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How to make 2018 money friendly

Posted On:Jan 12th, 2018     Posted In:Rss-feed-market    Posted By:Provision Wealth

As the Christmas decorations get packed away and life for many returns to normal, AMP Capital is encouraging customers to consider their finances when setting their resolutions for 2018.

Instead of making vague promises like “get fit” or “pay down debt” AMP Capital Head of Retail of Retail Business Manuel Damianakis recommends people set more specific resolutions to grow their

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As the Christmas decorations get packed away and life for many returns to normal, AMP Capital is encouraging customers to consider their finances when setting their resolutions for 2018.

Instead of making vague promises like “get fit” or “pay down debt” AMP Capital Head of Retail of Retail Business Manuel Damianakis recommends people set more specific resolutions to grow their wealth during the year.

“Consider a resolution to review and contribute more to your superannuation or commit to undergoing a New Year health check of your finances to ensure your investments are meeting your needs,” says Damianakis.

“Check if you’ve got the best rate on your mortgage and you have enough insurance, or resolve to invest some time towards better educating yourself about saving and investing.”

“Above all, setting a clear goal is critical for the success of any resolution and talking about your goal with others can help ensure you will actually follow through on your promise.”

HERE ARE AMP CAPITAL’S TOP FIVE NEW YEAR’S RESOLUTIONS FOR A WEALTHIER 2018

  • Set your spending habits early: Take the time to review every dollar you spent in 2017. Most credit card and internet banking sites allow you to download transaction data. Sort through and categorise them into absolute essentials versus discretionary spend. This can be a painful process but is necessary to help you prioritise where you will spend your hard-earned dollars in 2018. 

  • Talk about your goals. Our experience suggests that people who talk about their goals and resolutions are more likely to achieve them. Share your key resolutions or goals with someone you trust and respect and check in with them regularly throughout the year to let them know how you’re going.

  • Take a closer look at your superannuation. Don’t just commit to saving more for a rainy day. Commit to contributing a little extra to your superannuation in 2018 so you have more money come rain, hail or shine in the years to come. Through the power of compound interest, adding extra dollars to your superannuation now, will mean having so much more to fund your lifestyle when you retire. Your future self will thank you for the foresight shown. The New Year is also a good opportunity to review your investment options so that you have the appropriate mix of growth and defensive assets in your portfolio for your stage in life and in line with your goals.

  • Invest in yourself and read widely. Financial education is becoming more accessible and investing in yourself, even if it’s just making time to learn more, is one of the best ways to help you achieve your financial goals. There is a lot of valuable information available online (often for free) as well as offline for your benefit. So consider adding a few wealth management websites (such as www.ampcapital.com.au), blogs and books to your holiday reading.

  • Don’t leave it too late. If you have big long-term goals that require a lot of money, don’t wait a couple of years to start working towards them. For example, if you would like to retire at a certain age, your resolutions should include determining how much you need to contribute to superannuation and then understanding what investment strategy you should have in place. Seeking the assistance of a financial adviser may be appropriate.

 

Source: AMP Capital 12 January 2018

Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

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Debunking 3 myths about listed infrastructure

Posted On:Dec 14th, 2017     Posted In:Rss-feed-market    Posted By:Provision Wealth

Did you know it takes 957 gallons of water to create a single Big Mac? Some 550 million Big Macs are consumed each year in the US alone. That’s a lot of water. But we simply wouldn’t have Big Macs without the infrastructure to filter and transport water to each part of the Big Mac production process.

It’s easy to forget

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Did you know it takes 957 gallons of water to create a single Big Mac? Some 550 million Big Macs are consumed each year in the US alone. That’s a lot of water. But we simply wouldn’t have Big Macs without the infrastructure to filter and transport water to each part of the Big Mac production process.

It’s easy to forget that infrastructure is a vital cog in the items we consume every day in a dynamic and growing economy. Infrastructure is often viewed as old and boring, dangerous when rates rise, and relatively volatile.

But if we can deconstruct the three most pervasive and misleading myths around global listed infrastructure, investors, particularly retirees, will be less likely to dismiss an asset class that delivers them two powerful benefits: a defensive and stable yield for income, and also the capital growth needed to keep up with their rising costs of living.

MYTH 1: Infrastructure is a boring old-economy style investment

The first myth is that somehow in a world of Amazon, Uber and Google infrastructure is an ‘old economy’ style investment; it has little growth potential and limited relevance to future economic needs.

Nothing could be further from the truth. Indeed, McKinsey estimates that US$57 trillion will be spent on infrastructure worldwide by 2030. And infrastructure is at the core of many key global secular themes that are shaping the future of investment markets:

  • Communication and data usage. Our ability to deliver and enable the technology and communication needs for the new economy relies on infrastructure. Global mobile data traffic is expected to increase seven-fold between 2016 and 2021, according to CISCO.

  • Shale gas. Drillers have used fracking technologies to extract new sources of natural gas from previously uneconomic shale formations. That natural gas is helping meet the insatiable global demand for energy. We require some $A641 billion of investment in midstream energy infrastructure through to 2035, an annual spend of $A29 billion.

  • Electricity production and transmission. The production and delivery of an economic electricity supply will become increasingly important if we are to maintain global economic growth.

  • Water. Our ability to store and efficiently deliver a reliable water supply is becoming increasingly vital as the world’s population surges and global water distribution remains unpredictable. Agriculture currently uses around 70-80% of available water. That usage will rise as developing economies, such as China, increase consumption of meat, which requires significant volumes of water to produce. Indeed, some forecasts say that, by the year 2030, the global demand for water will exceed the global supply of water by an astounding 40%.

MYTH 2. Volatility in listed infrastructure is a disadvantage compared to unlisted infrastructure

A myth also persists that because global listed infrastructure (which can be bought and sold on exchanges) can be more volatile, it is therefore a worse investment than unlisted infrastructure.

Yes, unlisted infrastructure can be less volatile because assets are typically valued twice a year. But listed infrastructure’s daily pricing creates opportunity. An active manager can find arbitrage opportunities when economic growth slows and the value of listed infrastructure falls faster and more than unlisted assets.

Listing infrastructure on an exchange brings other benefits to investors, including diversification. Investors can access a broad set of liquid investment opportunities across geographies and sectors that may not be available through direct investment.

We believe that, ultimately, the returns from infrastructure are determined by the asset itself, and not by whether the asset is in the listed or unlisted format. In many cases, listed infrastructure companies and direct investors co-own assets and as a result, both formats should deliver similar returns in the long term.

MYTH 3. Infrastructure assets are susceptible to rate hikes

But perhaps the most pervasive myth is that infrastructure suffers when central banks increase interest rates. But the reality is that infrastructure assets typically provide protection against rising interest rates.

As we’ve noted previously, global listed infrastructure is sensitive to rate rises in the short-term. Since the end of the GFC, we have witnessed 4 periods of meaningful increases in sovereign yields. Global listed infrastructure initially underperformed global equities, but then, as you can see in the chart below, the asset class showed remarkable resilience and recovered all the relative underperformance over the next 12 months.

Table 1.  Relative performance following periods of rising yields – Global Listed Infrastructure vs. Global Equities 

Why is infrastructure rate rise resilient? Firstly, infrastructure companies’ longer-term debt structures gives them the option to refinance longer-term debt at favourable rates should market conditions allow. Secondly, when rates rise, infrastructure companies can  often charge customers more because contracts and regulation are often negotiated on a ‘cost-plus’ basis. And thirdly, when interest rates rise because of GDP growth, infrastructure assets are usually benefiting from increased demand in a buoyant economy.

Over the long term, investors should focus on global listed infrastructure’s ability to generate visible and growing cash flow, because that is ultimately what determines performance, not fluctuating rates.

A different story

More than ever investors, particularly retirees, need both stable income and growth, which is exactly what global listed infrastructure delivers.

Yet it is an asset class that is particularly prone to distorting myths, perhaps because it is relatively new. That creates a danger that investors don’t include it in their long-term portfolios.

But global listed infrastructure will continue to deliver income and growth, even as quantitative easing (QE) ends and interest rates rise, because of its strong cash flows and because it is the foundation of improving global growth.

People will still be eating Big Macs, and we’ll still need the gallons of water required to make the hamburgers, and most importantly we’ll still need the infrastructure that delivers that water.

 

Source: AMP Capital 14 December 2017

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Monetary Policy Decision – Statement by Philip Lowe, RBA Governor, December 2017

Posted On:Dec 05th, 2017     Posted In:Rss-feed-market    Posted By:Provision Wealth

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy have improved over 2017. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy continues to be supported by increased spending on infrastructure and property construction, although

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At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy have improved over 2017. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy continues to be supported by increased spending on infrastructure and property construction, although financial conditions have tightened somewhat as the authorities address the medium-term risks from high debt levels. Australia’s terms of trade are expected to decline in the period ahead but remain at relatively high levels.

Wage growth remains low in most countries, as does core inflation. In a number of economies there has been some withdrawal of monetary stimulus, although financial conditions remain quite expansionary. Equity markets have been strong, credit spreads have narrowed over the course of the year and volatility in financial markets is low. Long-term bond yields remain low, notwithstanding the improvement in the global economy.

Recent data suggest that the Australian economy grew at around its trend rate over the year to the September quarter. The central forecast is for GDP growth to average around 3 per cent over the next few years. Business conditions are positive and capacity utilisation has increased. The outlook for non-mining business investment has improved further, with the forward-looking indicators being more positive than they have been for some time. Increased public infrastructure investment is also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.

Employment growth has been strong over 2017 and the unemployment rate has declined. Employment has been rising in all states and has been accompanied by a rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead. There are reports that some employers are finding it more difficult to hire workers with the necessary skills. However, wage growth remains low. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time.

Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. The Bank’s central forecast remains for inflation to pick up gradually as the economy strengthens.

The Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.

Growth in housing debt has been outpacing the slow growth in household income for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Credit standards have been tightened in a way that has reduced the risk profile of borrowers. Nationwide measures of housing prices are little changed over the past six months, with conditions having eased in Sydney. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities.

The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Source: Reserve Bank of Australia, December 5th, 2017

Enquiries

Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY

Phone: +61 2 9551 9720
Fax: +61 2 9551 8033

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Could our mortgage monster become the Christmas Grinch?

Posted On:Nov 14th, 2017     Posted In:Rss-feed-market    Posted By:Provision Wealth

The disappointing retail sales figures from the last quarter could be just the tip of the iceberg for those watching the retail sector heading into Christmas, reckons Dermot Ryan, AMP Capital’s Portfolio Manager – Australian Equities.

But it’s not likely to be the so called “Amazon effect” of internet shopping, nor competition from fast fashion retailers, or even unfavourable currency swings

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The disappointing retail sales figures from the last quarter could be just the tip of the iceberg for those watching the retail sector heading into Christmas, reckons Dermot Ryan, AMP Capital’s Portfolio Manager – Australian Equities.

But it’s not likely to be the so called “Amazon effect” of internet shopping, nor competition from fast fashion retailers, or even unfavourable currency swings Ryan is factoring in when he’s calling out the possibility we’re heading for a flat Christmas in terms of spending and economic growth – although all three of these factors could prove to be head winds for retailers but a boon for shoppers.

It’s the debt overhang from the housing boom that could end up casting the longest and coldest shadow over Australia’s Christmas cheer, Ryan says, pointing out he’s reading the data and not himself the Christmas Grinch.

“We’re at the mature stage of a housing cycle where a lot of mortgagees have large debts and some groups have overextended themselves buying property. Even before the RBA (Reserve Bank of Australia) thinks about raising interest rates this year, stresses are appearing as banks raise the cost of interest only and investor loans and I’m guessing it will seriously curtail their ability to spend this festive season,” Ryan explains.         
 
Much has been said and written about the challenges facing retailers, firstly stemming from new competition coming to Australia, and secondly as technology facilitates better price discovery which has the effect of eating into retailers’ margins. 

The September quarter was the first quarterly decline in retail sales figures since 2012 and only the fourth recorded decline since the global financial crisis, according to the Australian Bureau of Statistics data released in early November.

The market had forecast a rebound in September following a steep fall in retail sales the previous month – the largest monthly decline recorded by the ABS in close to five years – but that rebound never materialised.

However, reading further into the data, Ryan believes the hefty weight of mortgage payments – which he points out Australian households remain on the hook for – have not impacted retail sales to the extent he ultimately expects they will… yet.

See, when a mortgage customer moves from an interest only mortgage to a principle and interest mortgage, there can be up to a 40 per cent increase in monthly repayments, Ryan explains. This change has a big impact on what left over at the end of the month, particularly for young families who are amongst the most indebted cohorts, he adds.

“It does seem like the increased mortgage payments are starting to make an initial dent into retail sales. This has further to play out given the mortgage rate hikes and ongoing push to switch mortgages to P&I (principal and interest) loans from interest only loans,” Ryan notes.

All the major banks and many of the regional institutions have raised lending rates – particularly on interest only loans – even though the RBA has kept its 1.5 per cent cash rate on hold this year.

Meanwhile, mortgagees, particularly those with interest-only loans, are already feeling the pinch, Ryan highlights.

“There are also a lot of uncontrollable cost increases for households like electricity, insurance and education that are also rising and crimping disposable income,” Ryan adds.

Cutting spending is the first thing households worried about mortgage repayments will do, Ryan says, highlighting the findings of a recent UBS study which surveyed Australians who had recently taken out a mortgage to buy a residential property.

Half of those surveyed who said they were feeling anxious about repayments said they’d cut spending while others surveyed said they’d likely opt to switch to principle and interest loans.

Switching to P&I loans increases monthly mortgage costs by 30-40 per cent which won’t be good for household spending either, Ryan highlights.

It’s clear the hangover from the housing boom and its potential impact on spending and economic growth is on the radar of the RBA too; at the latest monetary policy decision RBA Governor Philip Lowe noted “a continuing source of uncertainty is the outlook for household consumption” adding that “inflation is likely to remain low for some time, reflecting the slow growth in labour costs and increased competitive pressures, especially in retailing.”

 “Looking at the data it’s clear this trend to P&I is still in play which points to a difficult Christmas ahead,” Ryan notes.

Source : AMP Capital 10 November 2017 

Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

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4 steps to help protect portfolios against political risk

Posted On:Nov 14th, 2017     Posted In:Rss-feed-market    Posted By:Provision Wealth

When Australia’s High Court ruled deputy prime minister Barnaby Joyce ineligible to sit in Parliament because of his dual New Zealand citizenship, the decision briefly sent tremors through equity and currency markets. It was a clear reminder that political risk matters to markets.

We face troubling political and geopolitical risk across the world: Trump, Brexit and, above all, the risk of

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When Australia’s High Court ruled deputy prime minister Barnaby Joyce ineligible to sit in Parliament because of his dual New Zealand citizenship, the decision briefly sent tremors through equity and currency markets. It was a clear reminder that political risk matters to markets.

We face troubling political and geopolitical risk across the world: Trump, Brexit and, above all, the risk of nuclear confrontation with North Korea. Yet some investors, used to QE-fuelled rises, have simply forgotten about political risk and are maintaining highly concentrated portfolios, which exposes them to the fallout from political shocks.

To protect against heightened risk to portfolios, advisers and investors need to begin assessing political risk objectively from a multi-dimensional perspective. This involves four key steps. If they can grasp those steps, they will not only get better portfolio protection, but also gain a broader insight into the field of managing risk and uncertainty as investors.

1.    Put some odds on it

The first step is to put some probability on the risk of the event happening. As we headed towards Britain’s referendum on whether to remain in, or leave, the European Union, we believed the probability was 50/50: there was a 50 per cent chance a leave vote would win; and a 50 per cent chance Britain would stay in the EU. But the market was pricing in a much higher probability of Britain remaining – 80 per cent. Financial markets were pricing in the prevailing view in London and ignoring the rest of the country. The market, therefore, hadn’t priced in the risk of Brexit, especially in the pound. We took advantage of that gap and took a short position in the pound as a hedge.

2.    Assess likely impact

The second step is to determine the impact of the political event. If the impact is likely to be extremely high, then it may make sense to move to help protect your portfolio. A North Korean nuclear attack might be unlikely, but the impact would obviously be horrific.

But sometimes the market overstates the possible impact of a political event. The market frets about a Donald Trump impeachment or US political risk. But we believe the impact of an impeachment and political paralysis is relatively low.

The impact might be high in the short term, but not in the long run. For the first time in eight years we have the Republicans in control of both the Senate and the House and they are motivated to get a fiscal package announced before the mid-term election in 2018. So, it’s a risk we’re aware of but we’re not doing anything about it.

3.    Ask how much of that bad scenario is priced into the market.

The third step is to analyse how much the political risk is priced into the market. Broadly, if everyone is talking about a political risk, it’s usually priced in and it’s too late for us to do anything.

But other various measures provide guidance, including volatility and sentiment measures. Low volatility and crowded positions usually mean investors are not pricing in risk. Conversely, if investors are avoiding or have sold out of a position, volatility is high, valuations are cheap, and everyone is talking about it, then political risk is likely priced in.

Sentiment measures help gauge investor enthusiasm. If everyone is enthused about the downside, then bad news is priced in. If everyone is enthused about the upside, then risk is usually not priced in. Valuations measures such as price-to-earnings and price-to-book ratios for equities, and real effective exchange rates for currencies, are also useful.

4.    Construct a portfolio that accounts for risk

The final step is to construct your portfolio to account for the risk. That may involve using put options, shorting an asset class, or using currencies to hedge.

If we look again at North Korea, our previous steps have told us that the probability of an attack is low. That’s similar to what the broader market believes. But the impact if it did happen would be devastating, so we want some protection in the form of a ‘tail hedge’. (A tail hedge helps protect against extreme market event scenarios that are unlikely to happen, but have a very high impact.)

What is an asset class that would benefit in the unlikely event of a North Korean attack? Gold. Because the probability of an attack is low, we have a small 3 per cent allocation to gold. But if North Korea attacked, the impact would be so huge that the small allocation to gold is likely to multiply upwards of 300 per cent.

Currencies are another great lever for managing political risk. Italians go to the polls to elect a new government by May 20 next year. There is a risk, albeit relatively low, that Eurosceptic parties will do well, triggering fresh talk of a breakdown of Europe. But we don’t believe that risk is priced into the euro, which warrants a short position.

Less fearful investment

The recent events surrounding Barnaby Joyce’s eligibility, as well as the history of markets shows that political risk surrounds us, and that political events can rock markets and severely damage portfolios. Yet when political risks hit markets, investors are often caught by surprise. They then panic, as they did back in 2008, and often sell at exactly the wrong time.

I well remember back in October 2008 when the House of Representatives rejected a $700 billion financial rescue package, triggering one of the biggest stock sell-offs in history. The market had been expecting the bill to pass.

By firstly being aware of political risks, then objectively assessing those risks, investors can remove that emotional element and better prepare their portfolios to weather those risks. Not only is their portfolio potentially going to benefit, but their fears around investment performance and volatility will also ease.

Source : AMP Capital 8 November 2017 

About the Author 

Nader Naeimi has more than 19 years of experience in Australia’s financial markets, including 16 years at AMP Capital. As the Head of Dynamic Markets, he is responsible for leading the Dynamic Asset Allocation strategy for the Multi-Asset Group, as well as other macro strategies and asset allocations for several AMP Capital funds.


While every care has been taken in the preparation of this document, AMP Capital makes no representation or warranty as to the accuracy or completeness of any statement in it including without limitation, any forecasts. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. Investors and their advisers should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs.

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Monetary Policy Decision – Statement by Philip Lowe, RBA Governor, November 2017

Posted On:Nov 08th, 2017     Posted In:Rss-feed-market    Posted By:Provision Wealth

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy are continuing to improve. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy is being supported by increased spending on infrastructure and property construction, with the

Read More

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy are continuing to improve. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Australia’s terms of trade are expected to decline in the period ahead but remain at relatively high levels.

Wage growth remains low in most countries, as does core inflation. Headline inflation rates are generally lower than at the start of the year, largely reflecting the earlier decline in oil prices. In the United States, the Federal Reserve has started the process of balance sheet normalisation and expects to increase interest rates further. In a number of other major advanced economies, monetary policy has become a bit less accommodative. Equity markets have been strong, credit spreads have narrowed and volatility in financial markets remains low.

The Bank’s forecasts for growth in the Australian economy are largely unchanged. The central forecast is for GDP growth to pick up and to average around 3 per cent over the next few years. Business conditions are positive and capacity utilisation has increased. The outlook for non-mining business investment has improved, with the forward-looking indicators being more positive than they have been for some time. Increased public infrastructure investment is also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.

The labour market has continued to strengthen. Employment has been rising in all states and has been accompanied by a rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead. The unemployment rate is expected to decline gradually from its current level of 5½ per cent. Wage growth remains low. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time.

Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. In underlying terms, inflation is likely to remain low for some time, reflecting the slow growth in labour costs and increased competitive pressures, especially in retailing. CPI inflation is being boosted by higher prices for tobacco and electricity. The Bank’s central forecast remains for inflation to pick up gradually as the economy strengthens.

The Australian dollar has appreciated since mid year, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to continued subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.

Growth in housing debt has been outpacing the slow growth in household income for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Credit standards have been tightened in a way that has reduced the risk profile of borrowers. Housing market conditions have eased further in Sydney. In most cities, housing prices have shown little change over recent months, although they are still increasing in Melbourne. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities.

The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Source: Reserve Bank of Australia, November 6th, 2017

Enquiries

Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY

Phone: +61 2 9551 9720
Fax: +61 2 9551 8033

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