ASIC Credit Roadshow hits the ground running

Brokers seeking to improve their understanding of the soon to be introduced National Credit Regime are encouraged to attend ASIC’s Credit Roadshow as it tours the country from today until April 2010.

The Roadshow, which was developed to assist brokers understand how the impending legislation will affect them and their business, will visit every state and territory capital as well as 24 regional centers.

Each session will give brokers the opportunity to hear how the legal requirements have changed and how to prepare for the changes. ASIC senior executives will also explain how to register for an Australian Credit License, and outline brokers’ general obligations under the new laws.

Attendance is free but registration is required to reserve a seat. Brokers can register at: www.asic.gov.au.

Share falls expected following Wall St drop

The Australian share market is expected to open weaker today after losses on Wall Street last Friday.

Concerns about China's plans to curb bank lending dragged down the Dow Jones Industrial Average, which fell 45 points to 10,099.

In local futures trade, the Share Price Index 200 has shed 18 points to 4,516.

At 9:34am (AEDT) the Australian dollar was worth 88.72 US cents.

IMF questions inflation targeting for rates

The International Monetary Fund has reignited debate about whether inflation targeting is the best way for central banks to set interest rates.

Currently, stable and low inflation is the primary target of central banks.

Australia's Reserve Bank, for example, aims to keep inflation within a 2 to 3 per cent target band, and it uses interest rates to boost or slow down the economy when it looks like inflation will get too far out of that range.

However, according to the IMF's chief economist, Olivier Blanchard, inflation targeting should not be the only tool, and he says stable inflation might not be sufficient, and that low inflation actually lulled many economies into a false sense of security in the lead up to the global crisis.

Notably, he refers to the dangers of falling into a liquidity trap - or easy access to money - which sparked the subprime mortgage crisis.

The IMF is arguing that, in some cases, a 4 per cent inflation limit should be allowed.

Another idea is that lowering interest rates to stimulate the economy in a scenario of rising unemployment may not be the best approach, and that cash handouts or stimulus payments might be a more direct solution.

There is also discussion of perhaps going more directly to banks which caused the crisis in many ways, with tighter regulation to prevent the problems of a few spreading to entire economies.

This discussion is particularly relevant in Australia, as there is already a big debate about the link between government spending and higher interest rates.

We will find out more this week when the Reserve Bank governor Glenn Stevens faces the House Economics Committee on Friday, when it is also likely that Mr Stevens will be asked for his views on the need to cut government debt and to reduce government spending.


(Source: acb.net.au, By business editor Peter Ryan for AM)

Non-bank lender bumps up LVR

In a sign that competition is beginning to reemerge in the market, Australian First Mortgage (AFM) has expanded its loan portfolio to include a 95 per cent loan-to-value ratio (LVR) full doc product with a variable interest rate of 5.84 per cent (CPR 6.19 per cent).

Borrowers will be asked to pay an application fee of $675.00, which includes the cost of one standard valuation.

Suitable for investors, first home buyers and debt consolidation, borrowers have the option of choosing from a range of features including flexible repayment options, AFM said.

“While Westpac recently reduced its maximum LVR from 97 per cent (including LMI) to 87 per cent for new customers, AFM is looking at ways of assisting borrowers entering the property market by offering products with features, competitive rates, and most of all quick turnaround times of a conditional approval within 24 to 48 hours,” said AFM’s director sales and marketing Iain Forbes.

“The interest rates presently on offer from AFM are well below that of most other lenders.

"AFM represents good old fashioned customer service, strength, long term sustainability, and solid alliances,” he said.