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RBA Keeps Interest Rates at 1.5 Per Cent

The Reserve Bank of Australia (RBA) has announced that it would keep the cash rate at 1.5 per cent, only two weeks after governor Philip Lowe said more interest rate cuts might be necessary to prevent rising inflation.

“The board judged that holding the stance of policy unchanged … would be consistent with sustainable growth in the economy and achieving the inflation target over time,” the RBA stated.

“The bank’s forecasts for output growth and inflation are little changed from those of three months ago,” Dr. Lowe said in a statement on Friday.

“Over the next year, the economy is forecast to grow at close to its potential rate, before gradually strengthening. Inflation is expected to pick up gradually over the next two years.”

The RBA also expected commodity prices to stabilise after inflating by 9.5 per cent in October.

Economists expect the rate to remain on hold, at least through 2017.

“Moving forward, if domestic economic data remains strong, there should be no reason for the Reserve Bank to change their stance on monetary policy,” said John Flavell, chief executive at Mortgage Choice. “As such, the cash rate could be left on hold at 1.5 per cent for the foreseeable future.”

“Even though the underlying inflation rate is still below the RBA’s target rate, ‘keeping its powder dry’ is absolutely the right monetary policy decision for the moment,” said Brendan Rynne, chief economist at KPMG. “Waiting for a clearer picture of which way the local and international economic forces are moving is smart.”


News: Chinese Investment in Australia’s Property Market Declines

Chinese property investment in Australia has declined by 37 per cent year-on-year, according to a report by London-based property consultancy Knight Frank.

The Changing Currents, Rising Tides report found that Chinese developers and investors spent US$1.7billion in the first half of 2016, with the volume of office and hotel transactions dropping 65 per cent and 42 per cent respectively year-on-year.

“The volume of Chinese investment in Australia is down considerably year-on-year because of a lack of mega-deals in the first half, as large deals such as the Investa portfolio dragged the 2015 number higher,” said Matt Whitby, head of research and consulting at Knight Frank.

However, Whitby said en-block commercial properties in Sydney and Melbourne remained popular to Chinese investors, who were “attracted by rental growth supported by strong tenant demand and a supply shortage.”

The report also noted that Chinese investors’ interest in foreign real estate market remained strong, “driven by Chinese economic and policy factors and are attracted by favourable local market conditions in gateway cities” in Australia, Canada, the United Kingdom, and the United States.

Dominic Ong, head of Asian markets at Knight Frank indicated that more major deals could be made in the second half of the year, as fewer transaction opportunities and a promising rental market have pulled in investors.

“Activity has picked up in the past few months,” said Ong.

“Some of the most recent transactions in Australia from Chinese buyers include 15 Help Street, Chatswood which sold for $43.8 million to One Pro Investment Group; 20 Bridge Street, Pymble which sold for $78 million to YuHu; 210 George Street, Sydney sold for $160 million to Poly Group; and 61 Lavender Street, Milsons Point sold to Aqualand for $110 million.”


Construction equipment sales in China have improved based on reports from Equipment hunt

Finance Trends: Construction Industry

Financing in the construction industry continues to be a challenge for many contractors in the United States, according to Todd A. Feuerman of Construction Global.

He states that “even during the pre-recession period, lending to construction firms presented challenges to most banks.” Feuerman suspects “that this was due to a number of economic factors, including the sensitivity of contractors to economic cycles, revenue fluctuations from year to year, excess competition and the expansion of the construction industry”.

Additionally, Feuerman concludes that “there are other credit underwriting issues that continue to challenge banks in lending to construction firms, including prominent construction company failures, the unpredictable nature of the work, estimates used in the preparation of financial statements, diminished gross profit margins with continued backlog profit erosion, lending against bonded accounts receivable and addressing “quasi liens” on accounts receivable secured with joint check agreements”.


Lifestyle: What Is A Home Equity Loan?

When you are looking to renovate or buy a second house, home equity loan might be a good idea. What is home equity loan, and how can you benefit from it? Let’s look deeper.

Home equity loan – what is it?

According to, home equity loans (or lines of credit) “are given to the home owners to renovate their home or to buy a second property. Home equity is the difference between the value of your home and the money you owe.”

For example, if you owe $200,000 and your home’s worth is $600,000, your home equity limit would be $400,000. You would be able to apply for a loan of up to $400,000.

As yourmortgage explains, the amount of interests you need to pay depend on how much money you are drawing out. For example, if you take out $100,000 to purchase a car, you would only need to pay interests calculated based on this amount instead of the whole $400,000.

The benefits of home equity loan

“People are using home equity for what they need [rather than] what they want,” Kelly Kockos, senior vice president of home equity for Wells Fargo said.

Home equity loans are mostly used for durable purposes, such as house renovating, vehicles, aged care accommodation and more.

The interest rates for home equity are also generally lower (ranging from 3.5-4.5%) than personal or credit card loans (starting from 6%).

Home equity loans also enable you to access large amount of fund that you can use or save to reduce interests. You have flexibility in managing repayments – it enables you to pay more than the minimum if you want to shorten the loan term.

The risks of home equity loan

You will need to be mindful about your daily transactions, as you have access to large amount of additional funds. If you are impulsive in making financial decisions, home equity loan might not be the right choice as it can increase your debt significantly.

Using home equity loan for investment or to lend to other people (e.g. relatives and family members) is also not recommendable, as you will be risking your own home in the process.

Oil rig

Market: Oil Prices Fall Following Iraq’s Backtracking on OPEC Output Curb

Oil prices have fallen following Iraq’s statement that it sought to be exempt from the OPEC’s planned output cuts, as the group seeks to stabilise crude market.

Iraqi officials were reported on Sunday saying they would not reduce output, which is currently at 4.77 million barrels per day, because the country needed more fund to fight Islamic State militants.

Oil prices fluctuate around US$50 per barrel, mostly down 30 cents or 0.6%. West Texas Intermediate for December delivery dropped 33 cents to close at $US50.52 per barrel on the New York Mercantile Exchange. Brent fell 32 cents to $US51.46 per barrel.

Iraq is the second-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), behind Saudi Arabia.

“Iraq’s request to be exempted from a deal to cut output has further clouded the prospect of OPEC strategy to stabilise the oil market succeeding,” said Danske Bank analyst, Jens Naervig Pedersen.

“There is a risk that Iraq’s refusal could trigger a domino effect that other producers would ask to be exempt from the cuts too,”  SCI International energy analyst, Gao Jian said.

OPEC members Iran, Libya and Nigeria expected to be spared from the deal. “If they do nothing, OPEC production next year is likely to average at least 34 mbpd (million barrels a day) with a real threat of it reaching close to 35 mbpd if the chaos in Libya and Nigeria were to be resolved,” broker PVM said.

OPEC produced a record of 33.75 million barrels per day in September, with Saudi Arabia producing 10.58 million of them.

coins finance

Global Economics/News: China’s Slowdown Is Biggest Economic Threat

China’s slowdown is the biggest threat facing global economy, former chief economist at the International Monetary Fund (IMF) told BBC.

Current Professor of Economics at Harvard University and former IMF economist Ken Rogoff said the economy could be “slowing down much more than the official figures show.”

“Everyone says China’s different, the state owns everything they can control it,” Rogoff said. “Only to a point. It’s definitely a worry, a hard landing in China.

“If you want to look at a part of the world that has a debt problem, look at China. They’ve seen credit fuelled growth and these things don’t go on forever.”

A Reuters poll shows that China’s economic growth next year is expected to slow down to 6.5 per cent, compared to this year’s 6.6 per cent.

The decline in global demand has resulted in the country’s exports falling 10 per cent year-on-year in September. Analysts also expect the increasing national debt levels to trigger a new financial crisis.

Furthermore, private investment has continued to drop. “The slowdown in private sector investment over the past years means that the organic growth momentum of the economy may have declined, requiring policymakers to be more vigilant in terms of keeping policies as supportive as possible,” said economists at HSBC in a statement.

The Chinese government has allocated more spending to provide fiscal stimulus, cutting lending rates six times since November 2014 and lowering banks’ cash reserve requirements to 17 per cent. However, analysts believe the government’s effort to increase liquidity in the market will not help much, as investors are more likely to save than make new investments.


Lifestyle: How To Plan A Good Wedding (On A Budget)

Your wedding day is one of the most important days in your life. However, this does not mean that you should spend all your savings for this day without preparing for what comes next: marriage life. Apart from financial prudence, many of us also could not afford to spend a lot of money for the ceremony and reception. At a time when weddings cost over $30,000 on average, a beautiful wedding could leave you with a lot of memories to cherish, but budgeting would truly help you live for your days ahead.

The wedding industry has also been known for charging customers with “wedding tax” – extra cost for weddings compared to other events such as birthdays and family reunions. This makes it all more important to prepare wedding budgeting properly.

So here is a tip to plan a good wedding on a budget:

When preparing your wedding, choose the more cost-efficient options for every aspect of the wedding, or give them up altogether depending on your priorities, eliminating some costs permanently.

For example, opt for ready-to-wear wedding dresses instead of custom-made ones, which could be three to four times as expensive.

Instead of photographers from established companies, hire a student photographer to capture the moments from the event. The same goes with musicians and catering – there is an abundance of local music graduates and hospitality students ready to serve your wedding for a very competitive price.

You can also hire the venues for four hours instead of six, and set the date on a Thursday or Friday instead of the weekends.

Paper invitations and RSVPs could also be a bit expensive – some people have opted for all-digital cards, meaning you will save cost and help the environment.

Ask for help from families and friends for the things you need, be it transports, hair and makeup, or making bridesmaids’ dresses.

Professional service might not always be the best, especially when it comes to affordability – make sure you look into all your options before spending some money.

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“Nearly all men can stand adversity, but if you want to test a man’s character, give him power.”
― Abraham Lincoln