Interest rates slashed to lowest level in 40 years

The Reserve Bank of Australia (RBA) again slashed the official interest rate at its February meeting, cutting it by 1% to 3.25%.

The RBA has cut four full percentage points off the cash rate since it began reducing rates last September.

The central bank said it had taken into account the Government's Nation Building and Jobs Plan, also announced the same day.

'The combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad,' the RBA statement said.

Sydney Morning Herald, 3 February 2009

Middle Australia to benefit from Government stimulus

Following a week of negotiations, the Rudd Government's $42 billion Nation Building and Jobs Plan passed through Federal parliament on Friday.

The package includes one-off cash handouts as well as a raft of infrastructure initiatives aimed at boosting economic activity, these include:

• $252 million to build an extra 802 Defence houses (see below)
• the construction of more than 20,000 new social housing dwellings
• free ceiling insulation for around 2.7 million Australian homes
• new or upgraded infrastructure in all of Australia's 9,540 schools, and
• a significant increase in funding for local community infrastructure and road projects.

Deputy Prime Minister, Julia Gillard, is adamant the package will have the desired effect.

'This package will add to the economic activity in our nation both in this financial year and the next financial year. You'll see construction jobs, you'll see people spending the cash bonuses and creating ripple effects throughout the economy,' she said.

The Australian, 14 February 2009.

Defence Housing part of Government's national building investment

The Federal Government will provide $252 million to Defence Housing Australia (DHA) to build 802 new houses for Australian Defence Force members and their families.

This program is a key element of the $42 billion Nation Building and Jobs Plan and will offer massive and immediate support for jobs in the housing and construction industry.

The new homes will be built in both metropolitan and regional centres. The construction is in addition to the 1,500 homes already scheduled in the DHA housing program over the next three years.

Construction will commence in April 2009 and run through until June 2011.

Minister for Defence, Science and Personnel Media Release, 3 February 2009.

Good news property investors—housing affordability increasing

The five-year decline in housing affordability has finally been broken, with a 39% improvement in the December 2008 quarter, according to a new report by the Housing Industry Association (HIA) and Commonwealth Bank of Australia (CBA). 

The HIA-CBA First Home Buyer Affordability Index attributed increased affordability to rapidly falling interest rates and greater government subsidies.

According to the index, the average monthly home loan repayment fell by 26% in the December quarter, and about 135,000 households come out of 'mortgage stress'.

Households would need an annual income of $70,000 to buy a modest property. Previously a household would have to be earning around $85,000 to avoid going into mortgage stress.

The Australian, 17 February 2009
Eureka Report, 19 February 2009

Positively geared investment properties on the rise

A rise in the number of positively geared investment properties—where rental returns exceed mortgage repayments and other costs—is set to generate a recovery in the property market, according to SQM Research Managing Director, Louis Christopher.

Mr Christopher said that cuts to official interest rates, lower house prices and rising rents mean investors can now buy properties that will return as much in rent as they cost in mortgage repayments. 

'There is a real possibility we will see positively geared properties emerging this year in the affordable markets of the southern capitals,' he said.

'Vacancy rates are still very tight at the affordable end of the market so rents will continue to rise in the sector in 2009, further boosting returns for investors'.

The Australian, 16 February 2009.

Australians restore their appetite for debt—household borrowing increasing

Interest rate cuts, lower living costs and government hand-outs are working to restore the pace of household borrowing, according to the latest Australian Bureau of Statistics (ABS) figures.

The figures showed that new lending commitments rose by 3.5% in December, driven by a surge in borrowing for houses, land, cars and loan refinancing.

CommSec Chief Economist, Craig James, said very attractive interest rates were fuelling demand for home loans but households also remained cautious about taking on debt.

'People see plenty of opportunities with lower interest rates, but they are going to show a considerable degree of caution,' he said.

The Australian Financial Review, 17 February 2009.

Reserve Bank says we've already seen the worst

According to the Reserve Bank of Australia (RBA) we have seen the worst of the global economic crisis and Australia will emerge better off than all other countries.

Appearing before the House of Representatives economics committee, RBA Governor, Glenn Stevens, said there were positive signs that China, Australia's key economic market, and the Rudd Government's stimulus packages would ensure the economy remained solid.

'There are reasonable groups at this stage to think that the Australian economy will come through this very difficult episode, not unscathed, but well placed to benefit from renewed expansions,' Mr Stevens said.

He said that there were tentative signs that the slowdown in China was being arrested, and while the global economy had deteriorated sharply, the outlook for Australia was much stronger than other comparable nations.

West Australian, 21 February 2009.

Investors and first home buyers go head-to-head

With low interest rates and high rents, 2009 will see investors and home buyers competing for property bargains.

Mark Armstrong, Director of Property Planning Australia, says that first home buyers and investors are taking advantage of this unique time in the property market cycle, and are on a collision course.

'When the contest heats up, it will be investors that more often than not come out on top,' he said.

Unlike first home buyers, investors usually already have a home with significant equity which means that their borrowing capacity is greater.

'They also get the benefit of rent and have access to negative gearing to help them with their cash flow,' Mr Armstrong said. 

The Age, 13 February 2009

The long arm of the law—ACT court serves notice on Facebook

In a landmark ruling, the ACT Supreme Court has granted lawyers permission to serve a court judgement via the social networking website, Facebook.

The Meyer Vandenberg lawyers repeated attempts to find the couple who had defaulted on their mortgage were unsuccessful, even after hiring private investigators to track them down.

Two of the firm's young lawyers came up with the innovative idea after finding the pair's Facebook pages.

Courts have previously allowed default judgements to be delivered via email and text message, but this is a first for Facebook.

Australian Property Investor, February 2009.