Category: Financial Planning

| November Property Market Update
By Matthew Brown

Spring is typically the strongest season for the Australian Property Market and 2015 has been a year of the investor activity but since July it has become increasingly more difficult and expensive for investors to access funding.

Knowing this it should be a surprise that auction clearance rates in every capital city have dropped from again during November. What is more concerning is the continual weekly decline throughout the month to finish on all 2015 lows.

The average auction clearance rate for Australia in November was 48.69% with only two Victoria (67.25%) and Australian Capital Territory (66.75%) above the 60 percent level. This could potentially mean great buying opportunities early in 2016 particularly if the RBA maintain the current cash rate of 2% or reduces.

Rental Yields are still strong with vacancy rates remaining low. Darwin still the standout for both housing and apartment rental yields over 5%.

| Start 2016 on track to success with Goals – some quotes to get you thinking…
By Matthew Brown

As we enter the festive season of 2015 it’s a time to reflect on our achievements for the year. Did you achieve your most recent 90 day and 12 month goals? Is your life progressing towards the Success that you desire?

Below are some my favourite quotes that I recommend you read as review the year that 2015 was and plan for what 2016 will be:

  • “Everything you can imagine is real.” — Pablo Picasso
  • “Change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek.” — Barack Obama
  • “It is never too late to be what you might have been.” — George Eliot
  • “If you love what you do and are willing to do what it takes, it’s within your reach. And it will be worth every minute you spend alone at night, thinking and thinking about what it is you want to design or build.” — Steve Wozniak
  • “Try to be a rainbow in someone’s cloud.” — Maya Angelou
  • “In the midst of movement and chaos, keep stillness inside of you.” — Deepak Chopra
  • “We should remember that just as a positive outlook on life can promote good health, so can everyday acts of kindness.” — Hillary Clinton
  • “As we look ahead into the next century, leaders will be those who empower others.” — Bill Gates
  • “There are no mistakes, only opportunities.” — Tina Fey
  • “We can’t help everyone, but everyone can help someone.” — Ronald Reagan
  • “Be yourself. Everyone else is already taken.” — Oscar Wilde
  • “In the middle of every difficulty lies opportunity.” — Albert Einstein
  • “Education is the most powerful weapon which you can use to change the world.” — Nelson Mandela
  • “Your time is limited, so don’t waste it living someone else’s life.” — Steve Jobs
  • “But you have to do what you dream of doing even while you’re afraid.” — Arianna Huffington
  • “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” — Maya Angelou
  • “If you can do what you do best and be happy, you’re further along in life than most people.” — Leonardo DiCaprio
  • “Success isn’t about how much money you make. It’s about the difference you make in people’s lives.” — Michelle Obama
  • “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” — Warren Buffett
  • “Life isn’t about finding yourself. Life is about creating yourself.” — George Bernard Shaw
  • “The best way of learning about anything is by doing.” — Richard Branson
  • “Efforts and courage are not enough without purpose and direction.” — John F. Kennedy
  • “Don’t let the fear of striking out hold you back.” — Babe Ruth
| Ready To Increase Profits by up to 200% in 90 Days
By Matthew Brown

All successful people have a team of advisor’s to help them get to the top and stay at the top. Last week I read a  Fortune  article outlining the best advice the Top 40 Under 40 – Most influential Young People in Business List have received from their advisory team. It shouldn’t be any different for you. Who is in your “A Team” of advisor’s and have they already created the success you are planning to achieve?

Remember the lesson from the Richest Man in Babylon – “Advice is the one thing that is freely given away, but watch that you only take what is worth having.”
The article is a great quick read and only take about five minutes of your time. It outlines the best counsel from a broad group of people. The advisors include investors, a teacher, a college professor and good old Mum & Dad.

My two favourite quotes are:
“You don’t fail until you stop trying” – Charles Falzone (Father)
“Don’t take life too seriously you’ll never get out alive” – Unknown<

Our Profit First Casflow Methodology is revolutionising SMEs profitability in their business.
We are mentoring business’ to increase their profit by 100-200% within 90 days.

Want to know more?

Here’s your next step – click here to contact us about booking in a “No-Obligation” Profit First Assessment and let’s discover the hidden profits in your business… [Valued at $1495.00 – yours FREE]

| How much can you afford to borrow?
By Matthew Brown

Section Buying your first home

1.3: How much can you afford to borrow?

Every new home buyer’s financial circumstances will be different and how much you can borrow will depend on your income, expenses, assets, debts and credit history. Lenders will also take into account how many dependents you have when weighing up your application for a home loan.

Income

Your income helps a lender determine how much you can borrow and your capacity to make the mortgage repayments.

Determining how much you can afford is pretty easy these days thanks to the glut of online calculators available. The Federal Government’s Money Smart website offers one of the best home loan calculators, which is available here.

Expenses

To ensure you can comfortably afford the home you want, a lender will consider all your financial commitments, including monthly bills, living expenses such as medical costs, school fees, food, transport, as well as debts like credit cards or personal loans.

Your financial commitments will impact your borrowing capacity. Therefore paying off as much of those pesky credit cards and personal loans as possible will help when the lender reviews your home loan application. .

Assets

For most first time buyers, your only asset will be your deposit. However a lender will also take into account other assets such as shares, a term deposits, an inheritance and even gifts from family members.

Ultimately the aim is to save as much as possible – as a larger deposit will mean a smaller mortgage and lower interest repayments. It could also help you avoid paying lenders mortgage insurance (LMI). This is a charged imposed by the lender if you don’t have a deposit that is equivalent to at least 20% of the value of the property.

Credit history

Having a decent deposit and getting your debts under control debt will improve your credit history, while also demonstrating your ability to manage the mortgage repayments. Moreover a sound credit history will demonstrate that you’re a good financial bet and help your loan application.

To check your credit history, you need a copy of your credit report. This will show whether you have any black marks on your history such as some unpaid bills or other loan applications. You can get a free copy of your credit report at www.yourcreditfile.com. Alternatively, we can organise a credit report for you.

For more tips on improving your credit history, contact Your Corner on 1300 688 988

| The value of budgeting
By Matthew Brown

Section Buying your first home

1.2: The value of budgeting

Buying a first home can seem like an intimidating goal, particularly with housing values around Australia near enough to historic highs.

Yet it’s not an impossible challenge if you take the time to get your finances in shape, and this is where a budget will come in very handy.

There are plenty of good online budget planners such as the Federal Government’s Money Smart website that can give you a flying start. You simply fill in details such as your assets, liabilities, income and expenses and the budget planner will help you determine whether the required mortgage repayments are within your budget and highlight expenses you may need or wish to cut.

Once you have a budget in place, and have identified where and how much you’re spending, you can start to reorganise your expenses, with a ‘spending plan’. Typically a spending plan involves using 50% of your salary or income for ‘fixed costs, 30% for ‘discretionary spending’ and 20% for savings.

No matter whether you’re earning $50,000 or $100,000, aim to spend no more than 50% of your income on ‘fixed costs’ such as rents, transport, groceries, healthcare and debts such as credit cards or personal loans. It will be a great result if you can spend less than 50%. This will enable you to squirrel away more savings for your deposit.

Then consider committing no more than 30% of your salary or wage to ‘discretionary spending’ on holidays, big screen televisions and sports cars. In other words, if you’re earning $70,000 a year and want to take a $25,000 overseas family holiday, then according to the 50/30/20 rule, it won’t be possible. What’s more, any excessive discretionary spending will delay your plans for a first home.

Making a commitment to spending 50% of your income on fixed costs and no more than 30% on discretionary expenses enables you to commit at least 20% of your income to creating some additional savings.

Fundamentally, the 50/30/20 is a proven formula for developing sound, long-term wealth creation habits and generating consistent cash flow that can help you achieve your financial goals such as first home faster.

For more tips on saving for a deposit, contact Your Corner on 1300 688 988

| What you need to know about Passive Income
By Matthew Brown

For the jaded 9-5 employee, the idea of earning a “passive income” has become a silver lining.  The prospect of generating revenue streams while you’re sleeping, or sipping mojitos in some tropical beach was the stuff dreams are made of, for someone who would like to give up working for income.  But what does passive income really entail?  This article will give you a lowdown on passive income.

What is passive income? 

Investopedia defines passive income as earnings derived from a rental property, limited partnership or other enterprise in which he or she is not actively involved in.  So basically, it’s anything you earn from ventures that you are not hands-on with for most part.  It could be in a form of shares from a business you have invested in, but are not working on directly, or royalties you earn from the books you have published, or patents you have created.

What are the benefits of earning passive income?

When done right, you can reap the following benefits:

Extra revenue stream when combined with your day job.  Wouldn’t it be nice to earn a bit of extra cash without having to toil for another 4-5 hour for a part-time job?  Earning passive income lets you do just that:  earn extra without having to get a second job to make ends meet.

Buffers.  Think of it this way:  if you get laid off from your work, or if you don’t have gigs booked for a month, you probably won’t have much to get by for the next four weeks.  Earning passive income every month lets you ride through rough times until you can get another job, or get a gig.

Protection against inflation.  The great thing about income from rental properties is that you have full control of the rental fees.  This means you can increase every year to keep up with the inflation rates.

Improve your credit ratings.  You’re more likely to improve your credit ratings when you rent out or lease properties, for as long as it’s officially registered and backed by bank statements.

You own your time.  Being your own boss is probably the most obvious perk of earning passive income.  For starters, you’re not answering to anyone but yourself.  You’re in control of your time!  Think about it:  Can having a 9-5 job let you to spend more time with your family, or go yachting to the Bahamas?  We can bet our bottom dollar you can’t.  But with passive income, you can do all these and more, and still see the dollars rolling in.

Sounds great!  Now where do I start? 

There are many ways you can generate a steady stream of passive income.  But these are the most common:

Become a landlord.  Sure, you can earn huge capital gains from buying and selling properties.  But wouldn’t it be better if your properties keep working for you, thus guaranteeing you positive cash flow regularly?  Leasing out your house or apartment can guarantee you a steady revenue stream, provided that you have the right skills, the patience to deal with the most difficult tenants, and the 24-7 responsibility of maintaining the property you are leasing or renting out.

Earn dividends from income portfolios.  Income portfolios are usually made up of different investments that will result to a predictable payout, according to moneycrashers.com. Investments can be in a form of bonds, dividend stocks that payout portions of a company’s profits, annuities, or microloans.  While the returns are lucrative, income portfolios also come with risks, and it is important that you are familiar with these types of investments before you dive in.       

Earning from interests from bank investments.  Earning interests from bank investments entail lower risks, compared to earning dividends from stocks or investment portfolios.  But depending on the type of savings account you applied for in a bank, interest rates may be lower.  Case in point:  some Australian banks may only offer more than 2% interest on savings accounts.  But you can always consider high-yield money market savings accounts, if you want to yield higher interest rates compared to regular savings accounts.

Corporate and government bonds.  When you’re investing on bonds (whether corporate or government), you are basically lending money to a government or a private institution at an agreed interest rate for a certain period of time.  So what you’ll earn are:  (1) the face value, which you’ll be getting back once the bonds mature, and; (2) the interests you earn each year.  But just like any other investments, bonds can range from very safe, to very risky (though less volatile compared to shares).  Hence, it is important that you know where you’re investing in.      

Earn online through affiliate marketing.  Affiliate marketing is basically the practice of rewarding one or more affiliates for each visitor or customer they have brought through their affiliate marketing efforts.  Simply put, it’s earning revenue for each visitor who clicks on the ads posted on your website or blogs.  To earn from affiliate marketing, you must first:  Build a website with rich, relevant and helpful content (it could a blog, or a business website where you sell your own products, and advertise other products as well), and sign up for an affiliate program (such as those offered by Amazon.com or Google.com) and choose which products or services you can feature on your website.  The sellers will provide you a unique affiliate code you can use to refer traffic to the target site.  If you love to write, or showcase your knack for graphic designs on your website, you can earn on the side by signing up for an affiliate program, optimizing your website, and keeping it updated with fresh and relevant content.

Now, the caveat

Do take note that “not actively involved in” does not necessarily mean not getting your hands dirty from time to time.  A website that’s not updated and optimized according to Google’s most recent algorithms won’t guarantee you revenue, just as a rental property that has fallen into disrepair won’t invite tenants.

As Patt Flynn of Smart Passive Income puts it, “There’s no such thing as a 100% passive income”.  Any form of revenue streams will always involve time, passion and effort to put up and maintain, including passive income.

| The science of snooze: Four more reasons to enjoy a restful sleep at night
By Matthew Brown

Getting a good night’s sleep does more than guarantee a cheery mood in the morning.  Read on and know why you shouldn’t skip bed time again.

These days, we’re finding more and more reason to delay bed time, whether it’s checking emails or social media accounts, or catching up on TV shows we’ve missed.  But did you know that you’re doing more harm than good when you’re skimping on quality sleep?

Here are four more reasons to enjoy a restful sleep at night:

  1. Our cognitive abilities depend on it. Think about how your computer’s performance slows down, the longer it stays powered on.  Our brain functions in much the same way when we go through a number of days with little or no sleep.  Studies show that our brains need to clear out all that junk accumulated during the day to keep it functioning at its best.  A. Thomas Perkins, a sleep expert and director of the Sleep Medicine Program at Raleigh Neurology in Raleigh North Carolina calls it the “glymphatic system”.  This system performs a routine flushing, by going through the spaces between cells and neurons and purging out the metabolic waste of the day, and this happens every night, while you’re sleeping. And when depriving yourself of sleep, you’re hindering your brain from doing this nightly flushing, thus essentially, your brain is trying to function with all that amassed junk laying around.  As a result, your ability to reason, remember, focus, and make good judgement calls are all impaired, and that’s bad news for your productivity.  The effects could even be more deadly when you’re driving or operating heavy machinery.
  2. Lack of sleep can affect work and personal relationships. So maybe getting a good night’s sleep won’t always guarantee a perky mood in the morning.  But it surely does keep you from waking up on the wrong side of the bed.  Jodi A. Mindell PhD., a professor of psychology in St. Joseph’s University in Philadelphia and author of Sleep Deprived No More says that not getting enough sleep can affect your emotional regulation.  “When you’re overtired, you’re more likely to snap at your boss, or burst into tears, or start laughing uncontrollably.”  It could also spill out to your personal life and put a strain on your personal relationships.
  3. Complete sleep = healthier you. Recent studies have found a link between sleep deprivation and serious health problems, such as heart diseases, diabetes, and obesity.  In most cases, according to an article in webmd.com, the health risks become more pronounced after a number of years. But a study has simulated the effects of disturbed sleep patterns of shift patterns on 10 young healthy adults.  After four days, three out of four already have blood glucose levels that qualify as pre-diabetic. Also, getting enough sleep can boost your immunity.  One preliminary study showed that people who got seven hours or less sleep were almost three times likely to get sick than those who got eight full hours of sleep.  But while that is still subject to more research and studies, it won’t hurt to get a full night’s sleep.  Your health and work success depends on it.
  4. Enough sleep keeps the pounds off for good.  Adequate sleep, too, can help you with your weight loss goals for two reasons:
    • Not having the time or energy to jog or pick up that dumbbell is the most obvious reason.
    • When you’re sleep deprived, you tend to have unhealthy food choices.  That’s because lack of sleep causes a drop in leptin levels, the hormones that play a key role in controlling your appetite.  As a result, you’ll feel hungrier and more likely to crave high-fat and high-calorie foods.

How much sleep is enough sleep?

While lack of sleep can be detrimental to your career and health, too much sleep, too, can have adverse effects as well.  Oversleeping has been linked to various health problems, such as depression, obesity, diabetes, and heart diseases.

So how much sleep is enough?  It will depend on certain factors, such as age.  But the consensus pegs 7-9 hours as the magic number.  Sleep beyond 9 hours is already considered excessive and could lead to detrimental effects on health and well-being.  Plus, your boss won’t probably buy oversleeping as a reason for coming to work late.

Quality of sleep matters, too

While the number of hours you sleep is important, the quality of your sleep matters just as much.  Even when you sleep for a full eight hours, you’ll still wake up feeling un-rested and drowsy when you haven’t gone through the most important sleep stages completely, and this can still have some effect on your productivity and health.

When we sleep, our brain doesn’t automatically shut off just like we used to think before.  We go through three stages of deep non-REM sleep (each stage deeper than the last), and an REM (Rapid Eye Movement) sleep, when dreaming occurs.  The third stage of the non-REM sleep is the most beneficial part of sleeping, as it is the time when our bodies repair themselves and build up energy for the next day.

Depending on the number of hours we sleep, we go through a number of sleep cycles that alternate between stages.  Each stage lasts up to 90 minutes, and we need at least 4-6 uninterrupted sleep cycles to get the benefits of restful sleep at night.

So how do you get a good sleep at night?  Here are some tips:

  • Follow a sleep schedule, where you go to sleep and wake up at the same time every day, even on weekends.
  • Fight mid-day drowsiness by taking a power nap in the early afternoon to pay off some of your sleep debt, and regain energy without affecting your sleep-wake cycle.
  • Get as much sunlight as you can.  Exposure to sunlight helps suppress the production of melatonin (the hormones responsible for regulating your sleep-wake cycle) during daytime, thus making you feel less sleepy while you work.
  • At night, keep your room dark to boost melatonin production.
  • Turn off the television or your computer, and as much as possible, avoid using your mobile devices when you’re in bed.  Not only will the light from these electronic devices slow down melatonin production, but it will also stimulate your mind rather than relaxing it.
  • Keep your room at a comfortably cool to aid in the drop in your temperature, which signals your body to wind down and prepare for sleep.
  • Keep dinners light for a restful sleep at night.  Avoid fatty foods, as these take longer to digest and thus keep you up longer.
  • Stay away from alcohol before bed.  While a nightcap may help you fall asleep at night, it may not necessarily help you get quality sleep, and you might find yourself waking up later at night.
  • Don’t drink coffee 6 hours before you go to bed.
| Australia’s Property Market Update
By Matthew Brown

Reports have shown that the Australian property market has shown a steady increase of around 3% per annum since the 1970s. However, in the 1990s, the prices have risen to around 6% per annum. A decade later, in the late 2000s, housing prices in Australia, parallel to average incomes, have become among the highest in the world. This prompted speculations that the country was experiencing a real estate bubble, similar to other countries. In Sydney, it was reported last July 2015, that the Property Market has risen in the first quarter of the same year by 3.1%.  

Based on figures from the Australian Bureau of Statistics (ABS), house prices in Australia rose by 6.8% across eight major cities in 2014 after a rise of 9.84% during 2013. Sydney saw the biggest increase in house prices. It went up by 12.2% in 2014. This is then followed by Brisbane (5.3%), Melbourne (4.5%), and Adelaide (2.5%). House prices also rose in Hobart (2.2%), Canberra (1.7%),Perth (1.2%), and Darwin (0.8%). The numbers show that there is an increasing and a constant demand in Australia’s property market.  

Real Estate in New South Wales  

New South Wales (NSW), especially Sydney, has the most expensive housing in the country. The median house price is at AU$ 760,000 or about US$ 591,962. According to ABS, the figures are about 33% above the national median house price of AU$ 571,500 or US$448,313.  

The difference of prices has led some critics to believe that the Australian property market is overvalued.

Though the figures have shown an increase in value, the demand in the property market is still rising. With prices adjusted, purchases of established dwellings increased 4.0% to 44,912 units in 2014. According to ABS, finance commitments for owner-occupied housing rose by 4.3% to 53,920, while their total value jumped 19.4%, to AU$ 18 billion or US$ 14 billion.  

The Australian economy is estimated to have grown by a modest 2.7% in 2014, up from 2.5% in 2013. This is the reason why the increase in prices are somewhat surprising. But it has been suggested that there might be two factors that may partially explain it. The Reserve Bank of Australia (RBA) has kept its crash rate at a record low of 2.0%. This is done after cutting it by 25 basis points in February 2015. The second factor is the increased purchases of residential real estate by foreign nationals, especially the Chinese. It has been reported that they continue to find the Australian property very attractive. Australia’s Foreign Investment Review Board (FIRB) gave permission for 11,668 residential property purchases by foreigners in 2012-13. According to FIRB, this was valued at AU$ 17 billion (US$ 15.21 billion), an increase of 19% on the previous financial year.

It has been reported that there had been ongoing difference in conditions in established housing markets across the country, as well as between houses and apartments. Housing prices had continued to rise rapidly in Sydney and to a lesser extent extent in Melbourne. In other places, there had been little change in housing prices over the past six months. The prices of apartments had been growing less rapidly than those of houses. This is consistent with the relatively strong growth in the supply of higher-density housing in many capital cities.

Overall, the growth in housing credit had been stable over recent months at around 7% on an annualised basis. On the other hand, growth in lending to investors had been steady at a bit above 10%. The household debt-to-income ratio, which is calculated by netting funds held in mortgage offset accounts from total household debt to the financial sector, had increased over the year to March but has not exceeded previous peaks.  

Australia’s Clearance Rates

The Australian property market looks set to continue to boom. This is because of the continuous rise in the country’s auction clearance rates. Domain Group reported an increase to 79% last July 18, 2015. The high percentage rate means that the condition in the real estate is a seller’s market, or a hot market. This means that there are high turnovers of properties in Australia. 

In summary, there has been little change in the conditions in the housing conditions over the recent months but there is notable strength in Sydney. The housing credit growth had been steady and remained relatively strong for investors in housing – although it did not accelerate. 

| China’s Share Market Crash: How will this affect Australia?
By Matthew Brown

The start of the second quarter does not look promising for the Chinese share market as numbers continue to plummet down. The share market, or commonly known as the stock market, is the market in which shares of publicly held companies are issued and traded by brokers through exchanges and/or over-the-counter markets.

In the case of China, Shanghai Composite (SSEC) closed at 5166.35 points. This is the highest since January 18, 2008. By the end of July 3, 2015, however, the SSEC lost 1481.99 points, losing almost 29% of its recent high and more than $29 trillion in value.

This has made the country’s policy makers uneasy at the Chinese stock market for ignoring the signals from the country’s leaders. After the 7.40% dive last June 26, the People’s Bank of China (the central bank of China) responded by cutting its benchmark interest rates at the amount of reserves certain banks are required to hold. The said bank cut its one-year benchmark-lending rate by a quarter of a percentage point to 4.85% and its one-year deposit rate by the same scale to 2%.

The reasons behind the fall of China’s stock market still remain unclear. There have been different theories that try to point out the cause of such difficult situation. The first probable theory is the incompetence of China’s past appointed stock market regulators. Shang Fullin was appointed as CSRC chairman for almost a decade, starting December 2002, until Guo Shuqing succeeded Fullin in October 2011. Xiao Gang took over as the chairman in March of 2013. [MFJ1] Although, there is no clear evidence to back up this claim, the Chinese stock market during their terms was seen as a roller coaster ride.

Those who see their asset values continue to decline in the last weeks blamed Xiao Gang, the current CSRC regulator, for the downfall. It has been reported that Xiao was not so good at Math. At an interview last March 17, 2012, Xiao confessed that he did well in Chinese literature but failed in his math during his national university entrance exams. Rumors have speculated that he could not comprehend the idea of the five-day moving average when some of his subordinates suggested that the CSRC pump funds to stabilize the SSEC at that level. But of course, stabilizing the share market is not just a simple mathematical problem.

Other people point fingers at foreign speculators. They strongly believe that big foreign banks and institutional investors had been shorting Chinese stocks. Global Times, a state-run newspaper that tries to look for negative consequences of external forces, came out to disprove the rumor by stating “foreign capital has only a small part of the Chinese stock market” and that “large-scale short selling by foreign investors in the Chinese stock market has not appeared and is an unlikely scenario.”

It turns out, the unpredictability of the stock markets has become a political issue but such needed intervention has not been effective. The Chinese leaders will likely find ways to boost the confidence in their stock markets. But such resolution could terminally backfire if they fail to handle the issue well. The government must be keen and decisive if they want to bounce back their market share.

Effects to Australia

To relay how this dilemma affects the entire world could take pages. To paint a clearer example, we look into one of the superpowers that may have a direct link to China – Australia.

Australia’s treasurer, Joe Hockey, says that the country’s economy has not been affected much by China’s stock market conundrum, even more so with Greece’s current financial state. This is despite the billions of dollars being wiped from the value of Australian shares in recent weeks.

The treasurer said the government’s economic plan was still “on track” because the effects of Greece’s economic downturn had been “minimal”, and China’s share market crash has not been severe to convince the government to change their forecasts for Chinese growth in the Commonwealth budget. In short, “The economy is not affected by what’s happening to Greece or China”, Mr. Hockey said.

To summarize, there are currently two major economic disasters that are running abuzz. These are Greece’s debt crisis that pushed the country out of the eurozone and China’s continuous downfall in its stock market. All of which have minimal effect to Australia’s constant economic boom. This comes as a good sign to Australia as it can rest well knowing it is unaffected by such turmoil.

| Reserve Bank of Australia August Update
By Matthew Brown

Cash rate unchanged; Remains at 2.0%

For the past three months, the Reserve Bank of Australia board has retained the cash rate at 2.0 per cent, according to the August 4 Monetary Policy meeting.

RBA Governor Glenn Steven’s reiterates that monetary policy needs to be accommodative to support borrowing and spending. Based on the available information, the Australian economy has continued to grow at a rate somewhat below longer-term averages. Growth of employment is somewhat stronger and unemployment remains to be steady over the past year.

Moreover, inflationary pressure has been contained as confirmed by recent information. Labour cost remains to show a very slow growth for some time and inflation forecast is expected to remain consistent over the next one to two years, even with a low exchange rate.

Credit is recording moderate growth overall, with growth in lending to the housing market broadly steady over recent months. Real estate property prices continue to grow in Sydney, but pricing remains varied in other cities.

RBA is working with other regulators to assess and contain risks that may arise from the housing market. Lower long-term interest rates have been supporting prices for equities and commercial property. The Australian dollar continues to adjust from its significant decline in key commodity prices.

In the global scale

The global economy remains to be expanding on a moderate pace and has remained very accommodative, despite the drop in some key commodity prices. The Federal Reserve is also expecting to increase its policy rate later this year (although some other major central banks are still easing up on their policy rates). And while recent developments in China and Greece has shook the global economy, long-term borrowing rates for most sovereign and creditworthy partners still remain remarkably low.

As of the moment, the Board remains in a watch-and-wait mode, until information on financial and current economic conditions over the next period is released.

pages 1 of 5
1 2 3 19