SSS – April 2015

RBA Cash Rate
Left on hold for April at 2.25%. This surprised many but national unemployment has dropped to 6.1% although inflation is still tracking in the low range of 2.0%. Aussie dollar is still considered high at around $0.76US. Many believe this should fall to mid $0.60US as we transition out of the mining economy and more into services such as tourism, education and agricultural exports.

For the first time in Australia’s history, Australian Government bond yields (where investors lend money to the Federal Government) went negative in April. This means that large investors were lending money at a negative interest rate. The main justification is that these large institutional investors (the big money) expect a further interest rate cut by the RBA to 2.0% very soon which would then turn their yields positive. We shall wait and see what the RBA does in May and June.

Uranium Exports

In case you missed it, our Foreign Minister Julie Bishop was in India recently to help foster an energy partnership agreement. ‘The Australian government and the Indian government are concluding the civil nuclear supply agreement. There’s also a parliamentary process to be concluded in Australia, which is a routine process. After that, uranium suppliers and buyers can negotiate.

This is very promising for Olympic Dam in SA which contains high concentrations of premium grade uranium. It’s certainly something to watch and if there is an announcement, it will bode well for the SA economy and of course land values in Adelaide.

Adelaide price growth

Adelaide’s median house price has increased by 2% for the March quarter (8% annualised). This is according to the Domain Group so expect some local news reports this week. This is particularly promising for our FHBs that have recently secured land in Adelaide!

Negative Gearing
As expected it was taken off the table for review by Tony Abbott this week.

Overall Market
We’re still concentrating on the south-east Queensland market and Cairns. Here is a link to local media reporting on the area. This is backed up by Herron Todd White who are independent national valuers in their April report. There are also opportunities in South-west Sydney but at higher price points. All these will be discussed with Catherine once you are at the asset selection stage.

QuoteKnow what you own, and know why you own it – Peter Lynch

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