Thursday, December 8, 2011

Dropped again! RBA announces interest rate cut


Which Banks passed on the interest rate cut?

  • Bank of Queensland - cut 0.25% to 7.36%
  • Police and Nurses Credit Society - cut 0.25% to 6.78% (EasyPay)
  • Members Equity Bank - cut 0.25% to 6.99%
  • ANZ - cut 0.25% to 7.3%
  • NAB - cut 0.25% to 7.22% (from 16 Dec)
  • UBank - cut 0.25% to 6.34%
  • Bankwest - cut 0.25% to 7.20%
  • Commonwealth Bank - cut 0.25% to 7.31% (from 19 Dec)
  • Westpac -  cut 0.25% to 7.36%
* Banks are listed in order of who cut their rates first. This will be updated as we receive news.
Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to lower the cash rate to 4.25 per cent, effective 7 December 2011.
Growth in the global economy has moderated this year after a strong performance in 2010. Some of the slowing reflected temporary factors, and as these passed, the pace of expansion in the United States and much of Asia began to pick up around mid year. China's growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.
The sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead. Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe. This, together with precautionary behaviour by firms and households, means that the likelihood of a further material slowing in global growth has increased. Commodity prices have reflected this, declining further over recent months and taking pressure off CPI inflation rates. This has increased the scope for some easing in monetary policy in a number of countries.
Information about the Australian economy suggests output growth has been close to trend, with demand growth stronger than that. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, changed behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little since mid year, though it remains close to 5 per cent.
CPI inflation on a year-ended basis remained above the target at the latest reading, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.
The reduction in the cash rate as a result of the Board's previous decision flowed through to lending rates, which are now around their average level of the past 15 years. Short-term market interest rates have tended to decline a little further in recent weeks, though term funding conditions for financial institutions have become more difficult. Credit growth remains subdued and asset prices have declined further over recent months. The exchange rate has been quite variable over the past few months, but remains at an historically high level.
Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.

What are the 9 Perth Suburbs Under $300k?

RP Data released a list of 154 suburbs around Australia which have a median house price of under $300,000. From that list, we have a list of nine WA suburbs under $300k, ordered by distance from the Perth City. The number in front of it shows where in the cheapest 154 suburbs in Australia they landed.

115 CAMILLO $286,481 22.4km
106 ARMADALE $281,473 25.7km
140 BROOKDALE $295,396 27.4km
110 ORELIA $285,480 31.3km
99 MEDINA $278,109 31.6km
125 PARMELIA $289,666 32.8km
139 CALISTA $294,451 33.km
113 HILLMAN $285,915 37.7km
132 COOLOONGUP $292,849 39.3km

Friday, December 2, 2011

Experts Tip Six More Months of Decreasing House Prices

It seems that experts are tipping that the decrease in house prices has still got a way to go in Perth with ANZ head of property research Paul Braddick saying property prices would definitely fall further in the next six month. RP Data has shown a drop in 5% in the past year while the Real Estate Institute of WA recorded a 7.6% drop.

Nigel Satterkey who is head of Satterley Property Group also predicts that house prices will continue to fall for the next six months to a median price of $420,000 which is $20,000 less than what he had predicted seven months earlier in May.

Wednesday, November 30, 2011

House Prices in Perth Continue Fall

The blood letting in the Perth real estate market doesn't seem to have ended, with the house prices falling anohter 0.8% in October 2011, bringing the year to date drop to 4.4% which equates to a drop of around $20,000 on an average Perth home according to RP Data. With a drop in interest rates, and possibly another one around the corner next week, it will be interesting to see how Perth prices hold up.

Friday, November 4, 2011

These Banks Dropped their Interest Rates on Tuesday

Now that the Reserve Bank has dropped the official cash rate for Australia, the question that most homeowners want to know is, "Did my bank follow?"

  • Ubank has made no announcement. Currently their rate is at 6.79%. 
  • Westpac has dropped their standard variable rate by 0.25% to 7.61%
  • Commonwealth Bank has also dropped 0.25% to 7.66% (or 6.86% depending on the product)
  • Bank of Queensland & Members Equity Bank have dropped 0.25%
UPDATE 3/11/11
  • ANZ has dropped their standard variable rate by 0.25% to 7.55%
  • NAB has dropped their standard variable rate by 0.20% to 7.47%
  • UBank still haven't moved on their home loan rates but cut their savings accounts by 0.40% much to everyone's outrage on Twitter and Facebook.
UPDATE 4/11/11
  • Ubank has dropped their UHomeLoan standard variable rate by 0.20% to 6.59% in line with the parent bank NAB. They are also offering new sign ups a loyalty bonus of 0.20% off their rate taking the rate to 6.39%!
UPDATE 8/12/11

RBA Announced another rate cut in December. Check out who dropped their interest rates in the most recent post here.

Tuesday, November 1, 2011

After 11 straight months RBA cuts cash rate to 4.50%

It has been exactly one year since the Reserve Bank of Australia dropped interest rates to 4.75%. Today, breaking eleven straight months of no interest rate movement, the RBA brought down the cash rate to 4.50%. Here is what the RBA released earlier:


At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.5 per cent, effective 2 November 2011.
Recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far. The pace of US economic expansion picked up in the September quarter, but is still only moderate and leaves considerable spare capacity. China's growth has slowed, as policymakers there had intended. Output in Asia has now recovered from the effects of the Japanese earthquake, and domestic demand in the region is generally expanding. Trade performance, however, is starting to see some effects of a significant slowing in economic activity in Europe, where the prospects are for economic weakness to continue. Commodity prices, while still at high levels, have generally declined over recent months.
Financial markets have recovered somewhat from the turmoil of recent months, helped by stronger economic data in the United States and by signs that European governments are making progress in their efforts to deal with the sovereign debt and banking problems. Equity markets have gained ground and the Australian dollar has risen significantly as risk aversion has lessened. But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households.
Information about the Australian economy suggests moderate growth overall. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little over recent months, though it remains close to 5 per cent.
After underlying inflation started to pick up in the first half of the year, recent information suggests the subdued demand conditions and the high exchange rate have contained inflation more recently, notwithstanding continuing sizeable increases in utilities charges. CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.
Financial conditions have been easing somewhat recently, with market interest rates declining a little and competition to lend increasing.  But overall conditions have remained tighter than normal, with borrowing rates still a little higher than average, credit growth subdued and asset prices lower than earlier in the year. The exchange rate has been very variable over the past few months, but on the whole has remained at historically high levels.
Over the past year, the Board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation. With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2–3 per cent inflation over time.



Wednesday, October 26, 2011

Prices are Down and Rent is up


The figures from September quarter are out now from REIWA showing that house sales in Perth increased by only 1 per cent for the quarter. Median house prices continued to declined by 2.1% and is expected to take the previous quarter median down to $467-470k from $479k which is a hefty drop.
First home buyers like myself apparently increased the proportion of sales in the $400-450k and <$350k markets. Meanwhile, the trend of increasing rents and decreasing house prices continues with the median rent up $15 to $395pw as the vacancy rate dropped to a desperate 2.8%.
So the wait continues for this upward turn in the housing market that experts keep talking about. Until then, my preference is to keep saving for that deposit.

Tuesday, October 25, 2011

What is Mortgage Stress?

Mortgage stress is when a homeowner needs to pay 30% of their income to mortgage repayments. It is not a psychological condition as some may think though the inference is that those having this level of debt would be stressed. A recent report from the University of Canberra has WA at the top of the mortgage stress list with 13% of mortgage holders under "mortgage stress".

With the economy going well, inevitably the Reserve Bank will feel the pressure to increase rates and this percentage will climb. However, a drop in mortgage stress percentage may not necessarily be a good sign. Many under "stress" may simply sell up their houses and go back to renting doesn't indicate an improvement in the situation. Are you in a mortgage and are you a part of this mortgage stress statistic?

Thursday, October 20, 2011

Land Sales Down 23% from Last Year

So as they talk about a recovery, the land sales in Perth have gone the other way. Whilst there have been improvements from the June quarter, we are still down 23.5% from last year's figures. Land value is on average $235,000 which is 12% down from the highs in 2006.

Personally I think it is simply because of the quality of land being released. Most land has been released in places that are 20km+ from the CBD and in places further from where house prices have plummeted recently. Just a week ago, articles came out saying that Perth house prices will go up 20% in the coming three years but there doesn't seem to be too many signs of that just yet.

Tuesday, October 4, 2011

Interest Rates Steady for the 11th straight month


Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.
Conditions in global financial markets have continued to be very unsettled, with uncertainty increasing about both the prospects for resolution of the sovereign debt and banking problems in Europe, and the outlook for global economic growth. While temporary impediments that had contributed to a slowing in growth in some countries over recent months are lessening, recent data suggest a continuing period of soft economic conditions in both Europe and the United States. Moreover, the uncertainty and financial volatility have reduced confidence, which could result in more cautious behaviour by firms and households in major countries.
It will take more time for evidence of any effects of the recent European and US financial turbulence on economic activity in other regions to emerge. Thus far, indications are that economic activity is continuing to expand in China and most of Asia. Nonetheless, recent events have led forecasters to reduce their estimates for global GDP growth, which is now expected to be about average this year and next. Prices for commodities have declined over recent weeks, though in general they remain high.
Australia's terms of trade are very high, which has increased national income considerably. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions. In other sectors, cautious behaviour by households and the earlier rise in the exchange rate have had a noticeable dampening effect. The impetus from earlier Australian Government spending programs is now also abating, as had been intended. While there remain good reasons to expect solid growth over the medium term, the indications are that the pace of near-term growth is unlikely to be as strong as earlier expected, due both to local and global factors, including the financial turmoil and related effects on business confidence.
Underlying inflation stopped falling and began to increase earlier this year. The Board has been concerned about the prospect of a further pick-up over the period ahead, but over recent months has been weighing the question of whether a period of weaker than expected conditions would contain that pick-up in inflation. Recently revised data show a pick-up to date in the underlying pace of price rises that was less sharp than initially indicated. Moreover, with labour market conditions now a little softer and households more concerned about the possibility of unemployment rising, the likelihood of a significant acceleration in labour costs outside the resources and related sectors is lessening.
Taking into account all the recent information, the path for inflation may now be more consistent with the2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme. This assessment will be reviewed on receipt of further data on prices ahead of the Board's next meeting. An improved inflation outlook would increase the scope for monetary policy to provide some support to demand, should that prove necessary.
The Board noted that financial conditions have been easing somewhat, with interest rates for some housing and business loans declining slightly due to increased competition and the fall in some funding costs in financial markets. The exchange rate has also declined from the very high levels of a few months ago. Credit growth remains low, however, and asset prices have declined.
At today's meeting the Board judged the current cash rate remained appropriate. As always, the Board will continue to assess carefully the evolving outlook for growth and inflation.

Thursday, September 29, 2011

Refinanced with Ubank after 4 months waiting

There have been recent reports about how the big banks have been desperately chasing the mortgage dollar more than ever before. With UBank taking out a global award for its innovative UHomeLoan product, there is little wonder that other banks are starting to react after years of intransigence.

 I haven't bought a place but after what you could say a "restructure", I am married now and the two of us are paying off a mortgage. We were with one of the Big Four banks when I suggested that we refinance with Ubank at the rate of 6.59%. It was late in May that the application was submitted and after four months, the account is up and running.

Money that I've transferred into the new account has made it into the account and we're off and running! I thought it would be interesting to share what its been like for those that may be on the investigative stage of refinancing. I have not been very happy with the time taken for Ubank to process the refinancing as time = money especially when we are working with a mortgage. I calculated that the delay was worth about $1000 in unnecessary interest paid on the property.

Having said that, the rate is low and very competitive which is probably what accounted for some of the delay at least. Having received our welcome pack from Ubank, with a tea towel thrown in, we hope that the journey from here is more smooth. We like the fact that we can top up on the loan anytime we like, and redraw in lots of $1000 any time that we are ahead on schedule. There seems to be a little delay on funds transfers with each amount taking around 2 days to hit the bank. If you transfer on a Friday, you probably won't see it in the Ubank account until Tuesday as weekends are not working days. Not sure of the interest ramifications of this.

 Ubank's product is much less complicated than other providers and my hope that their Uhomeloan will mature so that we can see more than just a boring transaction history but more like the rest of Ubank's products where SMS alerts, graphs etc can make even checking your home loan an enjoyable experience.

What is your experience with home loans? How would you make things more enjoyable and are you considering refinancing?

Our other post on Uhomeloan.

Tuesday, August 2, 2011

Homeowners breathe another sigh of relief - Interest rates unchanged


Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.
The global economy is continuing its expansion, but the pace of growth slowed in the June quarter. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income and spending in major countries both contributed to the slowing. It is still not clear how persistent this slower growth will be. The supply-chain disruptions are now gradually abating and commodity prices have softened of late, though they generally remain high. In China most indications suggest only a mild slowdown so far.
The central scenario for the world economy over the next couple of years envisaged by most forecasters remains one of growth below the pace of 2010, but at or above long-term averages. Downside risks have increased, however, as concerns have grown over the outlook for the public finances of both Europe and the United States.
Australia's terms of trade are now at very high levels and national income has been growing strongly. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions. But in other sectors, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect. The impetus from earlier Australian Government spending programs is now also abating, as had been intended.
The resumption of coal production continues, but a full recovery of flood-affected production now looks unlikely before early next year. Precautionary behaviour by households also looks likely to keep some areas of demand weaker in the near term than earlier expected. Overall, growth in real GDP through 2011 is now likely to be at about trend. Over the medium term, overall growth is still likely to be at trend or higher, unless the world economy deteriorates noticeably.
Growth in employment has moderated and the unemployment rate has been little changed, near 5 per cent, for some time now. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn, though productivity growth remains weak.
Year-ended CPI inflation has been high, affected by the extreme weather events earlier in the year. As these effects reverse over the next couple of quarters, CPI inflation should decline. But measures that give a better indication of the trend in inflation have begun to rise over the past six months, after declining for the previous two years. While they have, to date, remained consistent with the 2–3 per cent target on a year-ended basis, the Board remains concerned about the medium-term outlook for inflation.
It is appropriate under such circumstances for monetary policy to exert a degree of restraint. Most financial indicators suggest that it has been doing so, as a result of the Board's decisions last year. Credit growth has declined over recent months and is very subdued by historical standards, even with evidence of greater willingness to lend. Most asset prices, including housing prices, have also softened over recent months. The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal.
At today's meeting, the Board considered whether the recent information warranted further policy tightening. On balance, the Board judged that it was prudent to maintain the current setting of monetary policy, particularly in view of the acute sense of uncertainty in global financial markets over recent weeks. In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation.

Wednesday, July 27, 2011

Why we're not that stupid

Over the past couple of years, there is no doubt a change in the air. On its way out is the idea that you must get a house as soon as possible. So is the idea that house prices always go up. Generation Y is getting more savvy with their money and have come to realise a debt trap in mortgage is not necessarily the wisest move. Especially when house prices have been stagnant at best.

Many Australians don't realise that we are now home to the highest interest rates in the developed world. Whilst the interest rate is not 17% like in the 80s, high interest rates mean that we need to pay more than everyone else in the world when borrowing money.

However, the flipside is that we receive more interest revenue when we invest our money instead. For every day that the house prices stay flat, people who are owning houses who could have deferred their decision to buy, are losing money through interest payments. Times like these, many first homebuyers have decided to tuck their savings into high interest accounts so that later, they can put in a larger deposit and pay no interest in the meantime.

For example, if you invest a savings of $80,000 in a high interest account which pays 6.51% and buy a place in a year's time, you would have an extra $5200 to add towards your deposit.

So the decision not to buy can be the best thing you can do but of course, homeowners who are seeing their house prices drop from record highs would not be happy with this. But you have to do what's best for yourself.

Edit: An article recently said that the median house price for WA dropped $33,000 over the past year. If you  took out a loan of 80% of a $500k house a year ago, assuming your house dropped $33,000 in value,  you would have also paid $28,000 in interest. This might not be completely scientific but $51,000... that's a lot of money to lose in a year!

Friday, July 22, 2011

June Shows Another 2% Drop for WA

WA has experienced the longest stretch of monthly house price falls since the global financial crisis, with the month of June recording a 2% fall in the median house price. There have been 15 months of price drops but the total % drop has not been as much as in 2008, just for a longer period of time according to Alan Bourke from REIWA.

$350,000 to $500,000
For houses between $350k and $500k, there has not been much change in house prices as there is a consistent demand for cheaper housing in Perth. However, in other price ranges, there have been falls. There are around 17,000 houses on the marked in June which was a drop from 18,200 in April.

Tuesday, July 5, 2011

RBA keeps cash rate at 4.75%

Official quote from the RBA statement:



At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.
The global economy is continuing its expansion, but the pace of growth slowed in the June quarter. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income and spending in major countries have both contributed to the slowing. The banking and sovereign debt problems in Europe have also added to uncertainty and volatility in financial markets over recent months.
A key question is whether this more moderate pace of growth will continue. Commodity prices have generally softened of late, though they remain at very high levels. Despite the challenging international environment, the central scenario for the world economy envisaged by most forecasters remains one of growth at, or above, average over the next couple of years. A number of countries have tightened monetary policy but, overall, global financial conditions remain accommodative and underlying rates of inflation have tended to move higher.
Australia's terms of trade are now at very high levels and national income has been growing strongly, though conditions vary significantly across industries. Investment in the resources sector is picking up strongly in response to high levels of commodity prices and the outlook remains very positive.  A number of service sectors are also expanding at a solid pace. In other areas, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect. The impetus from earlier Australian Government spending programs is now also abating, as had been intended.
A gradual recovery from the floods and cyclones over the summer is taking place, though the resumption of coal production in flooded mines continues to proceed more slowly than initially expected. The recovery will boost output over the months ahead, and there will also be a mild boost to demand from the broader rebuilding efforts as they get under way, but growth through 2011 is now unlikely to be as strong as earlier forecast. Over the medium term, overall growth is still likely to be at trend or higher, if the world economy grows as expected.
Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5 per cent. Most leading indicators suggest that this slower pace of employment growth is likely to continue in the near term. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.
Credit growth remains modest. Signs have continued to emerge of some greater willingness to lend and business credit has expanded this year after a period of contraction. Growth in credit to households, on the other hand, has slowed. Most asset prices, including housing prices, have also softened over recent months.
Year-ended CPI inflation is likely to remain elevated in the near term due to the extreme weather events earlier in the year. However, as the temporary price shocks dissipate, CPI inflation is expected to be close to target over the next 12 months. In underlying terms, inflation has been in the bottom half of the target range, though a gradual increase is expected over time.
At today's meeting, the Board judged that the current mildly restrictive stance of monetary policy remained appropriate. In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation.

Wednesday, June 15, 2011

Perth Dominates Australia Top 25 Suburbs Price Plunge

RP Data has released a report showing Perth suburb Mosman Park amongst eight other WA suburbs in the top 25 suburbs - top 25 for biggest drop in median house prices in the last three years.Here are Perth's biggest losers.

Mosman Park 43% now $1.25 million
East Fremantle 30% now $910,000
Jarrahdale 25.2% now $430,000
Nedlands 22.7% now $1.7 million
Cottesloe 21.6% now $2.05 million
Claremont 20.8% now $1.225 million
Cambridge 16% now $1.05 million
Subiaco 14.3% now $1.157 million
Kalamunda 12.2% now $430,000

Where are you going to buy your home in Perth?

Tuesday, June 7, 2011

Rates on hold again (this is getting repetitive)


Here is the announcement from the Reserve Bank of Australia as to why the cash rate has been left on hold. At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.
The global economy is continuing its expansion, led by very strong growth in the Asian region, though the recent disaster in Japan is having a major impact on Japanese production, and significant effects on production of some manufactured products further afield. Commodity prices have generally softened a little of late, but they remain at very high levels, which is weighing on income and demand in major countries and also pushing up measures of consumer price inflation. In response, a number of the countries with stronger expansions have been moving to tighten their monetary policy settings over recent months. Overall, though, financial conditions for the global economy remain accommodative. Uncertainty over the prospects for resolution of the banking and sovereign debt problems in Europe has increased over the past couple of months, which has been adding to financial market volatility.
Australia's terms of trade are reaching very high levels and national income has been growing strongly. Private investment is picking up, led by very large capital spending programs in the resources sector, in response to high levels of commodity prices. Outside the resources sector, investment intentions have been revised lower recently. In the household sector thus far, there continues to be a degree of caution in spending and borrowing and a higher rate of saving out of current income. The impetus from earlier Australian Government spending programs is now also abating, as had been intended.
The floods and cyclones over the summer have reduced output in some key sectors. As a result there was a sharp fall in real GDP in the March quarter, despite a solid increase in aggregate demand. The resumption of coal production in flooded mines is taking longer than initially expected, but production levels are now increasing again and there will be a mild boost to demand from the broader rebuilding efforts as they get under way. Over the medium term, overall growth is likely to be at trend or higher.
Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5 per cent. Most leading indicators suggest that this slower pace of employment growth is likely to continue in the near term. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.
Overall credit growth remains quite modest. Signs have continued to emerge of some greater willingness to lend, and business credit has expanded this year after a period of contraction. Growth in credit to households, on the other hand, has softened, as have housing prices. The exchange rate remains, in real effective terms, close to its highest level in several decades. If sustained, this could be expected to exert continued restraint on the traded sector.
CPI inflation has risen over the past year, reflecting the effects of extreme weather and rises in utilities prices, with lower prices for traded goods providing some offset. The weather-affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring. The Bank expects that, as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the next 12 months.
At today's meeting, the Board judged that the current mildly restrictive stance of monetary policy remained appropriate. In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation.

Friday, June 3, 2011

FHSA holders can buy a house now

It has hardly recieved any news coverage but the First Home Saver accounts that have been offered by the federal government has just last week become more attractive (see 5 Reasons to get a First Home Saver Account for background information). The government has now allowed people who have a first homesaver account but not eligible to draw the money out just yet, to go and buy a house and when the first home saver account completes the four year requirement, you can use the money to contribute to the mortgage of that purchased house.

This seems to only apply for houses that were bought after 25th May 2011. Nothing has been said about the situation where you acquire an interest in a house after 25th May 2011. Anyone know whether that will qualify?

Thursday, June 2, 2011

New Law Passed for First Homesaver Accounts

Tax Laws Amendment (2011 Measures No. 1) Act 2011
 No. 31, 2011


An Act to amend the law relating to taxation and the First Home Saver Accounts Act 2008, and for related purposes
  
  

Contents
Schedule 3—First Home Saver Accounts                                                                9
First Home Saver Accounts Act 2008                                                                      9
Income Tax Assessment Act 1997                                                                            18




Tax Laws Amendment (2011 Measures No. 1) Act 2011
No. 31, 2011



An Act to amend the law relating to taxation and the First Home Saver Accounts Act 2008, and for related purposes
[Assented to 25 May 2011]
The Parliament of Australia enacts:
                   This Act may be cited as the Tax Laws Amendment (2011 Measures No. 1) Act 2011.
             (1)  Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

Commencement information
Column 1
Column 2
Column 3
Provision(s)
Commencement
Date/Details
1.  Sections 1 to 3 and anything in this Act not elsewhere covered by this table
The day this Act receives the Royal Assent.
25 May 2011
2.  Schedule 1, Part 1
The day this Act receives the Royal Assent.
25 May 2011
3.  Schedule 1, Part 2
1 July 2014.
1 July 2014
4.  Schedule 2, Part 1
The day this Act receives the Royal Assent.
25 May 2011
5.  Schedule 2, Part 2
1 July 2014.
1 July 2014
6.  Schedule 3
The day after this Act receives the Royal Assent.
26 May 2011
Note:          This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.
             (2)  Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.
                   Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.


  
1  At the end of subsection 15(2)
Add:
               ; or (e)  the FHSA was closed following the transfer of its balance to another FHSA as the initial contribution to the other FHSA.
2  At the end of section 15
Add:
Disregard requirement that person never held a qualifying interest
             (3)  Disregard paragraph (1)(c) if:
                     (a)  the person has given a notice under section 20 that contains a statement under paragraph 20(4)(aa) (about the person intending to seek an FHSA mortgage payment); and
                     (b)  the person has not given a revocation of that notice under subsection 20(5).
Note 1:    The following heading to subsection 15(1) is inserted “When person meets the FHSA eligibility requirements”.
Note 2:    The following heading to subsection 15(2) is inserted “Requirement for each FHSA that was closed”.
3  Section 16
Before “A”, insert “(1)”.
Note:       The following heading to new subsection 16(1) is inserted “When acquisition payments are ineligibility payments”.
4  At the end of section 16
Add:
When mortgage payments are ineligibility payments
             (2)  A payment from an FHSA held by a person is an FHSA ineligibility payment if:
                     (a)  the payment is an FHSA mortgage payment; and
                     (b)  the person did not satisfy the FHSA eligibility requirements when the payment was made.
Note 1:       For paragraph (b), the person’s acquisition of a qualifying interest in his or her main residence can be disregarded (see subsection 15(3)).
Note 2:       This Act does not provide for the consequences of the payment being an FHSA ineligibility payment. However, the FHSA holder will be liable for FHSA misuse tax in accordance with Subdivision 345‑C of theIncome Tax Assessment Act 1997.
5  At the end of subsection 17(2)
Add:
Note:          This Act does not provide for the consequences of a payment failing to satisfy the FHSA payment conditions. However, the FHSA holder will be liable for FHSA misuse tax in accordance with Subdivision 345‑C of theIncome Tax Assessment Act 1997.
Note:       The following heading to subsection 17(1) is inserted “Payment conditions for FHSA home acquisition payments”.
6  At the end of subsection 17(4)
Add:
Note:          This Act does not provide for the consequences of a payment failing to satisfy the FHSA payment conditions. However, the FHSA holder will be liable for FHSA misuse tax in accordance with Subdivision 345‑C of theIncome Tax Assessment Act 1997.
7  At the end of section 17
Add:
Payment conditions for FHSA mortgage payments
             (5)  An FHSA mortgage payment satisfies the FHSA payment conditions for a qualifying interest in a dwelling if:
                     (a)  no later than 28 days after the payment is made, the person who held the FHSA uses an amount equal to the payment in repaying all or part of a loan secured by a genuine mortgage:
                              (i)  over the qualifying interest; and
                             (ii)  for which the person is a mortgagor; and
                     (b)  for a continuous period that is at least 6 months long, and that starts within the period mentioned in subsection (6):
                              (i)  the person holds the qualifying interest; and
                             (ii)  the dwelling is the person’s main residence; and
                     (c)  if the construction of the dwelling is not complete when the payment is made—that construction is complete within a reasonable period after the payment is made.
             (6)  The period:
                     (a)  starts:
                              (i)  if the construction of the dwelling is not complete when the payment is made—when the construction of the dwelling is complete; or
                             (ii)  otherwise—when the payment is made; and
                     (b)  ends 12 months after the period starts, or at a later time that the Commissioner considers reasonable in the circumstances.
Note:          This Act does not provide for the consequences of a payment failing to satisfy the FHSA payment conditions. However, the FHSA holder will be liable for FHSA misuse tax in accordance with Subdivision 345‑C of theIncome Tax Assessment Act 1997.
8  Section 18
Insert:
arm’s length has the same meaning as in the Income Tax Assessment Act 1997.
9  Section 18
Insert:
associate has the same meaning as in the Income Tax Assessment Act 1997.
10  Section 18
Insert:
FHSA mortgage payment means a payment from an FHSA if the FHSA provider must make the payment under section 32A (about a payment for repaying a mortgage if a home is acquired before the qualifying period ends).
11  Section 18 (definition of FHSA payment conditions)
Repeal the definition, substitute:
FHSA payment conditions:
                     (a)  an FHSA home acquisition payment satisfies the FHSA payment conditions in the circumstances set out in subsections 17(1) to (4); and
                     (b)  an FHSA mortgage payment satisfies the FHSA payment conditions in the circumstances set out in subsections 17(5) and (6).
12  Section 18
Insert:
genuine mortgage: a mortgage is a genuine mortgage if:
                     (a)  when entering into the mortgage, the mortgagors and mortgagees deal with each other at arm’s length; and
                     (b)  none of the mortgagors is an associate of any of the mortgagees.
13  At the end of paragraph 19(1)(b)
Add:
                             (v)  if the person already holds an FHSA that is inactive only because of paragraph 23(1)(c) or (e)—the FHSA to be opened or issued will be inactive because of paragraph 23(1)(e); and
14  Subsection 19(1) (note)
Repeal the note, substitute:
Note 1:       For paragraph (b), the person may still satisfy the FHSA eligibility requirements even though the person has acquired a qualifying interest in his or her main residence (see subsection 15(3)).
Note 2:       Making a false statement in the application may constitute an offence: see subsection 8J(9) and sections 8K and 8N of the Taxation Administration Act 1953.
15  After paragraph 20(4)(a)
Insert:
                    (aa)  if:
                              (i)  the FHSA holder does not satisfy the FHSA eligibility requirements only because of paragraph 15(1)(c) (about never holding a qualifying interest); and
                             (ii)  the FHSA holder wants the FHSA to remain open until an FHSA mortgage payment can be paid;
                            a statement to that effect; or
16  Paragraph 20(5)(a)
Repeal the paragraph, substitute:
                     (a)  if the notice contains a statement under paragraph (4)(a) or an authority under paragraph (4)(b)—the FHSA holder becomes satisfied that he or she satisfies the FHSA eligibility requirements; and
                    (aa)  if the notice contains a statement under paragraph (4)(aa)—the FHSA holder becomes satisfied that he or she satisfies paragraph 15(1)(c); and
17  Subsection 21(1) (note)
Repeal the note, substitute:
Note 1:       The Commissioner may give the provider a notice under subsection 67(2) if a correct TFN was not quoted for the FHSA holder.
Note 2:       The person may still satisfy the FHSA eligibility requirements even though the person has acquired a qualifying interest in his or her main residence (see subsection 15(3)).
18  After paragraph 21(3)(a)
Insert:
                    (aa)  if the FHSA holder does not satisfy the FHSA eligibility requirements only because of paragraph 15(1)(c) (about never holding a qualifying interest)—subparagraph 23(1)(b)(iii) (about holder needing to notify provider if wants FHSA to remain open until an FHSA mortgage payment can be paid);
19  Paragraph 21(4)(a)
Repeal the paragraph, substitute:
                     (a)  if paragraph (3)(aa) applies to the notice—the Commissioner becomes satisfied that the FHSA holder satisfies paragraph 15(1)(c); and
                    (aa)  if paragraph (3)(aa) does not apply to the notice—the Commissioner becomes satisfied that the FHSA holder satisfies the FHSA eligibility requirements; and
20  At the end of subsection 22(1)
Add:
               ; or (c)  the provider of an FHSA makes an FHSA mortgage payment from the FHSA on a particular day (also the trigger day), and the balance of the FHSA immediately after the payment is more than nil.
Note:       The heading to section 22 is replaced by the heading “FHSA provider to close FHSA if inactive in some cases or FHSA mortgage payment made”.
21  Subsection 23(1)
Repeal the subsection, substitute:
             (1)  An FHSA is inactive if:
                     (a)  the FHSA provider receives a notice from the FHSA holder under subsection 20(1) that contains:
                              (i)  a statement under paragraph 20(4)(a); or
                             (ii)  an authority under paragraph 20(4)(b);
                            (and does not receive a revocation of that notice under subsection 20(5)); or
                     (b)  all of the following subparagraphs apply:
                              (i)  the FHSA provider receives a notice from the Commissioner under subsection 21(1);
                             (ii)  the FHSA provider does not receive a revocation of that notice under subsection 21(4);
                            (iii)  within 30 days after receiving that notice, the FHSA provider does not receive a notice from the FHSA holder under subsection 20(1) that contains a statement under paragraph 20(4)(aa); or
                     (c)  the FHSA provider receives a notice from the FHSA holder under subsection 20(1) that contains a statement under paragraph 20(4)(aa) (and does not receive a revocation of that notice under subsection 20(5)); or
                     (d)  the FHSA provider receives a notice from the Commissioner under subsection 67(2) (and does not receive a revocation of that notice); or
                     (e)  the FHSA is opened or issued in response to an application to which subparagraph 19(1)(b)(ii) applies, where the other FHSA referred to in that subparagraph was inactive only because of:
                              (i)  paragraph (c) of this subsection; or
                             (ii)  an earlier application of this paragraph.
Note:          Paragraph (a) or (b) applies if the FHSA holder does not satisfy the FHSA eligibility requirements. However, neither paragraph need apply if the only one of those requirements not satisfied is the one about never holding an interest in a main residence. In that case, the FHSA holder can cause paragraph (c) to apply, keeping the FHSA open until an FHSA mortgage payment can be paid.
22  At the end of section 23
Add:
             (5)  An FHSA can become inactive under a provision even if it has already become inactive under another provision.
23  Subsection 26(2)
Repeal the subsection, substitute:
             (2)  The FHSA provider does not contravene subsection (1) if:
                     (a)  the provider repays the amount from the FHSA to the FHSA holder within 30 days after receiving it; or
                     (b)  the amount is a Government FHSA contribution; or
                     (c)  the FHSA is inactive only because of paragraph 23(1)(e), and the amount:
                              (i)  was the initial contribution to the FHSA; and
                             (ii)  immediately before being contributed, was the balance of another FHSA.
24  After subparagraph 31(1)(a)(i)
Insert:
                            (ia)  section 32A (FHSA mortgage payment); or
25  After section 32
Insert:
             (1)  This section applies if:
                     (a)  the holder of an FHSA acquires at a particular time (the acquisition time) a qualifying interest in a dwelling in Australia or Norfolk Island; and
                     (b)  before that time, the FHSA holder had never held a qualifying interest in a dwelling in Australia or Norfolk Island at a time when the dwelling was the FHSA holder’s main residence; and
                     (c)  the FHSA holder gives the FHSA provider an application in the approved form requesting an amount to be paid from the FHSA; and
                     (d)  the FHSA holder declares in the application that the payment will satisfy the FHSA payment conditions mentioned in subsection 17(5) for the qualifying interest; and
                     (e)  any of the following requirements are met:
                              (i)  the requirement in subparagraph 32(1)(c)(i) would be met if the FHSA holder were taken to have made a personal FHSA contribution of at least $1,000 for the financial year that includes the acquisition time and for each later financial year;
                             (ii)  the FHSA holder is in breach of the account balance cap, and has held an FHSA in at least 4 financial years (one of which may be the financial year in which the payment is to be made);
                            (iii)  the FHSA holder declares in the application that he or she holds the qualifying interest together with another FHSA holder in respect of whom the requirement in subparagraph 32(1)(c)(i), or in subparagraph (i) or (ii) of this paragraph, is met; and
                      (f)  the provider is satisfied that the requirements (if any) specified in the regulations are met; and
                     (g)  the FHSA is inactive only because of paragraph 23(1)(c) or (e) (about an FHSA remaining open until an FHSA mortgage payment can be paid), and is yet to be closed.
Note 1:       The FHSA holder will need to use the payment to repay all or part of a loan secured by a genuine mortgage over the qualifying interest (see subsection 17(5)).
Note 2:       Making a false or misleading statement in the application may constitute an offence: see subsection 8J(9) and sections 8K and 8N of the Taxation Administration Act 1953.
             (2)  The FHSA provider must pay the amount as requested:
                     (a)  as soon as practicable after the application is made; and
                     (b)  no later than 30 days after the application is made.
Offence
             (3)  A person commits an offence if the person contravenes subsection (2).
Penalty:  100 penalty units.
Validity of transaction not affected by contravention
             (4)  A contravention of subsection (2) does not affect the validity of a transaction.
26  Paragraph 35(1)(a)
After “of the FHSA”, insert “(the first FHSA)”.
27  Paragraph 35(1)(c)
Repeal the paragraph, substitute:
                     (c)  either:
                              (i)  the first FHSA is not inactive; or
                             (ii)  the first FHSA is inactive only because of paragraph 23(1)(c) or (e) (about an FHSA remaining open until an FHSA mortgage payment can be paid).
28  At the end of subsection 36(1)
Add:
Note:          A person’s acquisition of a qualifying interest in a dwelling after a personal FHSA contribution has been made for the person in that financial year, does not of itself stop a Government FHSA contribution from being payable for the financial year.
29  At the end of subsection 51C(2) (after the penalty)
Add:
Note:          For subparagraph (b)(i), the person may still satisfy the FHSA eligibility requirements even though the person has acquired a qualifying interest in his or her main residence (see subsection 15(3)).
30  Subparagraph 67(2)(c)(iii)
After “32,”, insert “32A,”.
31  At the end of subsection 128A(5)
Add:
Note:          The person may still satisfy the FHSA eligibility requirements even though the person has acquired a qualifying interest in his or her main residence (see subsection 15(3)).
32  Section 345‑100 (after the heading)
Insert:
Payments to acquire a home
33  Section 345‑100
Before “A”, insert “(1)”.
34  At the end of section 345‑100
Add:
Payments for repaying a mortgage
             (2)  A person is liable to pay tax imposed by the Income Tax (First Home Saver Accounts Misuse Tax) Act 2008 in respect of an *FHSA mortgage payment from an *FHSA held by the person if:
                     (a)  the payment fails to satisfy the *FHSA payment conditions; or
                     (b)  the payment satisfies the FHSA payment conditions, but is an *FHSA ineligibility payment.
Note:          The Commissioner may make an assessment of the amount of the tax under section 169 of the Income Tax Assessment Act 1936.
35  Subsection 995‑1(1)
Insert:
FHSA mortgage payment has the meaning given by the First Home Saver Accounts Act 2008.
36  Application provision
The amendments made by this Schedule apply in relation to acquisitions of qualifying interests in dwellings on or after the commencement of this Schedule.


[Minister’s second reading speech made in—
House of Representatives on 24 February 2011
Senate on 25 March 2011]

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