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4 Oct 2013
Two developing stories in Australia to bear in mind
FXstreet.com (Barcelona) - Earlier today, at FXstreet.com , we have published two articles from Westpac and RBS referring to early sings of the New Zeaalnd property bubble moving into Australia and talk of increased government spending respectively.
The articles are significant in terms of what it means for future RBA monetary policies
As Westpac explains: "The last few months have seen a significant shift in Australia's housing markets with a surge in auction activity and signs of a quickening in price growth." Should the RBA start to be worried about this significant increase in house prices, the odds of a return to a more neutral/hawkish stance are higher than the market is currently pricing.
Australia's neighbor New Zealand has been facing extremely high house price, situation which has led the government to introduce restrictive measures for individuals to qualify for loans, while at the same time, the RBNZ recently announced, quite explicitly, that it expects to raise rates by 2% between 2014 and 2016 to combat the rising prices in the housing market.
The second article makes reference to the new plans by the Australian government to increase fiscal spending. As Gibbs, Strategist at RBS, notes: "the LNP - now in power - is attempting to turn the debate towards more government infrastructure spending, borrowing more, running a bigger budget deficit for longer. With the now rapidly approaching onset of the peak in the mining investment boom there has been increasing academic support for more government spending on infrastructure. The urgency and support for it has been increasing in the last year."
If the projections by RBS come to fruition in coming months, in view of Gibbs, "it may help lift economic confidence in Australia, or help underpin it somewhat if the Chinese economy deteriorates and mining sector confidence sours," Gibbs said. From a markets perspective, "it should mean the down-turn in the AUD and period of low interest rates may be less than otherwise."
The articles are significant in terms of what it means for future RBA monetary policies
As Westpac explains: "The last few months have seen a significant shift in Australia's housing markets with a surge in auction activity and signs of a quickening in price growth." Should the RBA start to be worried about this significant increase in house prices, the odds of a return to a more neutral/hawkish stance are higher than the market is currently pricing.
Australia's neighbor New Zealand has been facing extremely high house price, situation which has led the government to introduce restrictive measures for individuals to qualify for loans, while at the same time, the RBNZ recently announced, quite explicitly, that it expects to raise rates by 2% between 2014 and 2016 to combat the rising prices in the housing market.
The second article makes reference to the new plans by the Australian government to increase fiscal spending. As Gibbs, Strategist at RBS, notes: "the LNP - now in power - is attempting to turn the debate towards more government infrastructure spending, borrowing more, running a bigger budget deficit for longer. With the now rapidly approaching onset of the peak in the mining investment boom there has been increasing academic support for more government spending on infrastructure. The urgency and support for it has been increasing in the last year."
If the projections by RBS come to fruition in coming months, in view of Gibbs, "it may help lift economic confidence in Australia, or help underpin it somewhat if the Chinese economy deteriorates and mining sector confidence sours," Gibbs said. From a markets perspective, "it should mean the down-turn in the AUD and period of low interest rates may be less than otherwise."