Just a quick update on the .25% rate increase on 1 Dec 09. In the words of the Governor of the RBA, Glenn Stevens:-

“The global economy has resumed growth……. 

In Australia, the downturn was relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery…..

 Inflation has declined from its peak last year…..though it will probably not fall as far as thought likely six months ago……

Credit for housing is expanding at a solid pace, and dwelling prices have risen significantly this year….with higher dwelling prices, has meant a noticeable recovery in household wealth……

With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. 

RBA Media Release December 1, 09 2.25pm

Interest rates are an instrument of Monetary Policy, designed to manage the economy, and are known as a “blunt instrument”, that is, they “knock everything on the head”; productive spending (investment) as well as the inflation causing type (consumption). That’s why the RBA is stating clearly that they will be raised just enough to curb inflation but not enough to undo the recovery - they are “taking the foot off the accelerator and not putting on the brakes”.

It seems that most people understand the wisdom of this position. Remember, we still have the lowest rates in decades! Take at look at the two articles below! The property market is moving and prices are rising – supply remains restricted, population is growing and confidence is strong. These things always have a ‘lag time’ attached to them. At Ozinvest we have seen proof of the resurgence over the last 6-7 months of this year, selling more properties than we did in the whole of last year!  More than one third of those surveyed plan to buy a property in the next 2 years, 43% of them an investment property!!

Don’t be worried by the negative spin the media will inevitably put on this - the signs for a great future are there- rising rents, rising prices and a central bank that openly recognizes the need to try and contain the boom it can see coming without stopping the recovery in the economy and therefore causing unemployment. A big ask, but one you can be sure they will navigate very carefully.

Kathy Blahut
OzInvest

Tax Benefits of Negative Gearing Explained (June 09)

Phil Kelly, CEO of OzInvest, explains the role that tax benefits for negative gearing plays in easing the current housing shortage, how it can help average Australians to build wealth for a safe and secure retirement and why it's here to stay.

Residential Property Investment — is now the time to buy?  (May 09)

Phil Kelly from OzInvest, gives his take on why record low interest rates and a lack of stock makes it opportune to invest in property despite the economic downturn.

Results of the capital growth performance review of OzInvest projects:

OzInvest recently conducted a review of capital growth rates of past projects that were researched and hand selected by OzInvest during 1997 to 2007.