SSS – August 2014

RBA Cash Rate – Left on hold again at 2.5% for the month of August. As I’ve said previously I expect low rates to remain for at least the next 12-18 months. We’ve just seen Westpac, CBA and NAB move their 5-year fixed rates to below 5%! The big banks pay large sums of money to employ actuaries whose sole job is to research and predict the future cost of capital and hence maximise banking profits. Whenever you see fixed rates below variable – this is a sign that banks think rates will be going even lower.

The RBA (the King Bank) even had this to say last Tuesday:

  ‘Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

In the Board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

We’ve just seen national unemployment increase to 6.4% and the Aussie dollar still sitting high at around $0.93US – If that combined with the RBA’s last statement regarding inflation doesn’t mean interest rates are staying low for at least the next 18 months, then I don’t know what does.

Tax Time – I use the EOFY to also review my insurances (building and landlord), interest rates and PAYG Tax Variation. I’ve managed to source further interest rate discounts across all my current lending (including the NAB DHOAS loan) ranging from 0.06% to 0.4% bringing total discounts off the standard variable rate of between 0.85%-1.05%. This has freed up some decent cash flow which can then be reinvested. All it takes is a phone call to your lender – if you don’t ask, you don’t get. It’s also a good time to review your credit file which can be sourced for free from here.

Catherine Norris from CJB Property Group is currently working on an investors’ pack that will assist clients in your investment record-keeping requirements. I’ll keep you posted on its progress.

Toowoomba Market – Terry Ryder who I subscribe to for research purposes recently advocated again for the Toowoomba region. Attached is a spread out of The Chronicle in May detailing the latest on infrastructure spend.

Cairns Market – Although economic diversity lacks in Cairns and its primary industry is tourism, details of the proposed Aquis Casino development caught my attention this week. For want of a better phrase – this is fricking massive! It’s estimated to be an $8+ billion project over 10 years; 7,500 hotel rooms and a 20,000 strong workforce. An older colleague likens it to what was happening on the Gold Coast in the late 80’s early 90’s where massive property gains were made by those who got in early. The casino project is still undergoing EIS (Environmental Impact Study) and is far from being a sure thing – however if it goes ahead, the flow on effects to property (especially during the construction phase) will be significant. Be rest assured we’ll be watching this closely and will keep you posted. More details here.

Quote‘Land prices need to be high enough so that workers who saved to buy land of their own remained in the workforce long enough to avoid a labour shortage.’ Edward Wakefield -1829 in support of the South Australian Colonisation Act.

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