Commerse, Earnings and Banking - Your money

5050 chance of a melbourne cup day interest rate cut




A MELBOURNE Cup Day interest cut will be a decided in a photo finish today as economists remain divided on whether the cash rate will fall in time for Christmas.

Smaller lenders are continuing to drop their variable rate deals at the same time the big four banks have all jacked up the variable rate loan offers in an out-of-cycle move to raise capital ahead of the next financial year.

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But recent rate jumps by the big banks, low inflation and struggling consumer confidence could be the key drivers that push the Reserve Bank of Australia board to drop the cash rate to a record low 1.75 per cent when it meets today, experts say.

HSBC chief economist Paul Bloxham said all the signs are leading towards a cut the first Melbourne Cup Day rate cut since 2011.

A cut is more likely than a hold and its the path of least regret for the RBA to deliver a bit more support for the economy,’ he said.

With the big banks having just lifted rates, its another reason for the RBA to deliver a cut.

Inflation rose just 0.5 per cent in the September quarter 0.2 percentage points less than expected which fuelled predictions of a third rate cut this year.

On Friday, the Australian Securities Exchanges RBA Ratetracker was almost an even split of whether the cash rate would drop to 1.75 per cent.

1300homeloan director John Kolenda is also tipping the RBA to cut rates this month in time to create more spending ahead this festive season.

If theyre going to do anything they will do it this month because it will provide stimulus leading up to Christmas,’ he said.

Weve seen the banks increase rates and thats not helping consumer confidence or the market so I think we need the RBA to be decisive and reduce rates to get the economy back on its feet.

Financial comparison website Canstar has found on an average $300,000 25-year loan, the average standard variable rate is 4.83 per cent and the monthly repayments are $1724.

On a three-year fixed mortgage the average rate is 4.53 per cent and the monthly repayments are

$1673.
The average standard variable rate of the big four banks is 5.61 per cent which factors in the rate hikes latest this month.

Lenders dropping variable rates in recent weeks

Auswide Bank, freedom package special discount variable offer dropped by 21 basis points to 3.98 per cent.

Bank Australia dropped its basic variable rate by 12 basis points to 3.98 per cent.

Yellow Brick Road dropped its rate Smasher variable loan deal by 15 basis points to 3.91 per cent.

Source: Canstar.com.au

A vote for your hip pocket




IT’S been criticised as one of the most boring election campaigns many can remember, but Saturday’s vote is going to have a big impact on finances.

Super fund members, investors and wage earners are facing major changes depending on which party wins.

So how do you decide what will be best for your hip pocket? And should you vote to make things better for yourself, or the future of the nation?

Finance experts say voters tend to adopt a whats-in-it-for-me approach, and each individual will be affected differently by party policies.

Financial strategist Theo Marinis believes voters should think of Australia first but the fact that we dont is the reason we have the politics we have.

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On the finance front, Marinis prefers the Coalitions superannuation policies, Labors negative gearing and capital gains tax changes, and the Coalitions economic management.

Labor is big spending, but how are they going to pay for it down the track?

CMC Markets has been monitoring investor sentiment about the election and it has fallen heavily since May.

Chief market strategist Michael McCarthy says investors have been unhappy with pork-barrelling in marginal electorates. Rank political populism rarely plays well with investors, he says.

McCarthy says election sentiment started to improve last week, perhaps because of a growing perception that many voters have decided their vote and are no longer paying attention to this exceptionally long election campaign.

Whoever wins on Saturday, there is no need to make knee-jerk financial decisions, because any proposed laws are likely to have a long and windy path through what could be another tricky Senate.

McCarthy says the impact of new policies will depend on your personal situation.

Changes to superannuation and taxation affect investors directly. Any investors unsure about the impact of proposed changes in these areas should speak with their advisors,
he says.

WHAT TO EXPECT:

HEALTH

Labor: spend more on health (and education) probably by raising taxes.

Coalition: says extra funding for health needs to be spent wisely and has cut some of Labors previous funding promises.

WAGES

Coalition: to scrap 2 per cent Temporary Budget Repair Levy for income over $180,000.

Labor: to keep the levy, making top tax rate 49 per cent.

INVESTMENT

Labor: to scrap negative gearing for all but new properties from July 2017, and halve capital gains tax discounts on assets.

Coalition: has kept its hands off these taxes.

SAVINGS

Both parties plan to increase super contributions taxes for high-income earners and the Coalition plans to introduce a pile of new super changes including lower contribution caps, tougher limits on how much wealthy savers can hold and put into in super, and new incentives for low-income earners.

RETIREES

Labor: 15 per cent tax on retirees earnings above $75,000 a year from their super pension fund.

Coalition: $1.6 million limit on how much people can hold in a tax-free retirement pension.