatively stagnant, but compared with the rest of the world our real estate prices are staying pretty solid.

The question now is whether Australian residential property prices are overvalued and could we see the same sort of cracks which are happening overseas.

The news from overseas is just appalling. A recent US house price survey by the National Association of Realtors recorded an average 7.7 per cent drop for the year to March - the biggest fall since records started in 1982.

Would you believe states such as California and Florida are seeing average falls of up to 30 per cent over the past year as the credit crunch bites hard. At this stage 1-in-194 homes in the US have been repossessed and that ratio is climbing constantly. There are reports that some financiers are repossessing homes and then asking the owners to stay rent free to protect the property from vandals.

Now there are fears this sort of property crash could spread to Britain based on its current valuations. Average house prices in Britain are running at six times average earnings, which is way above the historic average of 3.7 times wages.

Australian residential property values are currently double Britain's historic high - 12 times earnings in Sydney and 10 times in Melbourne.

Australian mortgage repayments are 57 per cent of average incomes compared with 50 per cent in Britain where the historic average is just 30 per cent.

A recent survey in The Economist magazine says Australia has the most overvalued residential property in the world.

All these comparisons make for very nervous reading and you'd think would point to an impending crash the size of that in the US. That may very well be the case a few years down the track.

But for the moment there appears to be a couple of significant planks underpinning Australian property values.

Firstly, the high skilled and business immigration numbers combined with low construction levels is creating a shortage of supply accentuated by the banks tightening development financing.

Full employment also means that even though higher loan repayments are stretching family budgets, household incomes won't fall.

The other factor is the rental crisis. Strongly rising rents are usually a precursor to rising values as investors chase property to take advantage of the strong yields.

For property owners it looks like a crash in values isn't on the cards for at least a few years. For those looking to get on the property merry-go-round for the first time, property is not going to get any more affordable either.

But it seems there is hope of picking up an affordable bargain if you know where to look.

Last week on my Sunrise program we interviewed Terry Ryder who is a former property writer and now runs a business called Hot Spotting, which analyses property issues.

Terry Ryder put together a list of the top 12 places to buy a house for under $200,000. Yep, $200,000 and many on the list are well below that level down to $90,000 in one area.

Now before you chortle and say they must be in the middle of nowhere, Ryder's 12 locations all have good community facilities and reasonably good employment prospects for people moving there, because they're booming.

There are only two locations on the list close to a capital city - Melton near Melbourne and Elizabeth on the outskirts of Adelaide.

Ryder says most areas close to Sydney and Brisbane were priced out of this list.

His personal pick is Parkes in regional NSW because of its location as a transport hub.

In Queensland, Charters Towers is the best pick while in NSW there's Broken Hill, Glen Innes and Inverell.

In Victoria, the best buys are Gippsland, Melton and Mildura.

Further south in Tassie, George Town and the Rosebery-Zeehan area are on the list.

In South Australia, Elizabeth rounds out the top 12.

Source: The Sun-Herald



Sun, 15 June 2008
Surprise slump for jobs
UPDATE Australia's economy shed jobs in May, a surprising slump that snapped 18 months of jobs growth, relieving pressure on the Reserve Bank to raise interest rates further to cool demand.

The country's labour force shrank by 19,700 last month, seasonally adjusted, compared with the 13,500 new jobs economists expected to be created. Of those jobs lost, 10,400 were full-time and the remainder part-time, the Australian Bureau of Statistics reported.

"We weren't expecting a contraction," said Helen Kevans, an economist with JP Morgan, who tipped the economy added 5000 jobs last month, among the most pessimistic of 22 analysts polled by Bloomberg. "Business confidence has been very weak, so it's not surprsing there has been a flow-on effect to employment."

The unemployment rate was 4.3%, seasonally adjusted, matching a revised 4.3% rate at the end of April. The participation rate decreased to 65.2% from 65.5%, or less was expected by a Bloomberg survey. The total labour force contracted to 10,691,200 in May.

The jobless rate remains near a three-decade low, kept down in part by mining companies expanding operations to meet rising demand from Asia. The monthly slump in jobs, though, was the most in more than five years, and compared with a revised gain of 37,500 jobs in April.

Rate risks recede, dollar dives

The jobs data "will take some pressure off wage growth, which the RBA has been concerned about for some time," Ms Kevans said, adding she expects the RBA to leave official rates on hold at 7.25%.

Economists said the impact of job losses on both full and part-time workers underscored the pace of the RBA-orchestrated slowdown.

"Normally you'd expect at the start of a downturn you would see it only in part-time," said Joshua Williamson, senior strategist at TD Securities.

"This suggests the slowing economy and tighter financial conditions are actually moving faster than expected."

Mr Williamson said the RBA may hold rates steady while expectations of a rate rise this year will ease.

The Australian dollar dived on the jobs data, falling about one US cent to trade recently as low as 93.74 US cents, as investors unwound bets that official rates will rise.

Credit Suisse's gauge of future interest rates moves halved, cutting its prediction of two rate rises in one year's time prior to today's jobs data to just one. The index also showed that expecations of a rate rise at the RBA's next board meeting in July halved from 10% to 5%.

NSW sags, Victoria gains

By state, the biggest loss of jobs was registered in New South Wales, which shed a seasonally adjusted 17,300 jobs last month, raising the unemployment rate to 4.7% from 4.5%.

In Victoria, the economy gained 5600 jobs, dragging the unemployment rate down to 4.3% from 4.6%.

Queensland, which has been experiencing a minerals boom similar in scale to Western Australia's, added 7200 jobs last month, leaving its unemployment rate at 3.8%. The Australian Capital Territory has the lowest jobless rate in the country at 2.7%.

Perhaps the biggest surprise was the loss of 400 jobs in Western Australia, the state with the fastest growing economy. The job losses raised the state's unemployment rate to 3.7% from 3.4%.

Inflation worries

While a shrinking labour force won't be welcomed by those out of work, signs that growth in the economy is easing will reduce the risk of further interest rate increases. Reserve Bank governor Glenn Stevens said last week that the central bank expects slowing demand to drag the inflation rate lower from its current 16-year highs, and warned that rates might have to go higher if price rises weren't curtailed.

A key concern is that a tight labour market will translate into bigger wage gains, fuelling further price increases.

Earlier today, a survey of consumers' inflation expectations registered a record high this month, as higher food and fuel prices flowed into the economy.

The median inflation expectation rose by 0.7 percentage points to 5.9% in June, the highest reading since the Melbourne Institute (MI) survey began in June 1993, AAP reported.



Wed, 09 July 2008
Minimum wage increase to hit SMEs hardest
The Fair Pay Commission's decision to increase the federal minimum wage by $21.66 a week will hurt small businesses already feeling the impact of a worsening economy, says the NSW Business Chamber.

The chamber's public affairs manager Paul Ritchie said small businesses were at the front end of dealing with economic changes, as that's where most people used their discretionary dollars.

"It's not just wage and salary earners who are experiencing a lot of financial pressure, small businesses are as well," Mr Ritchie said.

"I guess our concern is...that all we might be playing in the years ahead is a game of catch-up, where we potentially go back to the days of having a wage price spiral."

However Council of Small Business of Australia chief executive Tony Steven said the general feeling was that the wage rise was a "reasonable amount".

"But it is simply a catch-up situation and small business employers will simply have to pass the extra costs on to the consumer," he said.

"The trick here is that any wage rise like this which is not attributable to productivity increases simply perpetuates the problem of inflation, and you can be sure that the Reserve Bank of Australia has noted that there is still a problem."

Australian Retailers Association executive director Richard Evans said the decision would have a significant impact on about 149,000 single store operators.

"They'll either shed staff, pass it on to the consumer or indeed close," he said.

"Retail is the barometer of the economy and what's happening now in retail is probably going to happen to the rest of the economy in about six months time."

The increase will however provide some relief for 1.3 million lower-paid workers struggling under higher petrol and food prices.

The standard federal minimum wage moved up to $14.31 an hour from $13.74 last year, bringing the weekly rate to $543.78 from $522.12.

The 4.14% increase is less than the 4.3% sought by the Australian Council of Trade Unions, but well above the more modest increase sought by the business community fearful of a wage price-setting spiral being set off by rising wages.

In addition to minimum wage earners, the Commission's decision affects those on a pay scale based on the minimum wage.

But Australian Chamber of Commerce and Industry chief executive Peter Anderson said the increase was "economically risky" and would likely lead to price increases.

"The AFPC (pay commission) has underplayed the impact of recent economic developments, including interest rate increases and fuel price volatility, on the businesses which must apply this wage increase," he said.

AFPC chairman Ian Harper, announcing the pay rise in Melbourne today, said the wage rise, when combined with relevant tax and social security changes, would provide low income households with real increases in disposable income.

"It is a decision that takes into account the state of the national economy and the circumstances of low paid Australians," he said.

Professor Harper said the commission was aware of the financial pressures impacting on low income households.

"Movements in consumer prices, in particular, have put many low income households under considerable financial stress," he said.

He added the commission had sought to balance a range of key trends and developments in the economy, including inflation, employment conditions and factors affecting the safety net for low paid workers.

The commission believed the pay rise would only have a minor impact on wage and inflation outcomes in the economy, Professor Harper said.

The Australian Chamber of Commerce and Industry had urged the Fair Pay Commission to give an increase of $10.25 taking into account the tax increase that took effect in July 1.

The ACCI said the commission should bear in mind the higher inflation as well as the effect a pay rise would have on small businesses before making a decision.

Unions, pointing to the surging cost of rents, petrol and food their members face, had sought a $26 per week rise.

But the ACTU today praised the decision, using it as an opportunity to press for a further dismantling of industrial relations changes made during John Howard's government.

"Today's decision is a small step towards repairing the damage caused to the wages and conditions of the most vulnerable members of the workforce under WorkChoices,'' secretary Jeff Lawrence said in a statement.

The wage increase will take effect this October.



Sat, 02 August 2008
Debt mutes the horn of plenty


THE combination of rising interest rates and the global credit crunch has pushed the economy to the brink of recession. Consumers have reined in their spending and borrowing, while businesses are finding it hard to get the finance they need to proceed with investment projects. Consumer and business confidence has been falling for months along with the partial indicators of demand, such as retail sales and housing finance approvals.

The Reserve Bank has been cautiously pointing to the signs of slowing demand since March. What has changed views over the past week is the speed with which conditions appear to be deteriorating.

The National Australia Bank's business survey had profits, sales and employment at record levels in January. The survey it released last week showed businesses expect a recession over the next 12 months.

Business borrowing was booming at an annual growth rate of 25 per cent between July and January. Over the past three months, it has been rising at an annual rate of only 3.6per cent.

"The speed with which the economy has turned around is sharper than you've seen in the soft landings of the mid-1990s and early this decade. It is more akin to the end of the '80s, heading into the last recession," says ABN AMRO chief economist Kieran Davies.

He attributes the speed of the downturn to the "tightening in financial conditions". This includes not only the official and unofficial increases in rates, but also the toughening of lending standards by the banks.

This is hitting households as well as businesses. Home buyers can still get a mortgage, but not if they've got only a 10 per cent deposit, as was the case until early this year. In the second half of last year, the banks were welcoming new big business customers with open arms, as companies found they could no longer tap world financial markets with their own bond or commercial paper issues. But then the banks got scared.

They have to set aside twice as much capital for business loans as for mortgages. The banks are trying to conserve as much of their capital as they can because of a fear that over the next year or two they may face large write-offs. "We keep hearing anecdotes of good businesses with good projects that are finding it difficult to get finance," Davies says.

Tumbling share markets have made it hard for companies to access capital there, while they have also contributed to the loss of consumer confidence.

ANZ Bank's chief economist Saul Eslake notes that the Reserve Bank was planning for a sharp fall in consumer demand. In the second half of last year it was growing at a rate of close to 6 per cent: "Reading between the lines of the Reserve Bank's forecasts, it expected that to slow to something well under 2 per cent in 2008. That is a very abrupt slowdown in domestic spending."

Eslake says there are still some positive factors that could change the outlook in the second half of this year.

The tax cuts, which were more generous than any handed out by the previous government, are just starting to filter through into household hands. The petrol price, which contributed to the collapse of retail sales in June, is falling. And the benefits of the new contracts for iron ore and coal are just beginning to flow through.

Eslake puts the chance of a recession at no more than 25 per cent, saying that although consumers are pulling their heads in, there is enough business investment and exports in the pipeline to keep growth positive.

Consumers may feel as if there is a recession, but the long-awaited lift in export volumes could mean that Australia slips past the technical definition of two quarters of negative growth.

"The risk of a recession is small but it is rising and is probably closer than at any time since we were last in one," he says.

Even the US, which has been the epicentre of the world financial crisis, has so far kept economic growth in positive territory. But as the International Monetary Fund has stressed, the crisis still has a long way to run, with no sign yet that the downturn in housing in the US has hit bottom.

It is housing that is the soft underbelly for Australia's economy. For 20 years, Australian households have been rapidly raising more debt and using the lion's share of it to buy housing. Debt has risen at an average annual rate of about 15 per cent, more than three times as fast as income.

In 1988, the average household had debts totalling 32 per cent of its income. Now the average is 160 per cent.

It is the elevated level of household debt that has made consumers so sensitive to moves in interest rates, and which has the potential to pitch the economy into a much more difficult downturn.

The global financial turmoil has been described as a process of deleveraging. Sectors of the economy that had built up excessive debt are being forced to wind it back.

"Deleveraging can only occur in two ways," Eslake says. "People can repay debt, perhaps by selling assets and using the proceeds to repay debt or by saving more. Or else they can default, and that is a process with serious consequences."

The housing market has turned. Demand is falling while supply is increasing. The number of sales is down and prices are starting to weaken. Michael McNamara of Australian Property Monitors says the figures on the number of sales come through slowly. As of March, they were down by 25 per cent.

There are more unsold properties on the market, with 225,000 properties listed for sale, up from 200,000 a year ago. The number of housing loans for new purchases is down by 7.1per cent.

Morgan Stanley chief economist Gerard Minack believes prices will come down 20 per cent to 30 per cent. He does not accept the argument that housing is in short supply or that high rates of migration will support the market, saying that if houses are not affordable, they will not be bought.

"We are in the process of bringing the curtain down on what has been a super cycle for the Western world's financial institutions, which was built on the willingness of consumers to increase their leverage at fantastic prices," Minack says.

Financial deregulation and an extended period of low interest rates added fuel to the fire. "The escalation in leverage over the past 20years is completely off the scale. It is bigger than the 1890s property boom and bigger than the 1920s. It is bigger than anything we've ever seen, and I think we've reached the limit of how far these trends can go. The unravelling will be extremely painful."

Minack says there is a huge momentum in the growth of borrowing: even with the slowdown, households have $95 billion more debt now than they did a year ago.

There is a danger that what were virtuous cycles during the boom could become vicious in the bust.

Banks that were encouraged to lend by rising asset prices become fearful when prices fall and tighten their lending standards, frustrating the efforts of the central bank and government to stimulate the economy.

Attempts by households to reduce debts can result in a fall in housing prices, putting consumers under greater pressure to reduce debt. The growth in household debt has a counterpart in rising foreign debt, which stands at roughly $700 billion.

Bank deposits have not been enough to fund the rise in household borrowing, so the banks have turned to world markets, which have been more than willing to lend. They are still willing, albeit at a much higher interest rate than was being charged a year ago.

"The funding costs can only get worse if we see interest rates come down here and the currency starts to fall, so that the attractiveness of lending to Australia diminishes," Minack says. The economy may hover along at a reduced but still positive pace of growth for several more quarters.

The darker concerns are for 2009, when the pain of falling share prices is more likely to be compounded by falling house prices, while business will be cutting staff.

In its review of global financial stability released last week, the IMF's head of capital markets Jaime Caruana said the US sub-prime crisis was no longer the greatest threat to the world economy.

Rather, it was that a weakening world economy would reduce the banks' capacity to lend, which would further undermine growth.

Reserve Bank governor Glenn Stevens and Treasurer Wayne Swan have stressed the strength of Australia's banks as our bulwark against the global financial turmoil. However, they are not masters of their funding costs and their effort to correct for the years of plenty may yet pull the economy down.



Sun, 14 September 2008
Rental yields to jump another 10% in 2009
The stage is set for a recovery in the Australia's housing market fuelled by extremely tight rental market and chronic undersupply according to an economist.

Savanth Sebastian, economist with CommSec said any downward pressure on interest rates is likely to a surge in people looking to buy their first home. "The calls for rate cuts as early as September are being voiced, and potential investors and homebuyers would not want to be caught napping," he said.

"In recent times a perfect storm of factors has ensured that the housing sector remains the least favoured asset class despite the high rental yields on offer. The home loan market has experienced its weakest start to a year in 19 years. The rate hikes have clearly done their part in spooking potential home buyers and investors from signing on the dotted line. Clearly rate hikes, rising living costs and high oil price have all adding to the stress on the household budget. The Reserve Bank has put rate cuts on the agenda - a far cry from the possibility of further rate hikes that homebuyers were faced with a couple of months ago."

This optimistic outlook comes despite the housing finance data showing the number of total housing finance commitments falling by 24.8% over the past year – the biggest fall in 13 years.

"If Australia's population wasn't rising sharply, the fall in home lending would point to lower home prices. But the rental market remains extremely tight, with rental yields expected to jump a further 10% over the coming year," said Sebastian



Fri, 14 November 2008
THOUSANDS of jobs are set to go after St George shareholders approved the $17 billion Westpac takeover.
The vote was 95 per cent in support of the merger despite resistance from some shareholders and St George staff.

The merger will create Australia's largest bank, but 2000 jobs will be slashed despite promises to keep the St George brand and branch network for at least three years.

The job cuts will occur mostly in the technology divisions and back-office operations, where there will be duplication as a result of the merger, reports The Australian.

The Finance Sector Union warned the job losses could be higher, with up to 5000 positions under threat.

Suncorp revealed yesterday it would cut 350 staff, on top of the 200 it has already lost by merging its retail and banking businesses.

Shares in both banks were punished -- Westpac off 11 per cent and St George 9.5 per cent -- as weakness emerged in the broader financial sector.

St George chairman John Curtis, who will become the deputy chair of Westpac , said the financial landscape had changed.

"This is one of the most uncertain economic times we have seen in the past 30 years, so putting together two good banks and making one big bank is extremely important,'' he said.

"In the past six months the financial plates of the world have moved,'' Mr Curtis said.

Mr Curtis said there could be further consolidation in the banking sector, particularly at the junior end of the market, which was struggling with high wholesale costs.

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