Australia rate cut now seen on cards for May after soft inflation – Reuters poll

Calls for Australia’s central bank to cut interest rates as early as next month 

increased significantly on Wednesday, a Reuters poll showed, as first-quarter inflation 

data was disappointingly weak.

The Reserve Bank of Australia (RBA) has left policy at a record low 1.50 percent 

since last easing in August 2016. But this record spell of unchanged rates is likely 

to break with 12 of 23 economists now predicting a cut on May 7.

A raft of banks from ANZ to ING, JPMorgan and Citi are among those forecasting a May 


That is a sharp turnaround from the previous poll in March when the median view of 

45 economists was for stable rates until early 2021.

The median view of 23 economists is now for 1.00 percent over that horizon.

Expectations changed rapidly after official data on Wednesday showed consumer price 

inflation inflation slowed sharply last quarter to the lowest in three years.

Key measures of underlying inflation favoured by the Reserve Bank of Australia (RBA) 

averaged 1.4 percent for the year, again missing forecasts and marking 13 quarters 

below the central bank’s target range of 2 to 3 percent.

“The downward surprise to core inflation in Q1 leaves the RBA with little choice 

but to cut the cash rate by 25 basis point at its May meeting,” ANZ economists said 

in a note on Wednesday.

“We have doubts that modest rate cuts will do much to push inflation sustainably higher,

but it’s hard to see that the RBA has much choice but to use the tool at its disposal, 

ie a lower cash rate.”

The change in the outlook accompanies disappointing fourth-quarter gross domestic 

product data for March quarter while retail sales – a gauge of consumer health – have

also remained tepid for some time now.

The RBA shifted away from its long-held tightening bias earlier this year to put rate 

cuts on the table citing a slowing local economy and broader global risks such as

the ongoing Sino-U.S. trade war and rise of populism.

Minutes of the RBA’s April policy meeting showed it now believes a cut would be

“appropriate” should inflation stay low and unemployment trend higher.

 Reuters/APRIL 24, 2019 


Landlord negative gearing claims hit record high

Landlords are more likely to claim a loss on their investments than a profit.

The number of Aussie landlords making a loss on their investments and claiming negative gearing tax benefits has nearly doubled over the past decade, Australian Taxation Office data reveals.

The research showed a record 1.3 million landlords negatively geared their investments in 2017 compared to 631,000 in 2000.

Landlords who made a loss and claimed negative gearing in 2017 – the most recent year data was available -also outnumbered those who broke even or made a profit off their investments by nearly two to one.

Only 856,000 property investors broke even or made a profit in the latest figures, up from 532,000 in 2000.

The ATO figures further painted a picture of a rental market where more properties were becoming concentrated in the hands of only a few investors.

These landlords tended to make sizeable losses off their investments each year and were heavily reliant on negative gearing.

The number who had six or more properties and a taxable income under $18,200 – the threshold that attracted no income tax in FY2017 – surged from 1246 to 3008 over the 17 years, peaking at 3981 in 2008.

Landlords have also been getting older. Only 15 per cent of investors were over 60 at the start of the century, compared to 23.5 per cent in the most recent figures.

Those between 40 and 59 made up 53.7 per cent of the current market, while 21.8 per cent were in their thirties and just 5.8 per cent were under 30.

More than 2 million taxpayers claim property deductions.

The exorbitant costs of negative gearing appear to be sounding alarm bells within the halls of the ATO.

Tax commissioner Chris Jordan last month said almost nine out of 10 tax returns related to property investment contained “errors”.

These included deductions for capital works and repairs at times when the properties were not available for rent.

With 2.1 million taxpayers claiming $47.4 billion in property deductions against $44.1bn in rental income, “you can get a sense of the potential revenue at risk”, he said

Daily Telegraph/17 APR 2019

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