News about Australia

Mortgage holders should expect interest rates to stay higher for longer, whether or not the RBA lifts them again. The RBA says intense global competition for capital from AI and data centre companies is pushing up the neutral rate, and assistant governor Christopher Kent said there is reasonable evidence neutral rates are rising in Australia and abroad. The cash rate is now 4.6%, the highest in 15 years, and markets have almost fully priced in another rise by mid-2027, with no expected falls below current levels before mid-2028. Economists Luke Yeaman and Paul Bloxham link high government spending, at 26.9% of GDP in 2025/26 and the highest in 40 years excluding COVID-19, to weaker rate effects, and Bloxham urged further federal spending cuts.

The Reserve Bank of Australia is pushing back against the view that interest rates work mainly by punishing borrowers, and has shifted its messaging to stress the importance of the exchange rate for monetary policy. RBA modelling indicates that exchange rate movements triggered by rate changes can account for as much as two-thirds of monetary policy's impact on GDP and inflation.

Mortgage holders should expect rates to stay high for longer, whether or not the Reserve Bank of Australia (RBA) lifts them again. The RBA says competition for capital from AI and data centre companies is pushing up its estimate of the neutral rate, which Christopher Kent said appears to be rising in Australia and abroad. At 4.6 per cent, the cash rate is the highest in 15 years, markets have almost fully priced in another rise by mid-2027, and they do not expect rates to fall below current levels before mid-2028. Luke Yeaman of Commonwealth Bank warned that higher government spending would force the RBA to push rates harder, while Paul Bloxham of HSBC urged spending cuts after federal government spending reached 26.9 per cent of GDP in 2025/26. Treasurer Jim Chalmers has flagged further savings measures in the December update, though previously announced savings face resistance in parliament.

Western Sydney International, a A$5.6 billion airport about 50 km from the city centre, welcomed its first passenger flight on Sunday (18 October), a Jetstar service to Gold Coast, but its commercial outlook is in question. Cirium data show it has attracted only a few airlines and is expected to host at most about 6 scheduled flights a day over the next 12 months, as the Iran conflict pushes up fuel costs and many carriers, including Qantas, cut domestic routes. The rail link is not expected until 2027 at the earliest, while a bus to central Sydney costs A$55 and takes about an hour, compared with a 20-minute taxi or train ride from Sydney Kingsford Smith airport. University of Sydney transport professor David Levinson believes forecasts of 8.4 million passengers a year by the end of the decade are optimistic. The airport's advantage is that it is not subject to a night curfew, and it aims to serve 82 million passengers a year by 2063.

Mortgage holders should expect interest rates to stay high for longer, as the RBA warns that AI and data-centre investment is pushing up the neutral rate. Assistant governor Christopher Kent said there is reasonable evidence that neutral rates are rising in Australia and abroad. The cash rate sits at 4.6%, its highest in 15 years, and markets do not expect rates to fall below current levels before mid-2028. Commonwealth Bank economist Luke Yeaman argued that heavy government and AI spending makes rate hikes less effective, while HSBC's Paul Bloxham urged tighter fiscal policy ahead of the December update.

The ASX 200 gained 39.00 points (0.44%) to 8,845.70 and the All Ordinaries rose 0.39% to 8,975.70, as energy producers and the big banks offset a tech sell-off that followed a slump on Wall Street. The S&P 500 lost nearly 2% last week and the Nasdaq fell 4.5%, while weaker-than-expected jobs data cut the market-implied chance of an RBA rate hike to around 20%. Global X's Joseph Marassa warned that markets may be underpricing a hike given persistently high oil prices. Cleanaway surged 20.24% to $2.97 after announcing a sale to EQT for $9.3bn, and Challenger jumped 19.29% to $11.75 as it considers a takeover bid from Daiichi Life worth $7.8bn. Ampol fell 2.51% despite announcing that refined fuel margins had risen more than 120%.

Mortgage holders should expect interest rates to stay high for longer, whether or not the RBA lifts them again. The RBA says intense global competition for capital from AI and data centre firms is pushing up its estimate of the neutral rate, and Assistant Governor Christopher Kent said there is reasonable evidence neutral rates are rising in Australia and abroad. At 4.6%, the cash rate is at its highest in 15 years; markets have scaled back bets on another hike, but a rise by mid-2027 is nearly fully priced in, and no fall below current levels is expected before mid-2028. Heavy government and AI-related spending may be reducing the effectiveness of rates, forcing the RBA to hit households harder, and Luke Yeaman of Commonwealth Bank warned that more government spending would be a serious mistake. HSBC's Paul Bloxham urged further federal spending cuts, as federal spending reached 26.9% of GDP in 2025/26, the highest level in 40 years excluding COVID-19.

Mortgage holders should expect interest rates to stay high for longer, whether or not the Reserve Bank of Australia (RBA) raises them again on Melbourne Cup day. The RBA says intense global competition for capital from AI and data centre companies is lifting the neutral rate, and Assistant Governor Christopher Kent said there is reasonable evidence neutral rates are rising in Australia and abroad. At 4.6%, the cash rate is the highest in 15 years; markets still almost fully price in another rise by mid-2027 and do not expect rates to fall before mid-2028. CBA chief economist Luke Yeaman said heavy government and AI spending makes rates less effective at curbing demand, while HSBC chief economist Paul Bloxham urged the federal government to cut spending in its mid-year fiscal update in December.

Mortgage holders should expect interest rates to stay higher for longer, whether or not the RBA hikes again on Melbourne Cup day. Assistant Governor Christopher Kent said neutral rates are rising in Australia and abroad, driven by intense global competition for capital from AI and data centre companies. The cash rate is 4.6%, its highest in 15 years, and markets have almost fully priced in another rise by mid-2027 and do not expect rates to fall below current levels until at least mid-2028. The term premium has climbed to a 12-year high, tightening financial conditions. Federal government spending reached 26.9% of GDP in 2025/26, the highest in 40 years excluding COVID-19, which economists say is weakening the effectiveness of interest rates in curbing demand.

The article highlights three Australian penny stocks that have risen over the past year, against a backdrop of accelerating US inflation and tech share volatility. Alkane Resources (market cap A$2.4b) is a multi-mine gold producer with copper exposure from its Boda project, generating about A$935.8 million in revenue from the Tomingley, Bjorkdal and Costerfield mines. Ventia Services Group (market cap A$4.7b) runs long-term infrastructure services in Australia and New Zealand, with a record A$20.6 billion work in hand (up 19.4%) and a 95% contract renewal rate. SRG Global (market cap A$2.2b) generates about A$1.15 billion from maintenance and industrial services, and says roughly 80% of its earnings are annuity-style. The article flags risks including Alkane's greater complexity and the Boda-Kaiser capex project, and the rest is largely promotion for a fuller screener.

Greens senator Jordon Steele-John accused factions within the party of weaponising rumours against him and denied taking leave, even though leader David Shoebridge said he would not sit in parliament during an investigation. In France, protests over the cost of living and school standards turned violent, with looting in major cities after more than half a million people rallied, and President Emmanuel Macron condemned the violence. The Reserve Bank is reportedly concerned that the Middle East war will keep inflation high and could push interest rates up. Trade Minister Don Farrell urged the Coalition to back the Australia-EU free trade agreement, while Nationals leader Matt Canavan opposes it. One Nation leader Pauline Hanson pledged to reverse Labor's changes to capital gains tax and negative gearing, including restoring the 50 per cent discount.

A Grattan Institute report says state government debt has more than doubled since 2019, with the interest bill now at 0.6% of annual economic output, and warns that future Australians will pay for today's deficits through higher taxes or worse public services. An AMP survey finds more than half of adults under 30 have changed their plans to have children due to cost-of-living pressures, and saving a 20% deposit takes most more than a decade. To repair the budget, Grattan proposes raising the GST from 10% to 15% and taxing fresh food, which it estimates would raise an extra $76 billion a year, with $33 billion going to income tax cuts, $25 billion to welfare and rent assistance, and $18 billion to the states. It also recommends scrapping the 2018 GST deal with Western Australia to save $6 billion. The report notes Australia's tax take of 29.4% of GDP is below the OECD average of about 34%, arguing for modest revenue increases alongside spending discipline.

Deloitte Access Economics forecasts that underlying inflation in Australia will have been above the Reserve Bank's 2.5% target for a full seven years by late 2028, when it is finally tamed. Governor Michele Bullock faces growing questions about whether blunt interest-rate policy is effective. At the press conference after September's rate rise, she was asked whether monetary policy had become detached from the problems it is meant to solve. She responded that rate increases affect far more than mortgage holders.

Australians recorded one of the steepest falls in consumer confidence among developed countries over the past year, as stubborn inflation and rising interest rates squeezed household budgets. According to OECD figures, Australian consumer confidence fell 1.1 index points in the 12 months to September, with only Chile and Belgium recording sharper declines. The article says the drop highlights the Albanese government's struggle to convince voters it is doing enough to address cost-of-living pressures.

The Reserve Bank of Australia (RBA) is concerned that inflation will stay elevated because of the fallout from the war with Iran, which could force it to raise rates further even though this may increase unemployment as the economy slows. Oil finished the week at US$106 a barrel and shows no sign of falling, while the RBA's forecasts assumed prices as much as US$20 lower, and diesel is also much higher. Prices for other commodities have climbed too, with wheat up 37%, soybeans up 24%, sugar up 42% and cocoa more than doubled this year. After unemployment rose to a high of 4.7% in September, markets sharply cut the chance of a rate rise to 4.85% at the November meeting, from about one in three to closer to one in five. Governor Michele Bullock and researcher Anthony Brassil warned that high inflation erodes purchasing power and hits households with limited financial buffers hardest.

The Reserve Bank of Australia is growing concerned that oil, which closed last week at $US106 a barrel with no sign of falling as the Middle East war broadens, could keep inflation elevated and force further rate rises even at the cost of higher unemployment. Inflation has been above the bank's 2-3 per cent target in three of the past four years, while wheat is up 37 per cent, sugar 42 per cent and soybeans 24 per cent this year. After unemployment rose to a five-year high of 4.7 per cent in September, markets sharply cut expectations of a rate rise to 4.85 per cent at the November meeting. Governor Michele Bullock and Anthony Brassil noted that a supply shock means monetary policy cannot eliminate the real economic loss, only influence how it is distributed over time. With the cash rate at a 15-year high of 4.6 per cent, low-income earners, who are unlikely to hold mortgages, are hit hardest by inflation and rent increases.