Australia's Interest Rate down to 1.75%

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016. This follows information showing inflationary pressures are lower than expected.

The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently. While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies. China's growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.

Commodity prices have firmed noticeably from recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.

Sentiment in financial markets has improved, after a period of heightened volatility early in the year. However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom. GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved. Indications are that growth is continuing in 2016, though probably at a more moderate pace. Labour market indicators have been more mixed of late.

Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.

Monetary policy has been accommodative for quite some time. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector. Credit growth to households continues at a moderate pace, while that to businesses has picked up over the past year or so. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

In reaching today's decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate. At present, the potential risks of lower interest rates in this area are less than they were a year ago.

Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.

Top 20 Occupations who use Negative Gearing

If you are working in Australia and you don't even know what negative gearing is, it is likely that your occupation is not one of the top 20 professions taking advantage of the strangely named investment property tax benefit. Negative gearing is the use of an investment property's interest repayments as a tax deduction to reduce the tax payable.

There aren't too many anesthetists and surgeons in Australia but 28% of them use negative gearing. School principals are not too far behind, perhaps because these occupations have the time to look into tax minimisation? The Liberal government decided recently that it is a worthwhile election issue to support the continued practice of negative gearing. The Grattan Institute released a report on Monday which found that the top 10 per cent of earners collect nearly 50 per cent of negative gearing tax deductions and three-quarters of all concessionally taxed capital gains. Only 10% of taxpayers use negative gearing so it is a tax benefit that 90% of the taxpayers fund for the 10% that do. Ouch.. no wonder a recent poll found 73% support Labor's position on removing negative gearing.

Occupation	Total number of taxpayers	Number who claimed rental losses	Per cent who claimed rental losses	Average rental loss, per claimant ($)	Total rental losses claimed ($)
Anaesthetists	3,105	891	28.70%	22,829	20,341,408
Surgeons	3,693	1,020	27.62%	29,674	30,268,299
School Principals	11,422	3,135	27.45%	10,258	32,160,384
Internal Medicine Specialists	7,639	1,956	25.61%	20,904	40,888,249
Senior Non-commissioned Defence Force Members	7,390	1,797	24.32%	8,453	15,191,307
Air Transport Professionals	14,650	3,539	24.16%	14,618	51,733,872
Commissioned Officers (Management)	10,675	2,520	23.61%	10,379	26,155,407
Finance Managers	31,871	7,428	23.31%	12,704	94,370,557
Psychiatrists	2,611	600	22.98%	17,188	10,313,220
Engineering Managers	26,608	6,110	22.96%	12,946	79,101,081
Mining Engineers	9,471	2,127	22.46%	14,245	30,299,595
Judicial and Other Legal Professionals	2,528	560	22.15%	15,307	8,572,296
Police	59,029	13,026	22.07%	9,210	119,977,510
Dental Practitioners	8,533	1,864	21.84%	15,295	28,510,546
Other Building and Engineering Technicians	22,799	4,945	21.69%	11,498	56,861,581
Policy and Planning Managers	35,437	7,581	21.39%	10,863	82,357,108
Other Hospitality, Retail and Service Managers	32,051	6,775	21.14%	10,402	70,476,971
Human Resource Managers	23,604	4,812	20.39%	9,950	47,880,217
Generalist Medical Practitioners	27,713	5,565	20.08%	15,284	85,055,480
Occupational and Environmental Health Professionals	12,097	2,420	20.00%	9,870	23,887,482
Corporate Services Managers	9,669	1,930	19.96%	11,014	21,257,814
ICT Managers	60,009	11,917	19.86%	11,701	139,442,997
Electrical Engineers	22,944	4,547	19.82%	11,808	53,693,586

Rents haven't dropped for 20 years... until now

Would you believe your local real estate agent when they say that the Perth market has bottomed out? Or would you believe the statistics that just came out which indicate rent prices dropping for the first time in 20 years in Australia? CoreLogic RP Data has revealed that Perth dropped in rent price over the last 12 months by a massive 8.4%. Darwin has dropped 11.5%.

It comes a day after an article mentioned that Perth is undergoing a building boom with thousands of inner city and inner suburb apartments going up whilst the population has gone backwards due to the mining downturn. For the year ending June 2013, 77,000 more people came to WA but for the year ending June 2015 population growth had reduced to 33,000 people.

"The most concerning part of the population trend is that it has now been five consecutive quarters where interstate migration has declined. Before this current trend commenced in June 2014, it had been eleven years since a negative interstate migration figure had been produced in WA.

On the housing supply side of the equation, the city normally builds around 18,000 dwellings per year.  Over the last two years, 53,000 dwellings have been approved in Perth. The over-supply pipeline will hang around for at least of couple of years yet.

In July 2013, there were 7,800 properties for sale; today there are 15,200. It’s a similar story with sales volumes – in July 2013, approximately 900 properties were being sold per week and now it’s back to 500 per week." - Why Perth Property Prices will be lower again by year end