Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Property Market Revision, RBA Predictions

Friday, 1st July, 2022

Daily Flows

  • Yesterday saw NCD margins around the +50 mark. Highlighting the desperation of the ADIs to fulfil their funding targets before End of Financial Year.
  • Elevated flows continued to an unrated ADI, paying 2.50% for 3 months.
  • Rates remained above 4% for 12 month investments, despite a retraction in the benchmark. It will be interesting to see if this dynamic changes today, given the New Financial Year.

Property Market Revise

  • Yesterday, NAB Revised their property market forecast.
  • The outlook is for an 18% fall in house prices over the next 18 months. However, the outlook isn’t all grim, with rental incomes expected to prop the market up considerably.
  • The revision comes as the impact of higher rates will subdue demand for the foreseeable future.
  • Victoria and New South Wales are expected to be the most heavily impacted.

RBA To Hike 50 on Tuesday

  • Westpac have confirmed their view that the RBA will hike by 50 basis points on Tuesday.
  • The market is still pricing the cash rate at 3% by the end of the year.
  • Most economists are predicting that the cash rate will lie within the 2-2.5% mark, however.
  • Given that Australia entered the pandemic with a cash rate of 1.50%, and the RBA has stressed that we need to return the cash rate to ‘neutral’, 3% seems like an over reaction.
  • The reason being, the global economy is facing supply driven inflation, so hiking rates will only be so effective. Inflationary pressures are also coming from Australian weather events. Inflationary pressures from this are transitory in nature (pardon the pun).
  • However, Australia only receives quarterly inflation data. So a large emphasis will be placed on the data that is next released.
  • It begs the question, would the RBA be able to make more informed decisions if the prints were more regular?

Nicholas Allan

Associate - Money Markets