July 2007

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31 July 2007 - Labor to cut new home prices
The Australian
The federal Labor party has announced a bold new initiative to address the housing affordability crisis. The plan would see grants the cost of a new home slashed by $20,000 for up to 50,000 buyers over a 5 year period. The funds would be made available to local governments through a competitive bidding process and they would be required to use the money to address infrastructure as well as planning and approval costs for housing developments. Efficiency gains would then have to be passed to home buyers. The Treasurer Peter Costello has criticised the plan as simply using federal tax dollars to pay for state government charges.
 

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31 July 2007 - Fixed rate bargains
The Australian
A report by Fitch Ratings has found that Australians have one of the highest proportions of variable rate mortgages rather than fixed in the world, despite fixed rates currently being lower than variable. Competition between banks has seen heavy discounting of fixed rates and with the strong possibility of another increase in variable rates when the Reserve Bank meets next week now would be the time to switch to fixed. Around 85 per cent of mortgages in Australia are taken with a variable rate, the remainder are fixed or a combination of fixed and variable.
 

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31 July 2007 - Top deposit rate from BankWest
The Australian
BankWest has announced the launch of a new high interest savings account with a market-leading rate of 8 per cent. To receive interest on the new 'Regular Saver' account customers are required to each month deposit between $50 and $500, make no withdrawals in the month and have the account linked to another eligible BankWest account. The bank is expected to be ready to launch a whole range of 'better deal' products including credit cards and mortgages and will support these with a marketing blitz. The new account shows that BankWest is serious about their threat to take on the nation's big four banks and grow its current four per cent share of deposits.

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31 July 2007 - Outlook rosy for business
The Financial Review
Business confidence remains at a four year high despite the prospect of an interest rate rise next month. A survey by National Australia Bank has found that confidence about the outlook for the September quarter has risen by 2 points to 12 which is its highest level since the end of 2003 and far above the long term average of 5.3 points. The finding is the latest in a string of indicators that show business activity is building and adds to concerns about growing demand on an economy that is already operating at close to capacity.

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31 July 2007 - Westpac banks on service
The Financial Review
With Westpac enjoying improved customer service ratings the bank is now planning to add more staff to service premium retail customers and will overhaul its mortgage origination and servicing platform to increase sales. Sales of mortgages and credit cards are ahead of the other big banks in the year to May and deposits have been growing too. Analysts have suggested that Westpac is cutting margins to increase market share with a drop of 13 basis points in the margin on consumer loans to 2.10 per cent. Westpac said that margins were improving with an increase in branch sales of mortgages but that group interest margins are expected to decline further over the year.
 

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31 July 2007 - Climbing dollar takes a break
The Financial Review
Yesterday the Australian dollar traded as low as US84.5 cents, down 4.6 per cent on the US88.71 cents achieved last Wednesday. Sharemarkets fluctuated but the ASX200 Index closed 25.9 points higher after being down by as much as 38 points during the day. Analysts believe that the demand for commodities by countries such as China will remain strong and that the dollar will resume its upward trend.
 

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31 July 2007 - Home construction rate tumbling
The Australian
A survey of Australia's 100 largest developers by the Housing Industry Association has found that sales of new homes fell by 12 per cent in the 2006-07 financial year. The figures vary from state to state with Western Australia recording the worst drop of 29.7 per cent. South Australia saw an 18.9 per cent fall, NSW was down by 10.7 per cent and Victoria by 8 per cent. Queensland performed best with only a 2.3 per cent fall. The report also found that since 2000 building costs were up by between 40 and 50 per cent while land costs increased by an astronomical 200 per cent.
 

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30 July 2007 - Home ownership still Aussie dream
The Australian
A survey conducted by NAB has found that for those aged between 19 and 24 years, 90 per cent identify buying a home as their biggest goal in life. For the 25 to 34 year old group the priority is to see more of the world, but still 80 per cent say that home ownership is near the top of their list. However home ownership is just one of many goals for young people who usually have 5 major life goals while older groups averaged two goals each. The goals most often listed were overseas travel, volunteering, car ownership and huge adventures such as climbing Mt Everest.
 

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30 July 2007 - Melbourne million dollar club grows
Herald Sun
Since the start of this year the number of Melbourne suburbs where the median price for a home is more than $1 million has more than doubled to 17. Data from the Real Estate Institute of Victoria shows that the middle and top ends of the market in Melbourne is strong and affordability for first-time buyers continues to worsen. Eastern and beach suburbs are growing particularly strongly with the median price of homes in the suburb of Hampton jumping by 23.8 per cent in the quarter.

 

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30 July 2007 - Equities markets brace for sell off
The Australian
The continued sell off in US equities markets has local analysts tipping a further sell off in the Australian markets. The Dow Jones was off by a further 1.5 per cent on Friday evening taking the index 5 per cent lower over the week. This performance is the worse sell off in the last 5 years and the Australian market performance on Friday was the worst since the September 11 terrorist's attacks. AMP Capital believe the current climate could see between 7 and 12 per cent slashed from the markets current value with AMP economist Shane Oliver predicting the market to open close to 6000 today, meaning the market is off 6.8 per cent from record highs reached a little over a week ago. Technical analysis shows that if 6000 is broken the market could move to as low as 5650. The 2 per cent fall recorded on Friday wiped $41 billion off the market value of the ASX 200, a further 10 per cent fall would see close to $200 billion wiped from the market.
 

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30 July 2007 - Case builds for rate rise
The Financial Review
Data on retail sales and private sector credit is due out this week, both of which are expected to add to the case for the Reserve Bank to increase rates when they meet next week. Forecasters are predicting that seasonal factors plus government payments will have raised consumer spending for June. Sales of winter gear got off to a slow start due to warm autumn weather but the temperatures have been much colder since which would have driven a surge in sales. Adding to this, the federal government made $1.7 billion worth of payments to aged pensioners and carers but the impact of this depends on how much has been spent and how much saved.
 

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30 July 2007 - APRA warns on lost super
Investor Daily
The Australian Prudential Regulatory Authority (APRA) has released data showing that close to 5 million superannuation accounts belong to people who have lost contact with their superannuation fund. At June 2006 there were 29.1 million accounts, a significant increase from 16.3 million accounts in June 1996. APRA partly attributes this increase to employees joining a new superannuation fund as they change employment and forecasts that super choice and greater portability of funds will lessen future growth of the number of superannuation accounts.
 

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30 July 2007 - Aussie dollar lower over the weekend
News.com.au
The Aussie dollar will start the week lower falling rapidly over the weekend as investors locked in profits amid continued concerns surrounding the US mortgage sector. The dollar is trading around the $US0.8503 level well down from Fridays close of $US0.8583. Analysts expect the sell off to continue to below $US0.84 cents with any stability in global equities markets a signal for the Aussie dollar to receive some support. US GDP rose 0.6 per cent in the June quarter taking inflation to an annual rate of 3.4 per cent.
 

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27 July 2007 - Rate rise looks all but certain despite government spin
infochoice.com.au
In a blow to the Howard government's campaign to keep rates on hold the International Monetary Fund (IMF) has warned that central banks may need to increase interest rates in a bid to keep a handle on the sustained period of strong economic growth. Many national economies (including Australia) are operating at or near full capacity. The IMF comments follow the surprisingly high inflation numbers released in Australia on Wednesday, brought about by a strong acceleration in consumer prices in the June quarter.

Federal ministers, led wholeheartedly by the "Dynamic Duo" of Howard and Costello, are insistent that the annual inflation rate is well within the Reserve Bank's target range of between 2 and 3 per cent, and that there is no reason for the Reserve Bank to increase official cash rates. The financial markets however believe the government's argument will fall on deaf ears and have priced in an 83 per cent chance of a 25 basis point increase in official rates when the Reserve Bank meets on Tuesday the 7th of August.

A snapshot of the local and international economy's growth forecasts out to 2008 indicate that the Reserve Bank will be cautious in allowing any inflationary pressures to gather momentum. A hawkish approach may deliver some short term pain but will assist Australia in avoiding any significant periods of a sustained downturn in the future. The Australian economy is experiencing an almost one-off alignment of conditions; near record rates of unemployment, record rates of participation, high levels of consumer confidence, business investment confidence and housing prices recovering to near 2004 prices in many capital cities. These indicators combined make the case for an August rate rise highly compelling.

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27 July 2007 - Annual reports past it
The Financial Review
Research from the Australasian Investor Relations Association has found that almost 80 per cent of investors don't think that it is important to get a printed copy of company's annual reports as long as the information is available on the internet. Fewer than half the people who receive a printed copy of an annual report actually read all of it and 18 per cent don't read any of it. New federal laws mean that investors will have to ask to receive a printed copy of an annual report if it is available online.
 

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27 July 2007 - Banking policy prehistoric
Sydney Morning Herald
Outgoing Westpac chief David Morgan has again spoken out against the federal government's four pillars policy saying that it is a "woolly mammoth, dug from the Siberian tundra and shipped to Australia as a structure for banking". Dr Morgan is concerned that Australian banks are being prevented from participating in global mergers and corporate takeover deals such as the private equity bid for Qantas. Dr Morgan will retire at the end of this year after eight years as Westpac's chief executive.
 

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27 July 2007 - Rudd's housing affordability summit flourishes
Daily Telegraph
Kevin Rudd's much anticipated conference to tackle housing affordability issues was held in Canberra yesterday, with the Labor Leader grandly declaring "a national consensus". Labor's policies are expected to focus on assisting first home buyers save a deposit and Mr Rudd has already announced tax concessions for investors to increase rental housing. At the same time the Federal government has announced that the states' will lose their monopoly on Commonwealth funding for public housing, an estimated $1 billion is now open to private tender, namely councils, charities and developers. According to Community Services Minister Mal Brough, since 1996-97 NSW public housing stock has only risen by 4905 houses, from 133,675 to 138,580. The Commonwealth-State Housing Agreement will now see its first major change in 50 years, where NSW is now eligible to receive $301 million in funds for public housing this financial year.

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27 July 2007 - 50 per cent return for Fincorp victims
Daily Telegraph
Fincorp creditors have voted in favour of 47 resolutions that will result in the sale of 21 Fincorp companies being sold or liquidated. The sale will mean that secured noteholders in Fincorp will receive 50 cents in the dollar for their investments in September. Unsecured noteholders will not receive any of the funds but the administrators have reserved funds to pursue legal action against the former directors which may recoup some of their losses.
 

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27 July 2007 - Retail super funds lag
The Financial Review
Figures from the Australian Prudential Regulatory Authority show that retail superannuation funds are returning around 20 per cent less than the average fund due to higher costs. The latest information comes from analysing superannuation performance over the past 10 years. Retail funds have returned 5.3 per cent compared with an average return from all funds of 6.7 per cent. Public-sector funds performed best generating a return of 8 per cent, closely followed by corporate funds with 7.8 per cent, and then industry funds on 6.7 per cent.
 

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27 July 2007 - Rate rise won't slow property market
The Financial Review
Real estate agents say that if rates rise in two weeks there will be little impact on the demand for housing. Agents report that the market is going strong around the country with prices rising, particularly for higher end properties and those in desirable locations. However there is still danger in western Sydney where buyers often borrow 100 or 105 per cent of the property value and another rate rise will force more mortgagee sales.
 

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26 July 2007 - Super returns far from normal
Financial Review
Superannuation funds have delivered the highest returns in a decade due to booming equity and property markets. The median gain of 15.65 per cent by super funds balanced portfolios is a further increase on last year's 14.2 per cent return and the fourth year of double digit returns. The four year bull run has increased the 10 year return to 9.05 per cent with some industry insiders cautioning a return to single digit returns moving forward.
 

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26 July 2007 - Rate rise tipped as inflation rises
Sydney Morning Herald
Borrowers are bracing for an increase in official interest rates next month as the rate of underlying inflation jumped to 2.75 per cent, a sharp increase on the previous quarter. The increase has not been unexpected and is in line with other economic growth indicators, both domestic and global, that show the economy has strengthened throughout the year.
 

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26 July 2007 - Inflation still within RBA target band
Financial Review
Whilst underlying inflation is running at an annual rate of 2.75 per cent, the Federal Treasurer Peter Costello has pointed out that the headline inflation rate is running at 2.1 per cent, remaining well within the Reserve Bank's defined target inflation band of between 2 and 3 per cent. Talking to ABC television Costello said, "Whichever way you cut it, we're still within the band that the government has set with the Reserve Bank, 2 - 3 per cent is low inflation, and our monetary policy is directed at that target."
 

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26 July 2007 - ASIC and RBA remain unconcerned on private equity
Financial Review
In comments to a Senate inquiry the Australian Securities and Investment Commission believes there is no requirement for a regulatory overhaul on private equity deals, whilst the Reserve Bank of Australia has played down the effects of private equity transactions and leveraged buy outs on the federal tax take. The comments will undoubtedly deliver comfort to the private equity industry which is currently under fire in both the United Kingdom and United States of America where political parties are calling for greater transparency over taxation issues surrounding private equity and hedge fund structures.
 

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26 July 2007 - Second Australian hedge fund caught in US sub prime crisis
Financial Review
Sydney-based hedge fund Absolute Capital has closed withdrawals on a $200 million fund to protect its business as market liquidity in the US sub-prime credit markets continues to decline. Absolute told investors that it was facing an estimated 6 per cent loss in July and was not willing to sell assets into an already weak market. The fund (after legal advice) has placed a three month ban on withdrawals. The Yield Strategies Fund manages approx $200 million of a total $410 million managed by Absolute and is believed to contain a large amount of retail investment.
 

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25 July 2007 - Rental trap widening
Sydney Morning Herald
Over one-third of NSW renters suffered household budget stress bought about by rental payments taking more than 30 per cent of household incomes. 2006 census figures have highlighted the state wide spread of the rental crisis with rents soaring. The Prime Ministers own electoral seat of Bennelong is seeing 40 per cent of rental households contribute greater than 30 per cent of their income to their landlords
 

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25 July 2007 - Sydney property a tale of two markets
Sydney Morning Herald
Inner city areas of Sydney such as the inner west have helped raise the city's median property price despite continuing distressed conditions in some of the outer suburbs. Australian Property Monitors report the median house price in Sydney has increased 1 per cent to $528,533 in the June quarter whilst the Inner West recorded double digit growth of 11 per cent for the quarter. The Sydney median house price is still 7 per cent below the 2004 high of $570,000
 

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25 July 2007 - Customer satisfaction amongst banks increases
Financial Review
Recent investment by the major banks in improving customer service appears to have paid a dividend with all 5 major banks increasing their customer satisfaction levels with St George Bank importantly reversing last years drop in satisfaction. St George maintained their number one ranking by a comfortable margin with Westpac closing in fast on ANZ'S second position. CBA still lags its competitors but CEO Ralph Norris has set the bank the challenge to be number one sooner rather than later.
 

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24 July 2007 - Challenger to ASX emerges
Sydney Morning Herald
A US company, top brokerage house Liquidnet, has applied to the Australian Securities and Investments Commission to establish an alternative trading platform to the ASX. If approved the move would mean the end of the monopoly that the ASX has in processing trades of shares in listed companies. The new exchange would operate on a system of "crossing" where a single broker matches buyers and sellers on its own system and processes the trades directly. Liquidnet is targeting expansion in Japan, Hong Kong, Singapore, Malaysia and Australia.
 

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24 July 2007 - Dismal day of trade
Daily Telegraph
Fluctuating US Stocks has shaken Australian stock prices at the close of yesterday's trading, however commodity pricing kept the losses in line. Benchmark S&P/ASX200 index was down 31.4 points to 6390.4, while the All Ordinaries closed 28.9 points below at 6427.8. The Sydney Futures Exchange, dropping 45 points to 6,380 on the September share price index, finished on a volume of 19,307 contracts. Losses were kept minimal with the Big 4 Banks, with NAB down 44c to $40.38, Commonwealth 35c lower at $56.55, ANZ dropped 17c to $29.39, while Westpac remained steady at $26.70.
 

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24 July 2007 - Banks should beef up security
The Financial Review
The head of financial services for internet based RaboPlus, Bryan Inch, has criticised larger institutions for letting down their customers by scrimping on security upgrades to eliminate online scams. RaboPlus uses two factor identification, a combination of a one-time password device and personal identification number, which has resulted in no online fraud losses since being introduced. Mr Inch said "The banks have got to front up and implement appropriate security. The bottom line is that [large institutions] are not incurring the sorts of losses that makes it viable for them to upgrade their security."

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24 July 2007 - NZ fraud claims harder
The Financial Review
Liability for internet banking fraud in New Zealand has been moved from institutions to customers. Under the New Zealand Bankers Association code of conduct, consumers seeking compensation for losses due to internet fraud can be forced to submit their computer for analysis to see if they are sufficiently secure before any claim is paid. Most of New Zealand's largest banks are Australian owned but the Australian Bankers Association has denied that New Zealand is being used as a test case for similar changes here. Research has estimated that the big five banks in Australia currently incur losses of between $12 million and $15 million per month.
 

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24 July 2007 - Conditions easing for business
The Financial Review
The June quarter Producer Price Index has shown that business costs and charges were up by 1 per cent which exceeded market expectations, however the annual growth figure was a three year low of 2.3 per cent. Input costs are growing more slowly than output prices which is reducing the pressure on profit margins for business. Construction costs were up by 1.3 per cent for the quarter and it may not be long before this segment is growing at double the rate of inflation. More important to the deliberations of the Reserve Bank when it next meets in two weeks will be the June quarter consumer price index which is released today.
 

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24 July 2007 - Which way for dollar?
The Financial Review
Analysts are mixed in their views on the future outlook for the Australian dollar which is currently trading at 18 year highs. Chief economist for the Commonwealth Bank, Michael Blythe, expects that the dollar will be at 89 cents by the end of this year saying that the currency is commodities based and the dollar still lags commodity prices. However foreign exchange strategist at Deutsche Bank, John Horner, believes that while the dollar may jump above 89 cents in the next few weeks, it will be back under 80 cents by the end of 2007. Mr Horner believes that the current global economy could have peaked and says "a modest slowing will weigh on the outlook for the dollar given both its impact on commodity price prospects and also on risk appetites".

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23 July 2007 - Soaring $A raises alarm on CPI figure
Sydney Morning Herald
According to Bloomberg, the Australian dollar has surpassed US88c for the first time in 18 years, peaking at US88.34 and while many predict the dollar to reach US90c, economists believe an increase of the Reserve Bank of Australia's (RBA) official cash rate is the least of people's worries. Next month when the RBA board has its meeting, inflation figures, which are inversely related to the exchange rate, are of interest as it will provide a better indicator of whether the RBA board decides to raise the official interest rate. The RBA's trade weighted index, is the exchange rate economists use in determining underlying inflation, and since its last revised inflation forecast of 67, the index has increased to more than 70. As this figure increases, it indicates the economy is growing at a greater than anticipated rate and thus the RBA will intervene and increase the cash rate to slow down growth. Although the strength of the Australian dollar places a huge burden on certain industries, in particular mining companies, benefits are being realised by consumers, Goldman Sachs JBWere reported the June quarter the strongest in three years.
 

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23 July 2007 - ANZ renews focus on business banking
The Australian
ANZ Bank's new boss of institutional banking Peter Hodgson has said that volume by itself is not a worthwhile pursuit. Mr Hodgson said that while he would be keeping an eye on costs it would only be to keep them in line with revenue opportunities and promised faster decision making. Over the past two years the Bank's share of business lending has shrunk from 18.3 per cent to 16.4 per cent and at the announcement of the March half-year profit chief executive John McFarlane said that the result would have been "an absolute stunner" if not for institutional banking.
 

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23 July 2007 - Fincorp loans not recoverable
Sydney Morning Herald
Failed property group Fincorp had lent a total of $28 million to 15 other companies and individuals who were unable to obtain financing from banks and other lenders. Receiver Ferrier Hodgson has now said that it is likely that only $6.4 million of these loans would be recovered. Eight of the 15 loans were secured as first-ranking property mortgages however the remaining seven were either second ranking or mortgages or had caveats that put Fincorp behind other lenders. Many of the external loans are in default and there will be no cash left for the Fincorp receivers when the properties are sold.
 

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23 July 2007 - Wall Street in retreat
Sydney Morning Herald
Sharp losses have been incurred on Wall Street following disappointing company profit results as well as concerns about sub-prime mortgages. The Dow Jones fell 1.07 per cent on Friday to close at 13,851.08. On the local front investors are waiting for the latest quarterly inflation figure which will have strong influence on the outlook for interest rates.
 

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23 July 2007 - Risk in election promises
Daily Telegraph
Independent forecaster Access Economics said that inflation risks were worsening due to falling unemployment but this would ease as productivity improves. On the business front Access director Chris Richardson said that the business cycle that has been running since 2002 is stunning with an increase in capital expenditure of 85 per cent. Access has also warned that the $70 billion of policy costs being pumped into the economy from the federal budget, as well as further promises in the lead up to the election, are putting upward pressure on interest rates.
 

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20 July 2007 - Record close for Dow Jones
Courier Mail
The Dow Jones Industrial Average rallied overnight to set an all time record high. The Dow jumped 82.19 points, or 0.59 per cent to close at 14,000.41, almost 3 months after the Dow first pierced the 13,000 barrier. A surge of big mergers and acquisitions fuelled by private equity firms has led the US stock market to race to record heights this year. Al Goldman, analyst at AG Edwards said that "robust corporate earnings reports", especially in the tech sector, had fuelled the latest gain.
 

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20 July 2007 - Rising A$ may ward off rate rise
infochoice.com.au
Little new has emerged in the past week in the interest rate outlook and the chances of a rate rise as soon as August still hang on the release of the June quarter inflation figures on Wednesday.

The heat came off nicely in the March quarter with the inflation rate settling back to well within its target range. But the Reserve Bank has warned that inflation is likely to rise again from those levels and at the first sign of underlying inflation measures heading North again the RBA board is likely to act on interest rates.

But at this stage it's not likely that the coming week's inflation result will be bad enough to bring on an immediate response to raise rates. The economy so far has shown great resilience to inflationary pressures that had been fully expected to emerge amid the strong growth experienced in recent times.

Now, the rise of the Australian dollar offers more insulation against inflation, reducing the prices of the large volumes of imports being sucked in to our hungry economy. The Aussie dollar going over 80 cents during the last quarter will have started to have an anti-inflationary impact that will only grow this year as it heads towards US90 cents.

Already at an 18-year high against the US dollar, the rising Aussie is likely to hit exports hard next year and put a drag on economic growth. But at least for borrowers, the rise is good in the short term, reducing the likelihood or at least the magnitude of interest rate rises.
 

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20 July 2007 - Consumer sentiment remains high
Daily Telegraph
The Reserve Bank of Australia yesterday released figures showing total credit card debt at an all time high of $40 billion. Credit card spending is typically driven by retail purchases, rather than cash advances, and over the previous year in May there has been a 4.8 per cent decline in cash advances, from $1.135 billion to $1.086 billion. Consumer spending in the month of May continued to increase at relatively high levels, despite signs of a slowdown, with card purchases rising 6.2 per cent to a total value of $16.35 billion. Average debt was also reported to have risen by 7.2 per cent, to $2,990. CommSec economist Martin Arnold said "With the jobs market so robust and household income rising, we're going to see continued strength in consumer spending."

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20 July 2007 - Security checks faster
The Financial Review
The Federal government is looking to establish a national securities register which would record all encumbered personal property. The new electronic system will make it easier for consumers, finance companies and businesses to determine whether there is any money owed on the personal property before purchase. Currently it is not possible to check the records for every state in real time when purchasing a motor vehicle. Data will be available on the web, by SMS, call centre, interactive voice response, fax, mail or over the counter. The project is being driven by Federal Attorney-General Phillip Ruddock who said "Personal property security reform will reduce red tape for businesses and lead to cheaper finance, more competition in the financial services sector and a reduction in legal disputes."

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20 July 2007 - Fincorp directors face court
The Financial Review
Administrators of the failed property group Fincorp have set aside over $5 million to pursue court action against the property finance company's former directors. The directors would face charges over potential breach of duties, keeping inadequate accounts and making large payments to insiders. A deal to sell the assets of the company will go before creditors next week and would return 50 cents in the dollar to investors.
 

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20 July 2007 - Housing supply dwindles
The Australian
Housing supply is still tightening with the Housing Industry Association yesterday reaffirming its forecast of a 1 per cent drop in housing starts in 2006-07. The outlook for 2007-08 is not much better with HIA predicting only a 3 per cent rise which would not be enough to meet expected demand. Chief economist of the HIA Harley Dale said "Without a concerted all-of-government approach to rectifying the affordability crisis, the build-up in unmet demand will intensify."

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20 July 2007 - Housing industry suggestions panned
The Financial Review
A group representing renters has criticised the joint statement issued yesterday by four industry bodies that suggested ways of improving housing supply as the answer to the current affordability crisis. Australians for Affordable Housing spokesman David Imber said that improving the supply side would mainly benefit developers and speculators rather than people struggling to buy or rent a home. Mr Imber said "Industry groups are always quick to ask for special treatment but never offer any guarantee the savings they make will be passed on to renters and purchasers." He went on to say that policies needed to create supply at the lower end of the rental market and provide genuine non-inflationary assistance for targeted home buying and renting.
 

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19 July 2007 - Dollar highs OK by Reserve
Sydney Morning Herald
The Reserve Bank governor Glenn Stevens said yesterday that the bank was comfortable with the current high value of the Australian dollar and is not considering intervention to slow the currency's rise. The dollar has already reached an 18 year record high of US88 cents and is being tipped to move above US90 cents. Mr Stevens warned that any future crisis may be quite different to the one that hit Asian financial markets in 1997 when the Australian dollar slipped below US60 cents. "It is at least as likely to be truly global as to be regional, and just as likely to originate in the developed world as in the emerging world," he said.

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19 July 2007 - Property groups call for real change
The Financial Review
Four of the main industry property groups in Australia have called on the political parties to address the structural issues causing the housing affordability crisis instead of offering temporary fixes. A joint statement form Master Builders Australia, the Real Estate Institute of Australia, the Residential Development Council and the Urban Development Institute of Australia said that the key areas to improve were land supply, development approval delays and insufficient infrastructure. The four have suggested that Australia should have an independent residential housing affordability authority along the lines of the National Housing and Planning Advice Unit in Britain.
 

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19 July 2007 - Westpac terminates cards
Sydney Morning Herald
A security breach has resulted in Westpac cancelling thousands of Visa credit cards over the past week. The only thing that Westpac will say about the security breach is that it relates to a third-party vendor which had contact with all the affected cards. The bank is in the process of writing to customers whose cards have been cancelled.
 

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19 July 2007 - Borrowers may face deposit requirement
Herald Sun
A proposal that would force home loan borrowers to have a deposit of at least 20 per cent has been criticised by the housing industry, saying that it would stop home construction. A House of Representatives economic committee said that mandating the deposit level would help to prevent people from borrowing too much. Housing industry experts believe that this is too restrictive and that for some people a 100 per cent loan is viable. The committee is due to report to parliament within the next month after considering views of banks and consumer groups.
 

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19 July 2007 - ACR payout looks up
The Financial Review
Investors in the failed property group ACR may get between 70 cents and 85 cents in the dollar. The news follows a rumoured offer to purchase the ACR property portfolio for between $460 and $500 million. While there is nothing signed yet the price would go a long way to recouping the value of investments with more than $228 million owed to secured lenders and over $328 million to unsecured investors.
 

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19 July 2007 - RAMS float to determine value
The Financial Review
RAMS will be the first non-bank lender to list when it debuts on the stock exchange on 27 July. Investors are unsure of how the business should be valued, whether it is somewhere between the regional banks and Mortgage Choice, or if it is more a wholesale mortgage financier like Adelaide Bank. The lender has $13.3 billion of loans under management, posted a profit of $23.3 million for the 2006 financial year and is expected to be valued at just over $1 billion when it floats.

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19 July 2007 - Family housing unit holds its own
The Australian
The 2006 Census has concluded there has been no change in the market share by household type, despite speculation that societal changes seen between the 1991 and 2001 censuses would continue through this decade. Family occupied housing, comprising mum, dad and children, was a healthy 41 per cent of all households at the 1991 census, however a decline of 8 percentage points was reported in the 2001 census. A further downturn was predicted to follow, however, the traditional family unit comfortably held their market share of 33 per cent of all households between the 2001 and 2006 censuses. The number of privately occupied dwellings in Australia last August, was up 524,000, to 7.59 million, indicating an average annual growth of about 105,000. Household formation between 2001 and 2006 is 1.5 per cent a year, while the population growth averaged 1.2 per cent over this period.
 

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18 July 2007 - Positive credit risks
Sydney Morning Herald
The Australian Law Reform Commission is currently weighing up the risks and benefits in moving to a positive credit reporting system. Currently we have a negative reporting system where the information stored largely relates to defaults. A positive system would mean that additional information could be collected such as current credit card limits and balances, payment history, opened and closed accounts as well as information about applications. While some bankers think that the extra information would result in better credit decisions other suggest that it would simply result in higher levels of lending as institutions target people who could carry more debt.

 

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18 July 2007 - Sub-Prime loan crisis to spread
Sydney Morning Herald
The US sub-prime loan crisis will certainly affect further Australian investors according to leading Australian fund managers, David Bryant the head of Australian Unity Investment saying "I would be surprised if there weren't more. Not all of the problems have floated to the surface". In the US market there is approximately $2 trillion in US mortgages that are currently on attractive honeymoon or introductory rates, these loans are expected to revert to significantly higher variable interest rates over the coming 18 months. It is the end of honeymoon periods that have been blamed for the high default rates within the sub-prime market and to date, 40 US based sub-prime lenders have been shut down whilst a number of high profile hedge funds and investment banks have been caught in the debt repricing, including Australia's Basis Capital.
 

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18 July 2007 - ANZ boss questions penalty fees
The Sheet
Outgoing ANZ CEO John McFarlane has told the Australian British Chamber of Commerce that penalty fees hurt those least able to afford them - though ANZ doesn't plan to make any changes to their fee structure in the near term. Responding to a question from journalist Michael Pascoe McFarlane has been reported as saying "If you charge a fee to somebody who doesn't have much money in their bank account, then you charge the same fee again when they present another cheque and so forth, eventually they build up a negative balance that is unsustainable."
 

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18 July 2007 - Citigroup and Amex last two standing with David Jones
The Australian
Retailer David Jones has narrowed its future credit card partner down to either American Express or Citigroup; the two remaining candidates are left from an initial group of 11 institutions bidding for the DJ's business with a final decision expected in November this year. The winning group will also take over operational responsibility for the existing DJ's store card that contributes approx 30 per cent of the groups' annual pre-tax earnings.
 

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18 July 2007 - Now lenders are to blame for affordability crisis
The Financial Review
The Federal Government has opened up on mortgage lenders in the housing affordability debate launching an inquiry into if lending standards have become too lax. A House of Representatives committee will examine the issue meeting with lenders, regulatory bodies, industry groups and community groups. The inquiry comes hot on the heels of the Labor Party plans for a housing affordability summit before the Federal election.
 

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18 July 2007 - Saving level sinking
Sydney Morning Herald
Research from ING Direct shows that the proportion of households able to save money has fallen 11 points to 46 per cent over the past year. NSW is the worst performer with only 43.1 per cent able to save. The report also found that nationally the number of households that are going into debt to get by is up from 4 per cent to nearly 7 per cent. On a more positive note the number of Australians saying that they were saving to reduce debt has increased from 17 per cent to 25 per cent.
 

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17 July 2007 - ASIC put freeze on Fincorp founder
The Financial Review
The Australian Securities and Investment Commission (ASIC) has placed a freeze on the assets of Fincorp founder Eric Krecichwost and 12 associated parties as the administrator attempts to recover money that may have been taken from the development company before its collapse in March 2007. The asset freeze has occurred at a time that the property portfolio held by Fincorp will be purchased by Becton Property Group and AV Jennings for $205 million. Fincorp Administrators Korda Mentha say that the sale will result in secured noteholders receiving a return of 50 cents for every dollar invested whilst non-secured note holders will not receive any returns. Korda Mentha believes the total shortfall to investors in Fincorp Investments will exceed $120 million.
 

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17 July 2007 - Basis Capital calls a halt on withdrawals
The Financial Review
High profile Australian hedge fund Basis Capital has been forced to suspend all withdrawals from its flagship fund after last week informing investors of its exposure to the US sub-prime loans industry. The fund has been unable to calculate the value of its clients holdings post a revaluation of its assets, saying yesterday in a client note "This recent turn of events has made it impracticable to be able to fairly calculate the net asset value of the fund". Basis Capital manages over $2 billion of funds for investors and superannuation funds with more than 10 per cent believed to have been invested through leading investment platform catering for private investors. The move to halt all withdrawals follows a warning last week that there may be limited redemption limits imposed.
 

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17 July 2007 - Unlisted funds deliver fee frenzy
The Financial Review
Unlisted funds are tipped to deliver Macquarie Bank as much as $1 billion in performance fees over the next five years offsetting any downturn in performance fees from listed funds. Last year wholesale investors placed more than six times ($19 billion) the amount into unlisted funds with Macquarie Bank than into the banks listed funds, a dramatic turnaround in investor allocation from three years ago where the majority of investor demand was for the banks listed vehicles.
 

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17 July 2007 - Home loan demand to slow
The Australian
A recent joint mortgage industry survey conducted by industry body MFAA and BankWest indicates that less people are expecting to take out a new home loan in the coming 12 months whilst the number of people who were unsure, or never expect to take out a home loan increased by more than 15 per cent from a survey conducted in November. The survey indicates the home loan slowdown will be nationwide with no major distinction between states, whilst 61.6 per cent of those surveyed believed property prices would increase in the next quarter.
 

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17 July 2007 - New generation ATM's
The Financial Review
Financial technology company NCR yesterday launched a range of smart, multi-purpose ATM's. The new machines use paper scanning technology to handle bill payment, cheque clearing, claim forms and cash. Woolworths is in talks with NCR to be the first location for the ATM's and at least one of the big 4 is considering upgrading their ATM fleet in the next year.
 

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16 July 2007 - BankWest move pressures profits
The Financial Review
Analysts are predicting that expansion plans announced by BankWest could cut earnings for the five largest banks by 12 per cent in the 2008-09 financial year. While worst-case scenarios are unlikely to be realised, Goldman Sachs JB Were said that if the local banks lost 2 per cent market share and margins fell by 0.1 per cent cash earnings would drop for Commonwealth Bank by 8.7 per cent and 11.6 per cent for St George. Predictions from Deutsche Bank were more dire with their worst case resulting in profitability for the banking sector dropping between 19 and 28 per cent in the medium term.
 

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16 July 2007 - Key costs up in June
The Financial Review
Citigroup has conducted price analysis which found that household costs jumped almost 1 per cent in the June quarter. Petrol prices were up 9.7 per cent, health insurance up by 4.5 per cent and rents rose 1.5 per cent. Despite these increases Citigroup believes that inflation will continue its downward trend on an annual basis as the growth in prices is significantly less than this time last year when the CPI was blown out to 4 per cent by soaring petrol and banana costs.
 

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16 July 2007 - AWA's drive down wages
The Financial Review
A report commissioned by the Victorian government has found that workers under Australian Workplace Agreements earned 16.3 per cent less than those on collective agreements last year. Generally employees on AWA's in small businesses were paid less than those on collective agreements while the reverse was true for those in large firms and the public service. Median earnings under AWA's in 2006 were $20.50 - $4 below the median earnings under collective agreements.
 

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16 July 2007 - Queue for tax amendments
The Financial Review
The Commonwealth Ombudsman is urging the Australian Taxation Office to explain reasons for decisions to taxpayers more clearly and to address delays as a report reveals the extent of complaints about the ATO. A leaked document reveals that there is waiting list of 70,000 income tax return amendments and that ATO phone lines have been diverted to a shopping centre as well as an individual's mobile number. The ATO has said that the number of outstanding amendments is more than they would like and that they have put some extra people onto the problem.

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16 July 2007 - Closure for finance scandal victims
The Financial Review
The 3,600 people who lost up to $150 million in the West Australian finance broker scandal will receive a share of a $30 million compensation package funded by the state government. The pooled mortgage investment schemes were promoted by finance brokers in the 1990's with rorts and systemic failures investigated in 2001. The $30 million settlement followed action by investors against the state government claiming that the Finance Brokers Supervisory Board did not protect them from unscrupulous finance brokers.

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16 July 2007 - RBA prepare for next phase of reforms
The Australian
Since 2000, the Reserve Bank of Australia (RBA) has been working hard to abolish the nation's $60 billion payments system, whilst confronting legal challenges by Visa, Mastercard and retailer groups. There have been significant improvements made, with an estimated $900 million in consumer savings due to lower merchant service fees and increased market competition. Deputy chairman of the payments system board, Philip Lowe, believes there is "a willingness by some in the industry to explore a wider range of possibilities than was the case seven years ago." The next phase on the agenda for the RBA is to enforce regulation on the automatic teller machine system.
 

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16 July 2007 - Records made in US market
Sydney Morning Herald
Last Friday Wall Street had a second day of record highs with the Dow Jones Industrial Average of blue chips climbing by 45.5 points to close at 13,907.2. Other indexes on the exchange also achieved record levels following General Electric's announcement of a 10 per cent increase in profits despite losses from sub-prime mortgages.
 

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13 July 2007 - Jobs breather does little to ease rates threat
infochoice.com.au
Pressure for an increase in interest rates has perhaps eased slightly following the release of the June jobs figures showing a slight increase in unemployment and a decrease in full-time jobs.

However, there is nothing much in this latest monthly employment result to suggest the jobs boom is coming to an end, or that the heat is off inflation. After a strong run of full-time job growth in recent months, there was bound to be some form of correction in a set of figures that is notoriously volatile from month to month anyway.

Unemployment edged up 0.1 percentage point to 4.3 per cent, but this is really accounted for in a rise in the participation rate as people are drawn back into the workforce by the attractive job climate. Part-time jobs grew strongly, offsetting the full-time decrease.

The outlook for jobs growth still looks healthy in the second half of 2007, especially when combined with high consumer confidence (despite a slight fall in July) and ongoing growth in lending finance. Business lending grew 1.1 per cent in May, reversing a fall in April and adding to healthy overall growth over the past year. Personal credit grew 2.2 per cent and housing lending rose a modest 0.2 per cent.

All in all, the pointers suggesting continuing growth in the economy are little changed. The question is whether this leads to a squeeze that leads to wage and price inflation, and the need for the Reserve Bank to raise interest rates. That risk is certainly there and the release of the June quarter inflation figures in two weeks is critical for the 'if and when' questions about a rise in interest rates.

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13 July 2007 - Virgin calls for caution
infochoice.com.au
Virgin Money has backed calls for lenders to adopt responsible lending practices and not give consumers larger loans than they can afford to service. CEO of Virgin Money David Wakeley said that a huge area for concern is around high loan to value ratio loans which can be 105% of the property value and higher. Mr Wakeley also criticised the measure of 'mortgage stress' which is being applied to households where 30% or more of their income is committed to housing costs. Instead, individual circumstances need to be taken into account, whether they are single or have a family, any other costs and potential interest rate rises.

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13 July 2007 - Fewer jobs eases rate pressure
Daily Telegraph
A slight increase in the unemployment rate has eased pressure on the Reserve Bank to increase rates. The rise from 4.2 per cent in May to 4.3 per cent in June was small with the number of full time jobs falling by 34,300. A senior economist at ANZ, Riki Polygenis, said "After two red hot months in April and May, a pause in employment growth in June was always a possibility. This will ensure that the Reserve Bank remains on a tightening bias for some time to come, but will not be sufficient to prompt a rate hike before the federal election."
 

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13 July 2007 - Finding value in branches
The Financial Review
In a turn-around from the thinking that prevailed in the 1990's, the number of bank branches was up 4 per cent last year to almost 5,150. Banks have realised that there is value in the face-to-face experience even though 16 per cent of Australians use internet banking every day and 52 per cent use it at least once per week. While improvements are being made to the "retail experience" local banks are still some way behind Japanese banks which offer joint bank-cafes or sharing space with McDonalds to attract younger customers.
 

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13 July 2007 - New look BankWest branches
The Financial Review
New branches, announced by BankWest this week as part of a major expansion into the east coast markets, will be located at shopping centres, retail precincts and commercial districts. The branches will open for longer hours, including weekends, and will be designed to be brighter and more like a store. While other banks have found it difficult to obtain suitable locations for additional branches, BankWest have said that they have already secured locations for their initial branch openings later this year.
 

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13 July 2007 - Ratings agencies warn investors
The Financial Review
Credit ratings agencies PIR, Rapid Ratings and Grosvenor Bond Watch, which had all rated Bridgecorp as investment grade, are now trying to distance themselves from the development finance company's collapse. After ASIC had taken action to prevent Brdgecorp from further fund-raising in Australia, PIR had downgraded a Bridgecorp notes issue. Rapid Ratings have said that they have been in wind-down mode in the Australasian region since they pulled out of the New Zealand market in January 2006. The agencies said that investors need to better understand the risks involved before putting money into such schemes.
 

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13 July 2007 - BankWest bank on competition
Sydney Morning Herald
BankWest will take on the big four banks in the East Coast with the backing of its parent company HBOS. HBOS is one of the United Kingdom's biggest banks with assets of approx 380 billion pounds (A$900bn). The Big four have in recent years had skirmishes with regional players expanding outside of their core markets such as Bank of Queensland, Bendigo and Suncorp but BankWest may well prove to be a very different opponent with the deep pockets of its parent sure to make some banking executives nervous. Post the branch roll out BankWest will have over 260 branches which will still be short of the 390 branches offered by St George bank; Commonwealth Bank boasts the biggest branch network of over 1000 across Australia.
 

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13 July 2007 - Sydney based hedge fund looks to limit withdrawals
Sydney Morning Herald
A Sydney based hedge fund manager Basis Capital Funds Management has put a limit on withdrawals from two of its funds that invest in collateralised debt obligations (CDO's). CDO's are considered a higher risk product and recent losses resulting from the US sub-prime lending markets have seen credit agencies downgrade large amounts of sub-prime related debt. Basis Capital in a newsletter said "the imposition of withdrawal limits, were designed at inception to ensure the funds survival through periods of extreme dislocation such as this." Basis Capital was founded in 1999 and is located in Circular Quay Sydney, the fund has said it investments are "fundamentally sound".
 

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13 July 2007 - Lending standards called into question
Sydney Morning Herald
Home lenders are providing loans that will require the borrower to repay more than half their monthly income in repayments, well in excess of the defined 30 per cent level of mortgage stress. Amid fierce competition it appears many lenders are bypassing physical valuations in favour of cheaper online services. Data compiled by research firm Fujitsu Consulting reveals that one quarter of non-conforming loans are approved without an onsite inspection. In NSW the average loan to valuation ration (LVR) has increased from 51 per cent in 2003 to 75 per cent in 2007. The increase in loan sizes and inaccuracies in some valuation methods are placing borrowers in danger of negative equity (meaning they owe more than their house is worth).
 

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12 July 2007 - Mortgage Stress centred in safe Labor seats
The Financial Review
The centre of the housing affordability crisis is south-west Sydney where it is estimated more than half of all families are paying in excess of 30 per cent of their income on housing repayments. Data prepared by the Housing Industry Association (HIA) has revealed that the problem is at its worst in a number of safe Labor seats, with only one government held seat (Wentworth) in the top ten electorates under mortgage stress.
 

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12 July 2007 - Mortgage defaults on the rise
The Financial Review
Mortgage defaults and arrears in the mortgage funds industry are on the increase whilst investors appear to be taking cover as recent collapses of property finance companies and falling returns take their toll. A report by global ratings agency Standard & Poor (S&P) indicates that the worst is yet to come with higher interest rates stimulating returns, expected to increase defaults among borrowers. S&P has issued downgrades for 12 mortgage funds.
 

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12 July 2007 - BankWest lay down challenge to majors
InfoChoice.com.au
BankWest have announced plans to increase their East Coast distribution with plans to open more than 160 branches in NSW, Victoria, Queensland and South Australia over the next 3 to 4 years. The plan is believed to be the largest branch expansion program undertaken from scratch in Australia and will challenge the dominance of Australia's big four banks. The plan will see 125 retail and 35 business banking branches opened. It is envisaged that more than 3,000 jobs will be created and during 2007-2008 $380 million will be spent on the project.

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12 July 2007 - Debit cards on rise but credit still number one
The Age
Australians are increasingly opting for debit cards rather than conventional credit cards. Over the past 12 months, the number of debit cards issued has increased by 16.3 per cent. Bruce Mansfield of Visa says the take-up of debit cards is largely attributable to demand from the youth sector. Mansfield believes that debit is more appealing to young people and consumers hesitant to take on more debt. The Australian Merchant Payments Forum is concerned that banks are pushing the debit cards in an attempt to reduce use of the EFTPOS system.
 

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12 July 2007 - Westpac turns green
Sydney Morning Herald
Westpac is planning to launch a line of new environmentally sustainable products and services supported by a marketing campaign that will highlight their community and environmental credentials. While the move was welcomed by marketers they warned that consumers are about to be hit by a wave of "greenwash" as more companies seek to attract customers by addressing environmental concerns.
 

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12 July 2007 - US mortgages lead market lower
The Financial Review
Credit rating downgrades of up to US$17 billion in bonds backed by sub-prime mortgages have re-ignited concerns surrounding US credit markets. There are increasing fears that the US housing market may have a negative effect on growth for longer than previously anticipated and that higher interest rates will prolong the weakness in the housing market.
 

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12 July 2007 - Anti-Money laundering chief fires warning shot
The Financial Review
The head of the national anti-money-laundering regulatory body has threatened to implement sweeping powers to ensure that the financial institutions comply with harsh federal laws. AUSTRAC CEO Neil Jensen has warned company directors and senior executives that their operations need to be ready to comply with federal regulations to be implemented in the coming 18 months.
 

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12 July 2007 - McDermott to take new ball for Bridgecorp
The Financial Review
Former Australian cricket star Craig McDermott has emerged as the largest debtor to failed property finance company Bridgecorp, owing $18 million which was used to finance residential developments in South East Queensland. Bridgecorp went into receivership on July 3 2007 owing $24.6 million to 1,032 Australian investors. McDermott said that he had not yet been contacted by the administrator but will be working with the administrator to work through Bridgecorp's difficulties when and if they call him.

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11 July 2007 - Great rates on offer
Sydney Morning Herald
Negotiating for the best possible rate is of common practice in today's society, deals can extend from discounts on home loans to special rates offered on term deposits. However, for consumers wanting to attain competitive deals, it would require them to increase their product awareness and knowledge. Term deposits are a prime example, where you can achieve the best possible rate for the initial term, but at the end of the term if you neglect to review the term deposit arrangement, the money will be reinvested at the standard "carded" rate, a rate generally lower than what the investment was initially earning. A lot of the time, term deposit rates are given at the banker's discretion, indicating there is room for bargaining for those willing to go the distance.
 

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11 July 2007 - Melbourne rentals scarce
The Financial Review
Rental vacancies in Melbourne have remained under 2 per cent for the past 17 months. According to figures from the Real Estate Institute of Victoria, the vacancy rate for properties within four kilometres of the city centre was only 1 per cent in May, down from 1.3 per cent in April. Median rents in Melbourne are up 6 per cent on a year ago which is the highest increase in 10 years.
 

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11 July 2007 - Investors busy while renters squeezed
The Financial Review
Investors returning to the property market will only make it harder for first-home buyers. The proportion of first-home buyers was down 0.6 per cent in May to 16.6 per cent, significantly below the long term average of 20 per cent, while loans for investors increased 8.9 per cent in May, now accounting for 31 per cent of approvals. Of further concern is the slow pace of housing construction with building approvals down 5 per cent in May which includes a 10 per cent drop in apartment construction.

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11 July 2007 - Bull run may keep going
The Financial Review
The head of quantitative research and investment at broking firm CommSec, Ron Bewley, has said that total growth of the sharemarket in the past four years is less than average and that the current bull run is still two years short of the average length. Mr Bewley also said "There has not been a single occasion in the last 124 years where gains made over a run of four positive years were completely eroded by a subsequent negative run." Many analysts are tipping that the ASX 200 index will hit 7,000 some time in the next 12 months.
 

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11 July 2007 - Brochure shines light on dodgy investments
Daily Telegraph
The Australian Tax Office has issued a new brochure to help consumers to tell the difference between a good investment scheme and a bad one, although sometimes it's not easy to work out. In the brochure the ATO recommends getting independent advice, particularly in cases where some of the benefit relies on large tax refunds or putting money in an offshore tax haven. Consumers should also check for a product ruling which gives a legally binding ruling on that any tax deductions will be available to you as long as the scheme is conducted as set out in the ruling. The brochure is called 'Don't take the bait' and is available from the ATO now.

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11 July 2007 - Free credit not so cheap
Daily Telegraph
ASIC has warned consumers that in-store credit offers are not designed to help you to save, but encourage more spending. Delia Rickard, ASIC's deputy executive director of consumer protection, said "When added to the price of purchase, fees imposed for interest-free terms may equate to a much higher rate of interest on a purchase than if a standard credit card was used - possibly in excess of 20 per cent." She also said that if items aren't paid off within the interest-free period there could be interest rate charges as high as 27.99 per cent. InfoChoice says that the only way to take advantage of the interest- free deals is to pay the amount off in full before the expiry of the interest-free period.

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11 July 2007 - Discounted rates for the research savvy
Sydney Morning Herald
The findings of a recent Wizard Home Loans survey confirmed that a third of prospective home loan borrowers were unaware of discounted rates, indicating that Australians are not well informed about the home loan market. The Reserve Bank of Australia (RBA) quotes the average discount offered to borrowers on a standard variable rate home loan is 0.6 per cent, with more aggressive lenders offering up to 0.9 per cent. Chairman of Wizard, Mark Bouris said "Seventy-eight per cent of respondents to our survey said that a lender should tell them if they are eligible for an interest rate discount. They felt that they should not have to ask for it."

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10 July 2007 - Low job ads not all good news
Sydney Morning Herald
Economists are tipping an unemployment rate of below 4 per cent as the number of job ads has increased 36 per cent over the past year. The real level of vacancies is even higher as some employers have given up advertising positions that they cannot fill. There is a danger in the good jobless rate however with concerns that the low jobless rate could mean higher wages as competition to attract workers heats up. These figures mean that there is an increased possibility of the Reserve Bank increasing interest rates next month as a pre-emptive move against inflation.

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10 July 2007 - Tax benefits for cheap rentals
Daily Telegraph
After an altercation with a parrot in Adelaide yesterday, Labor leader Kevin Rudd proposed a new scheme to ease the shortage of rental properties. Under the plan landlords offering rental properties at below market rates would receive tax credits. Labor sources say that housing is a hot topic with voters. The parrot had lured Mr Rudd into a pet store but became territorial and bit him when he got too close.
 

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10 July 2007 - Below market buybacks not on
Daily Telegraph
ASIC has moved to stop a company that is making unsolicited share offers at below market price. Between 26 April and 19 May this year offers were made by Share Buyback Group to holders of shares in Bendigo Bank, The Rock Building Society, Mackay Permanent Building Society and Wide Bay Australia. In response Share Buyback Group has written to those who accepted its offers with an opportunity to change their minds.
 

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10 July 2007 - Vietnam broker acquired by ANZ
Daily Telegraph
ANZ Bank has invested further in its Asian operations with the purchase of Saigon Securities Incorporation (SSI) for $102 million. A spokesman for bank said that ANZ was one of the first foreign banks to open in Vietnam and that expansion in the country was a priority. SSI is a major player in the Vietnamese equities market having advised 11 of the 35 companies that have listed on their national stock exchange and accounted for 27 per cent of trades last year.
 

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10 July 2007 - Banks looking for customers to help fight fraud
The Financial Review
The major banks are offering customers discounted online security products to assist in fighting online banking fraud that is estimated to be costing more than $100 million per year. Both NAB and St George have confirmed they have entered into website referral agreements with a variety of software companies whilst CBA, Westpac and ANZ are expected to announce similar ventures in the near future. The move by the major banks to promote online security initiatives is a significant shift in strategy in assisting customers with their personal online security requirements.
 

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10 July 2007 - New entrants fight on price
The Financial Review
Rating house Moody's Investor Services yesterday announced that it maintained its 'Aa1 stable' rating for bank deposits. Moody's said that while asset quality had deteriorated to some extent following recent rate rises, impaired loans would need to increase dramatically to cause a review of the asset quality rating from 'A' to 'B'. The biggest threat to rating stability is aggressive new entrants such as HBOS, ING and HSBC who are using price to increase competition.
 

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10 July 2007 - Green exchange on the way
The Financial Review
A new sustainability investment market (or SIM) will be opened on the NSX in September this year. The board is being developed by the Financial & Energy Exchange (FEX) and will be devoted to the sustainability and clean technology sectors. The board will be the first of its kind in the world and is being done to bring together the purposes of wealth creation and environmental sustainability. Already FEX have had enquiries from 20 companies that ate interested in listing on the board but applicants will be screened for suitability before being approved for listing.
 

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9 July 2007 - Citibank leads way on savings
infochoice.com.au
Citibank are offering a market-leading at call deposit rate of 7.0%p.a. for new funds deposited to the savings component of their Citibank Plus account. The new rate will be paid until 31 December 2007 as long as a minimum monthly balance of $5,000 is maintained. Even if the minimum monthly balance is not maintained account holders will still earn the standard rate which is a healthy 6.0%p.a. The Citibank Plus account also gives free access to any ATM in Australia and, if you have your salary credited to the account each month, there is no account keeping fee.

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9 July 2007 - 3 year low rate from CUA
infochoice.com.au
CUA, one of Australia's largest credit unions, have launched a new home loan option with a low variable introductory rate for the first three years. The reduced price does not mean reduced features though with lump sum payments allowed, 100% offset available and free redraw. As well as being a standard mortgage to buy a home the loan can be used for purchase of land or construction of a new home. Currently the interest rate is 7.29% and there are no ongoing fees.

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9 July 2007 - Cards behind high bankruptcy
The Financial Review
In the last financial year 25,242 people were bankrupted despite good economic conditions and low unemployment. The figure is 13.2 per cent higher than the previous year while debt agreements were up by 34 per cent. Unsustainable lending rather then unemployment is driving the increase with the typical candidate having significant credit card debt used to support a struggling business. Debt agreements are a less formal alternative to bankruptcy that were introduced by the federal government in 1996 and are mainly used by consumers with after-tax income of less than $57,000.
 

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9 July 2007 - More land for Melbourne fringe
The Financial Review
The Victorian government's new Growth Areas Authority is aiming to avoid a land shortage in the south-eastern corridor of Melbourne through an accelerated zoning process. The process should deliver 28,000 developable lots of land in Casey and Cardinia to relive supply pressures in Melbourne's outer suburbs and should be enough for eight years of growth. As the market improves in the established areas, prices for residential lots in the outer fringe are also on the way up.
 

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9 July 2007 - Business emissions to be tracked
The Financial Review
Before the end of this year the federal government will introduce legislation into parliament that will force companies that emit 50,000 tonnes of carbon dioxide a year, or 25,000 tonnes from a single site, to report their emissions to the government. The reporting requirement will be phased in over three years with those emitting more than 125,000 tonnes in the first year, then those over 87,000 tonnes in the second year with those over 50,000 tonnes in the third.
 

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9 July 2007 - IMF lessens strain off ASIC
The Australian
Litigation funding group, IMF, has been appointed as a private sector proxy for the corporate regulator, as a recent string of high-profile failures for the Australian Securities and Investments Commission has spurred criticism over the effectiveness at policing the corporate sector. Recently, ASIC has been finding it increasingly difficult to keep up with the sudden influx of investor complaints. IMF Chairman, Rob Ferguson, said "ASIC's got heaps on and we've got lots of issues on as well but we're sort of working now in a private sector sense."
 

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9 July 2007 - A fairer new job regime
The Australian
The current labour market appears favourable in all aspects, the wage price index at 4 per cent suggests it is under control, inflation is considerably low at 2.1 per cent, and the unemployment rate is at an all time low of 4.2 per cent. Analysts predict that the unemployment rate will fall further this month to 4.1 per cent. Jobs growth remains to follow strong trends, currently at 2.7 per cent annually and full time employment is increasing at 3.5 per cent a year. The economy is pushing out 30,000 to 50,000 new jobs each month, and given the capacity of Australia's labour market is close to full employment, the question of how to fill the growing number of new jobs is the next matter of interest. Treasurer, Peter Costello, said "There has been strong immigration. It's good for Australia. With a strong business sector we need more people, people with skills."
 

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9 July 2007 - Federal audit to release land
The Australian
In a bid to ease housing prices, the federal government will conduct a review of all its land holdings (which are mainly defence properties) to see if any could be released for housing development. They are also asking state governments to speed up the release of land but NSW has said that high interest rates makes it uneconomical to develop the thousands of blocks that they have ready for release. Federal Treasurer Peter Costello said that house prices are rising due to low interest rates and a strong job market but that housing supply was not increasing sufficiently. "The Commonwealth will look at any land it has that could be released for housing. We will ask that states to look at any land they have that could be released" he said.

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7 July 2007 - Sydney property warms up
The Financial Review
A sign of the improving property market in Sydney is auction clearance rates over 70 per cent for the second month in a row, with May and June reporting the highest levels since September 2003. In June 2006 there were only 1,000 properties listed for auction, 30 per cent less than the most recent results, and the clearance rate then was only 61 per cent. In Sydney the median price for a freestanding house rose to $812,000 which is an increase of 8 per cent over the past year.
 

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6 July 2007 - Rate rise almost a question of when
infochoice.com.au
The Reserve Bank this week left interest rates on hold for July as expected, but August is another matter and data on jobs and inflation out over the next few weeks are key to whether we are in for a rate rise as soon as next month.

The RBA has already predicted that inflation is likely to rise again from the quite contained levels of early 2007. Given the economy has bounced back strongly this year and the world economy is also on the up, it seems a matter of time before inflationary pressures re-appear.

At the first evidence, the RBA will want to act to pre-empt any inflation breakout later in 2007 or 2008. With quarterly inflation figures next out in late July, that could come as early as next month, or perhaps later in the year - which might prove trickier for the RBA, coinciding with election time.

The latest retail trade and building approvals figures showed dips in May. Although the monthly figures often bounce around for both these measures, they may suggest that overall economic performance is not quite as robust as we thought.

Two successive monthly falls in retail growth suggest that consumer spending may be levelling off after being unambiguously upward in the previous twelve months. You wouldn't think so given how strong consumer confidence and the jobs market have been. It may be temporary seasonal factors at play but perhaps higher petrol prices and talk of higher interest rates have taken some toll.

Building approvals, looking like they might have turned the corner a couple of months back, now look to be as flat as ever. House and apartment approvals both fell in May to be 3.4 per cent and 16 per cent down on a year ago respectively.

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6 July 2007 - Credit check getting smarter
Daily Telegraph
Credit reference company Veda Advantage has implemented new technology to make it harder for people to lie about personal details when applying for a loan. Algorithms are used to identify those people who change details either accidentally or to hide a poor credit history. Veda Advantage has researched over 75,000 people and found that people who are using multiple identities to access credit are 13.7 times more likely to default on personal loans than the general population.
 

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6 July 2007 - Wage increase for over 850,000 workers
The Australian
The $10.26 per week pay rise granted by the Fair Pay Commission to over 850,000 workers is unlikely to place further pressure on inflation. The increase is less than unions had expected but has been met with approval by business groups. Federal Treasurer Peter Costello said he did not below the increase would have negative consequences for the Australian economy.
 

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6 July 2007 - New car sales continue to boom
News.com.au
New car sales continue to boom with Australians buying over a 1 million new cars for the first time in a 12 month period. The continued strength with new car sales over a number of years has coincided with record levels of household debt. Japanese car company Toyota recorded a massive 24,500 sales in the last month of the financial year, whilst other Japanese brands have also enjoyed strong 12 month sales growth.
 

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6 July 2007 - Beware offers of Debt Repair
BusinessDay.com.au
Consumers are being ripped off by debt consolidation and debt repair businesses targeting those on the brink of bankruptcy. The Consumer Credit Legal Centre in Sydney argued that the businesses offering such services may actually have the perverse effect of increasing the overall number of people pushed into bankruptcy. The CCLC has singled our three main areas such providers operate: debt consolidation, debt agreement administrators and credit repair businesses. The CCLC report acknowledges that consolidation offered through main stream lenders is at a lower all in interest rate but warns "There are businesses which target those in serious financial difficulty in order to gouge considerable profit while offering illusory benefits to consumers."
 

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6 July 2007 - CBA cards outsourced
The Financial Review
The Commonwealth Bank of Australia has decided to move processing for its 2.5 million credit cards to an external processing bureau to be run by EDS Australia. The existing CBA system was out-dated and was increasingly difficult to integrate with their more modern customer service and internet systems. Analysts say that CBA's credit card portfolio carries $7 billion in receivables and makes up 19.4 per cent of the credit card market.

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6 July 2007 - Card options for DJ's
The Financial Review
David Jones will retain its in-store credit card but later this month will announce which of two banks will be the issuer for their new credit card. Following due diligence by the short-listed candidates a final decision is expected around October or November with an anticipated launch date for the new card of August 2008. Two marketing partners will be selected from Visa, MasterCard and American Express. The existing in-store card generates one-third of the store's earnings.
 

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5 July 2007 - CBA equities expansion
The Australian
Commonwealth Bank has leaped up the equity capital markets league table from 14th to 7th position, almost doubling its market share from 7.7 per cent to 14.8 per cent. David Hancock, new equities and capital markets head, said that their broking arm CommSec was now coming into its own handling deals such as the $583 million initial public offering for Platinum Asset Management and, earlier this week, 60 million Qantas shares. "CBA has had traditional strengths in fixed interest, foreign exchange and retail equities, but now it's extending that into institutional equities," he said.

 

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5 July 2007 - No sign of rise before next year
Daily Telegraph
Following yesterday's decision by the Reserve Bank of Australia to leave interest rates unchanged, economists now believe that rates are unlikely to move again before early next year. As long as there is no sudden spike in the inflation figure that will be reported later this month there is no case for an increase, with housing construction slow and no sign of wage pressures. There is more chance of a rise next year as strong global and local economic conditions could lead to inflation.
 

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5 July 2007 - Super flood hits $10 billion
Daily Telegraph
Estimates from the Association of Superannuation Funds of Australia are putting the pre-June 30 flood of money into funds at around $10 billion on top of usual contributions. The rush resulted from superannuation law changes that allowed a contribution of up to $1 million to be made before the deadline which could then be accessed tax free by people over 60 from July 1.
 

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5 July 2007 - No housing relief yet
The Financial Review
Policies of both major parties to address the housing affordability issue have been panned for not addressing the problem. Shadow Treasurer Wayne Swan has said that the government's position of increasing land releases would mean that existing home owners would experience falls in land prices. The Labor party's savings plan scheme has been criticised by InfoChoice as insufficient as savings could not keep up with the pace of even moderate property growth. Discussions were held yesterday between Federal and State housing ministers that included looking at ways to tackle the affordability crisis but no commitments were made to any proposals.
 

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5 July 2007 - PayPal savings and loans
The Financial Review
PayPal are looking at ways to expand their presence in Australia possibly including provision of credit and high interest savings. Options being considered are a line of credit or a co-branded Mastercard and linking a PayPal account to a savings account. Mr Andrew Pipolo, managing director of PayPal, said that while the company was limited to being an authorised deposit taking institution which cannot pay interest, there were other options available. "It's not a full-blown banking license so we can't offer high interest accounts in our own name but we could certainly partner with a third party or go back and apply for a different licence," he said
 

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5 July 2007 - Visa smart about cards
The Financial Review
Visa International has backed down from its plan to penalise merchants an extra surcharge of 10 basis points if they do not upgrade their systems to be able to process smartcards. Instead, merchants who do join the Visa merchant alliance program which began on July 1 will qualify for merchant fees around 25 per cent lower than normal but will have to meet stringent security standards for terminals and protection of customer data. ANZ Bank is already issuing smartcards and Westpac have announced plans to introduce the technology.
 

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5 July 2007 - Trading hits new highs
The Financial Review
A record of $1.3 trillion worth of equity was turned over on the stock exchange last year, driven by superannuation inflows, mergers and acquisitions, as well as confidence in the outlook for corporate earnings. The number of equity trades was up by 55 per cent over the year with a total of 48.9 million trades. The number of companies listed is also up, increasing by 160 to now total 2,090.
 

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5 July 2007 - Consumers targeted by lending predators
Sydney Morning Herald
The Consumer Credit Legal Centre has issued a warning to consumers to be on the lookout for unscrupulous lending practices by some solicitors and accountants. In one case a brokerage fee of $19,615 was charged on a loan of $122,000 and in another an interest rate of 23.6 per cent was charged on part of a loan. The centre has alleged that practices were being used such as overstating income to gain approval and categorising the loans as 'investment' or 'small business' to get around the Uniform Consumer Credit Code.
 

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4 July 2007 - Tightening supply drives prices
The Australian
The Australian Bureau of Statistics has reported a decline in building approvals in May of 5.6 per cent from April and a decrease of 7.2 per cent over the last year. The Housing Industry Association (HIA) has attributed the decline to housing affordability problems particularly in outer suburbs. The HIA is predicting an increase of only 2 per cent over the next year. Research companies RP Data and Rismark International have found that the supply shortfall has driven prices of existing homes up 7.9 per cent from January to April this year. Prices were up in Adelaide by 5.7 per cent, Darwin by 4.1 per cent, Sydney by 1.4 per cent, and Canberra by 1.2 per cent. Perth prices however dropped 2.7 per cent.
 

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4 July 2007 - Warm weather cuts spending
Daily Telegraph
Retail trade fell in slightly May by 0.1%, enough to take pressure off the Reserve Bank of Australia to increase interest rates. Analysts believe that the restrained consumer spending behind the fall was caused by higher petrol prices and the unusually warm weather. The biggest falls were experienced in clothing, soft goods and recreational goods.
 

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4 July 2007 - Kaye investors stick together
The Financial Review
A class action by hundreds of property investors against the finance company that lent them money to join Henry Kaye's property investment seminars has been given the go-ahead. Australian Finance Direct has tried to get the class action broken up into individual cases but the judge reviewing the case decided that it would be more efficient to let it proceed as a class. At a date yet to be set, the court will decide if AFD is responsible for misleading statements made by National Investment Institute Pty Ltd which is linked to Henry Kaye.
 

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4 July 2007 - Future uncertain for shares
The Financial Review
Analysts are concerned at signs of increasing volatility creeping into the Australian share market. Key resource stocks such as BHP and Rio have shown increased volatility over the past few months which can have a large effect on premiums for put and call options. Increased volatility is usually taken as a sign of an impending bull trend but at the moment stocks are looking overvalued. ABN AMRO Morgans' Peter Josephson says that "The market has been good for so many years there's a complacency that evolves towards risk; an assumption that shares always go up... people who have been involved in the share market for only five years don't understand what it's like when it does crunch."
 

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4 July 2007 - Mortgage scheme withdrawals may take months
The Financial Review
The Australian Securities and Investment Commission has said that investors need to have a clearer understanding of the time periods that may be required when making a withdrawal from pooled mortgage schemes such as Bridgecorp and others that have collapsed recently. While these schemes are marketed on the understanding that withdrawals would only take a few days the reality is that it can take months to free up capital. Many of the companies rely on new in-flows to be able to fund withdrawal requests.
 

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4 July 2007 - Rising dollar affects miners
The Australian
The strength of the Australian dollar is making it increasingly harder for junior resource development companies to warrant mining projects. Wedgetail Mining was just one company who recently abandoned its $57 million Nullagine project, to produce 70,000 ounces of gold, due to the Australian dollar affecting project labour and equipment costs, and revenue margins. The value of the Australian dollar has strengthened close to 20 per cent against the greenback over the past year, from US72c to US86c, and many analysts believe it will comfortably stabilise above this figure. Wedgetail Managing Director, Terry Stark said, "For us, every cent appreciation impacts about $10 worth of revenue an ounce. The gold industry is under a lot of pressure."

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4 July 2007 - More land not the answer
The Australian
Analysis by Federal Treasury has claimed that releasing more land to reduce prices will end up driving values down for existing property owners. The report found that family finances are being tested by increasing mortgage repayments with four rate rises since the election in 2004. The treasury Secretary Ken Henry has said that the contents of the report are being misrepresented but the Labor party say that it is proof of the poor performance of the government on economics and that more pain is ahead.

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4 July 2007 - Repossessions on the rise
Sydney Morning Herald
Treasury documents report that the number of writs for repossession of properties in NSW is skyrocketing with 3,644 in 2006 which is double the volume of 2005 and triple the number in 2004. This equates to a rise in the proportion of households in NSW issued with a writ from 0.1% in 2004 to 0.25% in 2006. The Prime Minister John Howard has said that the affordability crisis is in large part due to slow land release policies by the state governments. However this is contradicted by the Treasury documents which say "Whilst better land release and land use policies by the state and territory governments are likely to improve affordability to some extent, these reports probably overstate this effect."

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3 July 2007 - Coles gone, at last
Daily Telegraph
The long-running saga that has been the sale of retailer Coles has finally ended with Wesfarmers making a successful $21.9 billion bid. After a four month bidding process the final price equates to $17.25 per share and includes a 25 cent dividend. Wesfarmers have said that they intend to hold the business and have no plans to sell any of their assets to finance the deal. The deal received unanimous approval from the Coles board.
 

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3 July 2007 - Card charges questioned
Financial Review
The Reserve Bank of Australia has said that it is not concerned about merchants over-charging for credit and debit transactions. The RBA believes that surcharges account for only 5 per cent of transactions and that market forces are sufficient to ensure that they do not rise above this level. Payments Australia disagrees with a spokesman saying that surcharges are higher in less competitive industries. Some small to medium businesses charge 2 to 3 per cent on top of the 1.2 to 1.5 per cent they have to pay to their bank. The bottom line for the RBA is that consumers would stop shopping at retailers with higher charges.
 

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3 July 2007 - Australian banks fight back
Financial Review
Figures released by the Australian Prudential Regulation Authority show that while banks backed by offshore companies have made inroads into the market share of the big 4 Australian banks, there are some areas where the locals are improving. The Commonwealth Bank has lost share in consumer products such as home loans and credit cards but has grown in business lending and deposits. Westpac has grown their home loans and business loans share and also had the highest growth in credit cards. ANZ has lost share in credit cards and business lending while NAB has put a stop to their losses in home loans by improving their payments to mortgage brokers.
 

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3 July 2007 - RBA keeps close eye on inflation
Financial Review
With increasing signs that inflation is on the way up, speculation is growing that the Reserve Bank of Australia will move rates up again sooner rather than later. However the RBA believes that, while the economy will show continuing strength, inflation will ease again before bouncing back up in 2008 which would relieve them of the pressure to not put rates up again prior to the federal election. RBA governor Glenn Stevens has said that political timing will not influence their decision and that it was just an urban myth that the bank would be reluctant to raise rates before an election.
 

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3 July 2007 - Bridgecorp crash leaves $450m at risk
The Australian
Bridgecorp, a high-risk property development group, is the next group to run into turmoil, following the recent succession of collapsed property groups, Fincorp, Westpoint and Australian Capital Reserve. An estimated $450 million is at stake for 18,000 investors, totalling losses in the troubled sector of more than $1.3 billion in the last 18 months. Whilst many shareholders wait anxiously on the outcome of their investments, the trustee of Bridgecorp, Graham Miller of Covenant Trustee Company, said an estimated 30c in a dollar was at least the expected potential outcome and would be "very surprised" otherwise. The fall of Bridgecorp has spurred the Federal Opposition to strengthen enquires relating to the collapse of all failed property groups.
 

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3 July 2007 - Rudd's home plans welcomed
The Australian
The Federal Labor government has called upon a summit this month to address the issue of housing affordability for first home buyers. The Housing Industry Association has warmly welcomed the Labor Leader, Kevin Rudd's proposal on Sunday to help first home buyers save by depositing their pre-tax earnings directly into high interest saving accounts. Rudd believes the key to relieving the pressures of housing affordability is by offering low-cost housing for renters through new public housing and investing more in the Commonwealth State Housing Agreement.
 

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3 July 2007 - Systems integration to fight laundering
The Australian
New anti-money laundering rules are expected to cost Australian banks a total of $1 billion in systems development to comply with new standards. Major organisations are facing bills of between $50 and $100 million and smaller institutions from $10 to $50 million, far more than implementation of the Basel II requirements. The anti-money laundering rules require that financial institutions be able to make an assessment on the likelihood of a customer being involved in terrorism financing or money laundering. The impact increases dramatically for larger institutions as they will have to consolidate information from all business units such as insurance, wealth management, retail, commercial and private banking.
 

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2 July 2007 - New player in low rate card market
infochoice.com.au
CUA has launched a new Low Rate MasterCard product. The card has a competitive ongoing interest rate of 9.99% p.a and offers a low 6 month introductory rate of 2.99% p.a on all purchases, cash withdrawals and balance transfers. CUA offer the option to choose silver or gold card status, free additional cards and purchase cover, not usually available on low rate or standard cards.

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2 July 2007 - Rudd offers pre-tax savings for first homebuyers
The Australian
The Federal Labor party is considering a plan that will enable first home buyer families to divert pre-tax earnings into identified accounts, to assist them in saving for a home deposit in a scheme similar to superannuation. Today, the Opposition Leader Kevin Rudd is set to launch an opposition policy that will outline the framework behind the plan that would operate in a low tax low overhead environment and generate higher returns than ordinary savings accounts. Mr Rudd placed the issue of Home Affordability firmly at the feet of the Liberal government saying "The decline in affordability and shortage of home is the result of a lack of leadership and innovation over the last 11 years at the Federal level by the Howard Government".
 

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2 July 2007 - US investment bank sacks asset chief
The Age
At the centre of a global credit market shakeout, United States Investment Bank, Bear Stearns has sacked the head of its asset management division. Bear Stearns has been weathering a storm through the near collapse of two subprime mortgage exposed hedge funds that forced the bank into putting up $US1.6 billion as a bail out. Bear Stearns has revealed that two Bear Stearns hedge funds had borrowed more than $US10 billion and invested heavily in bonds backed by subprime home loans.

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2 July 2007 - Costello private equity concern
The Financial Review
Federal Treasurer Peter Costello has expressed concern that private equity funds may be using high levels of debt to minimise tax and warns their activities could put companies at risk. Whilst acknowledging that he has a "love" for private equity, he expressed concern in the rising number of high leverage buy outs. Costello warns that any downturn will put companies purchased under a high leverage at risk and also expresses concern over the Federal tax take. Company taxes are expected to contribute an additional $6.3 billion to $65 billion this year and continuing private equity deals that use high levels of debt will put this contribution at risk by allowing companies to re-divert profits into tax deductible debt.
 

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August 2007

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31 August 2007 - Consumer spending puts further risk on rate rise
InfoChoice.com.au
Australian consumers spent freely in July as the national mood continues to be bright thanks to record employment conditions, strong consumer confidence and budget tax cuts. Retail sales increased 0.9 per cent in July to a record 19.29 billion dollars, markedly higher than market expectations. The strong sales data has economists tipping the third quarter to be healthy across the broader economy, whilst a lower trade deficit of $756 million for July indicates that trade may be in a position to contribute to economic growth in the quarter, after recovering from a weaker second quarter.

However all this good economic news means that those with a mortgage or extensive borrowings will continue to eye the Reserve Bank with caution as the risk to interest rates will continue to be for further increases. Borrowers are expected to be left alone in the first week of September as the global credit crisis has seen markets reduce the likelihood of an increase to virtually zero and with business borrowing up by 19.4 per cent annualised many business owners (and their employees) will breathe easy.
 

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31 August 2007 - Signs of confidence in business spending
The Financial Review
Businesses seem to be confident about future growth with capital expenditure increasing by 6.3 per cent in the June quarter, and by 11.4 per cent from a year ago. Contributing to the result were; a 5.5 per cent rise in spending on equipment, a 4.3 per cent lift in building and construction expenditure, and a 5.6 boost in mining equipment spending. NSW recorded the strongest growth with investment jumping 12.4 per cent to be 18.8 per cent higher than last year. Businesses forecast that they will spend $79 billion on construction, plant and equipment this year, an increase of almost 25 per cent on last year.
 

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31 August 2007 - Current account deficit hits record high
The Financial Review
Australia's current account deficit grew by 2.9 per cent in the June quarter to a record high of almost $16 billion. The trade deficit increased by 7 per cent to $3.8 billion and net income deficit was up 2 per cent to $12.1 billion. The drought continues to impact rural export volumes which were 1.7 per cent lower in the quarter, while the strong dollar pushed manufacturing exports down 0.5 per cent. The trade deficit was estimated to take 0.1 per cent from the nation's GDP in the quarter.
 

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31 August 2007 - Financial complaint bodies join unite
The Financial Review
A proposal is being considered which to streamline the dispute resolution schemes for banking, insurance and wealth management. A new one-stop shop for complaints about financial services would incorporate the existing Insurance Ombudsman, the Financial Industry Complaints Service, and the Banking and Financial Services Ombudsman. The proposal would require the support of the Australian Securities and Investment Commission to proceed and is not expected to be finalised before the middle of 2008. If the plan is successful it may also incorporate other dispute resolution services such as the Credit Union Dispute Resolution, the Credit Ombudsman Service and Insurance Brokers Disputes Limited.
 

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31 August 2007 - Economists tip more rate rises
The Financial Review
Five out of six economists speaking at a breakfast yesterday predicted that they expected the official cash rate to be 6.75 to 7.0 per cent in a year's time, with only one tipping that the rate would be unchanged from the current 6.5 per cent. However they said that it was unlikely that the RBA would raise rates before the end of this year as increased money market rates, which have resulted from the problems in the global debt markets, have already effectively created a second rate hike.
 

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31 August 2007 - E*Trade expands research options
InfoChoice.com.au
Online stockbroker E*Trade have added another research option to the tools available to clients. Now users get access to AAP Finance News which is put together around the clock by a dedicated team of finance journalists covering global markets and economic issues, but focused on the Asia Pacific region. This is in addition to their existing list of research providers: Aegis Reports, Aspect Huntley, Dow Jones, Ecinya, Intelligent Investor, wise-owl.com and Fat Prophets.
 

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31 August 2007 - ANZ joins rate warning chorus
The Australian
The third big bank to warn of price pressure due to the US sub-prime crisis is ANZ, with chief executive John McFarlane saying that, if high rates on bills continue, there would be a further rise in mortgage rates. Mr McFarlane said that if the problem resolves quickly then things would return to normal, however this scenario is unlikely. He went on to say that the bank has no immediate plans to increase rates and that it was possible that the turmoil could be an advantage for the bank as it had moved several years ago to extend the length of its wholesale debt. ANZ's share price dropped 41 cents yesterday to close at $28.59.
 

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30 August 2007 - No sign of housing recovery yet
News.com.au
The latest report on new home sales from the Housing Industry Association showed a 1.5 per cent increase in July. A recovery in the housing market still seems to be some way off with sales of detached houses dipping by 0.1 per cent. HIA chief economist Harley Dale said that sales of detached dwellings remained depressed as investors had not re-entered the market, causing the rental market to remain tight. Mr Dale said "For renters of both detached and other types of housing a significant increase in supply is essential to turning around the affordability crisis". The more volatile multi-unit sector recorded an increase of 13.5 per cent.
 

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30 August 2007 - World recession possible
Sydney Morning Herald
Stock markets around the globe were down yesterday following a warning from a prominent US economist that market conditions threaten to lead the world into recession. Chief economist at Standard & Poor's, David Wyss, said that market concern about growing home and company loan default rates were only moving up to their long-term average but that this could be sufficient to push economies into recession. The local market was down yesterday with the ASX 200 shedding 76 points, or 1.2 per cent.
 

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30 August 2007 - ANZ gives equine flu relief
Sydney Morning Herald
The ANZ Bank has announced a relief package to help its customers who are facing financial difficulty due to the equine influenza outbreak. The measures include: suspending loan repayments for three months; waiving fees on business loan restructuring; waiving early withdrawal penalties on term deposits; and considering temporary increases in lending limits. The racing industry is in turmoil with positive test results yesterday on a horse at the previously unaffected Randwick stables of Anthony Cummings.
 

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30 August 2007 - Interest rates drive up cost of living
Sydney Morning Herald
An annual survey conducted by the Australian Bureau of Statistics has found that rising interest rates are hitting consumers' hip pockets. The consumer price index rose by 2.1 per cent, but for our 4.5 million working households their out-of-pocket living costs were up by 3.1 per cent, while costs were only up 1.9 per cent for our 500,000 self-funded retirees who largely own their own homes. Payments by working households to financial institutions, for interest payments and insurance premiums, were up by 11.4 per cent over the past year. The 2 million households that survive on welfare payments are also being hit, with housing costs up by 4.6 per cent, compared with an increase of 3.6 per cent for housing costs in the consumer price index.
 

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30 August 2007 - Adelaide Bank responds to rate pressure
The Australian
Adelaide Bank has increased its low doc mortgage rates by 30 basis points, on top of the 25 basis point increase by the Reserve Bank earlier this month. With around half of its funding coming from wholesale markets, Adelaide Bank is the first traditional Australian bank to lift rates further than the official cash rate increase. Low doc customers of the bank are being offered the opportunity to switch to full doc loans, provided they qualify. The bank has reduced the proportion of its portfolio that is low doc loans, from about 35 per cent last December to 25 per cent now, and only account for 20 per cent of new loans. Non-bank lender FirstMac announced a rate increase of 1 per cent yesterday on its new no-deposit home loans.
 

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30 August 2007 - Retirement costs up 9 per cent
The Financial Review
The cost of funding basic retirement needs his risen by 8.8 per cent over the past three years, according to the Westpac-Association of Superannuation Funds in Australia retirement costs index. Food is the largest expense for retirees with a couple living as comfortable lifestyle spending $180 per week, up 15 per cent on three years ago. A comfortable retirement now costs $48,374 a year, while a modest lifestyle costs $26,154 a year. Three years ago these figures were $44,733 and $24,049 respectively.
 

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30 August 2007 - Next: credit goes mobile
News.com.au
NAB and Telstra have teamed up with Visa to conduct the first trial of new technology which will allow customers to authorise payments with the wave of a special mobile phone. The phone could be used to replace credit cards, as well as membership cards, marketing offers, public transport tickets and building access security cards. The Visa payWave technology is currently being trialled by financial institutions and telecommunications companies throughout the United States and Asia. The Australian trial will commence in Melbourne in early 2008.
 

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29 August 2007 - Rate discounts may dry up
The Financial Review
The deputy governor of the Reserve Bank of Australia has warned that some lenders may not be able to continue offering discounted mortgage rates as the cost of lending rises. Mr Battellino said, "My guess is if these funding pressures continue, some of that downward pressure on home lending rates is going to be reversed because the lenders won't be able to offer the discounts they've been having". He went on to say that it is the lenders that rely on wholesale funding instead of retail deposits that were most likely to feel the rate squeeze. Some lenders have already increased their variable rates by as much as 0.80 percentage points this month.
 

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29 August 2007 - RAMS profit solid but future unsure
The Financial Review
While RAMS Home Loans has posted a profit of $43.5 million - after stripping out accounting charges and other one-time costs - the company has warned that its difficulties finding short-term funding for $6.2 billion will impact future earnings. RAMS chief executive, Greg Kolivos, said that the total cost would not be known until the funding has been resolved. The lender grew its book 37 per cent over the last year to $134.7 billion but growth could be affected by the funding issues over the next year.
 

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29 August 2007 - Court declines to pinpoint source of repossessions
Sydney Morning Herald
A request by the Australian Bankers Association and the Consumer Credit Legal Centre for access to files that would show which lenders were responsible for the majority of legal actions has been denied. The NSW Supreme Court has said that reviewing the 18,000 files would raise concerns about privacy and that the court would not undertake research that could be used to advance a private or commercial cause. The ABA argues that its members, mostly major banks, are responsible for only 20 to 35 per cent of home repossessions and that it is non-bank lenders who launch the majority of such actions. The non-bank sector accounts for approximately $172 billion in residential mortgage-backed securities and about $7 billion of that is classified as "sub-prime".

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29 August 2007 - Investors take low-doc option
The Australian
Low doc home loans now make up 10 per cent of all mortgage approvals, up from just 0.5 per cent in 2000. Low doc loans are used by many investors who are building large property portfolios and may not be able to finance them on their salaries alone. Customers with low doc loans should be aware of the rate they are paying, with Pepper Home Loans increasing their variable rate by 0.15 per cent on top of the 0.25 per cent RBA increase. Property investment consultant at Metropole, Michael Yardney says that investors should have a buffer built into their strategy to cover unforeseen circumstances and interest payments over a number of years. "You have to allow a buffer. You shouldn't be living at the edge. Yes, you will have to pay more (interest)... Is it the right time to leave property? No," he said.

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29 August 2007 - NAB pushing for reform
The Australian
The Four Pillars policy which bans mergers between the nation's four largest banks has again been criticised, this time from NAB chief executive John Stewart. Mr Stewart said that if the policy was not removed then Australian banking industry risked becoming a "branch economy, where head office is always located somewhere else". NAB is planning to sponsor a series of lectures and debates around the country of the future of the financial industry, a sector which accounts for one quarter of our stock market's value. Participation of politicians would be welcome in discussions that would cover topics including excessive business regulation and a more competitive tax regime.
 

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29 August 2007 - ANZ cuts fee for those most in need
The Australian
With the ANZ Bank facing a grilling by a senatorial committee which opens on Friday the bank has cut the penalty it charges poorer customers for a periodic payment taking their credit card over its limit. The exception or dishonour fee has been reduced from $35 to $10 for customers who hold a Centrelink Health Care Card, Seniors Concession Card, Pensioners Concession Card, or Veterans Affairs issued Repatriation Health Care Cards. The new policy is effective from 1 December but customers can avoid the fee completely by nominating to switch off the ability for their card to be taken over its limit by electronic purchases and cash transactions. The senate inquiry will consider laws proposed by the Family First party that would stop excessive charging of penalty fees and allow customers to sue for damages.
 

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28 August 2007 - Suncorp profits swell
The Australian
The Suncorp banking, insurance and wealth management group yesterday reported a strong increase in annual net profit with a rise of 16.2 per cent to $1.06 billion. The result was helped along by an increase in home lending of 14.3 per cent to $23.8 billion and a 21.3 per cent expansion of business lending, contributing to a 12.5 per cent increase in profit for the division. Profit from the insurance arm which encompasses the brands AAMI, GIO and Vero grew by 20.8 per cent to $835 million. The healthy profit comes despite the June storms in NSW costing Suncorp around $160 million.
 

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28 August 2007 - Super fund tsunami
The Financial Review
The lure of tax benefits saw an unprecedented $20 billion flood into superannuation accounts in the June quarter, with a similar amount expected to have been put into cash trusts by those with self-managed super funds. Corporate super funds grew by $7.2 billion in the quarter, compared with only $4.5 billion in the March quarter, while personal funds took $21.7 billion, up from $8.9 billion in the previous quarter. Changes from July 1 mean that most super is tax free, however there are now strict limits on annual contributions.
 

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28 August 2007 - Incomes keep up with repayments
The Financial Review
Census data from the Australian Bureau of Statistics shows that in the decade to 2006, median household income rose 65.6 per cent, almost as much as median mortgage repayments which were up by 66.7 per cent over the same period. In 1996 the most common mortgage repayment was between $550 and $749 per month but $2000 to $2999 was most common last year. The results seem to indicate that a small percentage of the population is paying a lot more in home loan repayments which is boosting the average.
 

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28 August 2007 - Water investment plan floated
The Financial Review
A plan has been suggested which would allow investors to buy water and dedicate it to environmental use in a bid to obtain private support to save rivers. The idea comes from the chief executive of the eWater Co-operative Research Centre, Professor Gary Jones. He said that we should not rely on governments to ensure sufficient environmental water flows as they were under intense pressure from irrigators, particularly during droughts, and we need to create opportunities for individuals and companies to take a direct stake in managing river environments instead. The water market would need to be further deregulated so that investors could loan the water right to an environmental manager for a year and, if they were not satisfied, move it elsewhere.
 

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28 August 2007 - Non-conforming delinquencies up
The Financial Review
Delinquencies in the Australian non-conforming home loan sector are up to record levels although still nowhere near the problems in the US sub-prime market. In the second quarter of 2007, Moody's found that delinquencies greater than 90 days past due were up to around 6.5 per cent, from 5.97 in the first half of 2006 and 4.63 per cent in 2005. The numbers of borrowers finding it hard to meet repayments could climb higher yet as the effects of the rate rise in early August are felt.
 

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28 August 2007 - ACCU invests profit in future
The Financial Review
Investment in sustained long-term growth is to blame for the 12.1 per cent drop in after tax profit reported by the Australian Central Credit Union yesterday. Profit was down to $12 million despite revenues increasing by 15.3 per cent to $211 million and assets increasing by 12.6 per cent to $2.6 billion. Managing director, Peter Evers said, "During 2006/07, we made a major decision to invest in the future - to spend an estimated $22 million to fund our largest ever expansion over the next four years".
 

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27 August 2007 - Strict reading of the law for retirees
The Financial Review
A retiree paid for four days work has been forced to pay tax on a $58,000 personal superannuation contribution. Usually those who are self-employed can claim a tax deduction for personal super contributions as long as the income from any employer is less than 10 per cent of disposable income. In the test case decision the judge ruled that, as the retiree had a lump sum termination payment made after retiring four days into the financial year, he was over the 10 per cent threshold. The case highlights the importance of planning ahead when approaching retirement.
 

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27 August 2007 - Bank satisfaction continues to climb
The Financial Review
In the latest customer satisfaction survey results for the half year to June Citibank was the most improved at 81 per cent, up 6.7 points from the half year to March. The highest rating in the industry is Bendigo Bank which achieved 91 per cent. Of the major Australian banks Westpac showed the biggest improvement up by 4.3 percentage points, St George was up by 2.9 points to 73.1 per cent, Commonwealth was last on 55.8 per cent, and ANZ continued to rate highest at 73.9 per cent.
 

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27 August 2007 - NAB boss calls for more regulation
The Financial Review
The head of Australian operations at National Australia Bank, Ahmed Fahour, has said that a lack of regulation of non-bank and 'fringe' financiers has left Australia open to a US-style sub-prime mortgage crisis. Mr Fahour said that the majority of sub-prime loans are not done by banks but by non-regulated entities. He also said that mortgage brokers, which write 40 per cent of all new housing loans, should come under greater scrutiny. Consumers can be advised to switch loan products when there is no benefit for them, although it generates commissions for brokers said Mr Fahour.
 

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27 August 2007 - New margin loan doubles rewards
Infochoice.com.au
ANZ and E*TRADE have launched a new margin loan product that rewards investors two ways, with both interest rate discounts and cheaper brokerage. Customers of the ANZ E*TRADE Share Investment Loan qualify for discounted brokerage on any trades through linked E*TRADE accounts when the balance of the loan is above $100,000. At the same time a generous frequent trader discount is available: a margin loan rate reduction of 0.25% for those who make 10 to 19 trades per month and 0.50% for customers who make more than 20 trades in a month. Each month the loan balance and number of trades through the account and other linked E*TRADE accounts will be assessed and customers will receive their discounts the following month.
 

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27 August 2007 - Businesses not paying to entice staff
Daily Telegraph
A survey of 250 companies found that only 2 per cent placed any value on having a pay strategy to attract talented workers, despite having the best people being cited as the main factor in business success. The survey, conducted by Grant Thornton International, reports that 30 per cent of businesses have pay and reward schemes to retain staff but only 19 per cent believe that this maintains a positive attitude amongst staff.
 

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24 August 2007 - Rates steady as RBA waits and watches
InfoChoice.com.au
The Reserve Bank meets in ten days to consider interest rates but there is no realistic chance of any move in September, up or down. Not just because it lifted rates last month and will be wanting see further data on inflation later in the year, but also because the turmoil in share and credit markets around the world raises the possibility of a hit to economic growth.

The rates picture has already turned in the United States with the Federal Reserve cutting one of its key lending interest rates to banks, and is now expected to cut rates more widely by mid-September. There are fears of a slowdown in the US, which would effect growth around the world and have some impact here. It may well not play out that way, but while the picture remains uncertain, central banks will be cautious.

Inflation still remains the biggest concern in Australia, according to the RBA governor Glenn Stevens, given our solid growth across most sectors of the economy. That is, the bank's deliberations on interest rates remain focused on whether to put them up or not to contain inflation, rather than whether or not to cut them to boost economic growth. That's what Stevens told us last Friday in testimony to a parliamentary committee, but it would be interesting to know if his comments would have been quite the same had that testimony come this week, after the Fed's initial action on rates.

The balance between curbing inflation and maintaining growth must have shifted somewhat as the risks to growth here, although not great at the moment, have risen. This may mean the RBA acts more cautiously on rates and chances of a further rate rise in the next six months are lower. But it's still too early to tell just what the economic fallout from the global credit market shakeout will be for the world and us. All we can say is there is unlikely to be any move on rates in September or October.

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24 August 2007 - Runaway house prices in Brisbane
The Financial Review
House prices in Brisbane are powering ahead with a 90 per cent increase over the past five years. In the past year alone prices increased 15.7 per cent, ahead of Perth's 15.3 per cent and making Sydney's 3 per cent look positively unhealthy. Where talk used to be of moving to Brisbane from Melbourne and having $200,000 left over after buying a huge home the situation is now reversed with house prices cheaper in Melbourne. The boom has not been limited to Brisbane either with prices in waterfront properties as well as regional towns such as Ipswich all skyrocketing.
 

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24 August 2007 - Sydney prices bouncing back
The Financial Review
The housing market in Sydney looks to have turned the corner after falling by 3.9 per cent in the 2004-05 financial year and 2.9 per cent in 2005-06, according to data from the Australian Bureau of Statistics. Prices rose by 2.3 per cent in the June quarter compared with the March 2007 quarter, still well behind the national average of 9.2 per cent for the same period. Data from Residex shows that the average price for a house in Sydney was $568,982 in the June quarter, after being as low as $528,263 in March 2006, but still not as high as the peak of $573,496 in January 2004. Migration to the city has returned to positive territory, helping to lift property prices.
 

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24 August 2007 - Equity markets eat away super funds
The Financial Review
Superannuation funds may lose value for the third consecutive month due to the drop in world equity markets. If they do, it will be the first time in four and a half years that funds have fallen three months in a row. Super funds had lost an average of 2.6 per cent before yesterday's improvement in the local sharemarket but the impact may be somewhat cushioned by the expansion of portfolios into assets such as infrastructure and private equity. Returns over the year are still healthy with a median return of 14.6 per cent.
 

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24 August 2007 - Westpoint directors sitting on asset pile
The Financial Review
While investors in promissory notes from failed property group Westpoint are facing a return of zero to 30 cents in the dollar on their investments, the Australian Securities and Investments Commission has revealed that the group's former directors have assets of between $13 million and $54 million. A total of $300 million was lost by 4,000 investors when the property group collapsed in early 2006. ASIC is buying more time to investigate the role of directors in the collapse of the company by seeking a six-month extension on orders freezing the assets of the directors.
 

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24 August 2007 - Record tax take but no cuts for us
The Financial Review
Despite record surpluses and forecasts that the government will continue to rake in ever-growing tax receipts, the treasurer Peter Costello has ruled out further tax cuts for now. The strength of the economy and increasing numbers of people in work has driven total tax paid for 2007 to $228.5 billion. This expected to continue to rise with tax receipts, excluding GST, hitting 21.2 per cent of gross domestic product by 2010. Mr Costello said that tax cuts had come into effect six weeks ago and any more would risk placing upward pressure on interest rates.
 

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24 August 2007 - New disclosure rules for debentures
The Australian
Companies that issue unlisted and unrated investments will be asked to disclose eight key-risk areas to their investors under a new plan from the Australian Securities and Investments Commission. If the company does not meet the requirements they will be asked why not, then investors can make up their own minds whether or not they are happy to invest in such products. ASIC has issued a list of 92 companies with $8 billion in investments that are not rated by agencies such as Moody's, Standard & Poor's, or Fitch.
 

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23 August 2007 - Sincerity of real estate agents questioned
Infochoice.com.au
According to a survey conducted by non-bank lender MyRate has found that 85 per cent of Australians do not trust real estate agents. Most of the 1,232 people surveyed said they thought that agents were only out to get the best possible price for the clients and the best commission for themselves. The managing director of MyRate, Kevin Sherman, said "Researching the recent sale price of similar properties will give prospective buyers a more accurate indication when making an offer. Other precautionary practices involve having an independent site inspection conducted on the property and looking into government land proposals for the area." The survey also found that 66 per cent of people were sceptical about the legitimacy of bids at property auctions.
 

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23 August 2007 - Fresh idea from Aussie to fix housing
Infochoice.com.au
A new scheme to alleviate the housing affordability crisis has been suggested to the federal government and opposition by Aussie Home Loans Chairman and CEO, John Symond. The scheme proposes tax deductions for first home buyers of up to $15,000 per annum for the first five years after the purchase of a new dwelling, with 10 per cent per annum paid back by the buyers over the following five years. The average net benefit for the first five years has been put at $4,725 per annum and the average repaid for each of the next five years would be $2,362. The proposal aims to add 15,000 new homes per year to the nation's housing stock, improve affordability for 35,000 first home buyers every year, and reduce pressure on the rental market. The scheme would require a net investment of $505 million per year by the government.
 

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23 August 2007 - St George confident while looking for new chief
The Financial Review
St George Bank is expected to move quickly to name a replacement for Gail Kelly, recently appointed as the new chief of Westpac. In his role as acting CEO, retail banking head Paul Fegan and several other St George executives held briefings yesterday to reassure investors that the bank would continue to perform well without Mrs Kelly. Mr Fegan joined St George in 2002 from National Australia Bank to head the wealth management arm and is considered the leading internal contender for the top job. Outsiders that could be considered are ANZ's retail banking boss Brian Hartzer, NAB's head of retail banking Andrew Thorburn, and the retail banking boss of Westpac, Michael Pratt.
 

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23 August 2007 - Business outlook improving
The Financial Review
Corporate profits and building approvals seem likely to keep the economy growing strongly into next year. The Westpac-Melbourne Institute Leading Index increased to 7.1 per cent in June, up from 6.2 per cent in May and well above its long-term average of 4.5 per cent. The result was helped by building approvals which were up by 7.5 per cent. In other data released yesterday, the Department of Employment and Workplace relations' skilled vacancies index fell by 3.4 per cent, possibly signalling an easing in the pace of growth for the economy.
 

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23 August 2007 - Limits on tax amendments
The Financial Review
A paper from the federal treasury recommends that limits be placed on the time that the Australian Tax Office can pursue amendments to tax assessments. The changes would mean that, unless taxpayers have deliberately sought to evade their obligations, whether or not the correct amount of tax has been paid, eventually their tax affairs for a particular year would become final. Changes in 2005 meant that most taxpayers could only have their returns amended for two years but there were still over 100 special situations which would allow the tax office to impose retrospective bills indefinitely.
 

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23 August 2007 - Reserve steps in to relieve funding squeeze
The Financial Review
Overnight funds are now costing the banks 6.85 per cent when the official cash rate is 6.5 per cent. Yesterday, to ease the tightening of credit that is being experienced, the Reserve Bank poured additional funds into the system for the third day in a row with a cash injection of $4.7 billion, well over the $1.9 billion that was required for the day. The overnight funds are required to facilitate settlement between the banks - when supply tightens the interest rate applied to the funds is driven up and if there is excess the rate moves down. The RBA aims to balance out supply and demand by buying or selling securities.
 

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15 August 2007 - Care needed with DIY super
Sydney Morning Herald
More people are choosing self-managed funds for their superannuation, on average 3,800 were set up each month in the last financial year compared with 2,000 per month in previous years. There are now 360,000 such funds with an average balance of $800,000. The Tax Office is concerned that some people could be using the funds illegally to access their super early or hide money so is increasing their surveillance of the funds. Errors that have already been identified include transferring residential property to the fund when only business premises are eligible, and trustees transferring assets (such as cash), without correctly accounting for the transactions.
 

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15 August 2007 - RAMS hit by funding costs
The Australian
Non-bank lender RAMS has issued a profit warning as the US sub-prime market increases the cost of some mortgage funding streams. RAMS founder John Kinghorn said that while the business was not at risk, the tightening credit market is driving up the cost of funding which will result in "material increases in spreads and a shortage of liquidity". RAMS recently floated with an initial share price of $2.50 but the price of its shares dropped 34 cents yesterday to close at $1.41.
 

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15 August 2007 - Business outlook resilient
The Financial Review
So far business remains largely unaffected by instability in the sharemarket according to the latest NAB monthly survey. In the July survey firms rate current conditions as the strongest since the study was first conducted in March 1997, although confidence was down slightly. Much of the decline in confidence was driven by Western Australia where gains in housing have slowed and there are concerns about the US economy.
 

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15 August 2007 - IMB happy being mutual
The Financial Review
IMB yesterday announced a 13.5 per cent increase in annual after-tax profit of $20 million. Tough market conditions saw mortgage approvals by IMB drop 15 per cent in the last year to $952.2 million although total assets were up by 9.5 per cent to $4.6 billion. Perpetual Investments, which holds a 4.9 per cent stake in the mutual, is in favour of a public listing so that the company can access better funding, expand the business and pay higher returns to shareholders. Mutual organisations cannot pay out more than 50 per cent of their profits as dividends. The chief executive of IMB, Wayne Morris, said that its status as a mutual was not up for review.
 

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15 August 2007 - Becton lifeline for Fincorp investors
The Financial Review
Becton Property Group has offered Fincorp investors 50 cents in the dollar on their original investments as well as an opportunity to reinvest their proceeds into Becton's office fund at a price that equates to 55 cents for each dollar. Any investors that take up the offer will be given a three-year guarantee, with two opportunities to withdraw each year at a guaranteed minimum of their entry price. Becton's national manager of distribution, Simon Donohoe said, "The whole idea is to give them a level of comfort. For the first three years of this investment it doesn't matter whether the fund goes down [in value]. They will be protected at the entry price and if the fund goes up they get to keep all the upside as well". Becton has made two financial advisers available for free to discuss the offer with investors.

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15 August 2007 - Aussie boss warns on mortgage risks
The Financial Review
Aussie Home loans chairman John Symond believes that all lenders, including banks, will have to raise interest rates by more than last week's 25 basis points increase as the cost of borrowing rises. Mr Symond said that outer suburbs were likely to be most impacted where house price growth has not been strong and buyers are already stretched to meet payments. "They have negative equity so if ever circumstances change and they've got to sell, that's when you see blood on the streets," Mr Symond said. A spokesperson for the Housing Industry Association agreed saying that it is a significantly more fragile market on the outskirts.

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14 August 2007 - Labour shortages set to inflate wages and costs
The Financial Review
Labour shortages are putting a huge strain on wages and costs, as the housing sector struggles to keep up in the market. The construction sector, reported as a key driver of economic growth in the latest Reserve Bank's quarterly statement on monetary policy, has pointed out that while non-residential activity has sustained moderate growth, housing activity has remained idle. The construction sector has seen average growth of around 7 per cent a year, with gross domestic product accounting for about 7.5 per cent. Non-residential construction averaged 10.3 per cent growth since 2003-04, despite an estimated 8.6 per cent decline last year, compared to 16.9 per cent growth in 2005-06. Housing expenditure has increased by 0.6 per cent a year.
 

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14 August 2007 - NAB fees up, ATM's down
Sydney Morning Herald
NAB has increased the fee its customers pay for using another bank's ATMs from $1.50 to $2.00, netting the bank an extra $50 million in income each year. At the same time NAB has temporarily closed some of its ATMs while conducting an upgrade, making it harder for their customers to use their own bank's ATMs. A spokesperson for the bank said that service levels are expected to be back to normal by the end of this week and any customers who have been forced to pay the $2.00 fee due to their local ATM being closed could contact the bank for a refund.
 

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14 August 2007 - Another rate rise sooner, not later
Sydney Morning Herald
With inflation expected to stay at the top end of the Reserve Bank's comfort zone of 2 to 3 per cent until at least 2009 means that another interest rate rise is all but certain. In its quarterly statement on monetary policy released yesterday the RBA said that evidence was pointing to strong growth in the global economy. Locally, price pressures would remain as consumer borrowing and confidence are increasing, boosting demand while supply is stretched according to the RBA. Analysts are now predicting another increase in rates before the end of the year, but if wages figures reported tomorrow show strong growth another rise could be on the cards for next month.
 

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14 August 2007 - BoQ to acquire MacKay
The Australian
The board of the MacKay Building Society has unanimously voted in favour of a takeover proposal for the Bank of Queensland. The offer is worth $53.2 million, 15.7 per cent higher than a previous bid for MacKay by Wide Bay Building Society. The BoQ offer would give shareholders $8.25 per Mackay share or 0.5 BoQ shares per MacKay share. A spokesperson for the bank said that the merger would further strengthen BoQ's growing presence in north Queensland following its merger with MacKay-based Pioneer Permanent Building Society last year.

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14 August 2007 - Bluestone feels rate pressure
The Australian
Lender Bluestone has warned that the big four may have to raise their interest rates by more than just the Reserve's increases in cash rate and that borrowers would find it harder to gain access to discounted rates that have been becoming more common. Yesterday Bluestone said that it would be increasing rates on loans by 17-55 basis points on top of the RBA's 25 basis point increase last week. The move came following discussions the lender had with its bankers about the likely future cost of funding. A quarter of Bluestone's customers have prior credit problems however the average loan-to-value ratio of 75 per cent is far lower than the 90 per cent average in the US.
 

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14 August 2007 - Parties compete over housing stress
The Financial Review
The Housing Industry Association has called on the Coalition to match Labor's housing affordability funding which now totals $1.1 billion. Treasurer Peter Costello said that the government is already spending $15 billion on public housing over the next five years, would open up housing funding to private developers, and had started a land audit to find new land for housing. In the meantime rents in Sydney are skyrocketing with an average two-bedroom unit now being let for $330 per week, up $30 over the last year.

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13 August 2007 - Labor to help stressed renters
Sydney Morning Herald
The Labor party has announced a new policy which is aimed encouraging investors to build up to 50,000 low-cost residential properties that would be rented to families who are suffering from 'mortgage stress'. The policy makes available $6,000 per year in tax incentives to investors such as super funds and property trusts for each property that would then be let for 20 per cent less than the prevailing rate for up to 10 years. Under the plan a family would be eligible if they are receiving the maximum rate of Commonwealth rent assistance, receive at least the base rate of Family Tax Benefit A, and have paid at least 30 per cent of the gross household income in rent for over a year.
 

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13 August 2007 - Growth spurt for Bendigo
The Financial Review
Bendigo Bank's chief executive Rob Hunt has said that the merger proposed last week is a perfect fit as it brings together the strong retail presence of Bendigo with the wholesale book of Adelaide Bank. Mr Hunt said, "There's a diversity of revenue in there so if one market slows, we've got other levers to pull." If approved by Adelaide shareholders the new merged entity will challenge Suncorp-Metway as the sixth largest bank in Australia with 1.3 million customers, around 400 branches and a loan portfolio of $43 billion.
 

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13 August 2007 - Melbourne apartment glut relief
The Financial Review
The oversupply of apartments in inner-city Melbourne is clearing with 1037 sales in Southbank, Docklands and St Kilda road in the six months to the end of June. The 2006-07 financial year result of 1962 sales was the best since 2002-03 and 25 per cent over the long term average calculated from 1994. With rental yields improving, from $280 to $300 per week last year up to $310 now, investors are being attracted to the market.

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13 August 2007 - Westpac paves the way
The Financial Review
Westpac, having revamped their marketing approach has proven there are tangible results in producing and promoting marketing campaigns involved with environmental, social or community causes. Corporate social responsibility is a widely circulating topic in recent years and since Westpac's campaign launch, areas such as brand consideration, "product experience" and overall customer experience has increased strongly. Since October, Westpac reported an increase among existing accounts by 20 per cent, and the number of customers leaving the bank decreasing by 25 per cent.

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13 August 2007 - Fund injection to prop up banking system
Sydney Morning Herald
Central Banks in the US, Europe, Japan, Canada and Australia all moved to inject cash into the banking system on Friday. The US sub-prime crisis had caused the overnight lending rate between banks to reach 6 per cent but the injection of $US38 billion by the US Federal Reserve saw that drop back to their target rate of 5.25 per cent. As a result American stocks recovered most of the losses that had occurred early on Friday.
 

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13 August 2007 - Sub-prime problems hit close to home
The Financial Review
Macquarie Bank, BT Financial Group and AMP have all asked fund managers to clarify their exposure to the sub-prime market. The move comes as BNP Paribas has suspended three investment funds and suggestions that Citigroup lost more than $US700 million in credit securities in July. Valuations have been suspended and withdrawals frozen by hedge fund managers Basis Capital and Absolute Capital after their portfolios of mortgage-backed assets got caught in the US sub-prime fallout.
 

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13 August 2007 - Card bodies monitor chip and PIN
The Financial Review
A committee consisting of representatives from Visa, MasterCard, merchants, card issuers and card acquirers has been established by The Australian Payments Clearing Association, with a primary focus of identifying possible problems that could slow the uptake of new "chip" and "PIN" cards in Australia. The new cards have lower interchange fees and both Visa and MasterCard envisage acceptance by all merchants by early 2008.

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10 August 2007 - Rates up, but where will they stop?
InfoChoice.com.au
The Reserve Bank raised interest rates to their highest level in ten years this week, the official cash rate rising 0.25 percentage points to 6.5 per cent. This will push variable home loan rates up by the same margin over the coming weeks, adding about $50 to the average $300,000 mortgage.

No sooner had the widely anticipated quarter-point rise in official interest rates been duly delivered by the RBA board, then speculation began about a further rise. It is too early to start talking about further hikes. But it's clear that there is plenty of ongoing stimulus to the economy from the resources boom, strong business investment and plenty of federal government election spending that risks feeding further inflationary pressure.

A return to strong monthly employment results for July has helped underscore this and why the RBA found it necessary to act on interest rates. Another 21,800 jobs created last month, most full-time, sees a quarter of a million new jobs over the past year.

So the real economy is strong, but the current instability on financial markets can't be ruled out as a potential influence on interest rates. The longer it continues, the greater the chance that confidence among consumers and businesses is dented to an extent that economic activity takes a hit. There's no great evidence of that yet in Australia, but that concern must have weighed on US central bankers who decided to keep rates steady over there this week.

A full insight into what the central bank is thinking on interest rates, inflation and the economy will emerge over the coming week with the quarterly statement on monetary policy due out on Monday and a parliamentary committee appearance by RBA governor Glenn Stevens on Friday. There is also the release of wages growth figures, an important indicator for inflation.

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10 August 2007 - LMI providers exercise caution
The Sheet
Three providers of lender's mortgage insurance in Australia, PMI, Genworth and newly licenced MGIC, are expected to reign in aggressive growth targets. Genworth is believed to be planning to limit, and even completely stop, selling insurance on mortgages in certain postcodes, mainly in south-west Sydney. PMI has not announced any changes yet but its parent company in the US is experiencing larger claims and a default rate of 0.29 per cent, up from 0.16 per cent just a year ago. A sign that MGIC has not escaped the US sub-prime crisis is the scrapping of its planned takeover of Radain Group. While early signs are for a change of attitude to locations that have been hurting for years and only for non-bank lenders the expectation is that they will seek to reduce risk even further.

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10 August 2007 - Bendigo and Adelaide tie the knot
The Australian
Bendigo Bank and Adelaide Bank have agreed to merge with Bendigo being the senior partner. The new entity will be known as Bendigo and Adelaide Bank with a market capitalisation of $3.9 billion. Bendigo reported a full-year profit of $118.5 million, an increase of 15.6 per cent.
 

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10 August 2007 - More good employment figures
The Australian
The unemployment rate has remained at its 32 year low of 4.3 per cent, helped along by an increase of 21,700 jobs, most of which were full-time. Victoria showed the strongest growth in jobs with their unemployment rate now at 4.4 per cent. Unemployment is lowest in Western Australia at 3.3 per cent due to the resources sector. Increased unemployment rates were recorded in two states: NSW is now at 4.7 per cent and South Australia 4.9 per cent.
 

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10 August 2007 - Sales pressure encourages risky lending
The Financial Review
Workers in the finance sector will today speak at a parliamentary committee warning that pressure on sales staff could be leading to risky lending practices. The House of Representatives snap inquiry into lending practices will also hear evidence from lenders, regulators, consumer groups and others from the financial system. A survey by the Financial Sector Union found that most respondents felt obliged to try to sell a product even if they believed the customer did not need it. A joint submission by the Reserve Bank and Australian Prudential Regulatory Authority says that while innovation in the lending market has led to increased risk the overwhelming effect has been to widen the range of households that can get access to finance.
 

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10 August 2007 - Consumers already hit by higher rates
The Financial Review
The major banks are acting quickly to pass on the interest rate rise to their customers with Westpac and National already announcing higher rates and the others expected to follow today. Offshore based institutions such as ING and BankWest have already announced increases in their high-interest savings account rates. Competition in the sector has seen interest margins almost halve since the mid-1990's, from around 4.26 per cent to 2.21 per cent.
 

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10 August 2007 - ASIC should have acted earlier
The Financial Review
ASIC has been criticised as doing too little too late to prevent the collapse of risky property schemes. A parliamentary investigation said that strategies announced by the regulator earlier this year should have been triggered by the collapse of Westpoint in 2005 rather than waiting for the predicted further collapses to occur. ASIC has pledged to undertake more scrutiny of investment companies and their prospectuses, as well as greater investor education.
 

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10 August 2007 - No disclosure of environmental risks
The Financial Review
Guidelines that were being considered by the ASX to increase the amount of information sharemarket listed companies disclose to their investors have been dropped. Business groups lobbied to stop the adoption of new rules that would have forced companies to inform shareholders about environmental and other non-financial risks. Changes that did make it through include a requirement for companies to prohibit hedging unvested options and tightening the disclosure of remuneration by listed trusts.
 

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10 August 2007 - Fringe lenders prey on vulnerable borrowers
The Financial Review
A survey conducted by the NSW Consumer Credit Legal Centre has found that borrowers who refinance their mortgage because of financial difficulty usually do so to their own detriment. The additional costs of refinancing often mean that consumers lose more of the equity in their home than they would otherwise have retained. The survey also found none of the borrowers surveyed had their own solicitor, but were referred to solicitors by the brokers and lenders involved. THE NSWCCLC identified a small group of lenders, brokers, solicitors and accountants who offer expensive loans to vulnerable borrowers with a view to recovering the debt and considerable fees from the security property.
 

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10 August 2007 - Report suggests housing near crisis point
The Financial Review
The latest release of ANZ's Australian Property Outlook has reported the housing market nearing a "crisis point", and that while housing price growth is booming and rental growth is strong, new building development remains scarce. The Economics@ANZ team, led by author Paul Braddick, argues the current housing conditions will apply additional pressures on buyers and renters, and "deteriorate sharply" in the years ahead. The Australian Bureau of Statistics reported capital city housing prices rising 9.2 per cent for the first half of the year, while at the same time the Reserve Bank decided to increase rates by 25 basis points, two fundamental factors set to worsen the affordability crisis.
 

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9 August 2007 - Losses to impact bank earnings
The Financial Review
All major banks have said that they expect loan losses to rise following the latest rate rise. With a low exposure to sub-prime loans, Australian banks are expected to initially experience defaults in credit cards and unsecured personal lending. An analyst from JP Morgan said that even a modest escalation would reduce bank earnings by more than 5 per cent. Bank stocks usually outperform the broader market in the three months after a rate rise.

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9 August 2007 - Floating to compete for staff
The Financial Review
Westpac is planning a partial float of its investment arm, BT Financial Group. The bank is likely to retain a 55 per cent stake in the deal which would value BT at almost $1 billion. The decision to sell was driven by a need to retain key staff that are being attracted to boutique firms that can offer equity stakes. The sale could put pressure on rival Commonwealth bank to look at a similar move for its Colonial First State division.
 

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9 August 2007 - Location key to home value
The Australian
The fifth rate rise since the 2004 election could put further downward pressure on prices for houses in outlying suburbs around the country. According to analysis by Australian Property Monitors, homes in the outskirts of Perth and Darwin could fall by as much as 10 per cent, while those in Sydney's west and southwest, and Brisbane's growth corridor could drop by 5 per cent. Established and premium suburbs would be unaffected however, creating a two-speed market, one of the have and have-nots.
 

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9 August 2007 - Inflation key to future rate hikes
The Financial Review
In its biannual Statement on Monetary Policy which is released next Monday, the Reserve Bank is expected to indicate that underlying inflation will remain in the top half of its 2 to 3 per cent comfort zone, raising the prospect that rates will be raised again in the early part of next year. Strong economic growth has been keeping pressure on inflation and the RBA said that the board had been worried about this for some months.
 

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9 August 2007 - Home values push upwards
The Financial Review
The average house price across Australian capital cities was up by 3.2 per cent in the June quarter and 9.2 per cent over the year according to data released by the Australian Bureau of Statistics. Brisbane recorded the largest increase of 6.5 per cent for the quarter and house prices in Sydney improved with a 2.3 per cent lift in June taking the average increase for the year to 3 per cent. After strong growth over the last few years Perth house prices were down by 0.9 per cent for the quarter Darwin saw a decrease of 1.4 per cent.
 

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9 August 2007 - Business borrowing booms
The Financial Review
Business borrowing has grown by 18.7 per cent over the last year and was one of the factors considered by the Reserve Bank when they raised rates yesterday. Borrowing has contributed to an increase of 85 per cent in capital expenditure over the last five years. In spite of this, Macquarie Bank economist Richard Gibbs said that businesses would not be too troubled by the rate rise. "Balance sheets of Australian corporates are in a very healthy state and even small to medium enterprises, while they might have a bit more debt, they are not in a parlous way in terms of debt weightings," he said.
 

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9 August 2007 - Super choice is a super pain
The Financial Review
Employees are increasingly using their right to choose a superannuation fund but medium sized businesses are struggling to cope with the various administration of the funds. Over half of businesses surveyed with between 20 and 500 employees reported that changing funds for an employee was either a 'significant' problem or a 'moderate hassle'. A quarter of medium sized businesses now pay contributions to over 20 funds which is up from only 8 per cent in 2005 and 4 per cent in 2003.
 

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8 August 2007 - ING Direct reward savers
InfoChoice.com.au
Demonstrating the competitiveness of the Online Savings market, ING Direct has also announced an increase in deposit rates for their Savings Maximiser from 6 to 6.15 per cent and their Business Optimiser from 5.90 to 6.10 per cent.
 

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8 August 2007 - RBA increases cash rate to 6.50 per cent.
InfoChoice
The Reserve Bank of Australia has increased the official cash rate to 6.50 per cent the highest level since November 1996. For each $100,000 borrowed a borrower can expect to pay a further $17 per month in their repayments. The rise is the fifth increase since the last election and will play a critical role in the coming campaign. The quoted Standard Variable Rate will now move to 8.32 per cent whilst InfoChoice forecasts the InfoChoice Benchmark Variable Rate increasing to 7.78 per cent.
 

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8 August 2007 - BankWest first to market with increased deposit rates
InfoChoice
In response to the Reserve Bank decision to increase the official cash rate by 0.25 per cent, BankWest has increased the twelve month introductory rate paid on their TeleNet Online Savings Account to 7.00 per cent whilst increasing the revert rate the full 25 points to 6.50 per cent. BankWest has also passed on the increase to their Business TeleNet Saver to 6.60 per cent and to their AgriOne account to 5.75 per cent.

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8 August 2007 - Spending power surge
Sydney Morning Herald
The capacity of Australians to buy goods and services, save and invest has increased by 50 per cent since 1991 according to figures released by the Australian Bureau of Statistics yesterday. Price rises of goods such as cars, household appliances, clothing and footwear have been less than the average 3 per cent increase in our annual incomes. Some of the increased prosperity is a result of a higher workforce participation rate with 62 per cent of Australians over the age of 15 now employed compared with 56 per cent in 1985.
 

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8 August 2007 - Houses grow while households shrink
The Australian
Our houses are getting bigger while the number of people in a household shrinks. Data from the Australian Bureau of Statistics shows that in the 10 years to 2004 the average number of people per household dropped from 2.7 to 2.5. Households with only a couple account for 26 per cent of households and people living alone make up 25 per cent. At the same time, in 2003-04 57 per cent of new separate houses bought for owner-occupier purposes had four or more bedrooms. This leaves 77 per cent of households with one or more bedrooms to spare and 97 per cent of couple-only homes have a spare.
 

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8 August 2007 - House values increase equity
The Financial Review
The average amount outstanding on mortgages increased by 61 per cent from 1995 to 2004 but this was more than offset by an increase in equity over the same period of 72 per cent. The slower increase in principle outstanding can be attributed to 85 per cent of people having bought their homes before September 2000 when house values started to rise quickly. The average value of owner occupied home is estimated to have grown from $209,000 to $355,000 over the period which equates to a growth of 6 per cent per annum.

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8 August 2007 - New property price record
The Financial Review
A new record has been set for the sale price of a house in Australia. A mansion in Sydney's Point Piper changed hands for $29 million dollars but the record may not stand for long. Already larger offers have been made for other waterfront properties in Sydney and in Perth where one property could fetch as much as $70 million. Melbourne too is setting its own records with a property sold last week for $18 million.
 

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8 August 2007 - Warning for DIY fund travellers
The Financial Review
People who invest in do-it-yourself superannuation funds should think carefully before heading overseas for an extended period. Residency rules that apply to DIY funds have changed and mean that if you are going to be out of the country for two or more years the option of returning for 28 days to renew the fund's residency status no longer exists. Now trustee-members must not make any contributions while away and management of the fund must be conducted by someone in Australia. When a fund loses compliance status the top personal tax rate will be applied and not just for the latest year but on previous income as well.
 

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8 August 2007 - Rates to rise here on back of US problems
The Financial Review
Regional banks and non-bank lenders often use residential backed mortgage securities (RMBS) to fund their lending as they don't have the access to a large base of deposit funds as the big banks do. The cost of funding through RMBS issues is expected to increase as a risk premium due to the sub-prime crisis in the US. One lender last week was forced to raise the pricing on a $500 million RMBS issue in an attempt to generate any real interest but withdrew the issue from market after the increase failed to garner sufficient support. If this trend continues smaller lenders will be forced to charge higher interest rates on loans to consumers.
 

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8 August 2007 - Reserve raises rates to check inflation
InfoChoice
As widely tipped the Reserve Bank has increased the official cash rate by 0.25 per cent. The governor of the RBA Glenn Stevens said that the increased demand in the economy over recent months combined with a continued decline in unemployment were the key factors behind the decision. While the higher currency exchange rate has had a dampening effect on the local economy the high CPI figure for the June quarter indicated a less favourable near-term outlook. Also taken into consideration were the global economy and financial markets with credit markets a downside risk for the US economy.

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7 August 2007 - Signatures could be obsolete
The Financial Review
Smart cards will soon replace the magnetic strip credit cards that we have been carrying since the 1970's. ANZ has been issuing cards with chips since 2003 and later this month Westpac will start adding a computer chip to their Visa and Mastercard issued cards with the Commonwealth Bank expected to announce a similar move shortly. The new cards will provide more flexibility than is currently possible with the option of using a numeric code to allow transactions at a point of sale rather than using their signature. Other additional functionality that is being investigated includes retailer loyalty schemes, prepaid accounts that can be used in place of cash for small purchases such as public transport, or pre-approved additional credit that could be activated by the consumer when required. Currently there are about 1.5 million smart Visa cards in use around the country.
 

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7 August 2007 - Welfare change to swell unemployment ranks
The Financial Review
The ANZ job ads survey has shown that in July the number of ads was down by 0.5 per cent but this is still 33 per cent higher than they were just one year ago. However the unemployment rate is expected to be up when figures are released on Thursday as changes to welfare could affect up to 90,000 people who will be added to the total until they find work. Parents on welfare whose youngest child is seven or older will have to work a minimum of 15 hours a week.
 

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7 August 2007 - Insolvency risk if rates rise
The Financial Review
Liquidators have said that an interest rate rise tomorrow may be the straw that breaks the camel's back as more companies are using higher property values to borrow more money from banks. In the financial year to June 2007 12,000 companies entered insolvency which was less than in 2006 but higher than the 7,500 reported in 2000. The result was not as bad as it could have been due to the mining boom in Western Australia which meant that insolvencies were down 50 per cent in the state. Personal bankruptcies are also up to 25,242 people, a 13.2 per cent increase on the previous year.
 

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7 August 2007 - Most urban centres not affordable
The Financial Review
Labor has rejected calls to double the first-home-buyers grant and instead believes that tax breaks to help people to save for a deposit would be more effective. Kevin Rudd said that Labor was still finalising its housing affordability policy but that it already includes $500 million which would be used to cut state charges and red tape for buyers of new homes. The Urban Development Institute has found that only 39 per cent of our urban centres could be considered affordable and property developers have called for a ministerial council to address the issue.
 

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7 August 2007 - Sharemarket on the skids
The Australian
Over the past two and a half weeks the Australian sharemarket has lost 8 per cent of its value and investors have been warned that it isn't over yet. Analysts believe that until fears over the US sub-prime market have settled an increased risk aversion will keep the sell-off running. The value of the All Ordinaries was down by $20 billion yesterday as weakness in early European markets wiped out gains that had been made earlier in the day.
 

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7 August 2007 - ANZ turning green
The Financial Review
In a bid to reduce energy consumption and extend its technology purchasing cycles the ANZ Bank is looking at switching a third of its computers to thin clients. The technology means that processing is performed externally at central servers and the terminals use so little energy that they can be powered through their network connections rather than plugged into mains power. ANZ has committed to become carbon neutral by the end of 2009 by purchasing carbon credits to offset greenhouse emissions at a cost of around $5 million per year.
 

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7 August 2007 - Unknown bug affects online bankers
The Australian
National Australian Bank customers were yesterday experiencing difficulties while accessing phone and internet services, as the system was denying attempted access. This follows complications faced by the Bank of Queensland, who reported just days earlier of having similar troubles. Both banks have been struggling to understand the cause of the problem, and have yet to narrow down the root cause.
 

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6 August 2007 - Rate rise blame game
Sydney Morning Herald
The Minister for Finance Nick Minchin has said that while the Reserve Bank is independent, he does not believe that there is a case for a rate rise this week, saying that inflation is "under control" at 2.6 per cent. The Liberal Party has launched a new advertising campaign that aims to place the blame for rising interest rates on $70 billion in borrowings by the Labor state governments. However Macquarie Bank interest rate strategist Rory Robertson said that interest rate cuts over the past 5 years were at odds with interest rate increases by the RBA. "The Federal Government has disengaged the automatic stabiliser of increased tax revenue," he said.
 

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6 August 2007 - Shares less appealing as rates rise
The Financial Review
The Reserve Bank looks set to raise interest rates despite recent problems in the global credit and sharemarkets. The probability of a rise was put at 80 per cent by futures traders last Friday. While consumer-credit growth might be dampened business credit is unlikely to be impacted however banks may suffer in another way. With at call deposit rates of up to 8 per cent now being offered this could attract money away from riskier investments such as the sharemarket, eating into bank share prices.
 

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6 August 2007 - Higher tax on unregistered super
The Financial Review
Around 1.1 million superannuation accounts still do not have tax file numbers registered. 230,000 of these have balances of more than $1,000 and will be subject to rules that came into effect from July 1st that mean they will be taxed at the top rate (plus Medicare levy) and won't be able to make after tax or non-concessional contributions. A mailing campaign by the tax office has led to an increase in the number of accounts with tax file numbers from 77 per cent last October to 92 per cent now.
 

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6 August 2007 - Fixed mortgage rates on the move
The Financial Review
While the sub-prime crisis in the US is not being repeated here it is having an effect on the local market. As the cost of credit in wholesale finance markets has been rising, fixed mortgage rates have been moving up. Lenders are expected to place more emphasis on credit quality and focus on pricing for risk rather than slashing margins to win business. The cost of residential mortgage-backed securities is also expected to increase which would impact six lenders in Australia: Liberty Financial, Bluestone Group, Pepper Home Loans, Mobius Financial Services, Challenger and Adelaide Bank.
 

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6 August 2007 - ACR investors to get more than half back
The Financial Review
The administrators of failed property investment group ACR say that investors can expect to receive 60 cents in the dollar and lenders should be fully repaid. Over 7,000 investors are owed $330 million and lenders are owed $238 million. The value of the group's property portfolio had been put at $624 million at the beginning of June but this was based on valuations on an 'as if completed' basis rather than on an 'as is' basis. The administrators have since said that the most recent valuations are lower and that they are investigating the reasons for the reduction.
 

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6 August 2007 - APRA checks sub-prime health
The Financial Review
The Australian Prudential Regulatory Authority has been asking questions of our financial institutions to determine their exposure to the US sub-prime market but has found little risk. The National Australia Bank chief executive John Stewart said that the sub-prime crisis in the US is very serious and has a lot further to go with about 20 per cent of the $1.5 trillion sector in arrears but the Australian banking system does not face the same threat. While Australian banks have warned investors to prepare for some rise in bad debts the local equivalent of sub-prime loans, non-conforming, only makes up 1 per cent of the market according to Reserve Bank of Australia figures.
 

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3 August 2007 - Case strong for August rate rise
infochoice.com.au
It appears the time has come for interest rates, with a high chance that the Reserve Bank will raise official rates by 0.25 percentage points in the coming week in an early strike against inflation.

The RBA is on record as saying it expects inflation to accelerate into 2008 and the low March quarter inflation result only gave it more time to assess that threat. Well, more time has only revealed that the inflation jumped back up in the June quarter more quickly than had been expected, making the last inflation forecasts by the RBA looking too low now.

And there are plenty of economic indicators currently adding weight to the threat of rising inflationary pressures. The RBA's own figures on private sector borrowing can only serve to strengthen the case for a rate rise. Housing, personal and business credit all showed sizeable jumps in June, a phenomenon very rare in these figures.

Overall credit growth was 1.8 per cent in June for an annual rate of 15.4 per cent after being steady in the 14 per cent range over the last year. A massive 3.6 per cent rise in personal credit must be a one-off but housing and business borrowing also recorded the highest monthly growth in some years.

Add to that strong June figures for building approvals and retail sales, set it all against a background of record business investment, a strapping rate of job creation and a recovering rural economy and there is little to stand in the way of higher interest rates. The RBA might be concerned about the instability on share markets but what we've seen so far won't be enough to ward off a rate rise.

A 0.25 per cent rate rise would add an extra $17 to monthly loan repayments for every $100,000 in borrowings.
 

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3 August 2007 - Fringe lenders to blame for defaults
The Financial Review
Mortgagee possessions were up by 10 per cent from 2005 to 2006 but the Australian Banker's Association has denied that its members are driving the growth. The ABA has asked the NSW Supreme Court to obtain more data which they expect would show that it is fringe lenders, making loans with little regard to the ability to repay, that are causing the problem rather than mainstream lending practices. A similar request made to the court previously was rejected as collating the data would require a review of every loan file and would be too time consuming.
 

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3 August 2007 - US economy to have a soft landing
The Financial Review
The International Monetary Fund has said that the most likely scenario for the US economy is a soft landing, however risks remain. Growth in the US economy is forecast to be 2 per cent this year, down from the 3.3 per cent achieved last year but should recover to 2.8 per cent next year. Demand for American products overseas is strong which is offsetting a fall in local consumer consumption currently but the IMF said that consumption could weaken and financial market conditions could tighten rapidly.

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3 August 2007 - Ombudsman highlights online security concerns
The Financial Review
The Banking and Financial Services Ombudsman has warned banks and credit unions that delaying settlement of disputed online transactions would lead to larger compensation payments. As more banking services are conducted online banks can issue credit without ever seeing a customer. This has led to situations where the first a person knows about a credit card or loan being obtained fraudulently using their name is when debt collectors come knocking. A recent case saw a bank paying $4,300 to a customer after it had given out personal information which resulted in an adverse credit listing. NAB is looking at the viability of voice recognition technology to improve customer identification at call centres but said that such innovations had to remain customer-friendly.
 

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3 August 2007 - Healthy recovery for Aussie market
News.com.au
The Australian stock market bounced back yesterday with the S&P/ASX200 index rising by 70.6 points. Whether this will hold or not remains unclear as investors continue to watch the direction of US markets. Stocks in all of the major banks recovered with NAB up by 92 cents to $38.00 and Commonwealth up 95 cents to $53.20. A total of 2.13 billion shares were traded with a value of $7.93 billion.
 

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3 August 2007 - Public housing plan upsets state relations
Sydney Morning Herald
The NSW Premier Morris Iemma has warned the Prime Minister that he is not comfortable with proposed changes that would force state governments to compete with private developers for public housing funding. Mr Iemma said that the federal government has not consulted the state and territory governments and that the move undercuts the co-operative approach that had been established. The acting Minister for Housing in NSW Linda Burney said that the plan could place 327,000 NSW tenants in jeopardy.
 

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3 August 2007 - Rich getting richer
The Age
Results of a survey conducted by the Australian Bureau of Statistics showed that the gap between the wealthy and the poor continues to widen. The richest 20 per cent of households have 61 per cent of the country's wealth while the bottom 20 per cent own only 1 per cent. The top 20 per cent have average net assets of $1.7 million while the bottom 20 per cent have average assets of $27,000. Over the past two years the richest group has increased the average asset figure by over $300,000 while the poorest group's average assets only increased by $4,000.
 

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2 August 2007 - Market jitters cause wipe-out
Sydney Morning Herald
Concerns about global economic conditions led to $51 billion being wiped from the value of the Australian sharemarket. The ASX200 index was down 3.3 per cent, or 200 points. Investment banks were hardest hit with Macquarie alone losing $2.4 billion from its market capitalisation following news that investors in one of its funds that is exposed to the US sub-prime mortgage crisis will lose up to 25 per cent of their investment. Over the last week the Australian stock market has fallen by a total of 8 per cent.
 

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2 August 2007 - Less LMI equals higher rates
The Australian
APRA has announced a reduction in the concessions in regulatory capital requirements for loans that are protected by Lenders Mortgage Insurance that are granted to financial institutions. The chief executive of insurer PMI, Ian Graham, has warned that with less incentive to use LMI, lenders would be more likely to apply higher interest rates for loans with greater risk such as low or no deposit. The changes apply to banks, credit unions and building societies.
 

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2 August 2007 - CBA expands equities presence
The Australian
The Commonwealth Bank has made a bid to purchase online broking and investment portfolio services company IWL. IWL is Australia's largest independent discount broker and the offer of $6.57 per share values the business at $373 million. If the purchase is successful it would take banks' share of the equities market from CommSec's 4.4 per cent to over 5 per cent. Yesterday IWL announced a pre-tax profit of $31.9 million.
 

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2 August 2007 - BankWest ready for expansion plans
Sydney Morning Herald
HBOS Australia, parent company of BankWest, has announced a half-year pre-tax profit of $368 million, an increase of 16 per cent, despite costs rising by 30 per cent. The result ensures that the bank is well placed as it begins its aggressive push into the eastern states, although 50 per cent of its assets are already outside Western Australia. Lending in the half year was up by 28 per cent contributing to achieving a 4 per cent share of the national market, up from 1 per cent 4 years ago. The monthly target for take-up of the 8 per cent Regular Saver deposit account was achieved in just one day.
 

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2 August 2007 - High fuel prices to return
The Financial Review
Families on low and middle incomes face the prospect of financial pressure on two fronts with a rate rise looking likely next week and petrol prices tipped to rise again. While the average price of petrol in Australia was at a 16-week low of 124.9 cent last week, the price of oil on international markets is hitting record highs. Higher fuel prices would feed into inflation and increase the chances of further rate rises.
 

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2 August 2007 - Food prices climbing
The Financial Review
The value of retail sales was up by 1.4 per cent in June. While sales volumes were down by 0.2 per cent for the month higher prices, particularly in food, resulted in an increase in value of 6.7 per cent on a year ago. Price increases were highest for groceries as the drought reduces supplies, pushing food prices up. Imports were up by 0.8 per cent for the month while exports sunk by 3.4 per cent leaving a trade deficit of $1.75 billion.
 

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1 August 2007 - HSBC targets travellers
Sydney Morning Herald
HSBC has said that it aims to double its customers over the next five years but, instead of the branch expansion strategy adopted by BankWest, will focus on Australians who do business overseas and travel regularly. HSBC will leverage its network in Asia and around the world. Currently HSBC has 470,000 Australian customers and estimates this could reach almost 1 million by 2012. The Australian division of the bank announced yesterday that it is on track to produce a full-year profit of over $US100 million by February with the result for the last 6 months up 4 per cent on the same period last year to $US51 million.
 

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1 August 2007 - More rate pressure as debt balloons
The Australian
Private debt grew by $27.4 billion in June, further strengthening the case for a rate rise when the Reserve Bank meets next week. A large contributor to the debt blow-out was an increase in personal debt of $5.5 billion instead of the usual $2 billion growth each month. This is believed to be due to high-income earners borrowing to buy shares and managed fund units to put in to superannuation before 30 June. Borrowings for homes in June totalled $12.1 billion, the largest monthly increase since March 2004. Business lending was also up with $9.9 billion in new debt, adding to an increase of 18.7 per cent over the past year.
 

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1 August 2007 - House approvals edging up
The Australian
Yesterday the Australian Bureau of Statistics released new home approval figures which show a slow recovery after a drop caused by interest rate rises last year. Total new dwelling approvals were up by 7.5 per cent in June but new apartment approvals which can vary greatly from month to month contributed to the result. Trend analysis from the ABS shows approvals for private houses growing by only 0.2 per cent in the month and apartments by 0.8 per cent.

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1 August 2007 - Consumers reject biometrics
The Financial Review
Despite the promise of better security for our financial transactions a dislike for intrusive technology, such as biometric scanning, has slowed its introduction and some believe that we will never accept it. Two years ago the head of technology at Westpac, Michael Croomer, said that we would be using thumbprints and iris scans to identify ourselves by now. However he has conceded that there are emotional issues around privacy but also that the technology to support such systems is not yet commercially viable.
 

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1 August 2007 - House prices out of reach for many
The Financial Review
Research from the Property Council of Australia shows that workers on the average wage of $55,000 cannot afford to buy a median-priced home in any of the 16 metropolitan suburbs surveyed. The Council warns that this will have an impact on society as key workers such as teachers and nurses are denied access to the housing market and that the option of a single-income family is no longer viable. One example in the report is a primary school teacher and an administrative assistant on a combined income of $95,000 would pay 39 per cent of their income to buy a three bedroom home on the Gold Coast, 48 per cent in Rockdale, 30 per cent in Footscray and 41 per cent in Queens Park in Perth.
 

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1 August 2007 - No sub-prime fallout here
The Financial Review
The sub-prime loan crisis in the US will not necessarily be repeated in Australia. Although banks have warned investors that there will be some rises in bad debts here, this would be off a very low base and are half the level of arrears in the US market. Non-conforming loans, the Australian equivalent of sub-prime loans only make up 1 per cent of outstanding loans, compared with 15 per cent in the US.
 

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September 2007

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28 September 2007 - US rate cut holds mixed fortunes for Australian rates
InfoChoice.com.au
This week has seen signs that the global financial markets might be returning to normal following the shakeout caused by the sub-prime lending crisis in the US. If this is the case, there are mixed fortunes for Australian borrowers and their home loan interest rates. There are two factors playing on interest rates currently, generally pulling in opposite directions. As one risk threatening higher rates recedes, the other rises.

The risk of smaller lenders here having to raise interest rates for borrowers (because the global credit crunch is lifting their costs of raising finance) on variable loans may now start to recede but we are not totally out of the woods yet. No lender wants to be seen to be raising rates when its competitors aren't. Most lenders are not expected to raise rates, and those that do by small margins.

The risk of all lenders having to raise interest rates because the Reserve Bank increases official interest rates has, however, returned now that the global credit crunch is settling down. There is no real chance the RBA will lift rates as soon as its October meeting this Tuesday. But the significant 0.5 percentage point cut in interest rates by the US Federal Reserve has served to settle nervous world financial markets very nicely and reduced the risk that the US will go into recession, hitting world growth.

This means Australia's strong economic growth is less threatened and likely to continue, a situation that already has the RBA concerned over inflation. It is possible therefore that we will see an interest rate rise late this year or early next. The soonest a 0.25 per cent hike could come is early November, following the release of the all-important quarterly inflation figures in late October, although the chances don't appear high at this stage.

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28 September 2007 - Interest rates bite households and government
News.com.au
Over half the respondents in a survey of 1,530 people said that they would have trouble meeting their home loan repayments if interest rates rose by 1 per cent. The survey, conducted by polling firm Coredata, also found that those in the lower income group are worst affected by the cost of housing with one quarter of that group of borrowers reporting that mortgage repayments consumed 60 per cent or more of their household income. High loan-to value ratios are also causing problems with 13 per cent of all respondents saying that they think that their mortgage is now larger than the value of their home. One quarter of respondents who voted for the Coalition in 2004 said that they now intend to vote against the government at the next election because of recent interest rate rises.
 

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28 September 2007 - High vacancies to lower unemployment rate
The Australian
Data from the Australian Bureau of Statistics shows that job vacancies in the year to August rose by 11.9 per cent and a total of 172,700 job vacancies in the quarter to August. An equities economist at CommSec, Martin Arnold, said that the high level of job vacancies should see the unemployment rate slip below 4 per cent from its current 4.3 per cent as good business conditions encourage employers to put on more staff. He said that there are now less than three unemployed people for every vacancy. Vacancy rates were up by 31.8 per cent in Western Australia, followed by the ACT which was up 31 per cent. The only state where vacancies fell was Queensland which was down by 3.3 per cent.
 

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28 September 2007 - Mergers would allow local banks to grow
The Australian
Chief executive of the ANZ, John McFarlane, has said that the next challenge for the Australian banking system is overseas expansion, but that mergers between the major banks would need to be allowed to enable this. He said that the Asian region was the "natural province for Australian banks", but in Singapore the major banks were roughly the same size as Australia's big four and China had the largest banks in the world by market capitalisation. Mr McFarlane was speaking on the eve of his retirement, after 10 years at the helm of ANZ.
 

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28 September 2007 - Plan to regulate brokers
The Financial Review
A draft consultation bill is being prepared that will subject finance and mortgage brokers who issue high-risk loans to strict licensing requirements and the possibility of tough penalties. The bill is believed to include a single licensing regime which would allow brokers to operate across state borders and it is also likely to encompass the reverse mortgage market. Penalties under the new legislation will include criminal fines, infringement notices, and conditions being imposed on operating licences or even withdrawal of licence. Under the new regime brokers will be responsible for assessing the capacity of individuals to meet loan repayments, will have education requirements imposed, will be required to disclose commissions and relationships with credit providers, and have to join a dispute resolution scheme.
 

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28 September 2007 - Reverse mortgages reviewed by ASIC
The Financial Review
The Australian Securities and Investments Commission is expected to release the findings of its investigation into the reverse mortgage market in the next two months. The results of the study will be used as the basis for negotiations with lenders about product design. ASIC's executive director of consumer protection, Greg Tanzer, said that disclosure of costs and risks associated with the loans should be improved. "We think that consumers, when they go into this, must think about it as a long-term product and do long-term planning," he said. "People may well need to get specific advice about them. Advice in this area is not generally regulated." The Seniors Equity Release Association recently introduced a code of conduct for reverse mortgage providers which includes a 'no negative equity guarantee' that ensures borrowers will not have to pay back more than the value of their property.
 

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28 September 2007 - AFG delays IPO
The Financial Review
Australian Finance Group has delayed its planned public float due to concerns about the poor state of the credit market. AFG is Australia's largest mortgage broker and had planned to float the company in the last quarter of 2007 with an expected value of more than $200 million. Managing director, Brett McKeon, said "When you see listings like RAMS going from $2.50 to 55 cents in a few weeks of listing and financial services companies are a bit on the nose because of funding issues in the US, we have the concern that our business - even though it doesn't have any funding issues - that we would get caught up in the smell". AFG posted an annual net profit of $6.7 million for the year ended June 2006, compared with $5.9 million in the year before.

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27 September 2007 - Big banks chase Sunday trading
The Australian
The ANZ is aiming to introduce full-service banking seven days a week by 2010 in capital cities and selected regional areas. The bank already has one seven day branch in Melbourne with another in Brisbane. Yesterday it announced that the first branch of this type in NSW would be opened in Lismore, taking the total number of new ANZ branches since 2004 to 80. The Commonwealth Bank is seeking approval to open all of its branches in NSW on Sundays between 9.30am and 4pm. Westpac has 15 branches open on Sundays but these can only be used for home loan enquiries.

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27 September 2007 - APRA watching bank balance sheets
The Australian
The Australian Prudential Regulatory Authority has said that it is working closely with local banks to monitor the impact of the credit market problems. The regulator is paying particular attention to the way that banks can use the commercial market for asset backed securities to keep housing loans off their balance sheet. An APRA spokesman said yesterday "Australian banks remain well capitalised with very low levels of impaired assets. In recent months, APRA has stepped up its monitoring of ADI's (authorised deposit taking institutions) funding positions and maintains a close eye on any impacts caused by exposures to securitisation vehicles which are fully disclosed to APRA."
 

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27 September 2007 - Australia best for new businesses
The Australian
In a study of 178 countries conducted by the International Finance Corporation and the World Bank, Australia has been crowned as the easiest place in the world to start a new business. The report said that a non-liability company can be set up in Sydney in just two days and that business registration fees had been reduced by 50 per cent in NSW last year. Australia has always been in the top three positions since the first annual study was conducted five years ago.
 

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27 September 2007 - Rate rise tipped for February
The Financial Review
The inflation figures due out on 24 October are shaping up as the key determining factor for the interest rate outlook. Investors are currently putting the chance of another increase in interest rates by the RBA before the end of the year at 30 per cent and in February next year at 53 per cent. The RBA has made it clear that, if it were not for the global credit problems, the August rate increase would have been followed by another in September. The governor of the Reserve, Glenn Stevens, said last week that the economy seemed to be at least as strong as when the bank decided to lift rates in August.
 

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27 September 2007 - Skilled vacancies fall
The Financial Review
Wages pressure may ease with skilled vacancies down by 1.7 per cent in September, the second consecutive monthly decline. Figures from the Department of Employment and Workplace Relations showed that there was a 12 per cent drop in position advertisements for manufacturing, wiping out a 9.6 per cent increase in the construction and building sector. However a survey of 7,185 businesses conducted by recruiting firm Hudson found that over 95 per cent intended to increase or maintain their employment levels of the next three months.
 

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27 September 2007 - Bank stocks support market
The Financial Review
Bank stocks helped to limit falls on the local sharemarket yesterday as resource stocks dropped on the back of a weaker higher Australian dollar and weaker copper and oil prices. The S&P ASX200 was down 1.6 points to close at 6481.4 after climbing above 6500 points earlier in the day. Rio Tinto shares shed $2.04 to $106 and BHP lost $1.44 to $43.16 while in the financial sector Westpac gained 49 cents to $27.80 and ANZ was up 23 cents to $28.92.
 

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26 September 2007 - St George to expand ATM presence
InfoChoice.com.au
St George Bank has announced that it will partner with BP to install 200 of the bank's ATMs in prominent BP service stations across Australia. The arrangement means that St George customers will have better access to their own bank's ATMs, potentially reducing charges incurred by using machines belonging to other banks. Once the initial rollout is complete other opportunities for ATM installation will be considered with a focus on Western Australia, Queensland and Victoria. St George has also introduced an ATM locater service where customers can SMS their current suburb and state to a number which will then let them know where the closest ATM is.

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26 September 2007 - Special accounts used for tax not drought
The Australian
The average balance of a farm management deposit account rose to a record $68,600 in the June quarter, up $2,600 or 4 per cent from a year earlier. The scheme was created by the federal government with the aim of giving farmers tax breaks so that they would be encouraged to put money away in good years and will draw on it to get them through the bad. Official figures released last week show that while $500 million was drawn out of the accounts in the September quarter last year, this was offset by a $450 million increase in deposits in the June quarter, suggesting that the accounts are being used for tax benefits rather than managing drought. Tax on income paid into the accounts can be deferred until the funds are accessed.
 

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26 September 2007 - RBA says record debt levels OK
Sydney Morning Herald
The Reserve Bank of Australia has said that it is not concerned about our increasing debt levels as most has been taken on by higher-income and middle-aged households. The deputy governor of the RBA, Ric Battellino, said yesterday that rather than blaming increasing debt on young couples trying to buy their first home, the growth is driven by older, higher-income households that are trading up to higher-quality or better-located homes, buying investment properties and taking out margin loans to buy shares. "These are all signs of rising affluence," he said. Outstanding household debt as a proportion of gross domestic product has climbed from 20 per cent in the 1970's to 100 per cent now.
 

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26 September 2007 - Drought assistance for farmers and businesses
Sydney Morning Herald
In a package of drought assistance announced by the federal government yesterday, the largest component the allocation of $170 million to assist 1,000 farmers who decide to walk away from their land. In a total package of $714 million other measures include lifting the off-farm assets threshold from $473,000 to $750,000, a doubling of the amount that farmers or their spouses can earn off-farm to $20,000, and irrigators in the Murray Darling Basin will receive grants of up to $20,000 to help cope with low water allocations. Assistance will also be provided to all small businesses in towns of up to 10,000 residents which rely on farmers for income. Expenditure on drought relief has totalled over $3 billion since 2001, with $1.1 billion of that announced in the last week in recognition of widespread winter crop failures. Farmers on over half of the nation's agricultural land are now subsidised with special assistance drought payments.
 

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26 September 2007 - More scrutiny for home loan funding
The Australian
The Reserve Bank of Australia yesterday signalled that there was a need for greater scrutiny of bank funding. The deputy governor of the RBA, Ric Battellino, said that the US sub-prime crisis and the broader credit market turmoil that has followed has highlighted the widespread use of so-called conduits, or special vehicles, to take housing loan liabilities off the balances sheets of banks globally. "Around the world, banks have been able to make housing loans and fund them through these conduits without having to hold any capital, and I'm sure this will be discussed very deeply by regulators," he said. An unnamed banking industry insider said that APRA should be keeping a close eye on balance sheets to ensure that the phenomenon did not cause banks' capital adequacy ratios to deteriorate. "APRA should be asking how their capital adequacy has changed," he said.
 

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26 September 2007 - Bank profits growing strongly
The Financial Review
Bank profits continue to climb as three interest rate increases in the last year have not slowed our demand for home loans. The 53 banks licensed to operate in Australia posted a combined profit of $21 billion, up by 12 per cent on the year before, according to figures released by the Australian Prudential Regulatory Authority.
 

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26 September 2007 - SME lending to ease: Westpac
The Financial Review
Westpac has predicted that business credit growth will slow from the current annual rate of 15 per cent. Group executive of the bank's business financial services arm, Peter Hanlon, said that they expected that credit growth for businesses with a turnover of less than $100 million would tail off slightly over the next year, based on industry information and the level of forward orders, but it should still achieve growth of 14 per cent. Mr Hanlon said that growth in manufacturing SME's was still strong and Westpac's services to mining companies was also doing well. "In terms of geographies, obviously with growth in Queensland and Western Australia, they are [both] strong growth states for us. We have seen recovery for our segment in New South Wales, so it's not as much a gloom and doom situation," he said. "Victoria is not bad, but it's not a Queensland that's for sure."
 

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26 September 2007 - No buyer for RAMS yet
The Financial Review
While the chief executive of RAMS Home Loan Group, Greg Kolivos, said that he is not aware of any bank taking a stake in the non-bank lender, he declined to comment on whether any merger talks had been held recently. Shares in the company hit a peak of $1.02 yesterday as rumours circulated that NAB was about to make a move on the lender but had dropped back to 95 cents by the close of trading. Mr Kolivos acknowledged that the business had some problems due to its dependence on wholesale capital markets for funding but that they had found ways of competing in a changing financial services industry in the past. "How that plays out going forward, some of that is going to depend on how those markets are going to operate over the next few months so I wouldn't say we've formed any conclusive views at the moment," he said.
 

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25 September 2007 - NSW is repossession capital
The Financial Review
While the national rate of people falling behind in their home loan repayments is a low 0.41 per cent, in NSW this figure increased to over 0.6 per cent. Figures from the Reserve Bank of Australia show that the Liverpool-Fairfield area has the highest rate of home repossessions in the country with 0.5 per cent of all dwellings in the area seized in 2006, compared with a state average of 0.23 per cent. In NSW last year 3,600 writs for repossession were issued and figures show that over 4,000 are likely to be issued this year. The RBA said that the unemployment rate in western Sydney has risen slightly and property prices have decreased. "In addition, a disproportionately large number of borrowers in this part of Sydney took out investment housing loans around the peak of the house price cycle," it said.

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25 September 2007 - Super returns to slow
The Financial Review
While average superannuation returns hit 14.2 per cent for the year to August, research house SuperRatings has warned that we are likely to see a retreat to single digit gains. Recovering from losses on global sharemarkets early in August, balanced super funds managed to generate a 1.31 per cent return for August. SuperRatings managing director Jeff Bresnahan said that he doubted that super funds would be able to generate returns over 10 per cent this year. "These gains have been dictated by markets and I can't see markets sustaining that sort of growth...you would have to expect some kind of back-off from the levels we have seen over the last four years," he said.
 

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25 September 2007 - New record for stockmarket
The Australian
The Australian stockmarket has rebounded to hit a new record high with resource stocks leading the way. The Australian Bureau of Agricultural and Resource Economics yesterday forecast that commodity values will rise by 4 per cent this year, driving up share prices for companies such as BHP Billiton, Rio Tinto, Fortescue Metals and Woodside Petroleum. The S&P/ASX 200 was up 93.6 points, closing at 6,451.5, and the All Ordinaries was up 89.9 points to close at 6461.1 points. The Australian dollar is also being pushed higher, reaching US86.72 cents last night.
 

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25 September 2007 - Credit crisis not over yet
The Australian
In its latest review of the financial system the Reserve Bank of Australia has said that the relative calm in money markets over the past few weeks may not last. The report said that the cost of credit remains high so lenders are either absorbing the increased cost or passing it on to consumers, although standard rates for prime mortgages have not moved up yet. While most borrowers are positive about their personal finances according to the report there are pockets of Australia, particularly western Sydney where this was not the case. One indicator of the financial stress being felt is a 75 per cent increase in the value of superannuation policies being redeemed early. Analysis conducted by the RBA identified regions in NSW, Victoria and Queensland where mortgage repayments are taking more than 30 per cent of household income but in western Sydney there are areas where this figure is over 40 per cent.
 

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25 September 2007 - IMF forecasts slower growth
The Financial Review
The International Monetary Fund has predicted that world economic growth will remain high next year but at lower levels than in 2006 and 2007. At a seminar yesterday the managing director of the IMF, Rodrigo Rato, said "Credit markets are correcting, but slowly. We aren't at a stage of normality." However Mr Rato said that most countries should be able to cope with financial conditions. "It has an effect on the real economy which will be felt in 2008, with greater intensity in the United States, less in other areas," he said.
 

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25 September 2007 - Record population growth
The Financial Review
Australia's population increased by 307,100 in the year to the end of March, the largest rise ever recorded in a 12 month period, taking total population to an estimated 20,948,900. All states and territories recorded population growth with Queensland leading the way, growing by 2.3 per cent. Western Australia had the next fastest growth rate of 2.2 per cent, followed by Northern Territory with 2 per cent, Victoria and the ACT grew 1.5 per cent, South Australia and New South Wales 1 per cent, and Tasmania grew 0.6 per cent. The most populous state is New South Wales with 6.87 million residents, then Victoria with 5.18 million and Queensland has 4.16 million.
 

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24 September 2007 - Government has plenty of land in reserve
The Financial Review
Victoria has accused the federal government of sitting on enough land for around 30,000 new homes in the latest bout of the blame game around housing affordability. The Victorian Planning Minister, Justin Madden, said that the review of federal landholdings identified about 2,100 hectares that could be released around Melbourne. Mr Madden warned that if the government was to use the land it would have to consider selling it below market value. "You can't simply flog off surplus land to the highest bidder as the Howard government has been known to do in the past," he said. "This does nothing to encourage the development of affordable housing."
 

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24 September 2007 - Queensland to regulate mortgage brokers
The Financial Review
The Queensland government will go ahead with plans to regulate the mortgage broking industry even though national regulation will be introduced in 2009. With around 40 per cent of all new home loans originating via brokers, the federal government is considering a proposal to impose strict laws on the $165 billion non-bank lending industry and the thousands of mortgage brokers. The Queensland rules will require brokers to disclose the costs of services, provide a statement saying why a recommended product is appropriate, and be barred from accepting client commissions before securing credit or lodging a caveat over a property to secure payment. Brokers will also be required to run an internal dispute resolution process and comply with confidentiality and privacy obligations. Western Australia is the only state which regulates its mortgage broking industry currently.
 

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24 September 2007 - Property lot production too low
The Financial Review
Production of property lots in Sydney is predicted to increase by 25 per cent through 2008-09 but, in the nation's largest city, this is from a base that is around the same level as in Adelaide over recent years. Only 2,800 new lots were released in Sydney in 2005-06 which was less than half the rate of releases in the late 1990's. Lot production almost tripled in Perth from 4,700 in 1996-97 to 13,900 in 2005-05, but this is expected to drop by 38 per cent in the three years to 2008-09. Forecaster BIS Shrapnel said that while housing affordability is not improving, population growth is creating strong pent-up demand in most markets.
 

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24 September 2007 - Tenancy laws would make eviction easier
The Financial Review
NSW is proposing changes to its residential tenancy laws which it says are aimed at increasing the appeal of property to investors and improve the availability of rental properties. The most controversial of the proposed measures would make it easier for landlords to evict tenants for unpaid rent which can currently take up to three months. Spokesman for Australians for Affordable Housing, David Imber, has said that investors decide where to invest based on value rather than their interpretation of tenancy legislation and that there was no evidence that such reforms would increase the supply of rental property. The proposal does include some changes in favour of tenants including 30 days notice in the event of a mortgagee sale.
 

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24 September 2007 - Reverse mortgages booming
The Australian
The reverse mortgage market is growing strongly according to figures from advisory firm Trowbridge Deloitte. Outstanding loan balances were up by 67 per cent in the year to June, now totalling $1.81 billion. Over the same period the number of loans increased by 13 per cent to 31,544. The average size of a loan is now $52,000 and borrowers have an average age of 73. Almost a quarter of all borrowers drew down additional funds in the first half of this year. Most loans are taken as a lump sum, with only 15 to 20 per cent taking the option of having the funds payed to them in instalments.
 

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24 September 2007 - ETrade grows market share
Sydney Morning Herald
Online broking firm ETrade is expected to report a better than forecast profit following a significant increase in trading over the last quarter. Since being bought by ANZ the broker has increased its market share with market researcher AC Nielsen saying that ETrade has attracted 25 per cent of personal traders signing up for online broking, 3 percentage points ahead of CommSec and over 18 points ahead of the company in third position. Briefing documents from ANZ show that ETrade is expected to double its number of clients in the two years to the end of this month and currently has 362,000 customer accounts.
 

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24 September 2007 - No inquiry into ASIC
The Financial Review
The federal Treasurer Peter Costello has denied that investors need more protection despite 20,000 people losing a total of around $500 million over the last two years due to the collapse of Westpoint, Bridgecorp, Fincorp, and Australian Capital Reserve. Mr Costello said that the government's role is to ensure that investors make investments with full knowledge of the risks involved but does not regulate the returns. He also said that there was no need for a royal commission into ASIC's failure to protect investors from the development company collapses. Mr Costello said "The important thing of course is if you keep a growing economy, most investments will give good returns and we've seen good returns in the economy generally. In this area of the property market I think increased transparency and disclosure is very much the way to go."
 

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21 September 2007 - Home sellers ask saint for help
News.com.au
As homes in America become harder to sell with buyers drying up and credit becoming scarce, some desperate sellers are seeking divine intervention. St Joseph is the patron saint of home sellers so people looking to move property are burying a statue of the saint in the garden then asking him to intervene on their behalf to find a buyer. One shop that stocks religious paraphernalia has reported a doubling in the number of statues of St Joseph it sells over recent months. With houses sitting on the market for over 30 days that would previously have been sold before they were built, a real estate agent in Washington said that while they wouldn't force the idea on a client, if the client asks about appealing to St Joseph they would definitely tell them to get a statue and bury it.
 

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21 September 2007 - Another month, another card debt record
The Age
Australia's total credit card debt topped $41 billion for the first time at the end of July, an increase of $256 million from the previous month. The ratio of debt to income also reached a new record of 161.3 per cent in the quarter to the end of June, according to data from the Reserve Bank of Australia. Unchanged from the previous quarter was the 11.9 per cent of our disposable income that is committed to meeting interest payments.
 

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21 September 2007 - PM says no housing crisis
Yahoo.com.au
The Prime Minister, John Howard, has said that there is no housing crisis. Mr Howard said that while there are the beginnings of a housing crisis in the US the main problem we have in Australia is that wages are not increasing as fast as housing costs and said that the use of the term 'housing crisis' by the opposition was not helpful. "A true housing crisis in this country is when there is a sustained fall in the value of our homes and in house prices and for the leader of the opposition to use careless language is only aggravating, rather than helping, the situation," he said.
 

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21 September 2007 - Home sales slump
News.com.au
New home sales across the country were down by 8.6 per cent in August according to the Housing Industry Association. With the August rate rise starting to bite the largest fall was 19.1 per cent in Victoria, followed by a drop of 8.5 per cent in Western Australia, and 7.6 per cent in Victoria. South Australia and Queensland escaped relatively unscathed with falls of 1.8 per cent and 0.4 per cent respectively. Chief economist at the HIA, Harley Dale, said that the outlook for new home sales remains flat because of uncertainty about interest rates and the stability of global financial markets. Mr Dale said "The fact that we're going to continue to see talk about the potential for another interest rate rise is in itself going to mean that you get, at best, flat indicators of new home building through the rest of the year and possibly a modest deterioration in those forward indicators."
 

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21 September 2007 - Government wants ATM's away from pokies
Sydney Morning Herald
The federal government has called for ATM's to be removed from all venues where there are poker machines. Treasurer Peter Costello said that restricting the availability of ATM's in gambling venues would help to reduce the incidence of gambling addiction. "The ATM does represent a real temptation for a problem gambler with a fixed sum of money, gone through it, and now found that it's easy to go to the ATM to continue their addiction," he said.
 

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21 September 2007 - Credit pressure forcing up interest rates
Financial Review
The global credit crunch is forcing some lenders to increase their interest rates. The latest rate movements include the Commonwealth Bank which has lifted its one-year guaranteed home loan by 0.15 percentage points to 7.34 per cent for new loans. A spokesman for the bank said that fixed rate products were always under review and the increase reflected movements in the international money markets. Mariner Financial also lifted the rates on some of its loans by 15 basis points but on one product was able to reduce the rate by 5 basis points.
 

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21 September 2007 - Payday lenders challenged over interest rates
Financial Review
Payday lenders can charge an effective annual rate of over 1000 per cent. Not all states have caps on the interest rates that can be charged but in NSW there is a cap of 48 per cent per annum. Even in states where caps exist there are ways around the laws. One example is Safrock which uses a promissory note arrangement as bills of exchange and promissory notes fall outside the rate cap restrictions. Consumer groups have criticised the rates as being excessive, but the short term lenders say that they need to charge high monthly rates to cover their costs. Cash Converters general manager, Ian Day, says "We provide nearly 30,000 financial service transactions monthly in Queensland. An interest cap of 48 per cent [means charging] 4 per cent a month, so you could be lending $100 for $4, inclusive of all the due diligence you have to do on an individual."
 

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20 September 2007 - Finding a loan may get tougher
The Australian
Lenders will tighten their policies in the wake of the US sub-prime crisis according to the chairman of Wizard Home Loans, Mark Bouris, warning that it was going to get harder for borrowers to get loans at 100 per cent and 85 per cent of property value. "There have been a lot of bad lending practices in this country and the US, but on the other side there are also borrowers around who were happy to take as much money as they possibly could and buy things which they knew, deep down, they couldn't afford," he said. Mr Bouris said that it was politically convenient to blame lenders for the sub-prime fallout but that borrowers had to accept some of the responsibility as well.
 

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20 September 2007 - Non-bank lenders good for competition
The Australian
The deputy governor of the Reserve Bank, Ric Battelino, has come out in support of non-bank lenders saying that the growth of the sector had been positive for consumers. Mr Battelino said that a competitive financial sector could reduce the cost of loans for consumers and businesses. "Take the housing market. The development of wholesale capital markets provided funding for non-bank lenders and allowed them to compete with deposit-taking institutions in housing lending," he said. Mr Battelino said that this had lead interest margins for home loans dropping from around 400 basis points 15 years ago to 100 basis points now.

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20 September 2007 - Rate cut makes markets jump
The Financial Review
Australia's benchmark S&P/ASX 200 jumped up 2.6 per cent yesterday and the US Dow Jones Industrial Average was up 2.5 per cent following the US Federal Reserve's 50 basis point cut in official interest rates. The Fed's action was aimed at calming fears that the financial market problems would magnify the weakness in the US sub-prime market and could tip the US economy into recession. Most economists had predicted that the cut would only be 0.25 percentage points but inflation data, indicating a slowing economy, prompted a larger cut in an attempt to stimulate growth.
 

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20 September 2007 - Explosive growth in financial markets
The Financial Review
Financial market activity leapt by 20 per cent in the last year with trades totalling $120 trillion as more investors use derivatives to gain exposure to interest rate markets. A report by the Australian Financial Market's Association found that trades in shares were up by 35 per cent to $1.3 trillion in the 2006-07 financial year. This growth was fuelled by a strong corporate reporting season and mergers and acquisitions, as well as increased flows resulting from movements of funds as individuals took advantage of the one-off opportunity to invest superannuation funds at tax-effective rates. Futures and options trading on the Sydney Futures Exchange was up 33 per cent to $37 trillion.
 

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20 September 2007 - Pressure on interest rates remains
The Financial Review
While it is unlikely that interest rates will rise again before the end of this year, some economists have warned that the Reserve Bank of Australia could lift rates as early as November if strong growth in our economy keeps inflation close to 3 per cent. Another rate increase would be unwelcome news for the federal government in the lead up to the election. Treasurer Peter Costello has said that, while some mortgage originators will have to increase interest rates to cover the higher cost of credit, there was no justification for the major banks to lift their mortgage rates unless there is an increase in the official cash rate.
 

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20 September 2007 - ANZ sees deposit surge
The Financial Review
ANZ has reported strong growth in its deposit volumes and believes that a "flight to quality" will trigger an increase in its mortgage sales also. Deposit inflows to the bank are a few hundred million dollars ahead of target over the last few months according to the head of personal banking, Brian Hartzer. "We have concluded, but have no evidence to prove, that some of the increase in deposits is coming from people saying 'I'd rather put my money with one of the big banks'," he said. At an update to analysts yesterday ANZ said that it was targeting a 1 per cent increase in its share of the mortgage market and a minimum 10 per cent annual profit growth by 2010.

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20 September 2007 - Borrowers seek safety
The Financial Review
Mortgage brokers have reported a significant increase in inquiries as consumers become concerned about the global credit crunch and its possible effects on interest rates. Aussie Home Loans chairman, John Symonds, said that their brokers were writing a greater proportion of loans for the major banks than previously. "[About] 85 per cent minimum would end up with the banks anyway, and that's probably now going to over 90 per cent," he said. Aussies also reports an increase in the number of people opting for fixed rate loans from around 15 per cent to between 15 and 20 per cent.

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19 September 2007 - US Reserve cuts rates for first time in 4 years
New York Times
The US Federal Reserve has cut its benchmark interest rate by 0.5 percentage points, surprising markets which had expected a cut of only 0.25 percentage points. In a statement about the cut the Fed said "Developments in financial markets since the committee's last regular meeting have increased the uncertainty surrounding the economic outlook". Further rate cuts may be necessary in coming months with the Fed saying that it would "continue to assess" the economic outlook and "act as needed to foster price stability and sustainable economic growth".
 

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19 September 2007 - Oz markets jump following US rate cut
Sydney Morning Herald
The Australian sharemarket has responded positively to news that the US Federal Reserve has cut interest rates by half a percent. At 10.20 am today the S&P/ASX 200 was up by 2.4 per cent at 6338.2 points. The news has also helped to push the Australian dollar higher, jumping to 85.3 cents. Local bank stocks which have been hit with heavy falls over the past few days are busy making up the lost ground with NAB up $1.11 to 38.36, Commonwealth up 85 cents to $55.85, ANZ 82 cents higher at $28.62 and Westpac up by 48 cents to $27.28.
 

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19 September 2007 - Reserve governor warns more trouble ahead
Sydney Morning Herald
The governor of the Reserve Bank, Glenn Stevens, has warned that there may be further tightening in Australian financial conditions as investors around the globe continue to reassess their appetite for risk. "Risk pricing in general is going to look more like historical norms in the future than it has been in the past few years. From the point of view of the economic expansion that's actually a good thing," he said. Mr Stevens identified lessons to be learned from the sub-prime crisis including the need to ensure that investors understand the nature of investment products and how market supervisors should respond to a sudden shortage of liquidity in markets.
 

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19 September 2007 - Credit cards hide mortgage stress
The Australian
The number of households defaulting on mortgage repayments or at significant risk of default is predicted to grow from 70,000 now to 113,000 by the end of the financial year according to a report by JPMorgan and consultancy firm Fujitsu. The report also forecasts that the number of households which need to curb their spending to meet mortgage repayments will explode from 170,000 to 487,000 over the same period. Fujitsu's managing consulting director, Martin North, said "Severe stress has spread from the traditional battlers to middle Australia. In addition, a wide range of households are now under mild stress, requiring them to max out their credit cards to keep afloat." JPMorgan banking analyst, Brian Johnson, warned that credit card debt is masking the level of mortgage stress. "Average credit card outstandings have grown from the equivalent of one month's disposable income in 1997 to the equivalent of three month's income in 2007," he said.
 

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19 September 2007 - Banks may use credit crunch to fight for market share
The Financial Review
The Commonwealth Bank and Westpac are likely to take advantage of the tightening credit market to claw back market share lost over the past decade to rivals ANZ and NAB. A report by JPMorgan and Fujitsu Consulting says that CBA's large deposit base and Westpac's lower level of discounting and smaller proportion of lower-margin fixed rate mortgage sales mean that they are more insulated from current credit conditions. JPMorgan banking analyst, Brian Johnson, said "I think CBA and Westpac will be very aggressive in not repricing, so to the extent that NAB and ANZ do reprice, even more market share will go to those two banks".
 

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19 September 2007 - Young are cool on property
The Financial Review
A survey has found that people under the age of 35 are less willing to invest in property than their elders. Galaxy Research surveyed 1,051 people and found that while most residents in eastern states believed that now was a good time to buy, young people cited high interest rates and property being tool expensive as reasons not to buy property. Around half of all respondents under 35 thought it was a good time to invest, compared with 57 per cent of 35 to 49 year-olds, and 55 per cent of those over 50.
 

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19 September 2007 - Magnetic strips out of fashion in Europe
The Australian
Australians travelling in Britain and parts of Europe may find that they have difficulty using their credit card. Britain has moved to a system where cards contain a chip and a PIN is used to authorise payments so Australian cards that have only a magnetic strip may not be accepted. One traveller has reported that a gold credit card from NAB was refused by a grocery store, two petrol stations and a restaurant chain. ANZ was the first Australian bank to introduce chips and has already issued 1.7 million chipped cards and the Commonwealth Bank is issuing all replacement cards with chips.
 

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19 September 2007 - Adelaide Bank rumours unfounded
Sydney Morning Herald
Adelaide Bank shares fell 7 per cent yesterday to $13.71 as investors reacted to unsubstantiated rumours that it had turned to the Reserve Bank for funding after experiencing trouble with loans raised on US debt markets. Denials from both the Reserve and Adelaide Banks were not sufficient to stop a sell-off which saw 2.6 million shares change hands. The deputy governor of the Reserve, Rick Battellino, said "The bank is able to confirm that the rumour is false. There's no request for funding been submitted by any bank". Shares in other banks were also down yesterday, including Bendigo Bank, the potential suitor for Adelaide, losing 77 cents to close at $13.34.
 

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18 September 2007 - Bendigo not disturbed by Adelaide's woes
The Financial Review
Bendigo Bank remains comfortable about its proposed merger with Adelaide Bank despite the pressure of the credit crunch on Adelaide's business model. Bendigo's chief executive Rob Hunt said, "It's very important that when you're doing mergers like this that single events - albeit it's a large event in the overall credit market - don't have you dodging at shadows". Adelaide Bank funds only 57 per cent of its lending from deposits, while Bendigo can almost entirely fund its lending from its deposit base. Shares in Adelaide Bank were down yesterday by 6.1 per cent to close at $14.74.
 

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18 September 2007 - Banks prefer to avoid bond markets
The Financial Review
The Commonwealth Bank and NAB are avoiding raising funds on the bond market for now, preferring instead more traditional funding such as private placements to investors. According to a NAB spokesman the bank has raised around $1.6 billion since mid-July through private placements. CBA said that it has sufficient capital to see it through for some time but would look at private placements and other fund-raising strategies if necessary. Last week GE, Westpac and ANZ raised a combined $1.65 billion on bond markets, but at premiums over government bonds that are significantly higher than only six months ago.
 

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18 September 2007 - Tougher regulations to fight predatory lending
The Australian
A parliamentary inquiry has recommended that regulation of the mortgage industry should be controlled at the federal level rather than relying on the existing state regulations which have failed to keep up with the industry. The inquiry said that while most of the mortgage industry maintained high standards there was a minority that did not. "A small sector... preys on vulnerable people through the practice of predatory lending," the committee report said. Predatory lending is when a borrower is charged excessive fees and commissions to establish a loan, the lender then forecloses on the loan at the first sign of trouble and the loan must be refinanced or the house sold.
 

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18 September 2007 - Dangers of side-stepping consumer protections
The Financial Review
The Uniform Consumer Credit Code has been criticised for failing to keep up with the evolving mortgage industry since its introduction in 1994. The code is difficult to amend as it is state based so all state must agree to changes. Also, the code does not cover small-business borrowers or individual investors which make up an increasing proportion of low documentation loans from mortgage brokers and non-bank lenders. The Consumer Credit Legal Centre said "As a result of these exclusions, some fringe lenders side-step the requirements of the UCCC by requiring borrowers to complete a 'business purpose declaration', even when a loan is for a private purpose". Non-bank lender Liberty said that it was in its own best interests to meet the obligations of the UCCC and ensure its customers had the ability to pay, "otherwise we wear the consequences".
 

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18 September 2007 - Hackers target home computers
The Financial Review
Hackers are ignoring corporate computer networks in favour of home computers according to a report into internet security by Symantec. Managing director David Sykes said, "End users are the easiest way in to compromise privacy. They exploit vulnerabilities in web browsers and in PC applications - 95 per cent of specific, targeted attacks are aimed at the home user." Credit card details account for 22 per cent of all advertisements on underground economy servers and bank accounts were a close second on 21 per cent. Spam increased by 2 per cent in the last year and now makes up 61 per cent of all monitored email traffic.
 

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18 September 2007 - Rismark wins patent for shared equity
The Financial Review
Patents have been taken out on the shared equity loan product invented by residential property funds group Rismark. Under these loans the lender takes an exposure to movements in house prices and it is believed that the major banks are watching the sector closely with a view to creating their own shared equity products. The patents will make it harder for competitors to enter the market. Rismark's lawyer, Stephen Stern, said "Any potential infringer of Rismark's intellectual property faces the prospect of a long, drawn-out court case".
 

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17 September 2007 - Roses Only hit by data thieves
The Financial Review
Online florist Roses Only has advised consumers that its payments system may have been compromised earlier this year with credit card numbers believed to be amongst the data that was stolen. The chief executive of the Australian Bankers Association, David Bell, has said that any customers who have had money stolen would get it back. The NSW Police Force has set up a special unit to investigate the attack while Roses Only have changed their online payments system so that it no longer stores any credit card data.
 

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17 September 2007 - Westpac shifts jobs to India
The Financial Review
Westpac is moving 25 back-office data processing jobs from its operations centre at Concord in NSW to a third party in India. A previous plan to shift 475 loan processing jobs offshore last year was abandoned after the NSW government threatened to withdraw its business. The Finance Sector Union's Geoff Derrick said "The jobs that are going handle very sensitive customer details, including credit card details, as well as undertaking the very important service of providing special approvals on large or urgent cheques". Westpac spokesman David Lording said that customer data would be kept on servers in Australia and that they would ensure the protection of data. "We have stringent privacy requirements for any offshore provider," he said.
 

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17 September 2007 - Banks use technology to drive up card usage
The Financial Review
Banks and credit card companies are relying on new products including chip-enabled cards to drive growth in the credit and debit card market. There are already 13.5 million credit and charge cards on issue in Australia, plus 26.5 million debit cards (including around 5 million scheme debit cards that provide the same functionality as a credit card). The total value of purchases and cash advances in 2006-07 was up by 8.8 per cent to $181.5 billion, made up of $98.3 billion spent on credit and charge cards and $83.2 billion on debit cards. Over the last three years growth has been significantly lower than in the late 1990's and early 2000's when annual growth was running at around 30 per cent.

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17 September 2007 - Loan default rates climb
The Financial Review
Credit check company Veda Advantage said that the number of bills not paid for 60 days was up by 28.6 per cent in the 2006-07 financial year. Tasmania reported the biggest increase in defaults of 59 per cent, while Northern Territory was up 49 per cent, Western Australia by 44 per cent, Queensland by 41 per cent, NSW by 40 per cent, ACT and South Australia by 35 per cent while the best performing state was Victoria where defaults only rose by 10 per cent.
 

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17 September 2007 - Austcorp debentures downgraded
The Financial Review
Austcorp Property Group has had its debentures downgraded from "investment grade" to "not approved" by research firm Lonsec. The company issued a report on Austcorp's "Series II Debentures" which said the reasons for the downgrade were: the narrowing premium between the interest rates offered to investors and the official cash rate; the exposure to larger and early-stage development projects; and the relatively low interest rates offered "for bearing the level of risk". Austcorp has around $44 million in debentures on issue and Lonsec recommends that investors exit their investment at maturity.
 

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17 September 2007 - No public input for bank fees investigation
The Financial Review
The senate committee investigating Family First's proposed bank fee legislation will report today without having held any public hearings. Senator Steve Fielding is disappointed by the lack of public consultation and said that the government is overlooking serious issues because of its leadership problems. The legislation would mean that banks can only charge for cost recovery.
 

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17 September 2007 - IMF concerned about household debt
The Australian
The International Monetary Fund has highlighted the housing sector as a weak point in the Australian economy. In a report last week the IMF noted that mortgages were equivalent to 160 per cent of household income and interest costs were at 12 per cent. The fund said "There are a number of potential risks, including heavy exposure of banks to highly indebted households, which warrant close monitoring of household finances". The Reserve Bank of Australia has a different point of view saying that the greatest level of debt is held by those best able to bear it and that the financial assets are more then three times larger than household debt.
 

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14 September 2007 - Breathing space for home loan borrowers
InfoChoice.com.au
Home loan borrowers may be getting some respite from higher interest rates from an unusual quarter, amid buoyant economic conditions that might normally warrant further rates hikes.

The Reserve Bank (RBA) is likely to be more inclined to hold fire on further interest rate rises currently, given the tighter conditions prevailing in lending markets following the collapse in the US sub-prime lending market. Apart from the general uncertainty and potential dent in economic confidence, it has also caused banks to be very wary about lending to each other and they've raised wholesale interest rates to compensate.

This has to flow on to retail and commercial lending in some way and is already pushing up business loan rates, especially for shorter term financing, where interest rates are on the rise independent of any RBA moves in the official cash rate. For the business sector, there has already been the equivalent of an extra rate rise following the August official rise across the board by the RBA.

This may be in fact just the way RBA would prefer it at the moment - higher interest rates for business but not for home borrowers. Afterall, it's businesses driving our stellar rate of economic growth at the moment, not the housing market which has remained sluggish this year in the face of debt-burdened households and low housing affordability.

Monetary policy, the adjustment of official interest rates, is a very blunt instrument of economic management - one adjustment of rates impacts on virtually the entire economy. But in the current situation, the RBA is enjoying the luxury of seeing interest rates moving higher in that part of the economy that it wants to rein in, leaving more vulnerable parts alone (except probably the poor old farmers).

There is talk of lenders eventually having to raise home loan interest rates too, but this is less than certain. There is no more competitive lending market than that for home loans and, while some increases have already been seen, banks and smaller lenders alike will generally be trying and see through the credit crunch before hiking rates. There are no guarantees, however, and the longer the tight credit market conditions continue the harder it will be for lenders to contain home rates.

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14 September 2007 - ANZ offers fee refund for online failure
News.com.au
The ANZ Bank has apologised for a software glitch that caused its online banking service to be unavailable between 7am and 5.50pm on Wednesday. Customers were unable to pay bills and make other payments after a piece of software that tracks payment activity malfunctioned. ANZ spokesperson Mairi Barton said "We will be refunding fees if anyone has incurred a fee as a result of the internet banking issue (and the inability to make payments)". Anyone seeking a fee refund should contact the bank by telephone or at their local branch.
 

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14 September 2007 - Predatory lender watch list
The Daily Telegraph
Wizard Home Loans chief, Mark Bouris, has called for the creation of a 'red list' that would inform borrowers which banks and non-bank lenders have been identified as using dodgy lending practices. A Fujitsu Consulting report commissioned by Wizard found that around 0.56 per cent of all households were victims of predatory lending. The study covered 26,000 consumers and identified those where brokers and lenders had talked borrowers into accepting unfair or inappropriate loan conditions. The managing director of Fujitsu Consulting, Martin North, said "The research shows that the 70,000 households who are under the most mortgage stress in Australia were more likely to be subjected to predation."
 

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14 September 2007 - Westpac chases business banking share
The Australian
Westpac plans to expand its business banking division, increasing its staff by one third and opening 11 new business centres. The bank's group executive for business banking, Peter Hanlon said that his aim is for the division to surpass the 17 per cent market share of the Commonwealth Bank and claw back some of NAB's 22 per cent market leadership. Westpac has been lagging the business banking market but their share of 13.5 per cent in 2005 has increased to over 15 per cent now. Competitors have accused Westpac of reducing margins to buy market share but Mr Hanlon said that the bank's annual result in November would prove them wrong.
 

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14 September 2007 - New home starts fall
The Australian
The number of new homes being built nationally fell by 4 per cent to 36,512 in the June quarter according to the Australian Bureau of Statistics. NSW recorded its lowest number of homes being built for 23 years of only 6,514 seasonally adjusted, down 20 per cent for the quarter. Nationwide housing stats were down 3.4 per cent for the year to June, with a drop of 6.6 per cent in Western Australia but an increase of 14.6 in South Australia.
 

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14 September 2007 - Mortgage funder increases rates
The Financial Review
ANZ Bank's subsidiary Origin Mortgage Management Services which offers wholesale funding for residential loans has increased its interest rates. Origin supplies $7 billion in 40,000 loans to around 25 mortgage managers who may be forced to lift their rates by 0.10 to 0.15 percentage points. The increased rates will vary between lenders and will only apply to new business. The move is a result of the global credit crunch which has forced bank bill rates to their highest point in 10 years.
 

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14 September 2007 - ACR investors agree to liquidate
The Financial Review
Creditors of collapsed property investment group ACR look set to have 60 cents in the dollar returned. At a meeting yesterday they voted to put parent company Estate Property Group and 24 affiliated companies into liquidation. Becton property group will pay $533 million to purchase 18 properties from ACR and will retain 20 employees from across Estate Property Group. If the transaction proceeds as proposed on September 21 the 7,000 investors in ACR's unsecured deposit notes should recover around 60 cents in the dollar.
 

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14 September 2007 - ATO eyes small business
The Financial Review
The Australian Tax Office is targeting small businesses with two new compliance programs. With three new businesses starting up every hour the ATO will spend $40 million over the next four years making 30,000 calls and visits to help small businesses with compliance. Debt collection will also increase including an investment of $42 million in external debt collection agencies over the next four years. Tax Commissioner Michael D'Ascenzo said "Small businesses with a turnover of less than $2 million account for about two-thirds of outstanding collectable debt".
 

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13 September 2007 - Higher credit costs being passed to consumers
The Financial Review
Interest rates are starting to creep up as short-term bank bill rates hit their highest point in the last 10 years. Adelaide bank has stopped discounts on mortgages sold under other brands after announcing a 0.30 percentage point increase in its low doc rates less than two weeks ago. Other lenders who have raised rates by more than the 0.25 percentage point RBA increase include Macquarie Bank, Bluestone and AMP Banking. The ANZ Bank has lifted the rate on its margin loans by 0.05 percentage points to cover the higher cost of funding.
 

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13 September 2007 - St George and Suncorp clear of sub-prime problems
The Financial Review
St George Bank and Suncorp have both moved to reassure investors that they have no exposure to the problems in the US sub-prime credit market. At an investment conference in New York St George Bank's chief financial officer, Michael Cameron, said that the bank would not need to bring any funding vehicle assets onto their balance sheet as the market has been very willing to refinance the conduit on a daily basis. Mr Cameron also said that the bank has $20 billion locked in for an average of four years so has no need to launch a securitisation program. Suncorp's chief executive, John Mulcahy, said that they have no exposure to the US sub-prime market and only a very small percentage of low doc home loans in Australia.
 

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13 September 2007 - No demutualisation for IMB
The Financial Review
The chairman of building society IMB has issued a statement saying that it is not aware of any information that would explain recent levels of share trading. Chairman Russell Fredericks said "The board is concerned that IMB shareholders and/or members of the public considering buying IMB shares have mistakenly formed the view, or have been influenced by speculation in the media, that IMB may be about to commence a process of demutualisation". IMB shares had a weighted price average of $3.25 last week but traded as high as $3.99 on Monday.
 

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13 September 2007 - Consumer sentiment charging ahead
The Financial Review
Consumer sentiment is rising despite higher interest rates and sharemarket uncertainty. In a result which may cause the Reserve Bank to raise rates again, the Westpac-Melbourne Institute index of consumer sentiment is up 4.2 per cent this month, 14.3 per cent higher than a year earlier. The index of confidence in economic conditions over the next 12 months was up 7.3 per cent for the month and 27.1 per cent higher than a year ago, while expectations for the next five years were up 6 per cent for the month and 27.5 per cent higher for the year. Interestingly, confidence amongst Labor voters was up 9 per cent while the increase for coalition voters was only 1.9 per cent.
 

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13 September 2007 - Brisbane: a property boom just waiting to happen
Courier Mail
House prices in Brisbane could rise by up to 40 per cent over the next three years according to Frank Gelber, chief economic forecaster at BIS Shrapnel. Dr Gelber is also predicting two or even three interest rate rises over the next year, but says that this would only delay a housing boom and that demand is only being suppressed currently due to a continuing shortfall in the construction of new dwellings. "Governments are charging $15,000 to $170,000 per residential lot on the extremities of the city (so) it's going to cost (developers) $300,000 to turn the lot," said Dr Gelber. "It's going to take something like a 30 to 40 per cent rise in housing prices across the board in order to encourage enough of that land to be brought on to satisfy the 'greedy' developers and landowners."

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13 September 2007 - Land releases to ease affordability
The Australian
The federal treasurer, Peter Costello, has said that large parcels of commonwealth-owned land will be released for residential development in a bid to counter Labor's campaign on housing affordability. Mr Costello has stressed that land availability is the key to improving affordability and rejected the concept of using tax reforms to promote investment in low cost housing. "If you get further investment into the housing market, you could actually push housing prices up," he said. According to Mr Costello the government has completed an audit of commonwealth-owned defence and CSIRO land which has identified substantial blocks around cities that he hopes can be on the market soon.

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12 September 2007 - Positive about credit reporting
The Financial Review
The Australian Law Reform Commission has put forward a range of proposals to amend our privacy laws including positive credit reporting. The ALRC president, David Weisbrot said "If credit reporting agencies are able to gather a wider range of information, this may encourage improved lending practices and make it easier for some people on low incomes to obtain finance". The proposed changes would allow agencies to collect information about credit accounts such as the type of account, the dates accounts were opened and closed, as well as their credit limits. The Australian Bankers Association said that it had not yet had time to discuss the proposal with its members but that there were mixed views on the desirability of the system.
 

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12 September 2007 - Banks aim for customer advocacy
The Financial Review
Financial institutions around the world are starting to change their focus from customer satisfaction to customer advocacy. The idea is that a customer is not just happy with the service they receive, but is so fulfilled that they actually become an advocate for the bank. Canadian banks have proven to be excellent at driving loyalty through retention and cross-sell strategies with one finding that a customer who is a net promoter would increase a bank's business by more than 20 times compared with someone who was not. ANZ's Steve Sargent says "If we have a [customer] detractor, within 24 hours, a staff member will call and ask why they gave us a low rating - and we may refund a fee. If they are in our commercial business we go out and visit them. That in itself blows the customer away - and gets you to the root cause analysis of a problem."

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12 September 2007 - E*Trade focus on technology improvements
The Financial Review
Online broker E*Trade, recently purchased by ANZ Bank, is making significant investments in its technology platform and plans to leverage off the larger supporting technology environment offered by the bank. Initially E*Trade will make use of the underlying infrastructure of the bank rather than any immediate move to integrate the disparate technology of the two organisations. In the short term E*Trade will continue to focus on developing its online trading platform having recently released its second generation options trading system.
 

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12 September 2007 - Tight market driving up rents
The Financial Review
The vacancy rate in Sydney's rental market has remained at less than 2 per cent for the twelfth month in a row. Vacancies were up slightly to 1.5 per cent in August, from 1.3 per cent in June according to the Real Estate Institute of NSW. Figures from the institute show that over the past year Sydney the median rent for a three bedroom house has risen by 5.7 per cent in the year to June. Rents for two bedroom apartments were up by 10 per cent for the year and 3.1 per cent for the quarter.
 

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12 September 2007 - ACCC gives green light for Bendigo/Adelaide merger
Sydney Morning Herald
The proposed merger between Bendigo Bank and Adelaide Bank has been given approval by the Australian Consumer and Competition Commission. The ACCC said that its main area of concern was any possible reduction in competition resulting from the merger but as there was very little overlap between the two companies' operations this was no problem. Due diligence has been completed in the last few days so now the only hurdle left is a vote by Adelaide's 28,500 shareholders which will take place in November.
 

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12 September 2007 - First victim of credit crunch in UK
Sydney Morning Herald
The credit crisis has claimed its first scalp in Britain with subprime specialist Victoria Mortgages going into administration. The lender is one of the smaller players in the UK market and was dependent on wholesale markets for funding but the lack of liquidity there has pushed up the cost of borrowing for lenders. Subprime mortgages in Britain account for only 8 per cent of the market compared with 20 per cent in the US.
 

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11 September 2007 - Overnight rates threaten mortgages
Sydney Morning Herald
The rate at which banks lend to each other reached a 10 year high of 7.07 per cent yesterday, threatening to increase the cost of loans to consumers. An economist from Macquarie Bank, Brett Redican, said that if rates stayed this high it would only be a matter of weeks before banks decided to raise mortgage rates to compensate for the higher cost of funds. The Reserve Bank continues to pump additional funds into the system in an attempt to ease the pressure on overnight rates but nervousness about liquidity seems to be causing institutions to either hoard cash or lend it at high rates.
 

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11 September 2007 - Westpac looks on the bright side of credit crunch
Sydney Morning Herald
The chief of Westpac, David Morgan, warned yesterday that the future of Australian interest rates depends on how long the US subprime housing loan crisis continues and whether it tips the North American economy into recession. Dr Morgan said that local banks like Westpac were well placed to take advantage of the difficulties being experienced by some non-bank lenders as borrowers have "no appetite" for some of the more exotic loan products previously offered. Westpac assured the market that it has minimal exposure to the global credit problems even though it does have funding commitments to one American lender with around $120 million of subprime loans on its books.
 

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11 September 2007 - One in five home loans with non-bank lenders
Sydney Morning Herald
Non-bank lenders currently account for one in five new home loans, twice as many as in the 1990's, but down slightly from the housing boom peak. A total of 63,599 new loans were written in July, down 4.1 per cent from the previous month, and this may fall further as the effects of the August rate rise are felt. Less than 15 per cent of the new borrowers opted for a fixed rate meaning that around 55,000 were hit with a rate increase in the first or second month of their loan.
 

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11 September 2007 - Housing slump not over yet
The Financial Review
The housing slump that started in 2002 continues with loans to owner occupiers dropping by 3.3 per cent in July and loans to investors down 6.8 per cent. The overall value of home loans was down by 7.4 per cent in July, wiping out most of the 9.6 per cent rise in June. An analyst at ANZ, Paul Braddick, said that housing finance had surged in the last month of the 2006-07 financial year with investors rushing to take advantage of changes to superannuation rules, and that this was always likely to be followed by a slowdown.
 

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11 September 2007 - Banks lead sharemarket lower
The Financial Review
The local sharemarket was down yesterday, the S&P/ASX 200 losing 87.2 points to close at 6191.2 and the All Ordinaries down 86.9 points, closing at 6209.6. Banks were among the hardest hit as concerns continue over the US subprime crisis and the possibility of a broader downturn in the US economy. National Australia Bank was down 93 cents to $38.07, Commonwealth Bank was 27 cents lower at $54.40 while Westpac only lost 10 cents to close at $26.55.

 

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10 September 2007 - Home repossessions climbing
Sydney Morning Herald
The number of properties being repossessed by lenders in NSW is escalating with 2,300 writs issued in the first six months of this year, almost as many as in the whole of 2005. Sydney's west is being hardest hit with 41 repossessions in Blacktown, 32 in Guildford and 30 in Merrylands. Another indicator of the number of families who are unable to service their mortgage is a record 1,400 auctions in the west and south-west of Sydney in the year to 31 March, double the number in the whole of 2005. This is expected to increase as the effects of the rate rise in August start to bite.
 

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10 September 2007 - More market troubles as US jobs fall
Sydney Morning Herald
There are fears that there will be another sharemarket sell-off today as the possibility of the US sliding into recession grows. Following news of 4,000 job losses in August, Wall Street was down on Friday with the Dow Jones index losing 1.9 per cent. Economists believe that the US Federal Reserve will cut the cash rate by 0.25 points when it next meets on 18 September, but also that the state of the US economy could be poor enough to justify a 0.50 point reduction. The nervousness in the markets has not been helped by former Fed chairman Alan Greenspan telling a US conference that the current conditions were "identical" to the lead-up to the 1987 crash.
 

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10 September 2007 - Paperless signature system
The Financial Review
AMP has adopted an e-signature system that will allow their 1800 financial planners to move to a completely paperless system when dealing with clients. Each planner will have an electronic signature pad which will allow users to sign on a scanner with linked pen and then have that signature linked to the specified portion of a document they needed to sign. Once signed, documents can be electronically transmitted to AMP's head office, saving postage time and back-office work. To help prevent forgeries the system not only verifies the shape of a signature, but also the speed with which it was written.
 

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10 September 2007 - CFD market launch delayed
The Financial Review
Financial market volatility has caused the ASX to delay the launch of its contracts for difference (CFD) market. The ASX said that the launch is now scheduled for November, one month later than originally planned, due to a variety of factors including the problems of a new product trying to compete with extreme market uncertainty. Of the 3,500 participants who attended nationwide introductory seminars on CFD's 60 per cent said that they were new to the product. A trading simulator for CFD's will be made available later this month to help traders learn about the new products.
 

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10 September 2007 - Westpac accused of pushing debit cards
The Financial Review
Westpac has been accused of aggressively steering customers toward its Mastercard debit card to try to boost profits. The charge comes from members of the Australian Merchant Payments Forum which is concerned that debit cards, which earn card issuers higher interchange fees, may end up replacing cheaper Eftpos cards. A Westpac spokesperson said that they were not aware of any force-issuing of debit cards and that Eftpos cards were still available. However the bank made its debit cards standard issue in May when it introduced new savings and transaction accounts. Card issuers pay merchants an interchange fee of around 4 cents per transaction.
 

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10 September 2007 - Values up for northern rural properties
The Financial Review
Values of rural properties across northern Australia are climbing as cashed-up cattle barons seek to expand. Property advisers Herron Todd White (HTW) have estimated that prices for cattle properties have grown at 25 per cent each year since 1999. HTW said that there was a new wave of confidence in the northern pastoral industry due to the current abundance of feed. Demand is being driven by local, financially strong families who have made money out of the beef industry and who can average out the purchase costs over their other holdings. A property manager from Elders Real Estate in North Queensland said that it was probably the greatest undersupply of property for sale he had seen in 18 years.
 

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6 September 2007 - Rates steady despite strong economy
InfoChoice.com.au
The Reserve Bank (RBA) left interest rates on hold this week and can be expected to hold off again next month at least, despite the flow of economic data showing an economy going gangbusters.

Employment and overall economic growth figures underscore a very strong economy in 2007. Another 30,000 new jobs were created in August, 20,000 full-time, with unemployment remaining at a low 4.3 per cent. Meanwhile, June quarter GDP came in at 0.9 per cent. This puts the annual rate of economic growth to the end of June at a strong 4.3 per cent. But remember, this rate averages out a surprisingly weak rate of growth at the end of last year with surprisingly strong growth this year. Looking at GDP this year so far gives an annualised rate of 5.4 per cent.

When you add other indicators such as healthy retail sales and business investment readings out last week, you'd be forgiven for thinking another interest rate rise is not far away. But it's not quite the case, for a few reasons.

One, the latest batch of strong figures largely pre-date the August rate rise and the RBA is unlikely to act on rates until it sees some early signs of what impact that first strike is having. Second, no matter how strong the economic data is, the RBA is only worried if high growth triggers rising inflation. It will likely want to see the inflation result for the current quarter, out in late October, before seriously considering any further moves on rates.

Finally, the turmoil on world financial markets over the past month or so has introduced new risks to the world economy and Australia. The RBA will be a little more cautious on rates while the risk of a possible spillover to economic activity around the world remains. If that doesn't happen, and the inflation threat hangs around, it is quite possible we will see another 0.25 percentage point interest rate rise. But this would be late this year at the earliest, and more likely in early 2008.

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6 September 2007 - Money markets keep pressure on interest rates
The Australian
The pressure on lenders to increase rates continues to build with interbank finance rates running at around 7 per cent, an increase of 0.2 points in the last week. If rates remain at this level lenders will have no choice but to pass on the increased cost of funding which would mean that the total rate increase for the last month would be 60 or 70 basis points, despite the Reserve Bank deciding to not increase the official cash rate yesterday. To avoid increasing mortgage rates banks are likely to remove discounts for new customers and not lend to people considered a high risk.
 

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6 September 2007 - New car sales record
The Australian
Sales of new cars continue to surge despite the increase in interest rates last month. The number of new vehicles sold in August reached a new record of 88,206, 8 per cent higher than in the same month last year. Total sales so far this year have hit 700,000, up 9 per cent on last year, meaning that the market is on track to top the million mark this calendar year for the first time. Compact and luxury SUV's are leading the way with sales increases of 33 per cent and 23 per cent respectively.
 

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6 September 2007 - Australia attractive to international investment
The Financial Review
The Economist Magazine has ranked Australia as the ninth best place to do business out of the world's 82 largest economies. Since the 2002 - 2006 survey, Australia has moved up three places in the rankings which take into account performance in 10 categories including political and economic conditions, competition and investment policy. The ranking now puts us on par with Sweden and the United Kingdom, and ahead of Germany and Ireland. The study forecasts that, over the next four years, an average of $46 billion per year in foreign investment will be directed toward Australia.
 

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6 September 2007 - IMB chief parts company
The Financial Review
The chief executive of building society IMB, Wayne Morris, will depart at the end of this year when his current contract expires. Mr Morris is understood to be one of the strongest opponents of the organisation listing on the stock exchange, a move favoured by Perpetual Investments which holds a 4.9 per cent stake in IMB. Perpetual says that public listing would allow the company to access better funding, grow the business, improve service delivery and pay higher dividends to shareholders. IMB chairman Russell Fredericks indicated in a letter to members last week that it may be becoming more amenable to sharemarket listing saying, "The board has for some time been discussing and investigating specific concerns raised by a number of members, which from time to time come into conflict. A number of those areas are under a more detailed review and directors will communicate policies and views to members as appropriate".
 

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6 September 2007 - Big banks more likely to eat each other
The Financial Review
Outgoing chief executive at the ANZ Bank says that a merger between the big four, or a tie-up with an international bank, is more likely than a takeover of St George. While such a move would require dismantling of the four pillars policy, or regulatory approval for foreign investment, Mr McFarlane still believes that these are the more likely options, as any major bank acquisition of a regional bank would be earnings dilutive. Mr McFarlane says that a big bank merger would take the same amount of time as a smaller bank merger but would be 7 or 8 per cent accretive, therefore a much more attractive option.

 

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6 September 2007 - New Westpac site hiccups
Courier Mail
Westpac has launched a new website, but customers were not impressed that it has been out of action for the past two days. Westpac has offered no explanation for the outages, preferring instead to focus on the new look of the site. A message on the site says that while customers should be on the lookout for internet scams such as fake sites claiming to be Westpac, the new refreshed site is the real thing. While the main site was down, visitors were presented with a temporary page that had links to internet banking and broking facilities.
 

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5 September 2007 - NAB braces for staff poaching
The Financial Review
BankWest has said that its recruitment program for its east coast expansion plans is going well, with over half the people needed for the first tranches of branches coming from the financial services sector. The head of change management at BankWest, Andy Weir, said "We are offering competitive reward packages for anybody that comes on board, but I wouldn't say we are paying over the odds". NAB's head of retail banking, Andrew Thorburn, said that they believe that it's only a matter of time before their staff are targeted by BankWest, that competition in the eastern states means that a poaching war is likely, but that the bank has a new remuneration scheme for its most successful branch managers. "We haven't lost and[managers], recently, but I'm sure if BankWest are going to hit the ground fast they are going to get people and they will get them from existing banks," said Mr Thorburn.
 

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5 September 2007 - Savings and Loan expansion plans
The Financial Review
South Australia's Savings and Loan credit union has announced that it plans to open three branches in Melbourne, taking the total number to 30. The credit union posted an increase in annual profit of 8.2 per cent, to $16.1 million. Assets under management grew by 20 per cent in the year to $2.6 billion, with residential lending up by 15.7 per cent.
 

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5 September 2007 - Lower fees and new account options at NAB
InfoChoice.com.au
NAB has responded to consumer concerns by announcing reductions to their exception fees as well as a new range of deposit accounts that can be free of monthly service fees. From early next year exception fees, which include dishonour and over limit fees, will no longer apply to holders of a NAB Concession Card Account and will be reduced for other account holders. In October the bank will launch four new accounts, eBanking, Classic, Gold and Clear Banking. The accounts don't charge for electronic and branch transactions (except eBanking which is online focused and charges $3 for a branch transaction), and the monthly service fees can be avoided by depositing between $2,500 and $5,000 per month, depending on the account. Many consumers would be able to enjoy banking completely free of fees by having their salary paid into the account and sticking to the free options for transactions.

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5 September 2007 - Aussies pay more for banking than Brits
Sydney Morning Herald
Research by research group Oxera has found that the typical median-income Australian family pays $222 each year for a transaction account, while an equivalent family in Britain only pays $48. The news is better on the credit card front though: our average interest free period of 35 days ranked in the middle of the 11 countries surveyed and our rates are not particularly high after taking into account differences in the cash rate. Penalty fees for late payment, overdrawing accounts or exceeding card limits can be up to $150 in Britain but are usually less than $40 here. Australian consumers are also offered a wider choice of account types which means that fees can be minimised by taking a basic bank product or higher fees can be paid for a product with more features.
 

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5 September 2007 - Coalition stalks predatory lenders
The Australian
A new coalition of mortgage providers and consumer groups has been formed to push for uniform legislation and the closure of legal loopholes that may be used by fringe lenders to exploit those desperate for finance. The coalition believes that there are a small number of lenders who sign up homeowners to mortgages that they have no hope of servicing, with the expectation that when they default on the loan they could repossess the property and take the owner's equity. The Mortgage & Finance Association of Australia's Phil Naylor said, "Predatory lending relies on that equity and victims end up losing their family home and their equity". The most serious loophole allows the lender to pressure the borrower to declare that the loan is for business purposes which leaves them outside the consumer credit code.
 

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5 September 2007 - Business investment pushes GDP up
The Financial Review
The economy grew by 4.3 per cent in the year to June, and was up by 0.9 per cent in the quarter, placing further pressure on interest rates. Contributing to the result was an increase in business investment of 4.9 per cent in the quarter and 13.1 per cent annually, with the ratio of business investment to GDP at its highest ever, about 28 per cent. The drought continues to take its toll on economic growth with output in the rural sector falling by 11 per cent in the June quarter, and down 26 per cent on a year ago. Financial markets now put the chance of another rate rise in the next six months at 70 per cent.
 

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5 September 2007 - Consumers have money to burn
The Financial Review
Consumer spending was up by only 0.6 per cent in the June quarter, but this followed growth of more than 1 per cent in the December and March quarters, contributing to an annual increase of 3.9 per cent. Nominal disposable income for the year to June rose by 7.5 per cent, in line with an increase of 5 per cent in average wages and a 2 per cent employment increase. Consumer spending makes up around 60 per cent of the Australian economy which, if it grows too fast, can easily place more pressure on the Reserve Bank to lift interest rates.
 

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4 September 2007 - House prices still climbing
InfoChoice.com.au
The latest information from RP Data-Rismark shows that the Australian property market continues to power ahead with 6.6 per cent growth in prices during the first six months of 2007. The median cost of a house is now $459,402, up 8.2 per cent on June last year. Houses in Sydney are most expensive with a median price of $559,770, with Perth not far behind on $505,115. Comparatively less expensive cities are Brisbane ($411,491), Melbourne ($402,817) and Adelaide ($359,504). Prices for units are also headed north with an 8.5 per cent increase over the year, led by an astonishing 21.9 per cent increase in Adelaide.
 

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4 September 2007 - Virgin holds rates, for now
The Australian
Virgin Money are going to resist passing on to their customers any increases in funding costs for now, accepting reduced margins instead. Virgin's home loans are funded by residential-backed mortgage securities from Macquarie bank which has a 10 per cent stake in the company. If the current level of expense in credit markets persists for a long period Virgin said that it would have to consider raising rates. The company also said yesterday that its credit card business was very profitable despite offering some of the lowest rates in the country.
 

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4 September 2007 - Growth stunted by drought
The Financial Review
National accounts due out today will give an update on the state of the economy, but the continuing drought is expected to delay any rural recovery and impact forecasts of economic growth. If there is no rain in the next month the national wheat crop could be as low as 10 million tonnes instead of the 22 million tonnes forecast. The National Farmer's Federation said that, if the drought does break, there will still be the challenges of replacing 80,000 workers that have been lost over the past five years, and growing red-tape that is taking an increasingly large portion of farm income.
 

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4 September 2007 - Challenger grows broking arm
The Financial Review
Challenger Financial Services Group has paid more than $300 million to buy Australia's largest mortgage broking aggregators, Choice Aggregation Services and PLAN Australia, as well as a minority stake in FAST. The move means that Challenger now has around 5,400 brokers with a combined loan book of about $64 billion. Mortgage aggregators charge a fee for independent brokers to use their loan application platform, provide back office support, and negotiate commissions with lenders on behalf of brokers. Nearly half of all new mortgages are sold by brokers.
 

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4 September 2007 - Prospects good for Bendigo / Adelaide merger
The Financial Review
The chief executive of Bendigo Bank, Rob Hunt, has said that the due diligence process being conducted into the proposed merger with Adelaide Bank is almost complete. While there had been concerns about Adelaide Bank's exposure to the low-doc sector Mr Hunt said that "good bank underwriting standards" had been applied and it had withdrawn from areas in which margins evaporated. Mr Hunt said that the two institutions had found that they have very complementary strengths which would produce a more diverse revenue base and a broader funding capability. A report recommending that the merger proceed could be presented to the board of Bendigo as early as Monday.
 

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4 September 2007 - US homeowners struggle to meet repayments
The Financial Review
Mortgage defaults in the US for homeowner with private insurance surged by 28 per cent over the past year. The number of mortgages more than 60 days behind in repayments was up by 8.2 per cent in July alone. Lenders sent out a total of 179,599 notices of repossession, default or auction in July, nearly double the number of a year ago. The US government is implementing a plan to bail out about 80,000 individual borrowers by refinancing through the Federal Housing Administration, but said that it will not provide assistance to lenders or speculators.
 

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4 September 2007 - RBA told to drop regulation on card fees
The Financial Review
The Australian Bankers Association has called for an end to regulation of interchange fees on debit and credit cards by the Reserve Bank of Australia. Instead the association says that interchange fees should be set on commercial terms by the market, helping to restore regulatory certainty, and reducing the risk of sub-optimal levels of investment and innovation. In its submission to the review of payments system reforms American Express said that they had given merchants a significant and ongoing financial benefit, estimated to be at least $2.2 billion since 2003, but that there was no evidence of any decrease in the price of goods and services resulting from this.
 

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3 September 2007 - Lower fees for other bank ATM transactions
The Financial Review
The abolition of ATM interchange fees could mean lower charges to consumers. The removal of the fee, typically $1 per transaction, should lead to a substantial reduction and perhaps even abolition of the fees that consumers are charged when using another bank's ATMs. From October next year, the owners of ATMs must disclose fees charged, increasing transparency of any charges.
 

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3 September 2007 - BoQ aims for Home
The Financial Review
The Bank of Queensland has launched a friendly take-over bid for Western Australia's Home Building Society. The deal would be worth $592 million and follows a failed takeover bid by BoQ for Bendigo Bank. BoQ currently has 6 branches in WA which would increase by 29 if the bid is successful, with the Home brand being retained in the short term while ramping up the rollout of BoQ owner-managed branches across the state. The managing director of Home said "The combined financial strength of BoQ and Home will provide the Home business with greater financial strength and enhanced product offerings, and this gives us great confidence about taking our WA market share to a new level".
 

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3 September 2007 - Electronic conveyancing scheme deserted
The Financial Review
The major banks have pulled out of a Victorian pilot scheme for an electronic conveyancing system called ECV, instead favouring a national system. The banks had supported the Victorian project as it was to be used as the basis for national implementation, but withdrew from the project as Victoria has not yet made the software available for testing to determine its suitability as a national platform. Attorney-General Philip Ruddock said "I am extremely disappointed that Victoria's failure to co-operate has sabotaged a project that would reduce costs for home buyers".
 

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3 September 2007 - Exchange for structured products
The Financial Review
The Australian Stock Exchange is planning to launch a new market aimed at encouraging structured product and managed fund providers to offer their products to the public. The AQUA market is expected to be operating by the middle of next year and will allow investment banks and fund managers to trade or quote their products on the exchange. The market would also provide trading of capital-protected products, long-dated equity-linked products, exchange-traded funds and securitised assets.

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3 September 2007 - ANZ outlook not so rosy
The Financial Review
Analysts have downgraded their earnings outlook for ANZ following advice from the bank last week that both revenue and expense rates had come in at the top end of target ranges for the first 10 months of the financial year. While the bank's New Zealand and personal divisions remain buoyant, earnings growth in the institutional division was below management expectations as debt markets and business banking experienced poor growth.
 

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3 September 2007 - Australia at risk from US sub-prime fallout
The Australian
Analysis of the effects of the US sub-prime mortgage sector problems by The Economist Intelligence Unit has found that there is a 30 per cent chance of the US falling into a recession, and that Australia is one of three countries most at risk of following the US into a recession. The research says that the most serious fallout from the crisis is the repricing of risk and, for any given level of risk, financing will be more expensive and will be rationed. The report also says that affordability in Australia could be strained for all house owners as a result of high interest charges, already among the highest in the world, and which may rise.
 

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3 September 2007 - Internet job ads booming
The Australian
Job advertisements on the internet in August were up by 2.91 per cent from July to a record of 359,959. The figures from recruitment agency Olivier showed that the online job market has increased by 50.81 per cent in the last 12 months. Job ads rose in 14 out of the 21 industry sectors with healthcare, medical and pharmaceutical recording the largest increase of 9.62 per cent for the month. The cultural sector which has enjoyed a 127.08 per cent increase over the last year was down by 12.89 per cent in the last month. Information technology job ads grew by 46.47 per cent over the year, and increased by 4.51 per cent in August.
 

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October 2007

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31 October 2007 - Dragon reports strong growth and record profit
infochoice.com.au
St George Bank has announced an after tax profit of $1.16 billion for the year to the end of September, 13.1 per cent higher than the previous year and a record for the bank. The result was helped by strong growth in home loans, deposits and wealth management. The home loan book grew by 10.4 per cent over the year to total $69.2 billion, giving the bank a 9 per cent share of the market at the end of August 2007. Retail deposits were up by 10.9 per cent to $47.8 billion for a market share of 8.2 per cent but the second half was much stronger which, if annualised, grew at 13.2 per cent. Superannuation changes helped to increase funds in the Wealth Management division by 26.7 per cent to $49.7 billion. St George continues its expansion with five new branches opened in Western Australia over the year and four in Queensland.
 

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31 October 2007 - Westpac and ANZ battle for third
The Australian
Westpac has overtaken ANZ in terms of market share to become the country's third largest bank. ANZ Bank shares have been sliding since last week's annual profit announcement and yesterday lost a further 26 cents to close at $29.69. Westpac shares gained 7 cents to $29.95 putting its market capitalisation at $55.86 billion compared with ANZ's $55.36 billion.

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31 October 2007 - ANZ pressures wealth venture
The Australian
While the ANZ Bank may be frustrated about its relative weakness in the wealth management market, its joint venture with ING Australia is likely to continue beyond the current agreement's 2012 expiry date. The new chief executive at ANZ, Mike Smith, said that INGA is now delivering improved returns but that ANZ was still underweight in wealth compared with its Australian peers so the bank will "sweat (INGA) a bit harder". INGA's annual profit was up 28 per cent to $311 million for the year driven by growth in fund under management of 18 per cent to $46 billion. Strong growth in sales and profit terms was recorded for all key business units which include personal investments, employer superannuation, life risk and direct insurance. The joint venture now has the third largest group of aligned advisors after increasing their numbers by 189 to 1334.

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31 October 2007 - Escalating defaults in regional NSW
The Australian
The latest credit default figures show an alarming increase of 35.5 per cent in NSW across credit cards, personal loans and mortgages. Regional areas hit by drought are suffering most with a 60 per cent rise in defaults over the last financial year with some parts of the state seeing increases of as much as 77.2 per cent. According to analysis by Veda Advantage mortgage belt areas of the state such as western Sydney and the central coast are being hit hard where defaults increased by 43.5 per cent. NSW Farmer's Federation vice-president, Alan Brown, said that regional NSW was at a crisis point with the rise in defaults reflecting a collapse in farm incomes after years of drought.
 

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31 October 2007 - Staff shortage curtails growth
The Financial Review
In the latest National Australia Bank quarterly survey almost 65 per cent of firms said that difficulty finding staff was limiting their ability to grow. Of the 900 businesses surveyed 27 per cent of respondents said that lack of staff was a major constraint, highlighting just how much the skills shortage is slowing economic growth, while only 13 per cent said that low sales or orders was slowing their business. Labour shortages are not feeding through to higher wages however with labour costs increasing by 0.8 per cent in the last quarter to give an annual growth rate of 3.4 per cent.
 

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31 October 2007 - Super funds brush off market turmoil
The Financial Review
Despite one of the most turbulent quarters in memory, the average superannuation fund managed to generate a return of 2.01 per cent for the three months to September according to research firm SuperRatings. The average return for the month of September was 1.71 per cent, while the average over the past five years is 12.8 per cent and 9.9 per cent for the last 10 years. Managing director of SuperRatings, Jeff Bresnahan, warned that there could be a backlash against the super industry as, after 4 years of 13 per cent plus returns, many people may expect the same going forward. "CPI plus 3.5 per cent is generally normal over a five-year rolling period," he said. Catholic Super was the best performing fund for the year to September with a 19.6 per cent return, followed by 19.1 per cent for MTAA Super. According to SuperRatings the best performing asset class over the past year was Australian equities which were up by 29.5 per cent, followed by property which returned 15.8 per cent.
 

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31 October 2007 - Dollar dips as markets watch US rates
The Financial Review
After reaching a high of US92.72 cents on Monday, the Australian dollar yesterday dipped as low as US91.53 cents as speculation grew that the US Federal reserve may not cut rates when it announces its decision tomorrow. Traders had reduced the probability of a cut in rates to 80 per cent, down from 112 per cent on Monday. The greater than 100 per cent probability implied that investors believed there was a small chance of a 50 basis point cut instead of 25, but some analysts say that a 50 basis point cut is still possible.
 

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30 October 2007 - Adelaide to expand funding sources
Sydney Morning Herald
Bendigo Bank will seek to broaden the funding base of its merger partner Adelaide Bank to reduce the impact of global credit availability on Adelaide's profit. With one of the highest levels of exposure to wholesale mortgage markets Adelaide Bank has already been forced to increase the interest rates on its mortgages with some borrowers paying rates that are 30 basis points higher than those charged by its competitors. At yesterday's annual meeting the chairman of Bendigo, Robert Johanson, defended the decision to merge with Adelaide Bank but conceded that that the merged group would look to source its funding from a "much broader range of options". Without the global credit market shortages the wholesale business of Adelaide Bank would have contributed up to 10 per cent of the earnings of the merged company. Shareholders of Adelaide Bank will vote on the proposed merger on November 12.
 

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30 October 2007 - Wide Bay outbids Bank of Queensland
The Australian
Building society Wide Bay Australia has trumped the Bank of Queensland's takeover bid for Mackay Permanent Building Society. Wide Bay had originally offered MPBS a deal which valued the rival building society at $46 million but this was beaten by a $53.2 million bid from BoQ. The new offer from Wide Bay values MPBS at $56.6 million with each share receiving 0.65 Wide Bay shares plus $1 cash. The managing director of Wide Bay said that shareholders should look beyond current share prices and consider all relevant information including the cultural alignment and complementary agency networks of the two societies. "In short, we believe that a combined Wide Bay and MPBS would be the financial institution of choice for residents of fast-growing central and north Queensland," he said.
 

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30 October 2007 - Dollar heading for parity
The Australian
The Australian dollar was valued at over US92 cents for the first time in 23 years yesterday and economists believe that it could reach parity with the US dollar, perhaps as soon as Christmas. Fears of a recession in the US is eroding the value of the greenback and has driven the price of gold to its highest point in 20 years as investors seek safe havens. Interest in the local currency is being fuelled by the probability that the Reserve Bank of Australia will raise interest rates next week and the US central bank cutting rates this week. The S&P/ASX200 closed at a new record of 6792.1 after gaining 91.5 points on the day.
 

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30 October 2007 - Confidence proves resilient
The Financial Review
While business confidence has eased slightly companies still believe that trading conditions will be good in the December quarter despite the rising dollar and prospect of an interest rate rise. The latest National Australia Bank business confidence index was down 2 points but remains significantly higher than the long term average. Conducted between late August and the end of September the latest survey of 1,550 large, medium and small businesses found that confidence levels were highest amongst those with an annual sales turnover between $3 million and $5 million. The result contributes to fears that inflationary pressure is building due to sustained strength in the economy and further increases the probability that the Reserve Bank will lift interest rates at its meeting next week.
 

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30 October 2007 - Building industry skills shortage
The Financial Review
A lack of skilled workers in the building industry is putting upward pressure on costs. The availability of workers declined in 10 of the 13 main construction trades in the September quarter and the cost of contractors rose in 9 categories. The largest price increase was 3.9 per cent for general building while the cost of plasterers was up by 3.5 per cent. Over the year to the end of September the cost of bricklayers was up 14 per cent, joiners 7.8 per cent, and plasterers 7.1 per cent. The industry has renewed its calls for reform of the apprenticeship and training system including introducing shorter qualification periods for sub-trades such as paving, form-work and timber framing.
 

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30 October 2007 - St George staff free to surf
The Financial Review
In a bid to attract and retain talented young staff St George Bank will allow its employees to use social networking and role playing websites. The bank's head of architecture, Greg Booker, said that instant messaging applications are being provided for all staff as "they are already chatting all day... but they are using email and your resources to store it". "What we have come to find is if you want to hire people, and keep them, then the organisation they work for needs to be at least in line with what they are used to doing outside," he said.

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29 October 2007 - Strong growth in low doc loans
The Financial Review
The value of low-doc home loans written in the year to June 30 rose by 26 per cent to $8.37 billion, up slightly from the 25 per cent growth rate of the previous year, according to the latest data from the Market Intelligence Strategy Centre. The proportion of borrowers obtaining loans for more than 80 per cent of the value of the property hit 26 per cent compared with 15 per cent in September 2005. Some lenders have increased the rates on their low doc loans by more the Reserve Bank's cash rate increases reflecting a perceived higher risk level for the loans.
 

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29 October 2007 - Case builds for rate rise next week
The Financial Review
Rising oil prices are adding to pressure on the Reserve Bank to increase the official cash rate when it meets next week. With tensions between the US and Iran escalating and concerns that the conflict between Turkey and Kurds in the north of Iraq could worsen. The price of a barrel of crude oil hit a new record of $US92.97. If this level holds Australian motorists could be hit by a 10 cent per litre fuel price increase within two weeks. Figures on retail turnover are due out this week with economists forecasting a 1.6 per cent increase in sales for the September quarter. Futures markets currently have the probability of a rate rise at the RBA's next meeting at 85 per cent and have factored in another rise before May 2008.
 

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29 October 2007 - No plan means low growth for SME's
Daily Telegraph
A survey has found that 74 per cent of small businesses do not have a business plan, citing a lack of time, assistance and being unable to see the value of a plan as the main reasons. However the study, conducted by accountancy group RSM Bird Cameron, has found that those businesses that do have a plan report higher rates of growth. According to the report almost twice as many businesses that do plan have grown more than 50 per cent per year for the past two years. The most common reason given for not having a plan, by 41 per cent of respondents, was concern that the business was too small for a plan to be necessary. A business plan does not need to be a 80 to 100 page document but could be as simple as three of four pages with dot points.
 

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29 October 2007 - Fines for misuse of super funds
The Financial Review
A couple who illegally accessed their superannuation funds to pay off a business debt have been fined $30,000 and ordered to pay $35,000 in costs. As trustees of their own super fund the couple had sold a property which was owned by the fund and used the proceeds to pay a private debt. The Federal Court found that, while the $115,000 involved was not a large sum, the action had been deliberate and significant as it stripped the fund of its main asset. The Australian Taxation Office has reminded trustees of self-managed super funds that the main purpose of super funds is to provide for retirement and that funds cannot be used for other purposes.
 

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29 October 2007 - Cost blowout increases tension at ANZ
The Financial Review
At an internal meeting on Friday the new chief of ANZ Bank, Michael Smith, heavily criticised some of the bank's most senior executives after a disappointing second-half performance. Speculation is building that there will be a shake-up in the bank's management, particularly in the institutional division. Analysts are concerned that the ANZ Bank will struggle to deliver earnings per share at a similar level to rivals after reporting an increase of 7.6 per cent in its costs over the past year. The bank's costs increased by 7.6 per cent, compared with a rate of 5 per cent for Westpac and 5.9 per cent at St George. Merrill Lynch analyst Matthew Davison said that it is difficult to get excited about ANZ due to slow growth in its personal division and other headwinds that the bank faces.
 

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29 October 2007 - Westpac staff fight sales pressure
Sydney Morning Herald
With talks on a new wages agreement between Westpac and the Financial Sector Union due to commence, the bank's staff are pushing for the right to not sell financial products to customers who are unable to meet their repayments. Staff feel that, with household debt at record highs, the link between their pay and the sale of loan products should be removed. The FSU's national secretary, Leon Carter said "Our members want banks to be profitable but they're increasingly uncomfortable pushing debt in the current climate, where people are struggling to finance loans, even though bank profits are now in the billions". It is likely to be an uphill battle however as industrial relations laws prevent the negotiation of 'conscience clauses' or engaging in action that disrupts management's rights to run a business.
 

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26 October 2007 - Home borrowers hit by 37.5% increase in rates
Infochoice.com.au
Analysis conducted by InfoChoice shows that Australian mortgage borrowers have seen their home loan interest bill rise by more than 37 per cent over the last five years, a situation which may be about to get worse. General Manager Denis Orrock said that while the focus has been on the five rate increases since the last election, there have been nine since the current upward trend began in 2002. Over this time standard variable rates have increased from 6.07 per cent to 8.32 per cent which means that the interest bill for home-buyers has increased by 37.5 per cent. On an average sized mortgage of $270,000 borrowers are paying $350 more in interest than they would have five years ago, and if rates go up again in November this figure will be closer to $400. On top of this are warnings from some banks that their increased cost of funding will force them to raise their mortgage rates above any increase in the cash rate by the Reserve Bank.
 

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26 October 2007 - Howard and Costello warn RBA
The Financial Review
In an attempt to prevent a rate rise in November Prime Minister John Howard and Treasurer Peter Costello have reminded the Reserve Bank of a 2003 agreement on the RBA's independence. Mr Howard said that the RBA should only consider the Consumer Price Index when setting interest rate policy and Mr Costello added that the current annual CPI rate of 1.9 per cent was below the target range of between 2 and 3 per cent. However analysts believe that the Reserve will stick to its guns as the underlying rate, which strips out volatile items and one-off changes is too high. The bank's decision will also be influenced by an OECD report that shows that growth in labour costs is outstripping productivity increases.
 

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26 October 2007 - Growing pains for Melbourne
The Financial Review
The vacancy rate for rental properties in Melbourne hit a 25-year low of 1.2 per cent in September. Melbourne is the fastest growing city in the country with its population growing by about 4,000 people every month and the growing pressure on properties has seen rents increase by 1.4 per cent in the September quarter and 4.7 per cent over the last 12 months. The situation is not much better in regional Victoria with vacancy rates of just 2.3 per cent. The population growth is being attributed to higher fertility rates, increased immigration and less people moving to northern states.
 

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26 October 2007 - Strong growth in ANZ result
The Financial Review
Personal banking has contributed $1.442 billion to the ANZ Bank's profit result for the year to September, an increase of 16 per cent over the previous year. The retail division of the bank achieved a 12 per cent growth in mortgages, credit cards grew by 7 per cent and deposits were up by 13 per cent. The net interest margin that ANZ was able to achieve was down to 2.3 per cent, 1 basis point lower than last year's result. Profit from the institutional division was up by 6 per cent to $1.448 billion, helped by a 27 per cent rise in deposits as companies sought more conservative havens for their cash during the global credit crisis.
 

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26 October 2007 - Investors not happy with ANZ
The Financial Review
Investors hammered ANZ's share price following the bank's profit announcement yesterday despite reporting a 13.3 per cent rise in annual profit to a record of $4.18 billion. While revenue increased by 9.7 per cent, costs grew 7.6 per cent, higher than the bank's target of no more than 5 to 7 per cent. Provisions for bad debts were up by 39 per cent to $567 million, mainly due to problem corporate loans being written off, but there were also rising losses in the bank's credit card and home loan portfolios. Investors were also concerned that a merger with a similar sized offshore bank could be on the cards after new chief executive, Michael Smith, said that he wants to turn ANZ into a "super regional" bank. The bank's share price was down 3.7 per cent, or $1.15, to close at $29.96.
 

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26 October 2007 - Banks and government disagree over rates
The Australian
On the election trail Prime Minister John Howard and Treasurer Peter Costello continue to argue that there is no reason for Australian banks to increase their interest rates outside of any move in the official cash rate but some of our leading bankers disagree. NAB's chairman, Michael Chaney, has said that that the Treasurer's insistence that Australian banks were immune to higher credit costs on global markets as they could rely on local deposits was not entirely true. "All banks have a very significant proportion of their funding in the wholesale market. If wholesale funding costs have risen permanently, then banks will have to raise their lending rates as well," he said. ANZ's chief executive, Michael Smith, said that while they were absorbing the higher cost of funding for now, it was not a situation that could go on forever.

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26 October 2007 - Has inflation peaked?
The Australian
With government policies encouraging more people into the workforce, economists believe that we could almost be at the peak of the current inflation cycle. The Commonwealth Bank's chief economist, Michael Blythe said that an increase in the official cash rate to 6.75 per cent would be more restrictive for the economy and the increased labour participation rate would help to ease the economy's supply-side constraints. A Senior strategist with TD Securities, Joshua Williamson, agreed with Mr Blythe's inflation outlook but said any easing would be due to more infrastructure projects coming on line which will increase our level of exports.
 

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25 October 2007 - Markets confident of rate rise, and could be more
The Australian
With the market putting the probability of an increase in interest rates when the Reserve Bank meets in November at almost 90 per cent, the Australian dollar gained 0.7 of a cent to close at US89.84 cents while the All Ordinaries Index was down 25.4 points on the day to 6652.10. Economists from ABN AMRO and Westpac have warned that another rate rise could happen as early as December depending on what happens with global financial markets. Macquarie Bank's Rory Robertson said "The RBA has raised nine times in five years, so that is a moving average of one or two a year. It can be a gradual process, so I would say they will tighten in November and keep their tightening bias."

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25 October 2007 - Quick fix would save money
The Australian
If the Reserve Bank does increase rates by 0.25 per cent at its next meeting in November repayments on a mortgage of $500,000 will increase by $84 per month. Borrowers should consider fixing all or part of their home loan now as the banks will move quickly to pass on any increase in rates. Standard 3 year fixed rates for the major banks are around 7.80 per cent so fixing would save 0.77 per cent compared with the new standard variable rate which would be 8.57 per cent and even lower fixed rates can be found with other lenders. Variable rates for margin lending will rise to around 9.65 per cent and credit card rates will be as high as 20 per cent.
 

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25 October 2007 - Housing, electricity and pets cost more
Sydney Morning Herald
Contributing to the CPI rate announced yesterday was an increase of 1.8 per cent for housing rents in the September quarter, to give an annual rise of 5.8 per cent. The cost of electricity is up by 5.6 per cent over the last year while the cost of buying a house has increased 3.5 per cent for the year. Pets, pet food and supplies have grown 6.7 per cent more expensive over the year while hospital and medical bills are up by 5.3 per cent. Offsetting some of these increases are falls in the prices of electronic equipment which were down 5.6 per cent and the value of the dollar keeping a lid on petrol prices.
 

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25 October 2007 - Costello wants more competition on fees
The Financial Review
Banks have been asked to reduce their fees by the Treasurer, Peter Costello. With the costs of deposit and loan facilities increasing by 2.2 per cent in the September quarter and 3.5 per cent over the last year, Mr Costello said that he had written to the Australian Bankers Association the level of fees being charged. "You have to look at the fact that most of the banks have got their 'exception' fees, which are the fees banks charge when cheques bounce," he said. "The fees they were charging bore no relation to the actual cost to the bank." While some banks, including ANZ and NAB have moved to reduce penalty fees for credit cards and NAB has introduced new deposit accounts with no monthly service fees Mr Costello said that there was still room for more competitive products.

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25 October 2007 - Basis fund units hit 1 cent
The Financial Review
The value of units in Basis Capital's Yield Fund has been cut to 1 cent instead of the 20 cents that investors were hoping for. The valuation by Macquarie Bank has come after it was told that no further price updates would be issued for the troubled fund. Another Basis fund, the Australia Rim Diversified Fund, which has $355 million from Australian investors, has lost half of its value and Basis has asked investors to allow the separation of the problematic credit assets from the high-yielding securities for which they would receive shares in a new structure.
 

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25 October 2007 - Housing crunch in regional areas
The Financial Review
The slow rate of house construction in regional centres has caused high rates of housing stress for both renters and buyers. Research from the Australian Housing and Urban Research Institute shows that, at the 2001 census, over 23 per cent of renters and 14 per cent of home-buyers in non-metropolitan areas were experiencing housing stress. These figures are only expected to get worse as the pace of construction lags that of population growth. The report says "Housing policy, including housing assistance, needs to respond to demand in particular locations, especially those in higher demand locations such as the regional cities and coastal regions".

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24 October 2007 - Inflation hike heralds election rate rise
InfoChoice.com.au
The chances of an unprecedented election campaign interest rate rise are now very high after quarterly CPI figures released today show underlying inflation breaching the 2-3 per cent tolerance band set by the Reserve Bank.

Although the headline figure for the CPI in the third quarter came in at 0.7 per cent - giving an annual rate of inflation of just 1.9 per cent in the year to September - the RBA prefers to look at adjusted measures of inflation which take out volatile items and one-off price movements.

The two adjusted measures it uses don't make for pretty reading, now at 2.9 per cent and 3.1 per cent, up from 2.8 per cent. These figures weigh more importantly than any other in the minds of the members of the Reserve Bank board in considering interest rates - curbing inflation is their key priority in setting rates.

The latest inflation reading suggests that the economy is struggling to contain prices in the wake of solid economic growth this year and capacity constraints which don't allow businesses to raise supply to the levels necessary to meet demand. The wholesale or producer price index released earlier this week told a similar story.

The RBA board meets in less than two weeks - on Melbourne Cup Day - to consider interest rates. It will have to assess how much these latest CPI figures threaten an inflation breakout and weigh that risk against the possibility of recession in the United States and the hit to business activity in Australia from the fallout from the US sub-prime lending debacle, which is already nudging up interest rates around the world.

It would be a brave move to raise rates during the heat of an election campaign, something never done in living memory, although the RBA only took over responsibility for setting rates from the government of the day in 1996. RBA governor Glenn Stevens however said earlier this year elections would have no bearing on interest rate deliberations.

Borrowers on variable rate mortgages should prepare for a rise of 0.25 per cent in their interest rate in November, lifting repayments by $17 a month for every $100,000 borrowed.

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24 October 2007 - November rate rise almost certain
Sydney Morning Herald
With the September quarter Consumer Price Index rising by 0.7 per cent, and the underlying rate of inflation running at 1 per cent, a rate rise when the Reserve Bank meets in another two weeks seems a certainty. Before the CPI announcement markets had put the probability of the cash rate increasing from 6.5 per cent to 6.75 per cent in November at 60 per cent but this has now shot up to 83 per cent. If the RBA does lift rates it will be the first time this has happened during an election campaign.

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24 October 2007 - Tax Office warns on super rules
The Financial Review
The tax office has warned that the 8 per cent of superannuation funds that still do not having a tax file number attached will be taxed at 46.5 per cent. Personal contributions cannot be made to super funds which do not have a TFN so also miss out on any government co-contribution. The ATO is also assisting people who mistakenly paid over the $1 million into their super account this year which, if not rectified, would be taxed at 46.5 per cent. Assistant commissioner Stuart Forsyth said "People who may have inadvertently breached the cap because of special circumstances should write to the Tax Office or give them a call as soon as they become aware of the problem".
 

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24 October 2007 - Treasury predicts strong growth ahead
The Financial Review
In its Pre-election Economic and Fiscal Outlook report Treasury has forecast that the Consumer Price Index will grow by 2.75 per cent both this financial year and next, near the top of the Reserve Bank's 2 to 3 per cent comfort band. The economy is expected to grow by 4.25 per cent in the current financial year and 3.5 per cent in 2008-09. However Treasury has warned that there is a risk that, if the financial market problems are resolved in a benign fashion then the rate of growth could be even stronger which could increase pressure on prices and wages.
 

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24 October 2007 - Homepath profit hit by credit squeeze
The Financial Review
Online lender HomePath, which is owned by the Commonwealth Bank, reported a drop in net profit of 10.8 per cent to $7.7 million for the year to June. This is despite a 23 per cent increase in revenue to $107.5 million with rising finance costs impacting the profit result as most of the lender's book funded by securitisation. Total outstanding loans grew from $1.42 billion to $1.62 billion over the year, but still a small proportion of the CBA's total mortgage portfolio of $143 billion.
 

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24 October 2007 - IWL confirms support for CBA offer
Sydney Morning Herald
Online broker IWL has had an independent expert review the Commonwealth Bank's $350 million takeover offer to see if it is still fair after posting higher than expected first-quarter profits. Pre-tax profit for the September quarter was $10.2 million, double the result for the same period last year and 15 per cent higher than the previous quarter. The bumper profit result was due to increased trading levels in the quarter which have since dropped off as markets have settled down. The review said that, as the results should not be regarded as sustainable, the value of $311 million to $346 million reflected the long term earnings potential of the company. IWL has urged investors to vote in favour of the $6.45 share offer at the scheme of arrangement meeting next Wednesday.

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24 October 2007 - Banks lead sharemarket up
The Australian
The Australian sharemarket bounced back yesterday, recovering more than half of the losses incurred on the previous two days. The ASX 200 climbed 83.6 points to 6660.9 helped by strong gains in bank stocks. Macquarie Bank experienced the biggest gain of $2.08 to close at $81.73, NAB was up by 68 cents to $41.25, Westpac rose 51 cents to $28.82, while ANZ gained 46 cents to $31.21 and Commonwealth was up 44 cents to $59.01.
 

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24 October 2007 - Property valuations vital
Sydney Morning Herald
When considering buying or selling a property there are several ways to work out how much it is worth apart from looking at prices for similar properties in the street. Automated valuations (AVM's) are available from several sources including Australian Property Monitors. AVM's can use historical data on the property itself along with selling the sale prices for other properties in the area to come up with a market value, but this method does not take into account all factors such as age and condition of the properties. If you are selling your property then it is worth getting a real estate agent to go over it and give you a quote, but this would not work for buyers. The other option is to engage the services of a professional valuer who will thoroughly examine the physical condition of the property and take into account geographical characteristics, historical data and how appealing the layout of the home is. This is the most expensive option at around $300 to $350 but for buyers is a worthwhile investment.

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24 October 2007 - Variable Rate Loans are just that - Variable
infochoice.com.au
Recent comments from leading Australian banks that variable rate home loans may be forced to increase beyond or outside of any Reserve Bank movements have reinforced the fact that variable rates are indeed liable to change, and that Australian borrowers have been accessing cheap credit for much of the past decade.

Despite the Federal Treasurer Peter Costello maintaining that the banks have no reason to move their variable rate home loans outside of Reserve Bank movements, and suggesting that they not use the US sub-prime fall out as an excuse to increase price, the reality is that credit, and more importantly risk, has been repriced and the lenders including the major banks in the Australian market will be looking to maintain existing margins and in some cases increase margins to offset risk.

If the Treasurer is insistent that mortgage rates not be increased while personal loan, business loan and credit card interest rates have been increased over and above the August RBA rate increase, the narrow focus on mortgages appears to be a cynical exercise in electioneering and discriminates against Australians that do not have a mortgage but may have other debt facilities. If borrowers are looking for certainty on rates then they should be looking towards the fixed rate market that even today is offering competitive three year rates as low as 7.59 per cent or 73 points below the quoted standard variable rate of 8.32 per cent.

Lending conditions are forecast to tighten as the credit situation continues to unfold and perhaps lending criteria may shift to a tighter approach with high LVR loans and borrowing capacity calculations to come under scrutiny. Many will argue that this is a good thing but if the maximum LVR was to drop to 85 per cent a first home buyer in Sydney would require a deposit in excess of $75,000, furthering denting the home ownership aspirations of thousands whilst placing increased upward pressure on rental demand.

In 2007 there has been a lot said about Housing Affordability by both political parties, conferences held, and committees appointed, but we are yet to see any concrete plans put forward by either parties to assist not only first home buyers but young families as they struggle to make ends meet and strive to achieve their goals.

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23 October 2007 - Banks under pressure to increase rates
The Financial Review
The chief of National Australia Bank, John Stewart, has warned that banks will have to increase their rates above any rise in the cash rate as the price of credit remains high. Mr Stewart said that while there was pressure on variable mortgage rates it was unlikely that they would be lifted as they are the most sensitive rates for consumers. Yesterday ANZ increased rates on its fixed loan products by 10 basis points saying that it was due to the higher cost of funding on wholesale markets. Australian banks obtain around half of their funding from wholesale markets.
 

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23 October 2007 - Ex-CBA chief supports four pillars
The Australian
The former chief of the Commonwealth Bank, David Murray, has said that the industry had not yet articulated a case that the abolition of the four pillars policy would benefit consumers. Mr Murray, now chairman of the Future Fund, has broken ranks with the recent statements from other major bank CEO's who have been saying that it is time to change a policy which is outdated and preventing local banks from competing globally. According to Mr Murray it is the four pillars policy that has seen industry profits fall to the benefit of consumers. "If anybody wants Four Pillars to change, they'd better build a very solid argument about what's going to happen to that competition and the interests of Australian consumers," he said.
 

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23 October 2007 - Technology upgrade for Federal Police
The Financial Review
The Australian Federal Police have improved their ability to keep up with internet criminals with the creation of a new technology research and development unit. The new unit will have an oversight role to review technology purchases and has a budget to fund science and technology projects. At the same time the AFP is looking for the latest technology that allows the bugging of online chat rooms and internet phone calls. While the use of encryption and the distributed nature of the internet has made eavesdropping more difficult, the range of information that police want access to has increased to include images from mobile phones and communications through wireless networks.
 

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23 October 2007 - Middle-class not so stressed
The Financial Review
The Australia Institute says that mortgage stress is overstated and, rather than struggling financially, most Australian families are doing "very well". A study conducted by the Institute found that only one third of middle-class families had a mortgage and even then only 8 per cent of those had a mortgage over $200,000. For the purposes of the study a 'typical family', which comprises 41 per cent of the population, was defined as a couple with at least one dependent child and led by one person of prime working age. The Institute's Clive Hamilton said "There is considerable evidence that middle-class Australians focus not on what they have but on the gap between what they have and what they want, creating a sense of deprivation in a time of plenty".
 

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23 October 2007 - Index hints at rate rise
The Financial Review
The Producer Price Index, which tracks business production costs, was up by a higher than expected 1.1 per cent for the September quarter. The correlation between the PPI and the Consumer Price Index, due out tomorrow, has been increasing in recent times and after the result announced yesterday markets increased the probability of a rate rise in November from 40 per cent to 52 per cent. Leading the PPI increase was strong growth in new house prices of 1.2 per cent in the quarter, and 3.9 per cent higher over the last year. House purchase prices make up 8 per cent of the CPI.

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23 October 2007 - Local markets follow US
The Australian
The local market shed 130 points yesterday, or 1.9 per cent, following the 2.6 per cent fall experienced by Wall Street on Friday. Shortly after opening the Australian All Ordinaries Index had lost 2.4 per cent but picked up during the day. Other markets were not immune with the Hang Seng plummeting 3.7 per cent and the Nikkei down 2.24 per cent.
 

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22 October 2007 - Inflation danger rising
Sydney Morning Herald
The Australian economy has entered an inflation danger zone according to forecaster Access Economics. An Access report has said that our balance of trade will not improve until the economy slows and demand reduces, which is not likely until 2009-2010. This is also when falling commodity prices are expected to pull the Australian dollar back from its current high levels which will drive up the cost of imports. Another factor to consider is that, until now, China has effectively exporting deflation through the low cost of manufactured goods. Access warns that this will not continue as inflation rises in China itself meaning that prices for goods imported from China will be rising.
 

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22 October 2007 - Housing in a vicious circle
The Australian
Economic forecaster BIS Shrapnel says that the undersupply of housing will rise by around 8.4 per cent over the current financial year, after increasing by 5.2 per cent last financial year. Rents make up 5.3 per cent of the Consumer Price Index so could add 0.2 per cent to the inflation rate, increasing the chances of further interest rate rises and creating a vicious circle as any rate increase will further delay a recovery in the housing sector. Flat demand will maintain upward pressure on rents which will eventually underpin a recovery in housing starts as more tenants decide to buy and investors are attracted by higher returns.
 

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22 October 2007 - Big banks' earnings to increase 14 per cent
Financial Review
Merrill Lynch has forecast a 14 per cent increase in earnings growth per share for the nation's largest banks despite concerns that their results for the year would be impacted by the higher cost of funding. Profit increases to be reported over the next few weeks are expected to be ANZ by 10 per cent, and St George, Westpac and National Australia Bank all up by 13 per cent. While interest margins may be slightly reduced this has been more than offset by an 18.8 per cent increase in business lending and a 13 per cent increase in home loans.
 

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22 October 2007 - Duelling tax policies
Financial Review
The battle of the tax cuts is heating up with Labor announcing its policy on Friday followed by the Treasurer, Peter Costello, responding with additions to the package offered by the Coalition earlier in the week. In its first phase to be implemented in 2010, the Labor cuts would raise the current $75,001 threshold to $80,000 while cutting the 40 per cent tax rate to 37 per cent. 'Aspirational' goals for 2013 are to apply the 30 per cent rate to all with incomes between $37,001 and $180,000 and cut the 45 per cent rate for those in the top bracket from 45 to 40 per cent. In addition that ALP's plan will allow taxpayers to claim half of their children's education costs in their 2008-2009 tax returns. After Labor's announcement Mr Costello said that the Coalition would deliver further tax cuts in five years. The threshold of $37,000 for the 15 per cent tax rate would be lifted to $41,000; the top of the 30 per cent threshold would rise from $80,000 to $90,000; and the top tax rate would be cut from 45 per cent to 42 per cent in 2010, then cut again to 40 per cent in 2012.
 

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19 October 2007 - CPI figures: Crunch time for interest rates
InfoChoice.com.au
The chance of another interest rate rise before Christmas remains a possibility, and hangs very much on the release of the September quarterly inflation figures released this coming Wednesday. If the figure for underlying inflation is like the one we got last quarter then we can expect the Reserve Bank to lift official rates a quarter of a per cent two weeks later in early November.

The RBA says it expects inflation to be on the up next year so any further rise that sees the underlying rate nudge 3 per cent will worry it. We've already had one rate rise in response to last quarter's CPI jump, and that is still working its way through the system. But it's hard to see that has had a great effect yet, given consumer confidence and retail spending remain healthy.

The recent spike in the oil price is not likely to pose much of a threat to inflation and interest rates if the experience of the last couple of years is anything to go by. Western economies like Australia's are less oil-reliant these days and much more competitive, preventing businesses from passing through the costs of fuel to consumer products and services.

A 0.25 percentage point rate rise in November would add an extra $17 to monthly loan repayments for every $100,000 in borrowings. This would not be a good look in the housing market and among first homebuyers, already suffering as home loan affordability falls to record lows. Higher interest rates and enormous capital city house prices have seen the monthly repayment on the average first-homebuyer loan rising another 4 per cent to $2600, or almost 32 per cent of income.

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19 October 2007 - Less people able to save
Sydney Morning Herald
An ING Direct-Melbourne Institute survey of 1,200 households has found that the proportion of families able to save has fallen from 54 per cent one year ago to only 46 per cent. At the same time, the number of households that are running into debt has gone from 4 per cent to 7 per cent. ING Direct Spokesman, Michael Smolders, said "Higher interest rates, bigger mortgages, record levels of credit card debt, larger grocery bills and the general rise in the cost of living are affecting our inclination and capacity to save." The survey found that the number of people willing to commit to saving for home renovations was down to 14 per cent from 24 per cent while those who would save toward a new home was down to 14 per cent from 17 per cent.
 

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19 October 2007 - Pepper cuts product range
The Australian
Low doc mortgage provider Pepper Homeloans has adjusted to the tougher credit conditions by dropping its lowest margin loan options and making it harder to qualify for a loan. Pepper said that it will no longer offer its Xpress, Mega Express, and 12 month discounted honeymoon rate loans, while at the same time decrease the maximum loan-to-value ratio it would be willing to lend from 90 to 85 per cent. Pepper is the third largest low-doc lender after Liberty Financial and Bluestone.

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19 October 2007 - Affordability crisis getting worse
The Financial Review
Housing affordability has plunged to a new low according to the Housing Industry Association-Commonwealth Bank's index which was down by 2.1 per cent in the September quarter. Contributing to the result was an 11.4 per cent increase in house prices as well as the August interest rate rise. First-home buyers who are on the average national combined income of $98,000 now have to commit 31.7 per cent of their income to service their mortgage, up 0.7 percentage points from the June quarter. For first-home buyers the typical monthly loan repayment was up by 4 per cent or $100 over the quarter to $2,606.
 

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19 October 2007 - Credit card repayments increase
The Financial Review
The latest figures from the Reserve Bank of Australia show that more consumers are trying to reduce their credit card debt with an average balance in August of $2,999, down slightly from the previous month, but still 5.7 per cent higher than a year ago. A record $18.1 billion was repaid onto our cards which is $1.4 billion more than the same month last year. Still, total spending on cards was over $18 billion making the total outstanding debt in August $41.1 billion.
 

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19 October 2007 - Future grim for US economy
The Financial Review
Concerns about the state of the US economy have been reignited as the latest data on their home loan market shows that there was a 10.2 per cent fall in housing starts in September. This is not expected to improve any time soon as building permits which give an indication of future activity were down by 7.3 per cent. Economists are concerned that the weak housing market and tougher credit conditions will cause consumers carrying debt to spend less. The current housing down-turn is the worst since the early 1990's.

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19 October 2007 - Suncorp branch expansion to fight rivals
The Financial Review
Suncorp is aiming to grow and will expand its branch network in Queensland over the next three years in response to new branches being opened by competitors ANZ and BankWest. The changes will also mean trialling the outsourcing of some back-office functions with some going to local financial services vendor Perpetual, and others going overseas to India. However, Suncorp chief, John Mulcahy, said that the new arrangements would not reduce total staff numbers. "For every back-office job that is outsourced, we would expect that our investment in our customer service network will allow us to create one new customer-facing role, resulting in no net job losses over the period," he said.
 

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19 October 2007 - Land for auction on eBay
The Financial Review
In a first for Australia a developer has placed a lot on his estate up for auction on eBay. The property in Melbourne's Point Cook was listed on the online auction site on Tuesday and after 350 visits and six bids the price has reached $350,000. The auction will close at midday today and a late flurry of bidding is expected. A database of 500 bidders was created but there were extensive identification requirements to qualify.
 

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19 October 2007 - Finance companies stable but risks increasing
Sydney Morning Herald
While increased borrowing by consumers is helping to drive asset growth for finance companies, the risk of losses due to bad debts is also on the way up. A survey by KPMG has found that assets are growing at a rate of 7.1 per cent and that profits are stable for the market sector. However the cost of bad and doubtful debts is rising while profits on second-hand cars are decreasing. The performance of the finance sector is driven by their link to the motor industry with most lending money for consumers and businesses to purchase cars, financing motor dealers' stock and providing fleet management services.
 

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18 October 2007 - ASX to offer listed CFD's
The Financial Review
Contracts for Difference are expected to list on the Australian Stock Exchange in early November. The ASX is expecting strong interest in the 66 that it plans to offer initially, however established CFD providers say that they are not concerned about losing their clients as they offer a much wider range of options than will be available through the ASX. Around 3,500 people registered for education seminars conducted by the ASX to promote the new product and of those that completed feedback forms one quarter had already traded CFD's but the majority had not. The ASX plans to use price to attract investors and has said that the cost of their listed CFD's will be up to half that of an unlisted CFD.
 

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18 October 2007 - X Inc to expand through merger
The Australian
X Inc Finance will merge with the mortgage broking arm of the Ray White Group. The combined entity will have a loan book worth $8 billion with 500 brokers across the country writing around $600 million of new loans every month. A public listing may be considered further down the track but is not planned yet according to the chief of X Inc, Jennifer Neilsen. "I don't think it's a good time for a mortgage broker to be talking about listing anyway," she said. The group has a target of achieving a loan book totalling $30 billion in three years and would contemplate listing then.

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18 October 2007 - Lower dollar means higher petrol prices
The Australian
A 2 per cent fall in the value of the Australian dollar could means that consumers will be hit by petrol price rises within the next two weeks. So far we have been cushioned from increasing petrol price by the rising value of the dollar, but recent falls could add 5 cents per litre or more to the price of petrol. The price of crude oil was $US87.76 on the New York Mercantile Exchange, down slightly from a record $US88.20 that was reached on Tuesday.
 

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18 October 2007 - Shareholders want electronic voting
The Financial Review
The government has received many responses to a call for submissions to a federal inquiry into shareholder engagement which will review voting, director nominations and corporate governance practices. The Investment and Financial Services Association, representing institutional shareholders, has said that there should be an electronic voting system that can "provide a meaningful audit trail so superannuation funds, investment managers and other appointed proxies are able to confidently declare how they voted". Investor groups and advisory firms are concerned that proxies are not always used and can be lost so votes do not always truly represent the wishes of all shareholders.
 

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18 October 2007 - Economy keeps growing strongly
The Financial Review
The Westpac Leading Index is predicting that the economy will grow strongly over the next nine months. The Index reports that the economy expanded at an annualised rate of 5.6 per cent in August compared with a long term average of 4.3 per cent. Driving the increased expansion rate is consumer spending, business investment and strong employment growth. Figures released yesterday show that we have more money than ever with private sector wealth up by 6.1 per cent in the June quarter, taking wealth per capita to $408,000, an increase of $22,000 from the previous quarter. The Westpac Index has forecast that underlying inflation for September will have grown by 0.9 per cent in September which is widely thought to be sufficient to prompt the Reserve Bank to increase interest rates.
 

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18 October 2007 - No deductions for agricultural schemes
The Financial Review
The Australian Tax Office has reconfirmed its view that investments in agricultural schemes are of a capital nature and therefore are not tax deductible. The ATO said that the deductions were not possible as such investments were paying for an income producing asset and the ruling will apply after June 2008. The move is being challenged with industry body Agricultural Investment Managers Australia submitting a proposed test case to the ATO. The case would use an almond project that has been purposely built to test common features of all managed investment schemes. Forestry schemes will be able to continue as long as they meet certain conditions, however if the ruling stands non-forestry schemes will be wound up before the end of the financial year.
 

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17 October 2007 - New chief says ANZ will evolve faster
The Australian
The new chief executive of the ANZ Bank, Mike Smith, has been in his job for less than three weeks but it is already clear that he favours big bangs rather than quiet, incremental change. Within the bank he has talked about the need for a greater sense of urgency and more "edge". The main focus for the immediate future will be delivering on Smith's vision for ANZ to become a "super-regional" bank linking resource-rich Australia with its Asian customers. He has also acknowledged a weakness in ANZ's wealth management capabilities that needs to be addressed but is likely to not go as far as adopting a full scale bancassurance model.
 

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17 October 2007 - Care needed when choosing debentures
The Financial Review
The Australian Securities and Investments Commission has warned investors to be cautious, particularly with risky, offshore products, after New Zealand company Asset Finance advertised debenture rates of up to 12 per cent without lodging a prospectus. The website that investors were directed to did contain a New Zealand prospectus but it does not comply with our disclosure requirements. ASIC executive director, Greg Tanzer, said "If you take up an offer of securities from an overseas entity that has not complied with Australian law or deal directly with an overseas broker, you may lose the protections provided by Australian law". Asset Finance, which has 21 branches in New Zealand, has said that it will not make any further offers that don't comply with Australian law and did not raise any funds from the advertisements.
 

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17 October 2007 - Labor land release much like Coalition's
The Financial Review
The Labor leader Kevin Rudd has again been accused of stealing the Coalition's policies after yesterday announcing that, if elected, Labor would release surplus commonwealth owned land in an attempt to improve housing affordability. Under the policy land releases would have to be carefully managed so that it did not affect the value of properties in surrounding suburbs. Mr Rudd said that the gaff made by Prime Minister John Howard on Monday night, where he made an error in quoting the official cash rate, was further evidence that Mr Howard was out of touch with ordinary home buyers. Mr Howard hit back at Mr Rudd by saying that the Labor land release policy was Treasurer Peter Costello's idea.

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17 October 2007 - Now not the time to buy shares
The Financial Review
During the worst of the sharemarket correction in August, calls on margin loans hit their highest point in six years. Most were able to make up any shortfall in their position with cash but CommSec's general manager of quantitative research, Ron Bewley, has warned that investors should think carefully before using borrowed funds to bet on a sharemarket rebound. Mr Bewley said that the Australian market, as measured by the S&P/ASX 200 Accumulation Index, is well into an exuberance bubble and investors who plunge themselves into the market are likely to face another correction. CommSec's volatility index showed its eighth consecutive positive return last week and the exuberance measure stood above 6 per cent, a level which has previously triggered corrections. "As far as its potential for another correction is concerned, the market is now in a danger zone," said Mr Bewley. Investors would be better off waiting for the correction to occur and buying stocks at lower prices than can be had today so that they can benefit from the rally that would follow.
 

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17 October 2007 - Acquisition tax only applies to new deals
The Financial Review
The federal government has backed down on the timing of a change in the tax treatment of corporate takeovers after experts warned that, if effective from 12 October, would have jeopardised up to $28 billion in merger and acquisition deals. Listed companies and their advisers hit the government with a barrage of calls saying that the unexpected capital gains tax bill would force them to defer or shelve takeover bids. The timing adjustment means that the changes will not be applied to companies that had made an announcement to the ASX, or if unlisted had made a takeover bid, before 13 October.
 

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17 October 2007 - Citigroup up front about credit problems
The Financial Review
The world's largest bank, Citigroup, has posted a 57 per cent fall in quarterly profit. It also prompted concern that the worst of the US market problems may not be over by saying that US consumer credit would "continue to deteriorate" and that mortgage delinquencies accelerated in September. The bank wrote off $US6.5 billion in losses on troubled loans and at the end of September had $US57 billion of leveraged loans that it could not sell. Analysts are concerned that while Citigroup has been open about its losses, other have not, leaving investors to guess at how bad their problems could be.
 

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16 October 2007 - Non-bank lenders say they are the cheapest
The Australian
While the big banks have been bragging about their relative insulation from the effects of the global credit squeeze Challenger Financial, which funds a range of home and commercial loans for non-bank lenders, has pointed out that the figures from the Reserve Bank show that the non-bank sector has "consistently" offered lower mortgage rates than the banks over the past 13 years. Challenger's chief executive, Mike Tilley, said that recently the banks have simply disguised their rate rises by keeping their headline rates at the same level but ceasing the practice of offering discounts for new loans. Mr Tilley also said that the perception that non-bank lenders were riskier as they concentrated on low doc loans was incorrect as, over the longer term, loss rates on low doc loans were 0.039 of total advances compared with 0.045 for fully documented loans.
 

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16 October 2007 - NAB holds line on rates
The Australian
The National Australia Bank has flagged its intention to win back market share by not lifting its rates while some other banks and non-bank lenders have increased theirs due to the global credit market turmoil. NAB's retail chief, Andrew Thorburn, said "But I don't think we'll be doing it aggressively, through discounting". However he did go on to say that he could not see competition for home loans easing and that, over the next 3 to 5 years, we are likely to see lenders accepting reduced margins in order to win business.
 

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16 October 2007 - Booming economy may push up rates
The Australian
The mid-year budget update, brought forward from Christmas Eve to yesterday for the election, shows that the government has $59 billion more to spend than when the budget was announced in May. The booming job market sees income tax receipts being $2 billion more than expected for 2007-08, and as a result savings of over $1 billion in unemployment payments. Treasury has now forecast growth over the financial year to be 4.25 per cent, up from 3.75 per cent, and jobs growth to jump from 1.5 per cent to 2.25 per cent. All this good news places further pressure on the Reserve Bank to raise interest rates sooner rather than later, with the predicted 5.25 per cent growth in private demand well above the "three-point-something" that the RBA governor has said is a sustainable growth level.
 

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16 October 2007 - Record trade volumes boost broker profits
Sydney Morning Herald
Quarterly earnings for online broker IWL have hit $10.2 million, more than double the result for the same period last year. The profits bonanza has been driven by a huge increase in trading due to the global liquidity crisis. Rival CommSec, which plans to purchase IWL for $357 million, has also reported record trade volumes, peaking on August 16 with 120,892 trades for the day with a total value of $1.3 billion. A scheme of arrangement meeting will be held in two week's time where 75 per cent of IWL's shareholders will need to support the proposed sale to the Commonwealth.
 

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16 October 2007 - PM pledges tax cuts for all
The Financial Review
The Prime Minister John Howard yesterday fired the first salvo of the election campaign by promising to cut taxes by $34 billion over the next three years. The cuts are designed so that every tax payer benefits and those on average earnings would get an extra $20 per week from next June, increasing to $35 per week by 2010. The top marginal tax rate would be eventually be reduced to 42 per cent while the tax-free threshold for low income earners will be increased to $16,000. Implementation of the changes is being staggered to reduce the impact of the cuts on inflation. Mr Howard also said that there was an "aspirational goal" of cutting the top tax rate to 40 per cent and raising the tax-free threshold to $20,000 by 2013, but these would be dependent on reforms encouraging 65,000 people into the workforce by 2011.
 

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16 October 2007 - Banks move to bolster credit markets
Reuters
Three of America's largest banks have announced a plan to build a fund that can be used to ease credit shortages caused by the sell-off of billions of dollars of bonds and other debt that is linked to sub-prime mortgages. US Treasury officials have assisted in creating the fund which is expected total $US80 billion but the government will not be committing any taxpayer funds. However analysts believe that bailing out investment funds that have made bad decisions will simply roll over the problems into a new structure.
 

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16 October 2007 - PayPal moves into traditional credit card territory
The Financial Review
In a challenge to credit cards online payments company PayPal is expected to launch a service sometime in the next few weeks that will allow Australian customers to make payments for prepaid mobile accounts online. After negotiations with Prepaid International, Paypal has been given access to many high-traffic websites and the deal will allow prepaid customers of Optus, Virgin, 3, Boost Mobile and Dodo to use PayPal to recharge their phone rather than Visa or Mastercard. PayPal estimates that it currently has over 3 million customers in Australia.
 

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16 October 2007 - CBA performing well but shares fall
The Financial Review
In its first quarter update to investors the Commonwealth Bank has reported a 7 per cent increase in deposits and a 3 per cent rise in lending. A Deutsche Bank analyst, Ross Brown, said that while the market gains had been evident for most of the past year, the retail bank's revenue only increased by 4 per cent in the second half. The implication being that "the financial benefits of improved market share are yet to materialise" according to Mr Brown. CBA shares touched a record high of $60.45 yesterday but fell to close at $59.38 as investors found few positive surprises that would support recent increases in the bank's share price.

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15 October 2007 - Sharemarket pushes higher but is it overheated?
The Australian
The Australian sharemarket is expected to move further into record territory today following a strong session on Wall Street on Friday with the Dow Jones index gaining 78 points to 14,093. Other factors that will affect local markets this week are the announcement that a federal election will be held on November 24 and a speech to the Economic Club of New York tonight by the chairman of the US Federal Reserve Ben Bernanke. Some investors are becoming concerned that the recent rally has caused our sharemarket to become overheated. MFS Investment chief Guy Hutchings said that he believes that the local market rally has run ahead of itself short term and may be vulnerable to any pessimistic news flow in coming months.
 

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15 October 2007 - Business will remain strong over next five years
The Australian
In its latest report economic forecaster BIS Shrapnel says that business investment will remain at high levels for the next five years, driving growth in employment, income and spending. However they have also warned that higher interest rates would reduce the unprecedented level of investment in Australia for a brief period next year. Total business investment is forecast to grow by 10 per cent in 2007-08 to total $168.8 billion, but then ease by 1 per cent in 2008-09. While BIS Shrapnel expects that there will be another rate rise, possibly in the March quarter, there could be rate cuts in 2009.
 

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15 October 2007 - Absolute Capital future uncertain
The Financial Review
In financial accounts lodged with the Australian Securities and Investments Commission, fund manager Absolute Capital has said that it has concerns about its ability to continue if an attempt to restructure its flagship credit fund failed. The $200 million Absolute Capital Yield Strategies Fund reported an 11 per cent loss in the June quarter. The firm is confident however that credit markets had picked up and that plans to restructure the fund would be approved by clients. A meeting has been scheduled for late November where clients will be asked to approve changes to the fund's constitution that will be in the interests of those that wish to withdraw and those who wish to continue their investment.
 

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15 October 2007 - ING Direct broadens horizons
The Financial Review
Online bank ING Direct is planning to expand its product range to offer full service direct banking. In the pipeline are a mortgage insurance product, a transaction account slated for next year, and mutual funds some time after 2008. However the bank does not plan to follow the lead of BankWest which is expanding its branch network to drive growth. ING chief executive Eric Drok said "I see banks opening branches on weekends, but if you make banking simple with easy products, why is there the need to use a branch?" The bank may also use a third party to provide its customers with ATM access.
 

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15 October 2007 - Another low-doc fraud conviction
The Financial Review
A Newcastle broker has been found convicted on two counts of fraud for arranging a low-doc mortgage for an unemployed woman. The application for the loan stated that the woman was an accountant and consultant who earned $101,000 per year. The broker worked for Global Home Loans which received $1,876 in commission and a percentage of that went to the broker, Mark Shalimov, who is a director of the parent company, Future Management Group. The conviction follows a similar case earlier this month where a borrower was paid $30,000 in compensation after a broker was found to have engaged in misleading and unconscionable conduct for lodging loan applications with false information.
 

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12 October 2007 - Jobs high may bring rate rise nearer
Infochoice.com.au
The news of unemployment slipping to a new 32-year low is further good news for the economy and John Howard, but not so good for borrowers for whom it may portend another hike in their home loan interest rate. Unemployment fell to 4.2 per cent as jobs increased by another 13,000 in September. The jobs market continues to defy gravity with the participation rate going up and up in recent years, yet jobs being created for just about all of them.

This can only increase the chances of a further rise in interest rates, perhaps bringing it forward from next year to this year. If the inflation figures for the September quarter out later this month weren't crucial already to the question of a November rate rise they certainly are now. Anything close to a 1 per cent rise in the CPI for the last quarter is likely to force the hand of the RBA, even in an election campaign. That would turn the government's good economic news into a liability.

But a Melbourne Cup Day rate rise is no sure thing. The economy has shown itself pretty resistant to inflation pressures so far. And the RBA will also currently be trying to gauge the impact on the economy of tightened credit conditions from the US sub-prime lending shock, which have worked like a rate rise for some businesses and home borrowers.

Housing finance approvals rose 1.6 per cent in August, largely on the back of refinancings and purchases of existing homes. Approvals for loans to buy new dwellings fell marginally and is in keeping with the flat housing construction market.

The owner-occupier segment appears fairly healthy, excluding NSW, but a 4.5 per cent drop in the value of fixed loans, mainly the preserve of investors, is further evidence of one important driver of the housing market underperforming. Investors are certainly not crazy about property at the moment, the reality check from the last investment boom still fresh for some and the superannuation changes making this the retirement investment of choice for many now.


With high employment and immigration, the shortage of new housing stock is only getting worse, and the outlook for rents is only up.

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12 October 2007 - Aussie Dollar hits new 23 year high
smh.com.au
The Australian dollar has breached another 23 year high in overnight trading touching 90.61 US cents, surpassing the previous high of 90.50 US cents reached in June 1984; however the dollar still has some way to go before passing its highest level post the 1983 currency float of 96.68 US cents set in March 1984. At the close of the overnight session the currency had lost some momentum and finished lower at 90.07 US cents.

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12 October 2007 - Jobless rate falls to 33 year low
news.com.au
The good news on unemployment with the national jobless rate falling to 4.2 per cent is tinged, with a bitter twist for Australian borrowers as the news will place pressure on the central bank to increase rates at either the November or December meetings. Male unemployment has dropped below 4 per cent to 3.8 per cent whilst female unemployment remains slightly higher at 4.7 per cent. Economists fear the strength in employment markets will ultimately deliver significant wage acceleration and coupled with continued strength in consumer spending, an inflation cocktail is likely to be starting to brew with many tipping December as the most likely month for an increase noting the RBA will not meet in January.

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12 October 2007 - Bank Of Queensland profits up 22 per cent
smh.com.au
Bank of Queensland has beat expectations reporting a 22 per cent increase in profits and expressing confidence that the bank will see off the global credit crunch by forecasting earnings growth of 10-12 per cent in the current year. The bank reported a headline profit of $129.8 million which included a one off after tax profit of $29.1 million from the sale of the banks credit card business to Citigroup. The bank reported 27 per cent growth in loans under management, 31 per cent growth in housing lending activity, whilst the bank also reported strong growth of 33 per cent in deposit accounts.

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12 October 2007 - Bank Of Queensland acquisitions to assist further growth
Sydney Morning Herald
Despite being jilted by Bendigo Bank in June, the bank is focused on growth by acquisition with a number of Building Societies set to become part of the bank, subject to shareholder approval. Bank of Queensland purchased Pioneer Permanent Building Society last year for around $50 million and will soon add Home Building Society ($600 million) and Mackay Permanent Building Society ($55 million).
 

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12 October 2007 - ATO appoints debt collection agents
The Sheet
The Australian Tax Office (ATO) has appointed four debt collection agencies to assist in collecting delinquent tax debts. The four agencies appointed are D&B, Baycorp Collection Services, National Credit Management and Recoveries Corporation Group. The Australian National Audit Office estimated a compound growth rate of 19 per cent in the level of collectable tax debt. The ATO told a parliamentary committee last month that the rate of growth of collectable debt slowed in the 2007 financial year.

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11 October 2007 - Branch banking leaps into 21st century
The Daily Telegraph
BankWest is not the only one giving branch banking a make-over with the Commonwealth Bank's Rouse Hill branch offering its customers free internet and phones for banking. Apart from tellers staff are located on the floor rather than behind a counter. NAB is also moving to a more open plan design for its branches and initiatives such as child play areas have been trialled in some branches for the past year. Westpac said that its branches too are changing to a less formal layout in recognition that customers now usually only visit a branch to discuss major financial transactions such as a home loan or seeking financial advice. Some banks in the US and UK even sell their own brand of coffee or offer exercise classes after hours.
 

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11 October 2007 - Record numbers back out of home loans
Sydney Morning Herald
A record $2 billion worth of home loan applications were cancelled in August as the rate rise and concerns about the effects of turmoil in global credit markets grew. Around 8,500 borrowers decided not proceed with their loan despite having it approved and borrowers with a further $35 billion in loans did not make up their minds within the month to use their loan, an increase of 29 per cent over August last year. Total home lending was down 0.3 per cent in the month and the number of wholesale loans, mostly issued through non-bank lenders, was down 8.5 per cent to 7,194. In contrast, loans issued by banks were up by 2.2 per cent to 51,115.
 

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11 October 2007 - Consumers wary of further rate increases
The Financial Review
Despite recovering from an 8.1 per cent fall in August after the Reserve Bank increased interest rates, the Westpac-Melbourne Institute index of consumer sentiment showed a 0.3 per cent fall in October. A Westpac economist said that increasing rents, food prices and finance costs have all conspired to ensure that interest rates remain foremost in people's minds. Markets now put the chance of another rate increase in November at 45 per cent and December at 71 per cent. Key to the RBA's decision will be the September-quarter inflation figures, due out on 24 October and expected to be strong.

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11 October 2007 - Sydney still priciest but others catching up
The Australian
Sydney remains Australia's least affordable city but prices in Melbourne, Brisbane and Adelaide are all shooting up quickly with increases of 18.9, 18.6 and 16.7 per cent respectively expected this year. Values have increased more slowly in Sydney since an 'affordability crunch' in late 2003 and the same situation occurred in Perth late in 2006. To become as unaffordable as Sydney however, other capital cities would require a further 15 to 20 per cent increase in their house prices.

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11 October 2007 - Westpac reckons RAMS offer is a good deal
The Financial Review
Westpac's chief executive David Morgan has said that without its offer to purchase RAMS the lender would have had to shut down. "I think [RAMS chairman] John Kinghorn was very open and honest when he put to shareholders the Westpac proposition and was very open and honest by saying the alternative was that the doors would close - so measured against that reality this is a very good deal for [RAMS] shareholders," he said. Mr Morgan said that it was unlikely that a rival bidder would emerge and that by paying a fair price for the distribution system as well as giving RAMS access to ongoing funding the bank's offer was compelling for shareholders who will have to vote on the deal.
 

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11 October 2007 - Sharemarket climbs higher and higher
Brisbane Times
The local sharemarket is continuing to post new records with the ASX200 up 60.5 points to 6738.3, beating Tuesday's 6677.82. The All Ordinaries index was 56.9 points higher, closing at 6744.6. Resource and bank stocks were again the big winners with BHP Billiton recording the largest gain of $1.02 to $45.50. In bank stocks the Commonwealth was up 92 cents to $58.80, NAB gained 29 cents to $41.80 and St George hit a new high of $37.91 after putting on 89 cents. Prices for the proposed merger partners of Bendigo Bank and Adelaide Bank were both up too, by 9 cents and 11 cents respectively.
 

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10 October 2007 - World growth forecasts ease
The Financial Review
The International Monetary Fund has cut its economic growth forecasts for 2008. The projection of world growth of 5.2 per cent made in late July has been reduced to 4.8 per cent and its forecast for US growth has shrunk from 2.8 per cent to 1.9 per cent. Growth forecasts from Standard and Poor's put world economy expansion at 3.6 per cent in 2007 and 3.5 per cent in 2008 but US economic growth at only 2 per cent in both years.
 

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10 October 2007 - Sharemarket achieves new record
The Financial Review
The sharemarket continued to climb yesterday with the All Ordinaries up 20.5 points to hit a new record of 6687.7 and the S&P Index up 23.5 points to 6677.8, also a record. Financial institutions dominated the list of those that grew the most with NAB up 67 cents to $41.51 and Westpac adding 39 cents to a new record for its share price of $29.71.
 

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10 October 2007 - Aussie gets personal
The Australian
Aussie home Loans has expanded its assault on the major banks by launching new personal and car loans and said that other products will follow. The non-bank lender already offers credit cards and insurance, as well as its traditional mortgage products. Aussie founder John Symond said that the new loans were being introduced as he believes these loan sectors are currently under-serviced. Rates on used car loans will be between 8.29 and 9.99 per cent, while general purpose personal loan rates will range from 10.99 to 12.99 per cent, pricing which is as much as 2 or 3 per cent less than the major banks. The lender hopes that its brand awareness and lower rates will help it to grab 2 or 3 per cent market share in the first year.
 

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10 October 2007 - Borrowers get more support from MFAA members
The Australian
The Mortgage and Finance Association of Australia has amended its code of practice to provide more support for home loan borrowers that are having difficulty meeting their repayments. The new provisions mean that member organisations must now consider varying the terms of repayment once they become aware that a borrower is in financial difficulty. Members can suspend action to recover repayments and choose whether to delay the recording of a default against the borrower until a resolution has been determined. The MFAA represents over 13,000 mortgage brokers, bank and non-bank lenders, mortgage managers and originators. Non-bank lenders, mortgage managers and brokers write around 100,000 loans per year, or 55 per cent of the total market.
 

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10 October 2007 - Bankruptcy rate climbs
The Financial Review
A new record may be achieved for bankruptcies this financial year with 8,001 people becoming insolvent in the three months to September. The figures which include bankruptcies and debt agreements are 5 per cent higher than for the same time last year. Increasing numbers of people are applying to access their superannuation early on grounds of "financial hardship" but the Consumer Credit Legal Centre has warned that this is only a temporary solution and is likely to result in worse financial problems at a later stage. A financial counsellor at Credit Line said that some people are using their credit cards to pay mortgages that were larger than the value of their property and that some financial institutions were issuing credit cards with limits up to $30,000. Last financial year nearly 32,000 people became insolvent.
 

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10 October 2007 - BankWest branch revolution
The Financial Review
BankWest opened two branches in Sydney yesterday, the first of its planned 160 branch east coast expansion. The new branches, one in Parramatta and the other in Mount Druitt, offer a radically different banking experience with the focus on creating a relaxed environment where people want to spend time. As well as coffee, internet access, financial books, plasma TV screens, and toys for the kids, the branches have adopted a unique layout for staff service areas. Tellers sit in 'pods' and 'kiosks' rather than behind bullet-proof glass with security concerns addressed by cash deposits being transferred away from the service area and only small amounts of cash being able to be dispensed for each transaction. The branches will provide full teller service seven days a week and will be open late on Thursdays. BankWest expects to open 40 to 50 of the new style branches before the end of 2008.

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9 October 2007 - Aussie dollar should stay strong
The Australian
The Australian dollar his risen to a 23 year record of US90.3 cents and it is expected to remain high as the movement has been driven by long-term investors. Investors are taking advantage of the wider differential between Australian and US interest rates that have existed since the credit squeeze began in August but short-term speculative flows have been below the levels seen in the year before. The spread between the two currencies is at 175 basis points but this is expected to widen if an expected 25 basis point rise takes the official Australian cash rate to 6.75 per cent and another cut in the US takes their rate to 4.5 per cent.
 

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9 October 2007 - Higher dollar means more travel
The Financial Review
Many Australians are using the high value of our dollar compared with other currencies to take more overseas holidays. The number of Australia tourists in India was up by 48 per cent in August and those visiting Thailand and France were up by more than 43 per cent. The total number of people taking overseas holidays rose by 13 per cent in August while the inbound tourist market was only up by 5.7 per cent. Australians appear to be recovering from the shock of the Bali bombings with an increase in the number of people heading to Kuta or Ubud increasing by 60 per cent in August from a year ago.
 

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9 October 2007 - Origin sale put on hold
The Australian
The ANZ Bank has decided not to sell its Origin Mortgage Management Services for now. Origin has a total loan book of $7 billion and provides third-party branded home loans to 25 Australian mortgage managers as well as five in New Zealand. The bank said that it had decided not to sell as volatility in the credit markets would mean that an obtaining an acceptable price is unlikely. Market sources said that any offer above $200 million would have been a good price for the business.
 

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9 October 2007 - Mortgage sales plummet
The Financial Review
Mortgage sales fell sharply in September, with a 21.2 per cent reduction from August levels. The AFG Mortgage Index reports that the number of mortgage sales down from 9,412 to 7,412 and the total value dropping from $3.03 billion to $2.44 billion. This was a much larger fall than the 8.5 per cent recorded in the last two Septembers. AFG general manager of sales and operations, Mark Hewitt, said "There's no doubt that concerns about global debt markets and the unknown potential impact of sub-prime difficulties is making property buyers hold off".
 

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9 October 2007 - Property inspections automated
The Financial Review
Automated valuations (AVMs) only account for 1 to 2 per cent of Australia's mortgage valuations but this could increase to between 10 and 15 per cent within the next four years according to Australian Property Monitors. However valuers are concerned by the change saying that there are aspects of a property that can be overlooked without a physical inspection such as condition, planning issues or contamination. Lenders frequently use AVMs as an initial quick check and don't see the need for inspections particularly for specific areas, or when the borrower is low risk or has a low loan-to value ratio.
 

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9 October 2007 - ASX taken to court over cancelled trades
Herald Sun
The ASX is being sued for close to $1 million for cancelling 337 trades on the Sydney Futures Exchange on 25 July. The compensation is being sought by six applicants but others may join the action and push the total value of the claim to between $35 million and $40 million. The claimants say that some of the losses were incurred as single trades were cancelled that were part of a pair of trades that had been designed to work together. Stronger than anticipated consumer price index figures had been released and the trades in bank bill and three-year bond contracts were cancelled as their pricing fell outside the ASX's safety boundaries. The ASX is working with brokers to ensure that they understand the trading rules and has raised the thresholds for intervention.
 

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8 October 2007 - Credit funding taps turned back on
The Australian
Although RAMS $300 million and Liberty Financial's $225 million securitisation deals were priced higher than they could have been before the credit crunch, they give cause for optimism according to Bluestone's chief executive Alistair Jeffrey. "But (credit) spreads have been atypically low for the past few years due to the massive weight of capital in the global system pushing prices down to historical lows, so all we are seeing now is a cyclical reversion to more normal levels," he said. "But even at current levels, it still leaves us with a wholly sustainable and viable business model." The RAMS deal was priced at a 53 point premium over the 30-day bill rate and the Liberty bonds were issued at a 55 point premium. Bluestone intends to seek funding for $300 to $500 million before the end of this year.

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8 October 2007 - Internet banking hits new high
The Australian
More people than ever are using the internet to conduct their banking, with a record 31 per cent of all bank customers choosing the internet in the June quarter. The latest figures from MISC Australia show that there were an extra 90,000 users in the quarter, an increase of 1.4 per cent which off-set a 1.3 per cent decline in the March quarter. Customers grew their deposit balances and opened new accounts to take advantage of the opportunity to put up to $1 million into their superannuation funds before lower caps were introduced on 1 July. Transfers between accounts were up 2.2 per cent with a total of 1.5 million extra transfers.
 

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8 October 2007 - Banking jobs squeezed by credit shortage
Sydney Morning Herald
The global credit squeeze has led to a reduction in the number of jobs being advertised in the banking and financial services sector. According to the Olivier Internet Job Index, banking jobs were down 10.5 per cent in September and financial services job ads were down 4.27 per cent. The largest fall was in retail banking and mortgage lending jobs which dropped 11 per cent in the month, while investment banking and corporate finance job advertisements fell 9 per cent. The index showed that overall job ads were up by 3.25 per cent seasonally adjusted.

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8 October 2007 - ANZ reviews Gunns mill funding
The Financial Review
The ANZ Bank is reviewing whether or not it can finance the Gunns' $2 billion pulp mill. The bank adopted the Equator Principles in late 2006 which requires environmental and social factors to be considered when evaluating projects. Gunns has been a customer of the ANZ since 1995 but in a statement on Friday the bank said that it was still reviewing the project. "The review is testing the technical aspects of the mill's design and its overall feasibility with reference to engineering specifications, design plans and other supporting information," it said. The review will also look at the adequacy of the company's plans for managing social and environmental risks. Gunns said that while they believe that ANZ is supportive of the mill they could seek funding elsewhere if necessary.
 

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8 October 2007 - RBA consents to low-doc securities
The Financial Review
The Reserve Bank of Australia has announced that it will accept securities which include a portion of low-doc residential mortgages as it tries to improve liquidity in credit markets. For the first time the bank will be able to buy securities that have a low-doc component of more than 10 per cent, but at a significant margin of 10 per cent. The RBA retains its preference for AAA-rated full doc residential mortgages but has recognised that low-doc loans are now a common feature of the market.
 

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8 October 2007 - Online fraud set to increase
The Financial Review
The introduction of credit cards which use chips and PINs could result in an increase in online fraud according to the chief executive of Retail Decisions, Carl Clump. Mr Clump predicts that with the opportunities for traditional fraud drying up, scammers will turn to phone and internet purchases where the card and customer are not sighted. While no official figures are available it is believed that this type of fraud accounted for $23.8 million in losses in 2006. In Europe, which has already moved to chip-and_PIN cards, the incidence of online fraud increased has by 40 per cent over the past year. Retail Decisions issued 17 million pre-paid gift cards last year and has now expanded into provision of fraud detection and analysis services for online transactions.
 

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5 October 2007 - Rates on hold as RBA weighs risks
InfoChoice.com.au
Interest rates have been kept steady by the Reserve Bank at its October board meeting. Despite a buoyant economy to which the RBA says inflation is the greatest risk, the bank is awaiting the next quarterly inflation figures out later this month for a proper assessment of any need to raise interest rates further.

It will also likely be mindful that the August rate rise is yet to fully impact on the economy and also want to make sure the fallout from the sub-prime mortgage crisis in the US doesn't hit economic activity.

In any case, the sub-prime fiasco has seen a de facto rate rise for much of the economy already as banks lend more cautiously, credit becomes harder to get and rates rise in response. Home loan borrowers have so far been spared this de facto rate rise in most cases, given the highly competitive nature of the home lending market.

As to the indicators that might tell us where inflation might be heading, the data over the past week does not change the picture much. Consumer confidence and spending are high while the housing market remains flat. Retail trade rose 0.7 per cent in August continuing a solid trend averaging about 0.6 per cent a month this year.

Building approvals fell 1.7 per cent in seasonally adjusted terms in August, seemingly defying predictions that housing construction would pick up in the second half of this year due to low unemployment and high immigration. The overall trend estimate has been modestly on the rise over the past couple of months and the national figure continues to be dragged down by NSW, where housing affordability remains grim.

A 0.9 per cent rise in house approvals was offset by another decline in apartment approvals, this time 3.1 per cent. It's no wonder rents are soaring in many areas, with apartment investment not yet responding greatly to a shortage of rental stock.

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5 October 2007 - NAB CEO succession wide open
The Australian
The man that most thought would be next to lead the National Australia Bank has ruled out running for the top job. Michael Ullmer joined the bank at the same time as current CEO John Stewart and has spent the last 10 years making a series of career moves to position himself for an opportunity to run one of the big four banks. However, when a series of reshuffles of senior positions were announced yesterday, Mr Ullmer took on a new position of deputy CEO while saying that it would be difficult to do his new job properly if people thought that he had the inside running to be come the bank's new CEO. The other leading contender to replace Mr Stewart was thought to be Ahmed Fahour but one industry observer said that Mr Fahour still has a way to go to improve the Australian operations and that the reshuffle had created a new group of contenders from those newly promoted.
 

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5 October 2007 - BankWest turns to a Hero
The Australian
BankWest is continuing its attack on the established banks by creating a new transaction account aimed at people who have smaller account balances. The BankWest Hero account will pay 5 per cent per year for balances up to $5,000 which is 500 times more interest than is paid on transaction accounts by any of the big four banks. The bank's retail chief, Ian Corfield, said "We want to make sure that we're giving customers a great deal. That means we're going to be looking across the full product range and trying to make sure that we have got products that really put us into consumer's minds." Mr Corfield said that the uptake of the high interest rate Regular Saver account was 200 per cent ahead of target.
 

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5 October 2007 - Small business failures overstated
The Australian
New small businesses may not fail as quickly as is commonly believed. Credit reference agency Veda Advantage has released figures which show that only 1.5 per cent of businesses close within their first year. Instead it is the second to fifth years that are most difficult, accounting for 32 per cent of business exits. The report says that challenges diminish after the fifth year and that good cash flow management and properly managed credit systems are critical to fail-proof a business.
 

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5 October 2007 - House approvals lag demand
The Financial Review
Renters and first-home buyers will continue to find the going tough as housing approvals declined by 1.7 per cent in August and are down 0.1 per cent on a year ago. There is estimated to be a shortfall of around 15,000 new homes each year compared with demand. There has been no real sustained recovery in the construction rate since September 2003 according to the Housing Industry Association. New housing required this year has been estimated at 182,000 but the annual completion rate is likely to be 142,000, suggesting that the market will only get tighter.
 

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5 October 2007 - Homeloans looks for future growth
The Financial Review
Mortgage manager Homeloans has said that it plans to continue to look for expansion opportunities over the coming year. Challenger Financial paid $45 million for a 40 per cent stake in the company earlier this year and in its annual report yesterday Homeloans said that it would use the capital to play a part in any upcoming industry consolidation. The lender increased its total mortgages under management by 27 per cent to $4.9 billion in 2006-07.
 

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5 October 2007 - IPO's back on the cards
The Financial Review
A strong recovery by the local sharemarket will see investment banks revive a number of public floats that had previously been shelved. $5.3 billion has already been raised through floats this year compared with $5.9 billion in 2006. With the exception of Westpac's $800 million float of 45 per cent of BT Financial, NIB's $500 million listing in November, and the $200 million IPO of Storm Financial, the other 34 companies expected to list would be seeking to raise less than $15 million. Companies and their analysts believe that investors are prepared to back proven offerings but with an increased level of caution.
 

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4 October 2007 - RAMS shares slashed after Westpac offer
Sydney Morning Herald
Shares in non-bank lender RAMS closed at 48 cents yesterday, a drop of 18 cents or 27 per cent. Investors abandoned the stock as they realised the full impact of the Westpac "rescue" deal in which the bank paid $140 million for the RAMS franchise business and distribution network. A Merrill Lynch analyst, Andrew Lyons, valued the Westpac offer at 40 cents a share but believes that it is worth 65 cents a share. He said that the remaining RAMS loan business, which sees the lender with a $14.5 billion loan book in "run-off" mode, is worth around 55 cents a share or $231 million, and that a counter-bid is not out of the question. However this is complicated by the other two parts of the offer in which Westpac will provide $500 million to enable RAMS brokers to continue trading between 15 November and January next year when the deal is completed, and provision of $1.5 billion towards refinancing $6 billion of the lender's funding. RAMS executives have said that without Westpac's assistance they faced closing their doors to new business.
 

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4 October 2007 - Online deposits booming
The Australian
Online deposit balances grew from $6.9 billion to $8.8 billion in the year to June, an increase of 27 per cent, according to data from research company MISC Australia. The number of online accounts grew 6 per cent to now total 25.7 million. The stronger than usual growth was helped by a record level of voluntary contributions into superannuation funds of $22.4 billion, exceeding the level of employer contributions for the first time. Total deposit balances, including traditional offline accounts, dropped by $1 billion in the June quarter compared with a $3 billion increase in the previous quarter.
 

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4 October 2007 - November rate rise more likely
The Financial Review
Speculation of a rate rise in November has intensified with imports growing by 5.5 per cent in August, pushing the trade deficit for the month to $1.6.1 billion. Another indicator of the strong growth in the economy is an increase in Retail turnover of a higher than expected 0.7 per cent increase in August, contributing to an annual growth of 7.8 per cent. Sales of household goods were up by 2.4 per cent for the month, while food sales were up by 1 per cent. Financial markets now put the chance of a rate rise at the next RBA meeting at 37 per cent, but a rise in February is considered a 92 per cent probability and an increase by May is considered certain.
 

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4 October 2007 - ATO to crack down on non-lodgement
The Financial Review
The Australian Tax Office may be given increased powers to impose financial penalties on people who fail to lodge income tax returns. The inspector-general of taxation, David Vos, is expected to announce investigations next week that his office will undertake over the coming year and one area is expected to be the handling of non-lodging taxpayers. Tax agents have asked the inspector-general to look at the "many millions" of outstanding returns that have accumulated over the past few years as they are frustrated that, as the ATO has not been consistent in its prosecution of non-lodging taxpayers, tax agents have a hard time convincing clients to come in to do their returns. While the ATO has the power to impose penalties, many low-risk taxpayers may not know about the penalties or believe that the tax office will not pursue them. The ATO sent out 1.75 million letters to taxpayers in 2005-06 chasing up 2.2 million overdue activity statements and 436,000 overdue income tax and fringe benefits tax return.

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4 October 2007 - Broker pays compensation for misleading applications
The Australian
The courts have ordered a mortgage broker to pay $31,000 in compensation to a 20-year-old unemployed, dyslexic and homeless man that the broker had written a $360,000 home loan for. The federal court found that in approving the loan ACT Mortgages had engaged in "misleading and deceptive" conduct and "unconscionable conduct". The Australian Investment and Securities Commission alleged that the man had received an inheritance before the loans were written and that two loan applications had been completed with "substantially false" information about the income and assets of the borrower.
 

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3 October 2007 - RBA leaves rates unchanged
InfoChoice.com.au
As was widely tipped, the Reserve Bank of Australia has decided to leave the official cash rate unchanged at 6.50% at its October meeting.

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3 October 2007 - Shareholders not a priority for directors
Daily Telegraph
A survey of Australian company directors conducted by the University of Melbourne has found that only 44 per cent think that their shareholders are more important than other stakeholders. In contrast, in the US 80 per cent of companies put their shareholders first. The study also found that increasing the share price of the company was top priority for only a minority of local directors and most would be likely to cut the dividend to shareholders if company finances went down.
 

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3 October 2007 - Westpac moves to franchising model
The Australian
Westpac has indicated that it will use yesterday's purchase of the RAMS network of 92 branches to convert some of its branches to franchises. Westpac chief executive David Morgan said that the bank would bring RAMS under its umbrella in the first quarter of next year however it was not possible to say how long it would be before the first branch converted to a franchise. "But with this (acquisition) it will happen a lot quicker," he said. Dr Morgan said that a franchising business model had appeal for high-productivity sales people and that the opportunity would definitely be offered to Westpac staff.
 

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3 October 2007 - Adelaide house prices growing fastest
The Australian
The national average house price is now $437,234, an increase of almost 10 per cent in the past year despite rising interest rates. Figures from RP Data show that the biggest increase of 17.2 per cent was in Adelaide although it still has the country's most affordable homes with a median price of $348,850. Brisbane prices have also grown strongly, the average value increasing by 17.2 per cent to $400,004. Prices were up by 16 per cent in Darwin, 11.81 per cent in Canberra, 11.36 per cent in Melbourne, and 7.99 per cent in Perth. Sydney remains the most expensive city with a median price of $504,934 but recorded the slowest growth rate of 4.1 per cent.
 

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3 October 2007 - Mortgage brokers to account for half of new loans
The Australian
Around 40 per cent of all new home loans are originated through brokers according to market analysts Datamonitor. They have predicted that this will increase to 50 per cent within the next three years as consolidation and regulation make the broking industry less volatile and relationships with lenders stabilise. The mortgage market has grown from $13.2 billion in 1986 to $235.6 billion last year.
 

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3 October 2007 - New record for sharemarket
The Financial Review
The local sharemarket has hit another record as investors believe that the worst of the global credit market crisis might be over. Record highs for stocks including Westpac and Commonwealth Bank helped drive the S&P/ASX 200 to 6659.9, 4 per cent higher than the previous peak in mid-July. The 90 day bank bill rate was 6.86 per cent yesterday, well down from the 7.11 per cent reached in mid-September, but analysts have cautioned that an easing of credit liquidity problems does not necessarily mean that there won't be a global economic slowdown.
 

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3 October 2007 - Bank collapse could leave depositors vulnerable
Sydney Morning Herald
Australia does not have deposit guarantee insurance like that used in Europe and the US, but instead have first claim over a failed bank's assets. The banks argue that the cost of deposit insurance would have to be passed on to consumers and that, as about 50 per cent of Australian bank assets are in the form of deposits, the current arrangement means that a bank would have to lose half of its assets before depositors lost any money. A group of financial regulators has recommended that the government establish a fund administered by APRA that would allow immediate payments of up to $20,000 to depositors. Any additional funds could be claimed and the initial payment reimbursed when the bank's assets were sold. Only one small bank has collapsed in Australia in the last century and even then depositors only lost $1 in every $100.

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2 October 2007 - Westpac cherry-picks at RAMS
Sydney Morning Herald
The RAMS mystery buyer has been revealed as Westpac, however the bank is only purchasing the non-bank lender's franchise distribution business and not ASX listed RAMS Home Loans Group nor its existing mortgage book. The move will separate the distribution business from the funding arm so RAMS will remain a listed entity which will continue to service existing loans and new business settled up until 15 November 2007. Westpac has paid $140 million for the RAMS brand, franchise network, mortgage origination and servicing systems and will also help to resolve some of the financing issues that had troubled the lender. On the release of the news RAMS shares dropped by 8 per cent.
 

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2 October 2007 - Aussie dollar heading higher
The Australian
As the US dollar weakens the Australian dollar has reached an 18 year high of 89.2 cents. Despite the public holiday in some states yesterday, vigorous overseas trading pushed the currency higher. The former chairman of the Federal Reserve, Alan Greenspan, has warned that the US economy could slip into recession so investors are looking for a safe haven. Most currency analysts believe that the currency is close to being overvalued but there are some who believe that we could achieve parity with the US dollar.
 

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2 October 2007 - ANZ to lift interest rates
The Financial Review
The new chief executive of the ANZ Bank has warned that the global credit turmoil could last for years and that Australian consumers will bare the brunt of higher rates. The bank will lift credit card and personal loan rates by between 10 and 25 basis points this week. "We have held off as long as possible, but sustained high funding costs associated with the global liquidity squeeze mean we have no choice but to move," said an ANZ spokesman. Funding from the wholesale market and 30-day bill rate has risen 20 to 30 basis points above normal which is costing the bank $15 to $20 million each month.
 

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2 October 2007 - RAMS finds support
The Financial Review
A leading financial institution has taken a strategic stake in embattled non-bank lender RAMS. It is not yet clear who the buyer is but rumours were circulating last week that NAB was interested although ANZ and Westpac are believed to have considered buying a stake in RAMS previously. If it is a major bank then this would help to boost confidence among large international buyers of mortgage-backed securities which RAMS needs to maintain funding for its loans.
 

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2 October 2007 - ANZ leads institutional lending
The Financial Review
ANZ has jumped two places to become our most aggressive lender to big business after participating in 20 issues worth $US10.9 billion in the first three quarters of this year and capturing 16.1 per cent of the market. The bank's institutional division generates around 35 per cent of ANZ's revenue. Westpac was ranked second with $US10.533 billion of loans from 23 issues and NAB was in third place with a total of $7.639 billion. Business lending six month annualised growth to August at 24 per cent, well ahead of personal loan growth of 18 per cent and housing loans growth of 14 per cent.
 

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2 October 2007 - Residential property still a favourite
The Financial Review
The residential property market has been tipped to grow over the next six months by nearly three-quarters of the 846 property investors, lenders and advisers who responded to a survey by Ashe Morgan Winthrop. Over half of the respondents said that they would prefer to invest in residential property than office, industrial or retail and 71 per cent believe that there will be another interest rate rise within six months. 87.2 per cent said that there is a housing affordability crisis in Australia and 32.1 per cent said that reducing taxes and levies would be the most effective way of addressing the problem.
 

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2 October 2007 - Business could pay $10 billion for energy target
The Financial Review
The federal government has estimated that its clean energy target of around 15 per cent will cost industry between $8 billion and $10 billion until 2020. Modelling conducted by the government has shown that the cost of its target would be $7.9 billion if implemented on top of an emissions trading scheme but could be as high as $10 billion if there was no trading scheme. Emissions trading is set to be introduced in 2011 so the clean energy target will co-exist with a direct cost on carbon for only part of the scheme's lifetime. Research from the renewable energy industry shows that higher clean energy targets will lower the cost of reducing emissions as they would force industry to invest in energy efficient sources sooner instead of experiencing shock when emissions trading is eventually introduced.

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November 2007

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28 November 2007 - Higher rates equal lower satisfaction for lenders
The Australian
As non-bank lenders are forced to pass on higher costs of funding their customer satisfaction ratings have fallen. A survey conducted by Nielsen found that the only non-bank lender to escape unscathed was Wizard Home Loans. The highest rating of the big four banks also suffered with ANZ losing 4.1 points to score a satisfaction rating of 69.8 per cent. The fall means that St George Bank, which only lost 0.5 per cent, now sits on the top of the table with a score of 72.6 per cent.

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28 November 2007 - Regionals give big banks a run for their money
The Australian
While mergers and acquisitions have seen the number of regional banks in Australia fall, a report by KPMG has found that they remain a very competitive force. The combined profits for regional banks over the past year are up 14 per cent to $2.65 billion, compared with a total increase of 10.6 per cent for the major banks. Asset growth for the regionals was 17.9 per cent, just behind the increase achieved by the majors. KPMG partner Martin McGrath said that while the regionals would be keen to build their distribution and scale they were not looking to become major banks, instead retaining their points of difference from the majors.

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28 November 2007 - Aussie sub-prime delinquencies down
The Australian
Defaults on loans in the Australian sub-prime mortgage market have dropped to their lowest level since December 2005. A report by Fitch Ratings says that 30 plus delinquencies fell from 1.48 per cent to 1.15 per cent in the September quarter. Low doc loan delinquencies were also down, falling from 4.54 per cent in the June quarter to 4.05 per cent in the latest quarter. However the agency warned that delinquencies are usually lowest between May and October and the combined effects of Christmas and recent rate rises could see arrears increase early next year, although from a very low base.

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28 November 2007 - Credit cards a leading cause of bankruptcy
The Financial Review
Credit cards were to blame for only 11 per cent of bankruptcies seven years ago but are now to blame for 27 per cent according to figures from the Insolvency and Trustee Service of Australia. Over the 2006-07 financial year there were a total of 31,964 bankruptcies, debt or insolvency agreements. The number is a 17 per cent increase on a year before and was driven by increases of 26 per cent in NSW and 22 per cent in Victoria.

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28 November 2007 - Anxiety over US economy
The Financial Review
Investors will be watching economic data out of the US very closely this week as some economists believe that credit conditions will continue to tighten, increasing the chances that the world's largest economy will slip into recession next year. Head of equities at Challenger Financial Services, Peter Greentree, said that markets would remain volatile as the possibility of a soft landing in the US looks less clear cut. "The [Australian] market has initially focused on the actual losses arising from sub-prime but now it's beginning to focus on the real issues, which are more one of credit creation and the over-geared US consumer and the flow-on effect to corporate revenue," he said. Wall Street stocks are down 10 per cent from their peak in early October.

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28 November 2007 - Absolutely the end
The Financial Review
Australian hedge fund manager Absolute Capital has appointed receivers with its key income generating fund suspended. The Absolute Capital Yield Strategies Fund stopped withdrawals after reporting an 11 per cent loss in the September quarter. Absolute is 50 per cent owned by ABN Amro and has around $410 million in funds under management. A source told the Financial Review that ABN Amro would have nothing to gain by propping up the fund manager and that management rights to any credit funds may simply be transferred to ABN Amro.

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27 November 2007 - Big dollars beckon Costello
News.com.au
Recruitment specialists have estimated that former Treasurer Peter Costello could earn as much as $10 million per annum in the private sector. Mr Costello, who has decided not to run for leader of the Liberal party following their defeat at Saturday's federal election, says that he is "looking to build a career post-politics in the commercial world". Prospective employers would be able to draw on his knowledge of the global economy, his international network and an ability to deal with big strategic issues in the framework of a large organisation.

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27 November 2007 - RAMS says yes to Westpac
Sydney Morning Herald
RAMS shareholders have voted overwhelmingly in favour of selling the brand and distribution network to Westpac. Chairman and founder John Kinghorn said that of all the resolutions passed yesterday the saddest of all was the one authorising the change of name to RHG Group. Mr Kinghorn is still hopeful that that the company will be able to secure financing from global credit markets for $6 billion of the remaining $14 billion loan book but also warned that it was conceivable that global credit markets could be closed forever.

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27 November 2007 - ASIC worried about director's liability
The Financial Review
The Australian Securities and Investments Commission has said that the extent of personal liability for company directors could be hindering boards in their decision making. ASIC's chairman Tony D'Aloisio said that there was concern that "able and experienced women and men are shying away from the listed environment because of higher liability risks". A partner at Minter Ellison, Bruce Cowley, said that there was evidence of experienced people turning away from directorships due to the liability involved. Mr D'Aloisio said that ASIC recognised that it may be time to review the area of personal liability, however court cases against individual directors such as HIH and OneTel, were in the public interest.

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27 November 2007 - Shares help boost super savings
The Financial Review
Superannuation funds have generated an average 1.15 per cent return for investors in October with the three year rolling average now at 14.4 per cent. Australian shares contributed most to the result with a 2.63 per cent gain in the month. For the balanced option eight of the top ten performers were industry funds according to SuperRatings.

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27 November 2007 - Housing needs its own ministry
News.com.au
With Australia's Prime Minister-elect Kevin Rudd due to announce his ministry on Thursday, the Real Estate Institute of Australia has called for a new ministry dedicated to housing to be created. The president of the REIA, Noel Dyett, said that with housing affordability now firmly on the national agenda a Commonwealth housing minister would be able to coordinate a policy response across all levels of government. Mr Dyett said that data from the Australian Bureau of Statistics showed that between 2003 and 2006 44.5 per cent of first home buyers had to spend more than 30 per cent of their income on housing costs. "Housing is a necessity, not a luxury," he said.

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26 November 2007 - Financial services sector keen for reforms
Financial Review
The incoming Labor government is expected to launch a Wallis-style inquiry into the financial sector. Senator Nick Sherry has been Labor's spokesman on financial services and superannuation and is expected to be the minister responsible for such an inquiry. Prime Minister-elect Kevin Rudd has promised that red tape will be cut on financial products, withholding tax will be reduced for foreign investors and that Australia will become a regional financial services and investment hub. The plans have been welcomed by the ANZ Bank which has aspirations to become a major player in the region. "There is a need for the new government to have a fresh look at reform to help create a more competitive, outwardly focused economy - one that is more open and engaged with the region," said ANZ's chief executive Mike Smith. Senator Sherry said that they would also look at whether or not the Australian Securities and Investments Commission and the Australian Prudential Regulatory Authority should be merged.
 

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26 November 2007 - More losses expected in US sub-prime sector
Sydney Morning Herald
The global credit crunch has further to run as more losses are expected in the US sub-prime sector and liquidity dries up. A report by analysts in New York and London has warned that $US150 billion of sub-prime mortgages will be reset to higher interest rates over the next 18 months, noting that Standard & Poors has estimated that total losses in the sector could run as high as 14 per cent. More downgrades of residential-backed mortgage securities are expected on top of the 8,000 ratings actions that were taken in the 190 days from May 1.
 

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26 November 2007 - Labor faces building inflation risk
The Australian
The chief of Treasury, Ken Henry, flew to Brisbane yesterday to meet with the incoming federal treasurer, Wayne Swan. Economists believe that Dr Henry will have to tell the new government that inflation pressures are greater than was known in the last economic forecast. The most recent forecast was issued before the September consumer price index was known and had predicted that inflation would remain at 2.75 per cent this year and next. Chief economist at HSBC, John Edwards, said yesterday that building construction would be stronger than expected next year and treasury's forecast for economic growth of 3.5 per cent could be conservative.
 

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26 November 2007 - Result leaves property industry with mixed feelings
Financial Review
The property industry is pleased that the new Labor government has a strong focus on housing affordability but is concerned that its IR policies could hurt the industry. The chief executive of the Property Council, Peter Verwer, said that the attention that Kevin Rudd had paid to affordability and infrastructure had struck a chord. He also welcomed Labor's fund that will be used to retrofit buildings make them more green friendly. However Mr Verwer warned that Labor governments have a tendency to create more red tape around building and planning and also argued for funding to the controversial Australian Building and Construction Commission to be continued until 2010 and beyond.
 

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26 November 2007 - Securitiser assets crunched
Financial Review
Total assets of Australian securitisers have fallen for the first time in 12 years. Figures from the Australian Bureau of Statistics show that total securitised assets at the end of September were $272.4 billion, down by $1.5 billion from the June quarter. Securitisers found it hard to issue debt securities as trading around the world almost completely shut down due to concerns about sub-prime mortgage losses. "The slowing of debt issuance and fall in liabilities is an expected consequence of events in foreign sub-prime mortgage markets, which have decreased demand for bonds backed by mortgages," the ABS said.
 

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23 November 2007 - Labor v Coalition: The real story on interest rates
Infochoice.com.au
Given the great number of Australians currently struggling under heavy mortgage burdens, the election campaign has done little justice to a group whose votes will be so important in determining the election outcome. You could be forgiven for thinking otherwise but the outlook for home loan interest rates is very similar no matter who wins government this weekend. Coalition or Labor, budget surpluses and broad economic management will be very similar.

The die is cast on inflation. The Reserve Bank's latest quarterly monetary policy statement shows it sees a challenge on its hands to keep it in check. That means we can expect to see interest rates more likely to go up in early 2008 than stay at current levels. Another 0.25 per cent rise early next year is likely with a similar rise in mid-year also a possibility.

The Howard government has sought to scare the electorate into thinking that Labor can't be trusted on the economy. It's raised the spectre of the 17 per cent mortgage rates that prevailed in 1989 under the Hawke-Keating government to suggest Australians might expect an interest rate blow-out under a Rudd government. This is highly unlikely for reasons outlined below. Interest rates may well go up in 2008, but will do so regardless of who's in power and won't reach double figures.

By the same token, Labor's protestations over the six interest rate rises we have seen over the last three years are somewhat hollow - it is likely they would have come to pass if Labor had been in power too, perhaps give or take one of the six rises. Labor may claim that they would have been less extravagant with tax-cuts and handouts in the last three years. But if that is the case it's likely they would have spent most of the massive surpluses in other areas. The pressure on interest rates from the Federal Budget would have been more or less the same.

A look at the spending promises of the Coalition and Labor for the next three years suggests not much will change. Both have shown the temptation to make the most of the current budgetary windfall and spend up big, confining the surplus to around 1 per cent of GDP.

The true perspective lost in this election campaign is that ever since the early 90s recession, mainstream political parties around the Western world - no matter whether they lean to the right or the left - have converged in the area of economic management. Australia is no different. The one great lesson learned from the economically unstable decades of the 1970s and 1980s is that inflation must be contained. It is priority number one.

The last recession, for all its pain, gave the developed world the chance to wipe the slate clean and start afresh. To a large extent, governments and their central banks have been successful in containing inflation over the fifteen years since, no matter which side has been in power.

The 90s and the Noughties could scarcely be more different to the 70s and 80s. It is absurd - and an example of lowest common denominator politics - for our current leaders to be arguing over who had the highest interest rates in those decades, which bear little relevance to today. The debate has done no justice to today's borrowers under financial pressure who deserve an honest appraisal of the economic alternatives offered by both parties. And these differences largely don't stretch to interest rates.

It is almost heresy to some in the political arena to say, but Governments have less control over the economy and interest rates than ever before - a lot less than the parties would have us believe. The biggest and most welcome reform the last 15 years has brought us - Australia and most OECD countries alike - is the taking of monetary policy out of the hands of politicians and giving it to independent central bankers. Add in the wholesale deregulation of financial markets and the globalisation of he world economy and the result is we are hinged to the fortunes of our OECD partners like never before - and there is little our politicians can do about it.

Governments can still wreck economies if they're irresponsible enough, but the stark inflation lesson makes this much less likely. It would be improbable that any government would be allowed by its central bank and Treasury department to embark on a course of profligate spending and massive Budget deficits we saw in past decades. There will be recessions and budget deficits again no doubt, but they are unlikely to be any one government's doing.

Whoever you vote for on Saturday, bear this in mind and don't be fooled by the interest rate hype our politicians would have us accept.

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23 November 2007 - CBA warns that its rates will rise
Sydney Morning Herald
The Commonwealth Bank has warned that higher mortgage rates are on the way as it will not be able to continue to absorb the higher cost of funding loans. The bank said that it will have to lift its home loan rates more than the Reserve Bank's 0.25 per cent increase in the official cash rate. While the CBA is Australia's largest deposit taking institution it has to turn to international money markets to fund some of its mortgage book. NAB has previously flagged its intention to increase mortgage rates but political sensitivities may be causing the banks to wait until after the election to make any move. If CBA and NAB lift their rates it is likely that ANZ and Westpac will follow.

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23 November 2007 - Bluestone says volumes will drop
Sydney Morning Herald
Mortgage lender Bluestone has said that its business could be down by up to 40 per cent next year as funding for subprime mortgages becomes harder to obtain. The chief executive of Bluestone, Alistair Jeffery, told financial services newsletter The Sheet yesterday that any future funding would be a private placement rather than launching a deal and having investors line up. "We will give our people a budget and make sure they work with the brokers to get a prudent mix of business to get the appropriate return. We expect volume to be down 30 or 40 per cent," he said.

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23 November 2007 - November has been bad for stockmarket
The Financial Review
Concerns about the health of the US economy, and particularly the damage caused by the subprime mortgage crisis there, has caused the S&P/ASX 200 to shed 6.2 per cent since the beginning of November, the largest monthly fall since September 2001. The rally that started in mid-August saw the local market climb 20 per cent before this month, mostly on the back of resource stocks and recovering prices for bank shares. The director of Zurich Investments said that there is a prevailing feeling of pessimism in markets and that US economic issues were unlikely to be resolved before the second quarter of next year.

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23 November 2007 - Aussies waste time at work
The Financial Review
An international study has found that Australians waste more work days each year than every country except Portugal. The study by Proudfoot Consulting estimated that Australian employees wasted an average of 45 days of working time in both 2005 and 2006 with an annual cost of around $78 billion. It is not the workers that are to blame though, the wasted time is due to employees attending to administrative tasks that do not add value and by work being delayed by a lack of appropriate IT systems. The news is not all bad as the survey also found that Australia is ranked behind only France for highest labour productivity.

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23 November 2007 - Building costs to push even higher
The Financial Review
There seems to be no end in sight for rising construction costs as demand continues to surge despite ongoing shortages of labour and equipment. A survey conducted by the Australian Industry Group-Australian Constructors Association reports that the value of construction projects is expected to be up by over 10 per cent this year, and will hit $82 billion next year which is double the level of five years ago. Of the companies surveyed over 79 per cent said that they were either busy or very busy while employment in the sector is up by 7.2 per cent for the year to July. An analyst at BIS Shrapnel has warned that increased spending by the government on infrastructure was adding to skills shortages and growing costs.

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23 November 2007 - Another investment company goes down
The Financial Review
The Australian Securities and Investments Commission has wound up Caveat Finance on the grounds of insolvency. Caveat had offered investors returns of 24 per cent per annum and owes $3.7 million to debenture holders. ASIC has said that there was a serious risk that the money would not be repaid to debenture holders and that the company had breached the Corporations Act by issuing debentures without entering into a trust deed or appointing a trustee. ASIC urged investors to ensure that they understand the risks involved with debentures and that they are not the same as a fixed term deposit with a bank.

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22 November 2007 - Big banks fail business customers
Sydney Morning Herald
Customer service provided by the four major banks has been rated poorly by their business clients in a survey conducted by East & Partners. Regional banks such as Bank of Queensland, Suncorp and Bendigo Bank performed best, each achieving a score of 6.54 out of a possible 10 points. St George Bank also performed well with a score of 6.05, while NAB led the four major banks on 5.61. ANZ and Westpac both scored 5.07 while the Commonwealth bank came last on just 4.14.

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22 November 2007 - Borrowers unsure about reverse mortgages
The Australian
An inquiry conducted by the Australian Securities and Investments Commission has found that many people who take out a reverse mortgage do not really understand how the loan works and have trouble budgeting with such a large sum of money. The executive director of consumer protection at ASIC, Greg Tanzer, said that many people surveyed did not know how much the loan was going to cost them over time and more than half did not know what would happen if a loan condition was breached. A number of borrowers had found it difficult to resist the easy access to credit, and a few were already regretting how quickly they had spent the money and what they had spent it on. Members of the Mortgage and Finance Association already have guidelines which are designed to protect consumers and ensure they act appropriately when selling reverse mortgages.

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22 November 2007 - Consumer spending to drive economy
The Financial Review
Consumer spending is forecast to accelerate over the next year with the Westpac-Melbourne Institute leading index increasing by 5.8 per cent in September, well ahead of its long term growth rate of 4.3 per cent. The index assesses the likely rate of economic growth over the next three to nine months and the September result suggests that growth could exceed Treasury growth forecasts for this year and next of 4.5 per cent. The result is supported by new car sales for the year to October up 8.9 per cent on the same period last year.

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22 November 2007 - ASX to gain competitors
The Financial Review
The Australian Stock Exchange will be exposed to competition, but not until the Australian Securities and Investments Commission has had time to consider the impact of rivals. Two operators have already applied for permission to begin trading. One is the AXE electronic communications network which would focus on institutional "crossings", usually block trades where one broker matches both the buy and sell sides of a transaction so they occur off-market. The other applicant is Liquidnet which would allow fund managers to trade directly with each other. ASIC said that the different operators would need to co-operate with each other on matters such as the regulatory burden and when trading in a listed company is suspended by the ASX.

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22 November 2007 - OECD warns of US recession
The Financial Review
The Organisation for Economic Co-operation and Development has warned that the problems seen in global financial markets over the last few months may have been just a taste of a more protracted correction. "As adjustments have often occurred in waves, and as higher funding costs take typically several months to have their full impact on companies or consumers, it may well be that the recent correction is only a precursor of a more protracted downturn," said the OECD's latest financial markets report. The report also says that most forecasters have revised their estimates downwards and a recession in the US is now seen as more likely than before by some observers. The report was finalised on November 11, before concerns about large US banks such as Citigroup came to light.

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22 November 2007 - Outlook gets tougher for RAMS
Sydney Morning Herald
More troubled times ahead for non-bank lender RAMS as it struggles to obtain refinancing for $6 billion of the loan book it has been left to manage after selling the brand to Westpac. The embattled home lender has until February 11 to find ongoing funding for almost half of its loans. The group has said that it is hopeful of refinancing half of the amount which is believed to refer to $2.7 billion of assets that are backed by NAB, while a further $3 billion is thought to be currently provided as stand-by facilities by ABN AMRO. If the February deadline is not met RAMS has warned that it will lose most or even all of the income generated by those loans.

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21 November 2007 - IBM expects major bank IT upgrades
The Financial Review
Australian banks may soon replace their ageing core computer systems according to the head of IBM's consulting division, Ian Ball. So far they have been reluctant to upgrade their software, which in many cases dates back to the 1970's, but the need to cut costs and improve productivity could see that change. "A lot of the banks are looking at this area, and I would imagine in the next six months we're actually going to see some pretty significant activity," said Mr Ball. Most banks have a back-office processing system that is the core of their technology and these could cost hundreds of millions of dollars to replace and it would be difficult to unravel other interwoven systems while continuing to service customers.

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21 November 2007 - Market jitters as US concerns grow
Sydney Morning Herald
Concerns that US banks have more sub-prime losses to report, and about the health of the US economy generally, have seen falls on both Wall Street and the local sharemarket. Yesterday's fall in the US was triggered by a Goldman Sachs analyst saying that Citigroup may increase total write-downs to $US15 billion. The Australian sharemarket was then hit as our commodity driven economy becomes less appealing to investors when impacts from the US economy cause Chinese economic growth to slow. The Aussie dollar was down to US88.46 cents at the close of business yesterday and the All Ordinaries index fell 1.7 per cent to an eight week low.
 

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21 November 2007 - Bumper times for small business
The Financial Review
Trading conditions for small businesses are improving and profits are already at record levels. An index generated by surveying 1,800 companies by the Australian Chamber of Commerce and Industry reached 58.7 points in the September quarter, far ahead of the long term average of 54.8 points. The survey found that sales and profits have been increasing and that the outlook is for further improvements over the last three months of the year.

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21 November 2007 - Fed up with big fees
News.com.au
A survey conducted by news.com.au reports that of the 1,366 people interviewed 44 per cent had been hit by overdraft or dishonour fees on their transaction account. 64 per cent of the people who had been charged fees said they wanted to close their account while around half had asked for the fees to be refunded. Some said that enough is enough with one in ten people charged fees closing their account while a further 11 per cent simply stopped using the account.

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21 November 2007 - Labor to simplify financial documents
The Financial Review
The Labor party has announced a plan to cut red tape on life insurance and other financial services. Industry experts say that the cost of explanatory documents under the current system mean that obtaining financial advice has become too expensive for many Australians with a basic financial plan costing up to $8,000. Labor's superannuation spokesperson, Nick Sherry, said that if elected they would introduce a standard 2 or 3 page standard document for each financial product. "We are not talking about deregulation, but effective regulation," he said. Senator Sherry also said that the four pillars policy, which prevents the country's largest banks from merging, would not be reviewed.

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21 November 2007 - Westpac puts super online
Sydney Morning Herald
Westpac has come up with a new product that allows customers to easily move money between superannuation and an online bank account. The new Super for Life product combines savings, transition-to-retirement and retirement accounts in one and the balance can be viewed by the investor alongside their regular bank accounts. Westpac charges no dealer commission so has been able to reduce management fees to 0.99 per cent each year plus a flat $5 per month administration fee. Time will tell if the fund delivers on performance, but it has already been awarded 2007-08 Best New Product by SuperRatings.

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20 November 2007 - E-processing saves time and costs
The Australian
New electronic home loan document lodgement systems have saved an estimated $10 million and halved processing times in 2006 according to the Lending Industry XML Initiative. LIXI has said that its members, who include banks, credit unions, brokers, mortgage aggregators and insurers, valuers, solicitors and settlement agents, currently take 70 per cent of their applications electronically and expect this to move to 100 per cent in 2008. While the aim is for straight-through processing and electronic handling from application to conveyancing the group estimates that it will be another 10 years before land registry and financial settlement can be done online.

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20 November 2007 - Banks want switching to be simpler
The Financial Review
The Australian Payments Clearing Association has issued a discussion paper on reforms that would make it easier for consumers to switch bank accounts. The changes would mean that when an account is moved from one financial institution to another, any direct credit and debit transactions would be automatically moved to the new account. The suggestion has received support from the Australian Bankers Association and a range of banks, with only the Commonwealth Bank backing the current system. Research has found that one of the reasons people decide not to switch accounts is concern over the time required to move direct credit and debit arrangements, but the CBA says a trial it conducted recently to notify users of new account details had received little interest.

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20 November 2007 - BoQ pulls out of Mackay but still wants Home
The Financial Review
The Bank of Queensland has decided not to proceed with its bid for Mackay Permanent Building Society. The $53.2 million offer had been recommended by Mackay Permanent's board until Wide Bay Australia increased it's counter-offer to $68 million on Monday, with a shareholder vote on the competing offers only days away. BoQ's managing director, David Liddy, said that the bank takes a disciplined approach to acquisition activity and that it could see no benefit in increasing the offer further. A BoQ offer of $600 million for West Australian based Home Building Society has the recommendation of Home's board.
 

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20 November 2007 - Higher fuel prices heading your way
The Financial Review
The latest figures show that imports were up by 1.5 per cent in October seasonally adjusted, contributing to an annual growth rate of 3.4 per cent, driven by strong business investment and consumer demand. The Australian dollar is now around US89 cents, down from its highs of US92 cents which, along with higher oil prices, means that consumers should brace for petrol price rises of around 5 cents per litre in the next few weeks. The average household monthly fuel bill is now $185 compared with $170 in August, adding to the effects of two interest rate rises. Economists believe that while households may cut back on discretionary spending business investment is unlikely to be slowed by the weaker dollar.

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20 November 2007 - Businesses burnt by electricity prices
The Financial Review
Some businesses could see their electricity bill increase by more than five times the rate of inflation over the next year. Wholesale electricity prices are being pushed up by the drought which has reduced hydro generation, but is also impacting coal-fired power stations which require water to operate. Four hot days have already pushed Victoria's electricity prices to the maximum cap of $10,000 MW/h and the national Electricity Market Management Company's maximum demand forecast has been exceeded. Some businesses are avoiding negotiating 2 or 3 year contracts and opting for shorter 1 year terms in the hope that market conditions improve.

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20 November 2007 - CBA hits car insurance
Sydney Morning Herald
The Commonwealth Bank, already Australia's largest life insurer and fifth largest home insurer, is now taking on the established motor vehicle insurers such as NRMA and AAMI. The bank will use its CommInsure brand to underwrite its own car policies which were previously issued through Allianz. Motor insurance is the most common type of personal insurance, accounting for 40 per cent of the market segment. Commonwealth will rely on cross-selling of the insurance to customers through its branch network rather than expensive advertising activity.
 

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19 November 2007 - Liberty still looking to list
The Australian
Non-bank lender Liberty Financial is considering a public listing in 2008 but says that there is no urgency. The company's managing director Sherman Ma says "We have continuously looked at options. This year again we looked at another option... but we never made a decision to list". Despite the instability in global credit markets Liberty secured $925 million in funding, although at higher rates which have in part been passed on to customers.
 

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19 November 2007 - Costello ridicules financial services plan
The Financial Review
The federal Treasurer Peter Costello has rubbished the Labor Party's plans to turn Australia into an international fund manager by reducing withholding tax on distributions for non-residents to 15 per cent. The policy was announced in May but last week Labor leader Kevin Rudd suggested that Western Australia could turn to funds management once the resources boom was over. Mr Rudd gave an example where expertise in Perth to manage retirement funds coming out of China could be used for investments in Latin America. Mr Costello said that the plan was one of the silliest ideas that he had heard in a long time to which Mr Rudd responded by urging Mr Costello to have a bit of vision for what can be done with Australia's financial services sector.
 

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19 November 2007 - Generation Z alert to marketing
The Financial Review
A key consumer group over the next few decades will be generation Z, or those born since 1995 so currently 12 years old or younger. According to research company McCrindle Research, the childhoods of generation Z are less innocent than previous generations, creating an outlook that is more attuned to marketing tricks and hooks. A combination of wealthier parents and fewer siblings means that they have more material goods and will receive significant inheritances when their parents die. Generation Z will be entering the workforce when more people are retiring than starting and in just 10 years from now generation Z will make up 10 per cent of the workforce.
 

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19 November 2007 - RAMS to be reborn under Westpac
Herald Sun
With Westpac preparing a relaunch of the RAMS Home Loans brand the bank has put in place funding worth $500 million so that franchisees can continue to write new business. From last Thursday any new loans written by the lender are the responsibility of Westpac and all 53 franchisees, who operate the 92 RAMS branches, have signed up for the re-launch plan. The franchisees will continue to work with the existing management team and will operate as a stand-alone business within Westpac from early next year.

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19 November 2007 - Card switching can catch up with you
The Financial Review
Credit card issuers have become more wary of "rate tarts" who shift card balances around to take advantage of introductory low rate offers according to Infochoice's general manager, Denis Orrock. He warns that while consumers may get three or four chances to switch cards companies will start rejecting applications. Card issuers can access credit history files to see if there is a pattern of applying for a card every six months and may decide that you are not the type of customer they want if rate-tart activity is identified. Mr Orrock said that he expects card companies will introduce balance transfer fees where a percentage of the transferred amount is charged to cover costs and discourage card churn.

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19 November 2007 - US not out of the woods yet
The Financial Review
The US economy continues to struggle with the latest figures showing that industrial output was down by 0.5 per cent in October, the first fall since May. An economist for the Manufacturers Alliance/MAPI, Cliff Waldman, said "The broad-based decline in manufacturing output during the month of October indicates that the growing risks to both US and global growth are materially impacting US factory performance". The stockmarket was down after the figures were released as economists had expected industrial production to creep up by 0.1 per cent.

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16 November 2007 - Seventh rate rise in the pipeline
Infochoice.com.au
Borrowers may well face a further interest rate rise in the early part of 2008, that is the most likely scenario arising out of the Reserve Bank's quarterly assessment of the economy this week - and fresh indicators underlining the buoyancy of the economy.

Core inflation is already nudging 3 per cent, the upper limit of the target band set for it, and the RBA sees it rising to 3.25 per cent in 2008, it says in its monetary policy statement. That in itself suggests the finger remains on the rates trigger as it tries to keep inflation within target over the medium term. The RBA does expect inflation to fall back below 3 per cent over the next two years anyway, but says - when balancing the risks - "it is also possible at this stage of a long economic expansion that inflation will be more difficult to contain". This means it is leaning towards higher rates because it doesn't want that risk - keeping inflation in check is priority number one.

Significantly, the RBA statement says that it has discounted to some extent the factors that could retard growth in the economy and help contain inflation - namely the sub-prime-inspired instability in global credit markets raising concerns about a US recession, and the two-decade high in the Australian currency against the US dollar, which works to reduce import prices. Global market conditions are now more settled and the impact of the high dollar more muted than one might expect, the statement says.

The latest Wage Cost Index for the September quarter shows wages growth of 1 per cent for an annual rate of 4.2 per cent. This means wages growth remains stronger than average but is not accelerating and, most importantly, is not hitting the RBA's speed limit of 4.5 per cent. Wages continue to stay remarkably contained in the face of strong growth and inflationary pressures brought on by skills shortages. This is good news for borrowers. Interest rates may be uncomfortably high, but they could well be higher were it not for the more efficient labour market we have these days.

But inflation is bubbling up in the economy for other reasons, that much we know, and other indicators out his week underscore the fact. The Melbourne Institute index of inflationary expectations suggests consumers are anticipating headline inflation of 4.4 per cent. To some degree, these expectations are self-fulfilling. Consumer confidence has fallen in the aftermath of the November rate rise - but only 4.2 per cent, much lower than after previous increases. It remains 10 percentage points above the long term average, so consumers seem set to keep spending.

This is all grist for the mill in the chances of a further interest rate rise. It won't happen in December as some have been saying, but could well be in February if the next CPI figures out in January continue the upward trend.

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16 November 2007 - Ex-ANZ manager runs for board
The Australian
A former employee of ANZ is running for a position on the bank's board. Robert Reeves was made redundant by the bank in 2003 and says he believes that the bank needs to improve its governance practices to avoid "costly events" like his own legal settlement. "Based on my employment experiences with ANZ, I believe ANZ's governance practices and accountabilities need to be vastly improved," he said. "I believe the (legal) action and subsequent settlement was avoidable and has cost the ANZ in both monetary terms and reputation." The board of ANZ has said that it does not endorse the election of Mr Reeves at its annual meeting in Perth on December 18.

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16 November 2007 - Virtual credit for online shoppers
Sydney Morning Herald
A new method has been created for online payments so that credit card and bank account details do not need to be used. Consumers can buy a VCard virtual voucher with credit of up to $1,000 which can then be used instead of a credit card wherever Visa is accepted. The VCards can be purchased from retailers in a similar way to purchasing pre-paid mobile phone credit and cost $5.50 for each voucher. Each VCard comes with a Visa card number, expiry date and three digit security code. Market research firm Forrester earlier this year estimated that 7.2 million Australians shop online and this is expected to increase by 22 per cent each year until 2010.

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16 November 2007 - Temporary fall for margin loans
The Financial Review
Margin loan balances dropped slightly from $36.2 billion in the June quarter to $35.9 billion in the September quarter as investors pulled out of a volatile equities market. However it is expected that this is only temporary with the head of margin lending at St George Bank, Andrew Black, saying that investors are not closing down but simply taking some profits and getting ready to go back in again. According to Mr Black the average investor gearing ratio fell to 39 per cent from 42 per cent but the demand for loans has rebounded this month as the equities market recovers. Margin calls hit a three year high in September with an average of 104 made each day out of 193,000 accounts.

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16 November 2007 - Average wage up nearly 5 per cent
The Financial Review
The latest official figures show that average weekly earnings increased by 1 per cent in the three months to August and are up by 4.9 per cent from a year ago. The result is higher than expected as the labour price index only yesterday suggested that growth was at a moderate 4 per cent. A further sign of a tight labour market is a 33 per cent fall in the number of people unemployed for a year or more to hit 53,100. The Australian Bureau of Statistics reports that average full time adult earnings were at $1,102 a week for the three months to August.

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16 November 2007 - Inflation fears cut card spending
The Financial Review
In a survey conducted by the Melbourne Institute only 13.4 per cent of respondents said that they think that inflation will drop to within the Reserve Bank's target band of 2 to 3 per cent. With the Reserve Bank this week forecasting inflation to be at 3 per cent or above over the next year it seems that consumers are becoming more cautious. The average credit card balance in September dropped by $6 to $2,993, still 5.5 per cent above last year but the rate of growth is the slowest in the past two years. Credit card cash advances are down by 8.7 per cent over the year and repayments have increased by 4.3 per cent.

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16 November 2007 - St George rakes in the capital
Sydney Morning Herald
Investors have expressed confidence in St George Bank which raised $766 million in capital yesterday. The bank issued 21.9 million shares yesterday which were sold at $35 each which was an 8 per cent discount from the closing price on Wednesday and the new stock will go live on the ASX on November 26. The issue was heavily over-subscribed and the bank could have raised $1 billion but would not comment on whether any further raisings were planned. St George's retail shareholders will have a chance early next year to subscribe to another $400 million of stock.

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15 November 2007 - Wage growth remains steady
The Australian
The chance of a rate rise in December has receded somewhat following the release of the latest wage growth figures. Early indicators had suggested that labour supply constraints were driving a faster rate of growth, but an official growth rate of 4.2 per cent over the last year remains at around the same level of growth since late 2004 and is within the comfort zone of the Reserve Bank. Allowing for the timing of a minimum wage increase that came into effect from 1 October, economists have said that the actual increase for the September quarter was 1.3 per cent rather than 1 per cent, enough to keep the RBA on high alert over coming months.

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15 November 2007 - Consumers bounce back from rate rise
The Australian
Consumer confidence has not been dented by recent rate rises and of the prospect of more to come. The Westpac-Melbourne Institute indicator released yesterday showed that confidence has fallen 4.2 per cent from the beginning of last month to this month but is still 16.3 per cent higher than one year ago and 10.5 per cent above the long term average. Chief economist at Westpac, Bill Evans, said that it was the smallest fall in confidence following a rate rise in recent times. "The election campaign may have been a factor affecting households, including the likely positive effect of the proposed tax cuts," he said.
 

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15 November 2007 - Tax burden greater than reported
The Financial Review
Former Treasury official Greg Smith has disputed the government's claim that Australia is a relatively low-taxing country. Mr Smith said that even with $7 billion in tax cuts next year the total tax take will be $350 billion, little changed as a share of the economy from 10 years ago. He also pointed out that comparisons with other countries were difficult as many of the items that are payed for through tax overseas are not here, although they still remain as burdens on taxpayers. For example, other countries have national social security taxes but in Australia this is funded through compulsory superannuation contributions which are not counted as a tax. Other fees and charges that are funded through tax in other countries but not here include the Medicare surcharge, co-payments and fees for education and the HECS loan schemes.

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15 November 2007 - St George to beef up capital
Sydney Morning Herald
The new CEO at St George Bank, Paul Fegan, has jumped into the saddle and only one day into the job announced a $1.15 billion raising to boost its capital holdings. In a statement released after the close of trading yesterday the bank said that it was cancelling a previous plan to raise $458 million through underwriting its dividend reinvestment program. Instead up to $750 million worth of new shares will be issued and a separate initiative to raise $400 million should be finalised by the end of the year. Mr Fegan said that the extra capital is needed so that the bank has plenty of headroom to grow.

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15 November 2007 - Funding costs drive up margin loan rates
The Financial Review
Banks and credit unions are starting to pass their increased funding costs to consumers although mainly on margin loans and only some mortgage products while keeping increases on flagship variable rate loans to a minimum. An unnamed representative of one lender said that margin loan clients had enjoyed years of booming equity markets so could better withstand additional rate increases and that the bank would suffer too much brand damage if higher funding costs were passed on to home owners. BT Financial Group and Macquarie have both increased their margin loan rates by 0.45 percentage points while ANZ has lifted its rates by 0.35 percentage points. A spokesman for Westpac owned BT said that the 0.20 basis point rise on top of the RBA cash rate increase of 25 basis points was due to the volatility in credit markets and associated increase in the cost of borrowing that they had so far been absorbing.

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15 November 2007 - Boom has at least another two years to run
Herald Sun
A group of Australia's leading economists have tipped that the current economic boom will continue for at least two more years. At a meeting yesterday the Australian Business Economists executive committee said that after 16 years of economic growth fuelled by commodity price gains and consumer spending, the conditions are set for growth to continue until at least the end of 2009. However the committee unanimously predicted at least one interest rate rise of 25 basis points will be needed next year to rein in inflation and up to half believe that rates will peak at 7.25 per cent before the end of 2008.

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14 November 2007 - Export surge boosted by mining
The Financial Review
Export capacity is increasing after years of heavy investment in mines, roads, ports and railways. Total export volumes increased by 2 per cent in the September quarter and are up 5 per cent compared with last year according to figures from the Reserve Bank. The drought has caused a 15 per cent fall in rural exports over the year but this has been offset by an increase of 8.5 per cent in non-rural export volumes. Iron ore exports alone jumped by 8 per cent in the September quarter with the RBA predicting that international demand could push prices up by 30 per cent over the next year.
 

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14 November 2007 - Brisbane to more than double in 50 years
The Financial Review
Sydney is expected to remain Australia's largest city for at least the next 50 years according the Australian Bureau of Statistics. Assuming high levels of fertility, life expectancy, overseas and interstate migrant flows the Bureau expects Sydney's population to climb 46.5 per cent to 6.3 million in 2051. Over the same period the forecast for Melbourne is a 60 per cent increase to a population of 5.9 million and Perth to gain 98.3 per cent to nearly 3 million people. The capital where the biggest increase is expected though is Brisbane with a forecast growth of 125 per cent from 1.9 million people now to 4.2 million over the next five decades.

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14 November 2007 - Macquarie says second half to be weaker
Daily Telegraph
Macquarie Group has announced a profit of $1 billion for the first six months of the year while warning that the second half performance may not be as strong. CEO Allan Moss said "Subject to market conditions, we expect the second half result to be at least in line with the prior year's second half result of $733 million, but down on a very strong first half this year". The bank's overseas expansion is returning handsome profits with income from other countries up by 70 per cent to $2.45 billion, and income from Asia alone up by 96 per cent to $994 million. Shares in the company fell by 3 per cent to $79 after the announcement.

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14 November 2007 - New chief at St. George
Sydney Morning Herald
St. George Bank has announced that its new chief executive will be Paul Fegan who has been acting in the role since the departure of Gail Kelly. Mr Fegan previously headed the bank's combined retail and wealth management division which has recently been responsible for contributing nearly 60 per cent of the group's annual earnings. Investors responded to the news by lifting the price of St George shares by 42 cents to $37.42.

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14 November 2007 - E*Trade Australia not affected by US company troubles
The Australian
The ANZ bank has said that the problems affecting E*Trade in the US will have no impact on its local online broking arm. Shares in the US company fell by 59 per cent yesterday after it was announced that there would be significant losses from investments in asset-backed securities. However the only link with the Australian E*Trade operation is a licensing agreement with the US for use of the name with management and ownership being completely separate. ANZ assumed control of the broker in June this year after a February takeover deal worth $432 million.

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14 November 2007 - Reverse mortgage market slows
The Financial Review
The latest figures from DataMonitor show that growth in the reverse mortgage market has started to slow with an expected increase of 5.8 per cent over the year. Total reverse mortgage advances are anticipated to hit $660 million for 2007, a small increase compared with the jump from $239 million in 2004 to $624 million in 2006. The reverse mortgage market is now serviced by 26 lenders, up from 6 in 2004. Market analysts DataMonitor say that they expect reverse mortgage advances to reach $1.2 billion in 2011 as more people retire with a greater proportion of their wealth tied up in equity.

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14 November 2007 - Wage cost blow-out
The Financial Review
The latest National Australia Bank monthly survey shows that wages are increasing at their fastest rate in nine years with an annual growth rate of 5.4 per cent. Official labour price data will be released today but is expected to show an increase of 1 per cent in the September quarter to give an annual rate of 4.1 per cent. While this is unlikely to be sufficient to cause the Reserve Bank to increase rates in December, it will certainly be watching closely for signs of any further acceleration in wage growth.

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13 November 2007 - RBA suggests more increases to come
Sydney Morning Herald
The Reserve Bank looks likely to deliver further interest rate rises in 2008 but the volatility present in equity and credit markets will spare Australian borrowers from a follow up December increase. The RBA statement on monetary policy revealed the central bank believes inflation will exceed 3 per cent for 2008 rising to 3.25 per cent.
 

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13 November 2007 - Adelaide Bank investors tick off on Bendigo
Sydney Morning Herald
Adelaide Bank shareholders have voted in support of the $4 billion merger with Bendigo Bank. The transaction will result in Adelaide Bank shareholders owning 45 per cent of the new organisation and despite being viewed by the market as a take over, Adelaide Bank chairwomen Adele Lloyd describes the transaction as a "true merger in every sense of the word".
 

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13 November 2007 - Credit cards used to bridge pay periods
News.com.au
A News.com.au / CoreData survey has found that over half of Australians admit to using their credit cards to bridge pay periods. The survey also revealed that 90 per cent of respondents held at least one credit card whilst 52 per cent said that they had been charged penalty fees and or interest in the 12 months before the survey.
 

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13 November 2007 - Economists urge governments to stop big spending promises
The Australian
Leading economists are suggesting that the resources boom and unrestrained government spending may see interest rates increase and remain higher for some time; they have called on the new Government to show restraint or risk inflation spiralling out of control. Coalition election spending promises have seen the size of the cash budget surplus for 2010-11 fall below 1 per cent which economists argue is "economic nonsense".

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13 November 2007 - Funding costs increase
The Financial Review
The Reserve Bank has revealed that the lenders funding costs for lenders had been increased "over and beyond the effect of a high cash rate". The Bank estimates that funding costs have increased between 10 to 15 basis points on standard loans whilst low doc and non conforming loans had seen funding increases of 35 and 100 basis points respectively. To date each of the big four has not ruled out passing on further rate increases outside the RBA movements to recover the increased cost of funds, though none has yet done so.
 

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12 November 2007 - Call for a simple carbon tax
The Australian
The Centre for Independent Studies in Australia is promoting a carbon tax over proposed emissions trading schemes. The centre argues that the tax must be revenue neutral with money collected returned to consumers by further income tax reductions and or subsidies for energy bills. Both the Coalition and Labor are committed to introducing emissions trading from 2011.
 

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12 November 2007 - Analysts bullish on NAB three year prospects
The Australian
National Australia Bank is poised to outperform the banking sector over the next three years due to a heavy weighting in the business lending sector and a disciplined approach to ensuring expense growth is below inflation until 2010 according to Deutsche Bank. NAB reported a 17.7 per cent lift in cash earnings to $4.4 billion.
 

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12 November 2007 - Strong dollar put pressure on business
The Financial Review
Macquarie Bank research has estimated that profits of listed companies will be reduced by $A525 million if the currency remains over $US0.90. If the dollar reaches parity and trades at the level for the balance of the financial year profits may be slashed by $A875 million. Companies such as CSL, Amcor and Fosters Group have already issued downgrades on earnings guidance citing the strong Australian dollar.

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12 November 2007 - Lenders keep increases within 25 points
The Financial Review
Whilst no major home lenders has increased their interest rates by more than the RBA increase of 25 basis points, lenders are still warning that the increases over the 25 points may still be required due to the continued increases in the costs of funding bought on by the US sub-prime crisis.

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11 November 2007 - US banks agree on $US75 billion bailout fund
New York Times
Three major US banks (Bank of America, Citigroup Inc and JP Morgan Chase & Co) are believed to have reached agreement late Friday, approving a revised structured funding facility. The banks have been in discussions for two months with previous structures considered too complicated. The fund could be in operation by the close of the year and it is thought up to 60 financial institutions will be asked to contribute funding in the next fortnight. The fund is being created to assist in avoiding severe credit market disruptions by providing a safe haven for structure investments to avoid selling into illiquid markets. The fund will require the approval of the major credit agencies to ensure viability.

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9 November 2007 - CUA members profit with the company
Infochoice.com.au
Credit Union Australia (CUA) has recorded a net profit of more than $48 million over the 2006/07 financial year, with assets under management increasing to $6.6 billion. The 25 per cent increase in profitability placed CUA in a better position to deliver benefits worth $7 million to its members, through revised interest rates and fee structures. CUA Managing Director Graham Olrich was adamant that CUA's member base would grow over the next financial year despite recent difficulties in changing financial market conditions, stating "I do not believe the market cycle is going to affect credit unions too greatly. In fact I think this gives us a chance to snatch some market share back". He further went on to proudly say that given the revised member fee structure "80 per cent of members operated their accounts fee free". CUA's base of approximately 400,000 members extend across 74 branches throughout Queensland, New South Wales, Victoria, Western Australia and the ACT.

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9 November 2007 - Borrowers: Watch your lender closely
Infochoice.com.au
No surprise in the Reserve Bank's decision to raise interest rates this week, but the spectre of further rate hikes to come in the next six months will surely worry many borrowers. We'll have to wait until Monday and the RBA's quarterly statement on monetary policy for any insight into the likelihood of higher rates in the New Year.

The latest rate rise means most borrowers' home loan interest rate will hit 8 per cent for the first time this decade. While the standard variable rate is already above this mark and set to reach 8.57 per cent, the majority of borrowers will have either secured a discount to that rate from their bank or be with a non-bank lender offering lower rate upfront.

The true benchmark variable rate, the average of the rates that borrowers are actually paying as calculated by Infochoice, is expected to move from 7.75 per cent to right on 8 per cent. But borrowers should watch closely - during this rate rise period more than any other - for lenders passing on more than the 0.25 percentage points of the official rate rise.

Some lenders have been under pressure since the collapse of the sub-prime mortgage market in the US. The cost of funds in the wholesale finance market has risen and this has squeezed some lenders which may now be looking to use this opportunity to lift rates by a larger margin.

Credit card holders especially need to watch their bank or card provider closely. A number put up their credit card interest rate more than 0.25 per cent after the August rate rise. Those that don't pay off their outstanding card balance in full each month should not be using one of the high-rate cards which will now go to a whopping 19 per cent and beyond. Most business borrowers will already have seen rises in rates from the sub-prime fallout and can now expect to see them rise again after the RBA hike.

The two rate increases we've seen, and the threat of more, will put a serious dent in the owner-occupied housing market. The last rise in August alone appears to have put paid to the recovery in home borrowing occurring in the middle of 2007.

September housing finance figures just out show a 2.4 per cent drop in the number of loan approvals, while the value of loans fell by a similar amount. The trend in both is clearly down as home affordability hits new lows.

The small rise in unemployment in October is not a cause for alarm. Overall job numbers still grew, full-time positions very strongly. Generally, the labour force is still growing and job creation is growing with it. Just one sign that more interest rate rises may be in the pipeline.

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9 November 2007 - Banks start to move but warn more to follow
The Financial Review
NAB was the first of the major banks to announce a change to the standard variable (SVR) mortgage rate passing on the RBA rise of 25 basis points but warning that further increases may be required if the cost of funds does not fall back to normal levels experienced prior to the August credit crunch. The new big bank SVR is now 8.57 per cent. NAB have also passed on a 25 basis point increase to some personal deposit accounts and a thirty five basis point increase to some business accounts.
 

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9 November 2007 - ASIC launches action on Westpoint fiasco
The Financial Review
ASIC has launched legal action on behalf of Westpoint investors to recover $308 million for the former directors of the disgraced property financier and from financial advisors who advised clients to invest in the products. ASIC are pursuing five former directors for up to $245 million whilst in an additional case will seek $63.2 million from five financial planning firms.
 

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9 November 2007 - Jobs full steam ahead as pressure builds on rates
The Financial Review
Following the Reserve Bank decision to increase rates, jobs figures show that 70,600 full time positions were created in the last month a 16 year record, however part-time positions were negative with 57,700 positions lost in the month. Since the start of the year, 20,500 full time positions have been created and the economy has lost a net 14,000 part time positions. Economists warn the continued tight labour market will place pressure on wages and ultimately interest rates.
 

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9 November 2007 - APRA releases point of presence report
The Sheet
APRA reports that the number of "points of presence" (POP's) with a branch level of service has increased by 106 or 1.6 per cent in the year to June 2007. The report maps the location of every bank branch, ATM and even eftpos terminal. Interesting highlights in an otherwise dull and questionable exercise suggested that Building Societies are opening branches whilst credit unions closing them, this would be due to consolidation in the Credit Union movement and the takeover by Home Building Society of StateWest Credit Society. The overall picture shows that banks are now opening branches rather than closing them.
 

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8 November 2007 - Banks ready to pass rate increases
The Financial Review
The recent interest rate increases couldn't have come at a better time for Australian banks as it provides them with added reason to increase rates across their lending portfolios. Many of the banks have reported that the higher costs of funding is the main driver increasing rates, while further pressures exist to pass on more than the 25 basis point rate rise. Banks are expected to increase their standard variable rates by the end of this week.
 

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8 November 2007 - Oil prices set to reach $US100
The Financial Review
World oil prices leveled at $US98 a barrel yesterday setting a record high, while many market analysts suggesting $US100 a barrel is not far off. A report released by the US Energy Information Administration stated "Global oil markets will likely remain stretched as world oil demand has continued to grow much faster than oil supply outside of the Organisation of the Petroleum Exporting Countries (OPEC)..."
 

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8 November 2007 - Fasten the seatbelts... more interest rises on the horizon
The Australian
Economists warn that the Reserve Bank (RBA) is struggling to keep a hold on spending and believe further interest rate increases are close. The RBA issued an official warning with its 25 basis point increase that inflation could spike outside the desired 2-3 per cent target range. Interest rate markets are now pricing a post summer holiday increase in February as a certainty, whilst there is still a school of thought favouring a one-two combination in the form of a December increase.
 

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8 November 2007 - Howard seeks forgiveness on interest rates
Sydney Morning Herald
Prime Minister John Howard has asked voters to trust him again with interest rates after the Reserve Bank increased for the 6th time since the last election and warned that the inflationary pressures are liable to warrant further action in the near future. Prime Minister Howard argued that the government was not responsible for the increases, pointing to factors identifiably the Reserve Bank as beyond the government's control.
 

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8 November 2007 - Sydney property picks up the pace
Sydney Morning Herald
Sydney house prices have picked up the pace to be growing at their fastest rate since the end of the property boom, pointing to further deterioration in housing affordability whilst rental vacancy rates continue to plummet. The rental market in Sydney has reported strong increases in rents over the last 12 months with experts forecasting the latest rate rise will increase rents further as landlords look to recoup borrowing costs and maintain existing yields.
 

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8 November 2007 - Business backs government over interest rates
The Australian
Business leaders have backed the Government's industrial relations policy warning that the proposed Labor changes could encourage unaffordable wage increases, placing further fuel on inflationary and interest rate pressures. The head of the Australian Chamber of Commerce and Industry Mr. Peter Hendy warned "rolling back Work Choices will increase pressure on interest rates."
 

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8 November 2007 - Western Australia looking for another 400,000
The Australian
A report from the WA Chamber of Commerce suggest that a further 400,000 workers will be needed in Western Australia over the next 10 years to ensure the state has the capacity of reaping the full benefits of the economic boom. Currently 770 people are moving to WA each week but this is well short of demand for workers and the shortfall is severely limiting the states ability to grow. Projects such as the $100 billion pipeline are already short of workers and the situation will get worse due to the ageing of the population.
 

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7 November 2007 - BankWest lifts deposit rates
InfoChoice.com.au
BankWest has passed on the Reserve Bank's cash rate increase to its deposit customers by increasing the TeleNet Saver's 12 month variable introductory rate from 7.00 per cent to 7.20 per cent while the standard ongoing rate has been increased by 25 basis points to 6.75 per cent. The bank's business customers do not miss out with the AgriOne account rate up by 25 basis points to 6.0 per cent and the Business TeleNet Saver rate increased by the same amount to 6.85 per cent.

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7 November 2007 - ING pumps up savings rates
InfoChoice.com.au
ING has reacted swiftly to the Reserve Bank's 0.25 per cent increase in the cash rate today by announcing that it will pass on the full increase to its savings account customers from Friday November 9. The special offer rate on its flagship Savings Maximiser of 7.0 per cent will remain in place until the end of this year but the base rate that customers will earn after that has increased from 6.15 per cent to 6.40 per cent. The new term deposit rates are the highest that ING has offered yet with 7.25 per cent available for six month investments, 7.5 per cent for one year and 7.6 per cent for two years.

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7 November 2007 - Buyers attracted to co-ownership
Daily Telegraph
Research conducted by Wizard Home Loans has found that many people are turning to co-ownership to help overcome the high price of property. In a survey of 300 people who are about to buy a new home half were considering teaming up with up to five of their friends so that they could afford to purchase. Wizard has joined with co-ownership specialists PodProperty to offer borrowers guidance and pro-forma 50 page legal agreements to enable borrowers to get important legal advice before entering such an arrangement.
 

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7 November 2007 - Strong profits from building societies and credit unions
The Australian
A report by KPMG Financial Services says that building societies and credit unions could afford to avoid passing on the higher cost of funding to their customers through increased rates. Partner Martin McGrath said that with profit growth for building societies at 14.3 per cent and credit unions at 16.4 per cent they could keep interest rate increases at a minimum in order to win market share from non-bank lenders. "If cost of funds goes up, one or two things can happen. You either put up the cost of your loan products, or your profits shrink," he said. The KPMG survey found that while the rates of growth in the sector were strong they are below system growth so their market share is slipping.
 

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7 November 2007 - Pressure on construction costs
The Financial Review
Surging business investment is expected to increase construction costs with private sector capital investment up by 14 per cent in the September quarter to $535.5 billion. The latest figures from Access Economics show that the value of current and commissioned project now total $178.4 billion while those in planning jumper 20 per cent to $357.1 billion. "We have seen in the last few years the sharpest rise in construction demand in the nation's history. The pipeline of work to be done has tripled since 2001, and the construction boom is getting bigger," said the director of Access Economics, Chris Richardson. Investment in new office space was up by 26 per cent to $11.3 billion and any increase in housing activity would only exacerbate price pressures.

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7 November 2007 - Prosecutions over Westpoint advice
The Financial Review
Two financial advisors have had their licenses removed by the Australian Securities and Investments Commission for advising their clients to put money into failed investment group Westpoint. ASIC banned one of the advisors for 8 years as he had been operating without a licence, did not disclose commissions and made misleading statements about the security of Westpoint products. The other had has been banned from giving advice for five years after ASIC found that he had given inappropriate advice and made misleading statements about Westpoint products. Six advisors have now had their licenses suspended and a further 13 cases are yet to be determined.

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7 November 2007 - National e-conveyancing system could be forced
The Financial Review
Attorney General Philip Ruddock has said that if the Howard government is re-elected the commonwealth's constitutional powers will be used to set up a national land registry. If the states fail to create a national e-conveyancing system Mr Ruddock said that the commonwealth will look at whether or not the constitutional communications power may give it a basis for looking at this area of responsibility. Previous plans for a national conveyancing system fell apart after Victoria failed to make software developed for its electronic system available to NSW.

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7 November 2007 - Affordability could be solved by lowering prices
The Australian
ANZ economist Saul Eslake has said that housing affordability is just as bad as it was when interest rates were at 17 per cent but for different reasons. "Whereas the reason for dire housing affordability back then was high interest rates and the solution was low interest rates, which in principle is easy enough to achieve, today housing affordability is as bad as it is because of high house prices," he said. The only solution according to Mr Eslake is to lower house prices, but this would be unpopular with those who already own houses as they are often their main source of wealth.

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7 November 2007 - Borrowers hit by another rate rise
infochoice.com.au
The Reserve Bank has increased the official cash rate by 0.25 per cent, the tenth increase since 2001 and the first time such a move has been made during an election campaign. The RBA cited an underlying annual inflation rate of 3 per cent in the year to September as one of the key factors in its decision. This is likely to be over three per cent by March next year as demand in the economy continues to be very strong and shortages of labour persist. The rise will add $67 to the monthly repayments on a $400,000 home loan.

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6 November 2007 - Job ads boom as firms hunt for staff
Sydney Morning Herald
The number of jobs being advertised in October increased 2.7 per cent to an average of 254,554 per week, while the total number of job ads was 30.5 per cent higher than for October last year. The latest results from the ANZ job ads series show that demand for labour remains very strong but the head of economics at the bank, Tony Pearson, said that the October increase follows four months of flat or declining advertisements so, in aggregate, there is a steady slowing in the monthly trend increase in advertisements. "This suggests the demand for workers is now not increasing as quickly as it was earlier in the year," he said. Economists are tipping that the unemployment rate for October will remain at its 33-year low of 4.2 per cent when labour force data is released by the Bureau of Statistics on Thursday.

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6 November 2007 - Inflationary pressure building
Sydney Morning Herald
The case for the Reserve Bank announcing an increase in interest rates tomorrow continues to build with the TD Securities-Melbourne Institute monthly inflation gauge for October rising by 0.3 per cent. Increases of 0.2 per cent in September and 0.5 per cent in August have contributed to a rate of 3.3 per cent for the twelve months to the end of October and well above the reserve's target band of 2 to 3 per cent. The increase was driven by rising prices for fuel, holiday travel and accommodation, utilities and fruit and vegetables. Partially offsetting these were falls in the prices of audio, visual and computing equipment.
 

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6 November 2007 - PM says banks should minimise rate rises
Sydney Morning Herald
The Prime Minister John Howard has warned banks that they have no right to "take advantage" of the sub-prime crisis in the US by increasing their interest rates more than any expected increase in the official cash rate. "Australian banks are very profitable and increases in interest rates not related to increases in official interest rates would need to be very carefully justified," he said. The general manager of InfoChoice, Denis Orrock, said that he expects competitive pressures will prevent any additional rate increases. By limiting rate increases banks could win market share from non-bank lenders who are more reliant on funding from global credit markets.
 

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6 November 2007 - Virgin looking for growth
The Australian
Virgin Money is looking to build scale in its business through the purchase of other non-bank lenders. Virgin Money Australia's CEO David Wakeling said that the company is in talks with two Australian mortgage distributors, one of which could involve a purchase price of tens of millions of dollars. "There's recognition in Virgin that financial services is a scale game and we want to build our scale to be more competitive. It's the same realisation that underlies Richard Branson's attempts to rescue Northern Rock in the UK," he said. Superannuation and mortgage assets are growing quickly for Virgin Money in Australia and it already has 560,000 credit cards on issue.

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6 November 2007 - Micro-businesses want better relationships
The Financial Review
A study of micro-businesses, defined as those with a turn-over of between $1 million and $5 million, has found that while almost half want a dedicated business banker to deal with, only 16.6 per cent actually have one. The majority of respondents to the East & Partners Micro Business Banking Markets Report nominated a relationship banker as their preferred method of contact with a bank while 31.2 per cent said they preferred to use the internet. Where business banking relationships did exist almost 90 per cent said that they had been established for less than one year. According to the general manager of East & Partners, David Bartholomew, there are approximately 200,000 micro businesses in Australia, representing a major opportunity for banks.

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6 November 2007 - Borrowers seek safety in fixed rates
The Financial Review
Figures from the Australian Finance Group show that the threat of higher interest rates has made more consumers choose a fixed rate for their mortgage. Of the 8,797 mortgages taken out last month 23.2 per cent opted for a fixed rate, a 43 per cent increase from the 16.5 per cent that chose to fix in July.
 

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6 November 2007 - Sub-prime problems spook market
Daily Telegraph
The local sharemarket fell yesterday as concerns about the US sub-prime crisis were reignited. The chief of Citigroup in the US, Charles Prince, was forced to resign after the company announced that it planned to take $8 to $11 billion more in credit and other write-downs. The major banks all saw their share prices drop while the local S&P/ASX200 index lost 114.3 points to 6582.3 and more volatility is expected during the week.

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5 November 2007 - Y can't I afford a home?
Sydney Morning Herald
Generation Y, broadly defined as those aged between 20 and 30, are being squeezed out of the property market by a combination of their own spending patterns, lower incomes and the financial strength of baby boomers. A Roy Morgan research report, State of the Nation, has found that those under 30 owe an average of $202,000 compared with the average of people between 30 and 44 years of $179,000. The report also found that incomes for those under 30 have increased at a slower rate than for the rest of the population and that only 13 per cent of this group have a home loan, compared with 17 per cent of the previous generation when they were that age. Baby boomers are helping to keep property prices high by continuing to buy well past middle age while increasing the level of equity in their houses to 72 per cent from 66 per cent 10 years ago. Of the under-30's surveyed 28 per cent agreed with the statement "I was born to shop" compared with 19 per cent a decade ago.
 

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5 November 2007 - Credit code changes could limit bank fees
The Financial Review
Banks, credit unions and other lenders are opposing amendments to the Consumer Credit Code that are aimed at cracking down on payday lenders. The proposed changes target those lenders who offer short-term loans, usually less than $300,000 to consumers with low incomes or impaired credit records. However mainstream lenders are concerned that the changes will affect all lenders not just those on the fringes. "We are firmly of the view that many of the proposed amendments are inappropriate, wrongly directed at mainstream credit providers and likely to have a significant and anti-competitive impact on the market, which will directly affect the choices available to all consumers," said the Australian Bankers Association in a submission. The ANZ Bank said that the lower threshold on the 'unreasonableness' test could allow a court to effectively set prices and would cast doubt over the ability of financial services firms to return a profit to shareholders.
 

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5 November 2007 - ASX lists CFD's
The Financial Review
The Australian Stock Exchange will today be the first in the world to trade listed contracts for difference (CFD's). Unlisted CFD's have been used in Australia for the last 5 years and the ASX's listed CFD's have been two years in the planning. Anecdotal evidence suggests that unlisted CFD's are more popular with retail traders than warrants, exchange traded options and futures markets and the ASX has high expectations that listed CFD's will become a major market. While nine brokers have already signed up to offer listed CFD's E*Trade has decided to watch from the sidelines for now. Managing director John Daley said that direct market access unlisted CFD's offer a wider range of alternatives and has concerns that the listed version won't offer the same liquidity.

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5 November 2007 - Pace of super switching slows
The Financial Review
The number of people using the legislation introduced 5 years ago to allow switching of superannuation funds is dwindling. Research company Roy Morgan reports that only 3.3 per cent of savers switched their super fund in the three months to June, down from 4 per cent in the December quarter and almost half the 6 per cent reported in the quarter to September 2005. The director of Roy Morgan, Norman Morris, said that the decline in switching could be attributed to the recent strong performance of super funds as well as an easing in pent-up demand. The proportion of people satisfied with the performance of their fund was at 62.2 per cent for the first half of this year, compared with 52.4 per cent for the first six months of 2005.
 

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5 November 2007 - Borrowers desert RAMS
Sydney Morning Herald
Mortgage brokers are reporting a high volume of borrowers with RAMS Home Loans looking to refinance with other lenders and many are showing a preference for the major banks. The brokers say that people are leavings RAMS in part due to the negative attention that the brand has received but also because they have raised interest rates to uncompetitive levels. One broker reports that 20 to 30 per cent of the refinancing he has done in the last month is for RAMS which is much higher than their market penetration. Another broker reported that 15 to 20 per cent of his refinances were for RAMS and that others want to switch but have been unable to due to falling property values. The three year fixed rate of 8.39 per cent offered by RAMS is near the top of the market.
 

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5 November 2007 - Job ads climbing
The Australian
The latest data shows that the number of jobs being advertised online increased by 4.37 per cent in October and by 50.07 per cent over the last year. According to the Olivier Internet Job Index the increase is being driven by engineering and mining jobs which were up by 11.65 per cent but all sectors are growing with the exception of arts and entertainment.
 

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5 November 2007 - ALP offers tax breaks for house deposits
The Australian
The Labor Party yesterday outlined its $600 million policy to help improve housing affordability. If elected, a Labor government would help people to save the deposit for a home through tax concessions on a special savings account for up to $64,000. The scheme would require a minimum deposit of $1,000 each year but would allow up to $5,000 to be added pre-tax and a further $5,000 of post-tax income annually. Similar to superannuation savings, pre-tax contributions would be taxed at a rate of 15 per cent but deposits must not be touched for four years and can only be released tax-free if used for a deposit for a home. If the account holder decides not to purchase a home then the tax benefit can be retained by rolling the funds into superannuation.
 

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2 November 2007 - Case for Cup Day rate rise strengthens
InfoChoice.com.au
As if the risk of another hike in official interest rates wasn't already high after last week's inflation figures, latest economic data suggests there is little chance the Reserve bank won't lift rates again in the coming week.

Borrowers should brace for a 0.25 percentage-point rate rise to be announced on Wednesday which would be passed on to retail loans and take the mortgage rate for most borrowers over 8 per cent.

Building approvals took a surprise jump in September, at odds with the string of flat results in recent months which have had the housing market in the doldrums. A 6.8 per cent rise was well above expectations, but was largely on the back of a spike in apartment approvals. It's only one month's figures but the construction market does cautiously appear to be trending up, giving the RBA more food for thought.

Retail sales posted another healthy result in September, 0.8 per cent growth in turnover and 1.9 per cent in volumes. Consumers are showing a solid trend to spend as we head into Christmas.

The RBA's own measures of lending in the economy reveal that business continues to borrow at exceptional levels. Business credit is now growing at an annual rate of more than 23 per cent after accelerating over the last quarter to 2 per cent growth a month or more - a further indication that there is little prospect in sight of investment and economic expansion winding down into 2008.

Personal and housing credit, however, show a different story. Personal credit growth has tailed off over recent months, going negative in the last quarter. It appears consumers are spending more while borrowing less, something the RBA won't be unhappy about as long as the credit decline doesn't steepen. Housing credit remains flat, growing at less than 1 per cent per month recently, quite modest by previous years' standards.

A reversal in the borrowing profile across the economy is now complete - consumer borrowing for housing and consumption was driving the economy for the first half of the decade with businesses reluctant to invest. Now it's business-owners driving the economy with long-overdue investment in capacity that will make for an economy more able to grow sustainably.

That's good for the medium to long term, but doesn't do much for the inflation threat which faces us in the short to medium term. And that's what is highly likely to see the RBA decide to raise rates on Melbourne Cup day, adding another $17 a month to variable home loan repayments for every $100,000 borrowed.
 

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2 November 2007 - Retails sales growth puts pressure on rates
The Financial Review
The chance of an interest rate rise next week has increased even further with the latest retails sales figures showing that we are spending at the fastest rate in over three years. For the month of September retail sales were up 0.8 per cent, driving the annual growth rate to a very strong 8.2 per cent. Balance of trade figures released yesterday show a 1 per cent increase for imports of consumption goods which include electronics and furniture. With little sign of any slowdown after the August interest rate rise the Reserve is almost certain to raise rates next week and it is becoming likely that another rise will follow soon after.
 

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2 November 2007 - More people staying in workforce longer
The Financial Review
In good news for employers struggling with a shortage of skilled staff a survey has found that more people than ever over the age of 55 have no plans to retire. The study by Nielsen Panorama reports that 55 per cent of workers who are aged between 55 and 64 have no short term retirement plans, up from 43 per cent just one year ago. This means that there are 980,000 people over the age of 55 in the workforce who either have no plans to retire or did not intend to retire within the next 5 years.
 

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2 November 2007 - Tough new rules for investment schemes
Sydney Morning Herald
The Australian Securities and Investments Commission has moved to protect consumers by introducing new rules for issuers of unlisted debentures. As debts from losses on investments with unlisted property lenders such as Fincorp and Westpoint now total $1.3 billion, the regulator has announced eight key financial benchmarks that must be disclosed about these types of investments. Two of the conditions specifically address property investment groups which will now have to inform investors of their loan-to-value ratios and the valuation of their portfolios. All investment groups will also have to disclose their equity component, liquidity and credit ratings and where the information cannot be provided reasons must be given. The new rules come into effect on 1 December 2007.
 

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2 November 2007 - US rate cut makes dollar jump
The Australian
The sharemarket, oil and the Australian dollar have all gone up following yesterday's announcement of a 0.25 percentage point cut in the US cash rate by the Federal Reserve. The S&P/ASX200 gained 74.6 points to 6828.7 and has gained 21 per cent over the last year. The Australian dollar reached a new 23-year high above US93 cents while crude oil hit $US96.24 a barrel. With signs that the US economy was recovering from its sub-prime crisis with an annualised growth rate of 3.9 per cent, the Fed signalled that the latest cut could be the last easing of policy.
 

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2 November 2007 - Wizard expanding horizons
The Australian
Wizard is going global with plans to open branch networks in India, Greece, Eastern Europe and Latin America. According to Wizard Home Loans founder Mark Bouris the first location will be India where the company plans to open over 250 branches in the next four years. Mr Bouris is also behind plans for a new personal finance advice business in Australia called Yellow Brick Road which opened for business in July.
 

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2 November 2007 - Business lending drives Westpac profit
The Financial Review
Westpac is the latest bank to report a record profit for the year to September, with an after-tax result of $3.45 billion, up 12 per cent from the previous year. Shares in the bank gained 52 cents to close at $31.06 after reporting strong growth, particularly in business lending and its wealth management division. Total loans grew by 16 per cent and deposits by 19 per cent. The banks mortgage book expanded by 12 per cent while business lending was up 16 per cent. Revenue leaped by 9 per cent while growth in costs was limited to 6 per cent driving Westpac's cost-to-income ratio to a new low for the bank of 45 per cent.
 

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1 November 2007 - Credit growth increases rate pressure
The Financial Review
The Reserve Bank of Australia has reported that the total value of credit to the private sector was up by 1.2 per cent, contributing to a rise of 15.9 per cent over the year, the fastest rate of growth in credit since 1989. Borrowing by businesses leaped by 2 per cent in the month and is running at an annual growth rate of 23.3 per cent. Analysis of international consumer price indices shows that Australia's CPI, excluding fuel and food increased by 2.5 per cent in the September quarter compared with an OECD average of 1.9 per cent. These figures show that the local economy has not been significantly affected by the US sub-prime debacle and subsequent global credit tightening, so add to the case for another rate rise in an attempt to curb inflationary tendencies.
 

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1 November 2007 - St George confident about future
Sydney Morning Herald
At St George Bank's profit result announcement yesterday the acting chief executive, Paul Fegan, said that he expects healthy growth over the next year due in part to improved economic performance in the bank's home state of NSW. However plans to become a more national bank will be accelerated with at least 72 new branches opened, mainly in Queensland, Victoria and Western Australia. Mr Fegan also reassured the bank's 480,000 home loan borrowers that their mortgage rates would only increase in line with movements in the Reserve Bank's cash rate despite an increase in the cost of funding caused by the global credit shortage.

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1 November 2007 - IWL to be swallowed by CBA
The Financial Review
Shareholders have approved the proposed takeover of online broker IWL by the Commonwealth Bank. The deal, worth $373 million, was overwhelmingly approved at a shareholder meeting yesterday. IWL shareholders will receive either cash or CBA shares in return for the holdings on November 26.
 

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1 November 2007 - US Fed cuts rate, dollar soars
Sydney Morning Herald
The Australian dollar has pushed past US93 cents this morning following the US Federal Reserve's decision to cut its cash rate by 25 basis points to 4.5 per cent. The local currency is at its highest value against the greenback in 23 years, being buoyed by the prospect of another increase in the cash rate when the Reserve Bank of Australia meets next week.
 

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1 November 2007 - Record profit from Suncorp
The Age
Shares in Suncorp remained steady after yesterday's announcement of a record after-tax profit for 2006-07 of $1.064 billion, an increase of 16.2 per cent on last year. While the bank warned that the higher cost of funding could wipe up to $15 million off its earnings in the coming year chief executive John Mulcahy has forecast 10 per cent growth in profits this year. The bank has signalled that some capital will be returned to shareholders in the second half of the current financial year, after the first anniversary of Suncorp's $7.9 billion takeover of the Promina insurance group.
 

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1 November 2007 - Owning a home gets tougher
The Financial Review
New data from the Australian Bureau of Statistics shows that home owners with mortgages paid an average of 20 per cent of their gross income, or $338 per week, for housing in 2005-06. Renters were paying an average of 19 per cent of their income for housing, or $223 per week, however for people on lower incomes the percentage needed for rental payments increased to 29 per cent or $193 per week. The situation is getting worse with house prices and rents increasing significantly since 2005-06. The median price for houses and units was up by 12.34 per cent in the year to September alone. The proportion of people owning their dwelling decreased for 42 per cent in 1994-95 to 34 per cent in 2005-06.
 

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December 2007

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