The Board of the Reserve Bank meets on February 7 next week. In July last year Westpac forecast that the next easing cycle would

total 100bps beginning near year’s end. Subsequently, the Board decided to ease the overnight cash rate by 25bps in both November and December. Based on current information, we continue to expect a further 50bps of easings in this cycle with the next move at the February 7 meeting and another to follow in May.

The case supporting a rate cut next week is strong. Market pricing is certainly arguing for a move: current pricing puts an 85% probability on a 25bp cut.

Clearly, a key factor used by the Board to justify the decision to cut rates in December hinged around Europe and funding conditions.

The RBA Governor on December 6 noted, "Financial markets have experienced considerable turbulence and financing conditions have become much more difficult".

It is reasonable to argue that financial market conditions have improved since the December meeting. In the Board minutes it was noted, "Australian banks had found long–term debt markets dislocated" and "wholesale debt markets appeared to be closed to many financial institutions".

Bill Evans, Chief Economist

Westpac Bank

ANZ has joined Commonwealth Bank in lifting its interest rates 39 basis points, more than the Reserve Bank’s 25 basis point rate rise.

The ANZ’s standard variable rates is now 7.80 per cent.

CommBank on the other hand has fuelled intense anger from borrowers due by increasing its standard variable rate by 45 basis points, nearly twice the RBA’s official rate increase.

Westpac and the National Australia Bank have yet to announce their new lending rates. The four major banks had foreshadowed additional rate increases, citing rising funding costs on global markets.  The ANZ puts the large increase down to “intense competition for deposits and high wholesale funding costs is very real and has continued to increase the average cost of lending”.

Source: The Age

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The International Monetary Fund (IMF) has warned Australia and its neighbours of the need to raise interest rates and cut government spending because of the economic strength of the region.

It says in its Regional Economic Outlook for Asia and the Pacific released in Jakarta on Thursday that strong economic growth in the area is set to continue as it leads the global recovery. “Strong economic growth is leading to new policy challenges,” it says.

Inflationary pressures are building and the region is set to remain an attractive destination for foreign investment given the sluggish economy recovery in the US and Europe.

Such capital flows could add further to domestic price pressures. “We welcome the steps so far taken by policymakers to control inflation risks … but more now needs to be done given the continued strong growth in the region,” IMF’s director for the region Anoop Singh said.

“A faster withdrawal of the fiscal stimulus put in place during the global financial crisis would also help guard against the risks of overheating.” The warnings come as economists try to second-guess when the Reserve Bank of Australia (RBA) will likely raise interest rates again.  The central bank has indicated that rates will need to rise if the economy grows as it expects.

However, this week’s minutes of its October board meeting have thrown the strength of the Australian dollar into the mix of its policy deliberations, given its soothing impact on inflation.

The September quarter consumer price index is released next Wednesday. There is also a political row brewing over threats by retail banks that they may be forced to raise mortgage rates beyond moves by the central bank because of their increasing funding costs.

The federal opposition had demanded Treasurer Wayne Swan take a stronger stance against the banks. The IMF said economic activity continues to rebound in Australia driven by demand for its commodities that has raised the terms of trade to historically high levels.

“Growth was also boosted by high consumer confidence and tight labour market conditions, which supported private consumption, and public spending on infrastructure,” the Washington-based institution said.

The IMF expects the Australian economy to grow by 3.0 per cent in 2010 and 3.5 per cent in 2011, compared with 1.2 per cent in 2009. It expects private investment in mining and mining exports will take over from public demand as the main driver for growth.

More broadly, the IMF has increased its growth forecast for the region to eight per cent for 2010, nearly one percentage point higher than it forecast in April, led by robust growth in China and India – two of Australia’s leading export destinations.

Regional growth is expected to moderate to a more sustainable pace of 6.8 per cent in 2011. China said on Thursday that its economy grew by 9.6 per cent in the year to the end of September, just beating economists’ forecasts, but down from 10.3 per cent growth in the previous quarter.  Its annual inflation rate accelerated to 3.6 per cent, the fastest pace since October 2008.

China unexpectedly tightened borrowing conditions earlier this week. TD Securities strategist Roland Randall said the Reserve Bank would look at this data more closely than usual, given its own minutes this week indicated that a decision to raise rates was “finely balanced”.

“China data showing that Australia’s most important customer is recovering and not suffering the consequences of weak demand from its own customers reduces downside risks to hiking Australian interest rates sooner rather than later,” he said.

Story source: http://www.australian-real-estate.net.au

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A $1 billion-plus property fund based in New Zealand has drawn international media coverage.

Du Val Group said it planned to raise about $1 billion in two funds focusing on real estate in Australia and New Zealand. Stories about its rise have been published by Bloomberg, the South China Morning Post and the Wall Street Journal.

Du Val said it was seeking investors in Asia after launching its $250 million Mid-Market Fund in early August.

It planned to start the Opportunity Fund next month, to raise $1.1 billion.

Du Val has offices on level 27 of the PricewaterhouseCoopers Tower, Quay St, Auckland. Du Val’s Charlotte Clarke is married to developer Kenyon Clarke, whose father, Peter, is involved in Du Val.

“But Du Val has nothing to do with Kenyon,” Clarke said.

Inquiries had to be directed to an American media company, Roar.

She refused to say how much money had been raised or which buildings bought.

In 2008 the Waikato Times reported mother and son Jenepher and Kenyon Clarke, developers of many Hamilton studio apartment properties, had companies placed in receivership.

Du Val said some parts of Asia such as China were facing asset-bubble risks but markets such as New Zealand and Australia offered a more stable alternative because of steady growth.

“If you are a property investor, and most Chinese love property, the question is how can you leverage China’s growth but mitigate your exposure to the Chinese property market?” said William Nobrega, managing partner at Miami-based The Conrad Group, which is advising Du Val on the funds.

Jeannie Salameh of Roar Media, also in Miami, Florida, said money had already been raised.

“The Du Val Mid-Market Fund is a $250 million private-equity real estate buyout fund established to selectively acquire and add value to a significant portfolio of office, industrial, retail and residential properties in major New Zealand cities.”

She said the group had raised $75 million so far but she would not say what properties had been bought.

By Anne Gibson www.nzherald.co.nz

View the original article here

A $1 billion-plus property fund based in New Zealand has drawn international media coverage.

Du Val Group said it planned to raise about $1 billion in two funds focusing on real estate in Australia and New Zealand. Stories about its rise have been published by Bloomberg, the South China Morning Post and the Wall Street Journal.

Du Val said it was seeking investors in Asia after launching its $250 million Mid-Market Fund in early August.

It planned to start the Opportunity Fund next month, to raise $1.1 billion.

Du Val has offices on level 27 of the PricewaterhouseCoopers Tower, Quay St, Auckland. Du Val’s Charlotte Clarke is married to developer Kenyon Clarke, whose father, Peter, is involved in Du Val.

“But Du Val has nothing to do with Kenyon,” Clarke said.

Inquiries had to be directed to an American media company, Roar.

She refused to say how much money had been raised or which buildings bought.

In 2008 the Waikato Times reported mother and son Jenepher and Kenyon Clarke, developers of many Hamilton studio apartment properties, had companies placed in receivership.

Du Val said some parts of Asia such as China were facing asset-bubble risks but markets such as New Zealand and Australia offered a more stable alternative because of steady growth.

“If you are a property investor, and most Chinese love property, the question is how can you leverage China’s growth but mitigate your exposure to the Chinese property market?” said William Nobrega, managing partner at Miami-based The Conrad Group, which is advising Du Val on the funds.

Jeannie Salameh of Roar Media, also in Miami, Florida, said money had already been raised.

“The Du Val Mid-Market Fund is a $250 million private-equity real estate buyout fund established to selectively acquire and add value to a significant portfolio of office, industrial, retail and residential properties in major New Zealand cities.”

She said the group had raised $75 million so far but she would not say what properties had been bought.

By Anne Gibson www.nzherald.co.nz

View the original article here