Housing finance up 1.9% in October, Rates still expected to rise in coming months: Economy Roundup

Home loan commitments grew by a seasonally adjusted 1.9% in October, according to the latest results from the Australian Bureau of Statistics.

The figure comes in above market expectations, with analysts predicting a flat result.

The figures show the total number of commitments for owner-occupied dwellings rose from 48,365 to 49,307, with the value of home loans for owner-occupied homes growing 2.8% to $14.16 billion.

The value of loans for investment homes grew by 1.1% to $6.74 billion, with the number of commitments to buy new homes rising by 9.4%.

Commitments to buy established homes grew by 1.8%, with the number of loan commitments for building homes rising by 0.1%. Total housing finance value rose by 2.2% in October.

Meanwhile, Centro Retail Trust has said it expects underlying profit for the first half of the current financial year to be 20% below the $81 million result from last year due to poor market conditions.

“As previously disclosed by (Centro), a variety of market and credit factors in the US and Australia are affecting (Centro’s) first half FY11 underlying operating performance and cashflow,” the trust said in a statement.

Some of these factors included higher interest rates and a lower amount of net operating income from the US due to the higher Australian dollar.

But that rate pressure is set to increase, according to economists. Craig James from CommSec says the RBA may be in a wait-and-see position given yesterday’s decision to keep the cash rate at 4.75%, but says the next move is almost definitely upwards.

He also says CommSec’s expectation for the next rate rise is now set for April, rather than February.

“Even though rates are on hold, the threat of higher rates in 2011 together with lofty utility charges and higher petrol prices will ensure that consumer conservatism continues into the New Year.”

“Investors and borrowers need to go into 2011 with their eyes wide open. The RBA Governor has indicated that rates are still more likely to rise, not fall, in the coming year. Simply, if you factor in higher rates over the next year then you have the best chance of maintaining your current lifestyle without major disruption.”

ANZ also released a statement in which it said that the next move for rates is likely to be an upwards one.

“For now, it’s likely that the Bank (and ANZ) expects that the next move in Australian interest rates will be upward.”

“As it’s also likely that there will be a number of weaker economic data points released over the next few months in Australia, if the market begins to price no change in monetary policy or even possibly a reduction in rates, we would seek to fade this view, as at this stage, it still seems more likely that from here we will see a long slow tightening cycle continue to emerge, while the terms of trade remains elevated.”

Sharemarket falls on weak overseas leads

The Australian sharemarket has opened lower this morning following a weak night in overseas trading.

The benchmark S&P/ASX200 index was down 3.3 points or 0.07% to 4723.5 at 12.15 AEST, while the Australian dollar maintained its position at US99c.

AMP shares gained 0.8% to $5.23, as NAB lost 0.6% to $23.82. Westpac fell 0.4% to $2.185 as ANZ dropped 0.5% to $23.38.

Reuters has reported that Rio Tinto coal mines in Queensland have resumed operations following recent heavy rain and flooding.

“Significant rainfall throughout central Queensland has impacted on production at our Queensland operations,” Rio said in a statement. “All sites have partially resumed operations after the rainfall into the weekend and we’re working to determine the extent of the impacts.

Macarthur Coal also said that it had experienced problems due to the rain, with delays ongoing.

“Rio has operations spread across a much wider geographic area than us…So what they say may not necessarily apply to the rest of the Bowen Basin,” a spokesperson said.

MoneyGram international has joined with convenience store chain 7-Eleven to introduce a new money transfer kiosk.

The new product will allow users to transfer funds internationally 24-hours a day.

“The pilots conducted in nine Victorian stores have shown that consumers like the process and come back to the use the kiosk to conduct money transfers,” group chief executive Philip Course said in a statement.

IMF attacks Europe approach to debt bailout

The International Monetary Fund has attacked Europe’s response to the debt crisis. Managing director Dominique Strauss-Kahn has now said nations will not increase the sizes of their safety nets.

“The euro zone has to provide a comprehensive solution to this problem,” Strauss-Kahn said. “The piecemeal approach, one country after another, is not a good one.”

The comments come as American investors are still worried over the European debt problems. The Dow Jones Industrial Average fell three points or 0.03% to 11,359.16.