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Business

Fed set to keep interest rates near zero until at least 2023


In its policy statement, the Fed also began to pivot from stabilising financial markets to stimulating the economy: the Fed said it would keep its current government bond-buying at least at the current pace of $US120 billion ($164 billion) per month, but described the goal as in part to ensure “accommodative” financial conditions in the future.

US stocks added to earlier gains after the release of the Fed statement, but slid lower as Powell spoke. In late trade, the Dow Jones is up 0.4 per cent, the S&P 500 has lost 0.2 per cent and the Nasdaq has slid 1 per cent. Futures at 4.58am AEST are pointing to a loss of 10 points, or 0.2 per cent, at the open for the ASX.

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The coronavirus epidemic continued to weigh on the economy, the Fed said in the statement, released after the end of its latest two-day policy meeting, even as officials upgraded their immediate outlook for the economy.

The virus “is causing tremendous human and economic hardship,” the rate-setting Federal Open Market Committee said. “The Federal Reserve is committed to using its full range of tools to support the US economy in this challenging time.”

New economic projections released with the policy statement showed interest rates on hold through at least 2023, with inflation never breaching 2 per cent over that time. Policymakers saw the economy shrinking 3.7 per cent this year, far less than the 6.5 per cent decline forecast in June, and unemployment, which registered 8.4 per cent in August, was seen falling to 7.6 per cent by the end of the year.

All Fed policymakers saw rates staying where they are through 2022, with four eying the need for an increase in 2023.

Dissents

But in pledging to keep rates low until inflation was moving above the 2 per cent target, to make up for years spent below it, the Fed reflected its new tilt towards stronger job growth, announced late last month after a nearly two-year review.

Both dissenters to the statement, Dallas Fed President Robert Kaplan and Minneapolis Fed President Neel Kashkari, took specific issue with the central bank’s guidance that it would keep interest rates where they are “until labour market conditions have reached levels consistent with … maximum employment and inflation has risen to 2 per cent and is on track to moderately exceed 2 per cent for some time.”

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Kaplan said he would have preferred to have “greater flexibility” once inflation and maximum employment were on track to reaching the Fed’s goals, an easier hurdle to reach. Kashkari’s dissent suggests he wanted a higher hurdle: for rates to stay where they are until core inflation – which often runs cooler than overall inflation – has reached 2 per cent “on a sustained basis.”

More to come

Reuters

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Local News - Victoria

Victorian government to introduce interest free loans for new rooftop solar panels


Solar Victoria, the state government’s solar retailer, said if the total system cost less than $3700, there would be no upfront costs to new installations.

Households that earn a combined taxable income of more than $180,000, whose home is valued at more than $3 million are not eligible to apply.

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The announcement comes as recent Climate Council research suggested thousands of jobs could be created in large-scale renewable energy schemes to tackle steep job losses expected during the COVID-19 pandemic.

The report was the latest in a wave of research calling for government stimulus to focus on renewables, and was informed by current proposals from around the world, including the European Green Deal.

Ms D’Ambrosio said it was good news for renters, whose ability to participate in solar programs was limited because they didn’t own homes and couldn’t make the modifications on their own.

“We know renters often dream of the chance to cut their energy costs and this expansion will help thousands more get that chance,” Ms D’Ambrosio said.

“Not owning your own home shouldn’t stop you from having access to cheaper, cleaner solar energy.”

The loan is required to be repaid over the course of four years.



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Local News - Victoria

Westpac faces class action over high interest car loans


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In some cases, he alleged that consumers were charged three times the base rate with rates not determined by objective criteria such as credit risk.

“The expectations of consumers was that the dealer was a conduit for, but was not setting, the interest rate,” Mr Watson said.

“This case will seek to prove that Westpac and St George failed to comply with their obligations under consumer credit protection laws and that this failure caused substantial losses for many consumers.”

The Australian Securities and Investments Commission banned the scheme in 2018, finding the car-yard practice was almost universal across the industry with commissions paid to dealers as high as 79 per cent of the insurance premium.

Flex commissions were criticised in the banking royal commission, which in its final report said: “Many borrowers knew nothing of these arrangements. Lenders did not publicise them; dealers did not reveal them. The dealer’s interest in securing the highest rate possible is obvious. It was the consumer who bore the cost.”

The lead applicant in Maurice Blackburn’s litigation is 25-year-old teacher’s aide Alannah Fox, who paid almost $25,000 in interest on a $47,000 loan for a 2015 Hyundai ix35.

She said she was only told about the 12.99 per cent annual interest rate after she agreed to the purchase.

“They didn’t tell me the interest rate until I went to pick up the car,” Ms Fox said.

“I feel they targeted me because I was young and eager to get into my first new car.”

Maurice Blackburn is also investigating commissions charged by Esanda, ANZ and Macquarie Bank before November 2018.

Westpac said it was yet to be served with a statement of claim so was unable to comment.

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Australian News

CHOICE reveals banks’ sneaky $6.3 billion interest rate move


Australia’s official cash rate has been slashed again and again in recent months, but the same can’t be said for credit cards.

And it’s a move that has cost Australians a fortune.

In fact, a new analysis has revealed the failure of our major banks to pass on interest rate cuts has cost us billions over the past decade.

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Alan Kirkland, CEO of consumer advocacy organisation CHOICE, said the Reserve Bank of Australia had slashed the cash rate from 4.75 per cent in 2011 to the current historic low of just 0.25 per cent – but credit card rates had remained “stubbornly high”.

“By failing to pass rate cuts on for credit cards, banks have effectively stolen $6.3 billion dollars from the pockets of Australians,” he said.

“Some banks – including ANZ, Bendigo and St George – have even increased rates on credit cards.

“This is disappointing behaviour from an industry looking to restore trust after the scandals of the banking royal commission.”

Mr Kirkland said if credit card rates had been cut in line with the cash rate, it would have saved many Australians from “falling into a debt spiral and facing years of unnecessary hardship”.

“Banks have cut interest rates on mortgages as the cash rate has fallen. There’s no justification for failing to do the same for other credit products, especially now so many Australians have lost their job,” he said.

According to the research, the 12 cards with the biggest increase in interest rates since 2016 include Coles’ Low Rate MasterCard, ME’s Frank credit card, Police Credit Union’s Extralite credit card, ANZ’s Rewards, Rewards Black and Rewards Platinum, Australian Military Bank’s Low Rate Visa credit card, Bendigo Bank’s Platinum, Bank of Melbourne’s Vertigo, BankSA’s Vertigo, Citi’s Prestige and St George’s Vertigo.

CHOICE will today launch a crowd-funding campaign to raise cash for its Make Banking Fair campaign which will call on banks to do better.

Mr Kirkland urged Australians to take actions, warning that some banks had raised their credit card rates even as their costs had reduced.

“If you’re unimpressed with the interest rate your bank is charging, you should vote with your feet. Cancel your current credit card and switch to a bank with a lower-rate card,” he said.

“This will send the loudest message to the banks that they need to treat their customers fairly.”

Meanwhile, comparison site Finder has found the gap between the cash rate and credit card interest rate was now the widest ever, with the standard credit card interest rate nearly 80 times the cash rate.

If banks had passed on cuts to customers, the average card rate would be 12.90 per cent instead of 19.94 per cent.

Graham Cooke, insights manager at Finder, said as the gap between credit card rates and the cash rate grows even wider, credit card customers should shop around for a more competitive deal.

“The average credit card rate followed the cash rate from 1990 to 2010. Every time the cash rate went up or down, so did the credit card rate,” he said. “But that all went out the door from 2010 onwards.”

He said today’s credit card interest rates range from 11.99 per cent to 21.49 per cent – but that some Aussies just didn’t care.

“The reality is that at the high end of the credit card market, customers don’t care about the interest rate. They are in it for the points, and that’s what this data proves,” Mr Cooke said.



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News

Why the NRL must take the power back from broadcasters to maximise interest – Daily Telegraph



Why the NRL must take the power back from broadcasters to maximise interest  Daily Telegraph



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News

CommBank to stop coronavirus-impacted customers from paying compound interest on loans


The Commonwealth Bank will make a one-off payment into bank accounts who have asked to defer their loans to ensure households and businesses are not paying compound interest, according to CEO Matt Comyn.

Small business and retail customers will be able to ask for a six-month deferral on paying back their mortgage if they are in financial strife due to the coronavirus pandemic.

Many Australian businesses are suffering in the wake of the global health crisis, which has prompted banks to slash rates on small business products and fixed-term home loans.

Mr Comyn told Sky News the bank, which is Australia’s largest mortgage holder, is willing to make concessions so customers are not paying “interest on top of interest.”

“Banking works on compound interest, but during a period of six month payment deferral … we are very conscious we don’t want customers to feel like they are paying interest on interest, which they ordinarily would be,” he said.

“We have found a simple way to address that and that’s effectively to make a one-off payment into each of our customers’ accounts to offset that interest-on-interest charge.”



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