April Financial News Highlights
The headline: Federal Budget 2019, Queensland reaps infrastructure boon
From: The Courier Mail, Jack McKay April 2
Our thoughts: A summary from the Courier Mail on where and what the Budget means for the “sunshine state”, which suggests some $4 billion will be spent on new and improved infrastructure. This includes a $378.8 million commitment to bust urban congestion through various key arterial road upgrades, as well as a half a billion-dollar fund for commuter car parks at major public transport hubs improving access to public transport with the potential to take tens of thousands of cars off commuter roads. Treasurer Josh Frydenberg stated this strategy also complemented the Governments vision for a fast rail network in Australia, which would include lines through Brisbane, the Sunshine and Gold Coast, of which a $40 million commitment was made to devise case studies for such a fast rail network across the country.
The budget also included other notable commitments for QLD health and primary industries. The health sector looks set to reap over $80 million through the “supporting our hospitals” initiative and following a devastating period of natural disasters; agricultural and primary industry communities should see over $3 billion of funds available to disaster-affected areas through a National Emergency Response Fund, in addition to existing response programs in support of rebuilding industry, schools and community wellbeing.
The headline: ANZ joins the lending crackdown as brokers fear delays
From: The Australian Financial Review, Duncan Hughes April 29
Our thoughts: Following the Royal Commission into banking; ANZ has stated it is reducing its reliance on a somewhat controversial industry benchmark, to assess their potential borrower’s eligibility for new mortgages. Currently, banks rely heavily on the “household expenditure measure” (HEM), a benchmarking guide calculated quarterly of what a family’s commitments are on a range of household expenses. Whilst the banking commission accepted this was a valuable tool in assessing an applicant’s eligibility, particularly border-line borrowers, far more scrutiny is required by the banks on an applicant’s overall financial position, including potential expenses outside of HEM parameters. This is in line with most of the major banks’ increased scrutiny on new loan applications in various forms and necessitating a more “responsible” approach to lending – following a scathing banking royal commission. There is however concern throughout the industry on the practical outcomes of new processing criteria, with time frames on assessing applications blowing out significantly and a fear that this frustration will drive potential customers to services in the “shadow” banking sector which is far less regulated.
The headline: Rate cut could aid house price recovery
From: The Australian Financial Review, Michael Bleby April 28
Our thoughts: Speculation is that the bottom of the current housing cycle could come earlier than other forecasts have suggested – following weaker first-quarter inflation data released last week and the potential for an official interest rate drop at the next RBA meeting. The last 2 recoveries in house price cycles seemed to occur 4 or 5 months after the first official interest rate cuts. This article cites other potentials and we agree that current credit policy is far more a fundamental of the current market than the official rate and whilst another rate drop should significantly help existing home owners get ahead quicker, it won’t necessarily drive an “early” recovery in the housing market just yet with so many other variables still at play.