RBA could cut interest rates following slow growth
It's been revealed the Reserve Bank could be forced to cut interest rates for the third time this year due to low productivity growth and reduced investment.
New data shows the economy grew by 0.2 per cent in the first quarter of this year as businesses cut costs.
Severe weather such as Cyclone Alfred and floods in North Queensland earlier this year has had some effect on the data.
Economists say the national outlook is uncertain after warnings the global trade war could force businesses and consumers to cut back on spending.
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The Age
5 hours ago
- The Age
Reserve Bank could deliver shoppers plenty of pre-Christmas cheer
The turnaround in market expectations on future rate cuts was driven in part by the Reserve Bank's most recent board minutes, which showed at its May meeting it seriously considered a half percentage point rate reduction, and the soggy national accounts for the March quarter. Loading The economy expanded by a less-than-expected 0.2 per cent through the first three months. Household spending, which accounts for half of all economic activity, increased by 0.4 per cent through the quarter. But those figures confirmed the struggle facing many consumers, especially those facing higher mortgage repayments. Over the past 12 months, consumer spending has increased by just 0.7 per cent. Spending on clothing and footwear grew the fastest, up by 3.2 per cent, closely followed by insurance and financial services, growing by 3.1 per cent. However, consumers spent twice as much on insurance and financial services, at $26 billion, in the March quarter than on clothing. Households sliced spending on new cars and driving those vehicles, expenditure on food grew by just 0.4 per cent, while eating out at restaurants or takeaways lifted by a modest 0.3 per cent. AMP deputy chief economist Diana Mousina said the figures, on top of the general economic outlook, meant the Reserve Bank would have to consider more rate relief. 'This gloomy growth outlook argues for more interest rate relief from the RBA, as the economy is travelling slower than expected. We had been expecting another 0.25 percentage point rate cut at the August, November and February board meetings, but now expect another 0.25 percentage point cut in July,' she said. One concern about further interest rate cuts is that they may drive up property prices in a country with some of the least affordable housing in the developed world. But Westpac's head of Australian macro-forecasting, Matthew Hassan, said existing high prices would prove an ongoing headwind for the market. He said the February and May rate cuts, on top of expected further rate relief, were providing some impetus to prices. 'However, the reaction remains measured to date, consistent with our view that the nature of the easing and the high starting point for prices would see a fairly muted affordability-constrained response,' he said. 'All up, where a lift is evident, markets appear to be tracking a slow, shallow turn. That may change. We are wary of housing's famous interest rate sensitivity. There is also evidence of substantial 'pent-up' or delayed activity.' Not everyone is convinced the bank will deliver another cut in July. ANZ's head of Australian economics, Adam Boyton, noted that the national accounts showed household finances were now improving rapidly, which meant the RBA could hold fire on further interest rate relief. Loading 'Household incomes are now showing robust growth, with the level of real income having returned to the pre-COVID trend. Given the strength in income growth, we don't think it will take much more on the interest rate front to make households confident enough to spend more,' he said. TD Securities, which had expected just a single rate cut this year in August, now thinks the RBA will move again in November.
Sydney Morning Herald
5 hours ago
- Sydney Morning Herald
Reserve Bank could deliver shoppers plenty of pre-Christmas cheer
The turnaround in market expectations on future rate cuts was driven in part by the Reserve Bank's most recent board minutes, which showed at its May meeting it seriously considered a half percentage point rate reduction, and the soggy national accounts for the March quarter. Loading The economy expanded by a less-than-expected 0.2 per cent through the first three months. Household spending, which accounts for half of all economic activity, increased by 0.4 per cent through the quarter. But those figures confirmed the struggle facing many consumers, especially those facing higher mortgage repayments. Over the past 12 months, consumer spending has increased by just 0.7 per cent. Spending on clothing and footwear grew the fastest, up by 3.2 per cent, closely followed by insurance and financial services, growing by 3.1 per cent. However, consumers spent twice as much on insurance and financial services, at $26 billion, in the March quarter than on clothing. Households sliced spending on new cars and driving those vehicles, expenditure on food grew by just 0.4 per cent, while eating out at restaurants or takeaways lifted by a modest 0.3 per cent. AMP deputy chief economist Diana Mousina said the figures, on top of the general economic outlook, meant the Reserve Bank would have to consider more rate relief. 'This gloomy growth outlook argues for more interest rate relief from the RBA, as the economy is travelling slower than expected. We had been expecting another 0.25 percentage point rate cut at the August, November and February board meetings, but now expect another 0.25 percentage point cut in July,' she said. One concern about further interest rate cuts is that they may drive up property prices in a country with some of the least affordable housing in the developed world. But Westpac's head of Australian macro-forecasting, Matthew Hassan, said existing high prices would prove an ongoing headwind for the market. He said the February and May rate cuts, on top of expected further rate relief, were providing some impetus to prices. 'However, the reaction remains measured to date, consistent with our view that the nature of the easing and the high starting point for prices would see a fairly muted affordability-constrained response,' he said. 'All up, where a lift is evident, markets appear to be tracking a slow, shallow turn. That may change. We are wary of housing's famous interest rate sensitivity. There is also evidence of substantial 'pent-up' or delayed activity.' Not everyone is convinced the bank will deliver another cut in July. ANZ's head of Australian economics, Adam Boyton, noted that the national accounts showed household finances were now improving rapidly, which meant the RBA could hold fire on further interest rate relief. Loading 'Household incomes are now showing robust growth, with the level of real income having returned to the pre-COVID trend. Given the strength in income growth, we don't think it will take much more on the interest rate front to make households confident enough to spend more,' he said. TD Securities, which had expected just a single rate cut this year in August, now thinks the RBA will move again in November.
Sydney Morning Herald
8 hours ago
- Sydney Morning Herald
Saved from the wrecking ball, AMP building reopens as a glittering star on Circular Quay
There was a frogman in its seawater tank. And the glass facade of the skyscraper was sprinkled with gold dust. Little wonder that the 1962 opening of Australia's then-tallest building, the 117-metre-high AMP 'Sydney Cove' building at Sydney's Circular Quay, would excite the nation and attract a million tourists, including Queen Elizabeth, to its observation deck within a year. Opening the modernist H-shaped office block at 33 Alfred Street, then-prime minister Sir Robert Menzies said it was a 'towering symbol' that 'quickened the imagination'. The city's first real skyscraper, the 26-storey office block by the late architect Graham Thorp, took advantage of a change in legislation to break the city's 150-foot (46-metre) height limit imposed in 1912. That started 'the skyscraper phenomenon' of higher buildings and increased density. Until then, Sydney had been a short and old-fashioned city, and the public feared it would go the way of New York. On Friday morning, Premier Chris Minns and Lord Mayor Clover Moore reopened the 63-year-old building at 33 Alfred Street. Minns said: 'The great thing about this project is that they didn't call in the wrecking balls. They called in some of our best architects and engineers and created an absolutely beautiful building.' The reopening follows a three-year restoration and modernisation by architects Johnson Pilton Walker (JPW) for co-owners Dexus Wholesale Property Fund and Mirvac Wholesale Office Fund, with heritage consultants Urbis. With AMP now housed in the Quay Quarter building, the newly modernised office block is expected to become home to some of Australia's top law firms, including Allens which is expected to take over the floor that was once a public observation deck. As Sydney's first real skyscraper, Minns said 33 Alfred had helped define the city. A symbol of post-war growth and architectural ambition, it married the best of the old with the best of the new. 'What this project shows is we can still do great things in the city.' He was taken with the curve of the roof seen from observation deck: 'When it is stretched again the blue sky on a wonderful Friday in Sydney, it looks like the wing of a Pan Am airplane. They don't make buildings like that any more.' Moore said the AMP building had to go up in height so it could look over the Cahill Expressway, which she described as a continuing blight that blocked views and separated the city from the harbour. By retaining the AMP instead of demolishing it, Moore said the redevelopment had saved tonnes of carbon and reduced emissions. It was also the culmination of the city's award-winning Quay Quarter redevelopment, which resulted in new laneways with restaurants and the restoration and reuse of heritage buildings. Dexus said the building had been transformed into a state-of-the-art office tower spanning about 32,000 square metres. Its re-use of the existing structure minimised landfill waste, extended the lifecycle of the building and was developed to achieve a 5.5-star NABERS Energy rating for the base building, and a 6-Star Green Star. Its heritage listing by the state two years ago said the facade was covered with gold dust. Dexus' general manager of development Nicholas Wilkinson said he didn't think it was real. 'I wish it was,' he said. Thorp wrote in the Herald in 1962 that the building's shape would not have been seen elsewhere in the world. A curtain wall spandrel with gold-fused backing was used to give a reflective surface with a constantly changing pattern in sunlight. During the restoration, parts of the original facade – the famous curtain walls – were retained. The rest was updated with a material that Wilkinson said sparkled like the original to honour its heritage but used contemporary techniques. The windows were also changed because the views across one of the world's most famous harbours were 'located somewhere between the hips and the chin of the average person standing up. With some smart design, there is now a good line of sight to the harbour.' 'That's where the magic happens,' he said. Nobody has any record of the original frogmen who cleaned the seawater air-conditioning system that created a steady indoor climate in the building. During the restoration, Wilkinson said divers had cleaned and repaired pipes under the ferry wharves to remove seawater, crustaceans, and other matter. Built in 21 months, it was expected to last 40 years. But now it appears increasingly small in contrast with many other tall buildings, including Sydney's tallest, One Crown at 271 metres high, and others expected to go even higher. Wilkinson said engineers had certified the newly renovated office block for another 50 years, but they expected it would outlast that estimate. He said the building was now setting a precedent for the sensitive renewal and reuse of existing heritage buildings. Many of its features are things we now take for granted. Every floor had 400 to 500 power points in the floor, Wilkinson said. It had windows that didn't open, a novelty at that time, and was one of the first buildings to house large computing equipment and banks of speedy lifts. It had a vertical conveyer to transfer papers up and down the building. Music was piped into some floors to calm staff. It included decorative panels, art, and about 6690 sq m of glass mosaic tiles and 4600 sq m of Italian and Australian marble. This telegraphed that customers were in safe hands taking out life insurance with the company. Wilkinson said: 'It really did set the benchmark.' James Bosanquet of the National Trust of Australia, NSW, said the AMP was promoted as a modernist marvel and really changed Sydney. 'Before then, we had modernist buildings, but nothing on this scale.' It may have looked like a 'modern mausoleum on the harbour', he said, but its curved walls allowed it to control the amount of light throughout the day. It was among many changes to transform Circular Quay about that time, ranging from the railway in 1954, the Cahill Expressway in 1958, the Overseas Passenger Terminal (1958), which is now the MCA, and later in 1973, the Opera House. 'An awful lot was happening quickly, and it reflected the feeling that Sydney was coming of age.' Loading Professor Philip Oldfield, the head of the school of built environment at the University of NSW, said it was Sydney's first real skyscraper, 'built with all the mod cons you'd expect for a post-war office – open plan floor plates, curtain wall glazing, and even novel spray-on fire-proofing to the steel frame.' Skyscrapers had been springing up in cities around the world. But in Sydney, Oldfield said, a fear of fire safety in taller buildings and a desire to extend the city outwards rather than upwards, resulted in the 1912 Height of Buildings Act, which limited buildings to about 13 storeys. 'It wasn't until 1957 when the legislation was changed, fuelled by competition with Melbourne, that buildings like the AMP Tower became possible.'
