RBA could be forced to hike interest rates as house price boom continues


Since the overnight cash rate hit 17.5 per cent in January 1990, Australians have seen the RBA cut interest rates 51 times. Now, after more than three decades of interest rate cuts, the cash rate sits at just 0.1 per cent.

This has led some analysts to call the bottom, predicting that the cash rate will never be cut lower than it is today.

With the economy’s recovery from the pandemic still fragile and heavily reliant on government support and household savings, RBA governor Philip Lowe has stated interest rates would stay low for “as long as needed”.

In a recent appearance before a parliamentary committee, Mr Lowe stated that rates would stay at this level for up to three years.

RELATED: Property dreams are over for young Aussies

This was no doubt music to the ears of Australia’s 2.1 million property investors, and the more than 100,000 first homebuyers who purchased property since the pandemic began.

With many mortgage holders still facing an uncertain future, the predicted certainty about the stability of interest rates also provided a much-needed boost to household confidence. Partially as a result, the Westpac consumer sentiment index recently hit a decade high.

While the RBA does have a great deal of power to influence interest rates through a number of different tools it possesses, the direction of interest rates are not entirely within their control. They are ultimately guided by the tides of the global bond market.

Despite Governor Lowe’s view that rates would stay low for at least three years, financial markets are seeing things quite differently.

According to a report from Bloomberg, credit markets are pricing a 30 per cent chance of the RBA being forced to hike interest rates by the middle of next year.

As global government bond yields (aka borrowing costs) continue to rise, the RBA aren’t the only central bank beginning to see upward pressure on mortgage rates.

In the United States, banks have already started to raise mortgage rates without a move by the Federal Reserve. In the past four weeks, the interest rate on a 30-year fixed rate mortgage has risen by 0.45 per cent.

This has resulted in demand for mortgages beginning to cool. According to the US Mortgage Bankers Association mortgage applications to purchase a home, fell 11.4 per cent in the latest week’s data, with applications for refinancing down 11 per cent.

While the level of mortgage applications remains elevated, above pre-pandemic levels, if rates continue to rise, demand for property will likely moderate in time.

As global bond yields continue to rise, US banks are increasingly finding their lending margins squeezed, forcing them to raise mortgage rates in order to maintain profits and the stability of their businesses.

RELATED: Huge change 95 per cent of Aussies want

Back in Australia, there is an unprecedented consensus surrounding the direction of the property market. Across a wide range of analysts and market commentators there are few that disagree that residential property as an asset class is set to boom and likely very strong price growth in 2021.

Unlike other housing price booms that have occurred in the recent past, this one is predicted to be the first truly nationwide property boom in years with a few very notable exceptions.

But as mortgage rates in the United States and elsewhere continue to rise, the global bond market could slam on the brakes of this would be multi-year housing price boom.

In as little as 15 months time Aussie mortgage holders could be staring down the possibility of not only an interest rate hike, but the chance that rates may only rise from here.

After relying on interest rate cuts for over 30 years to make paying off our homes significantly easier and/or faster, the Aussie mortgage holder’s greatest friend, the interest rate cut, may be put to rest for the foreseeable future.

If we do see continued upward pressure on borrowing costs the RBA is not likely to sit idly by. It will use its various tools to attempt to continue to artificially suppress interest rates.

As it stands the RBA is engaging in yield curve control. In plain English, it has set a target it does not wish three-year government borrowing costs to significantly exceed (0.1 per cent) and is buying bonds in an attempt to keep borrowing costs in its target range.

So far it has been relatively successful in suppressing rates to its desired level, despite seeing some brief moments where their target was significantly exceeded.

RELATED: Stunning prediction for house prices

However, the Australian Government’s long-term borrowing costs have seen far more explosive growth in their relative cost.

In the past six weeks, the cost of the Federal Government borrowing money for a 10-year fixed term has effectively increased by 79 per cent, with interest rates rising from 0.94 per cent to 1.68 per cent.

Despite the RBA Governor’s promises of rates staying low for at least three years, the directions of interest rates are not entirely within his control. They are ultimately at the mercy of the unpredictable tides of the global bond market.

As the global bond market attempts to price in what lays ahead and borrowing costs continue to rise, Aussie mortgage holders and the Reserve Bank may increasingly find themselves caught in the crossfire.

Going forward, rates may stagnate at roughly this level or even go slightly lower again if the global recovery shows signs of faltering. But as the global consensus turns towards a more inflationary future, it’s possible the days of bargain basement interest rates may already be slowly drawing to a close.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator



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Australian housing: What’s fuelling the property market insanity and possible impact of rising interest rates


Record low interest rates have been fuel to Australia’s red-hot property market, but the dream run on rates may be about to end, leaving some buyers exposed.

A one per cent hike on a typical $500,000 home loan could add more than $3000 to annual repayments.

“The Reserve Bank looks likely to find itself under property price pressure a lot sooner than it had expected, with reports stating housing prices climbed in February,” said Canstar group executive, of financial services, Steve Mickenbecker.

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The market is so hot that people are camping out days to get land for homes in southwest Sydney.


In 2020, Reserve Bank governor Philip Lowe said interest rates would likely remain at 0.25 per cent for years – then they dropped to as low as 0.10 per cent.

His argument was that the unemployment rate would need to fall to around 4.5 per cent and inflation should be sitting between 2 and 3 per cent before rates would head north.

“I think it’s reasonable to expect that will not be for some years,” he said at the time.

However, Australia’s unemployment rate is already falling, dropping from 6.6 in December to 6.4 per cent by January, the economy is booming and dwelling prices are soaring.

“The Reserve Bank doesn’t expect to raise the cash rate for three years or more, but unless property prices can be slowed it will have to start looking for some way to apply the brakes,” Mr Mickenbecker said.

Housing aerial shot from realestate.com.au

We’re witnessing a perfect property storm.


The perfect storm

New listings throughout 2020 were at four-year lows according to Mr Mickenbecker, meaning there just isn’t enough stock on the market.

“Property demand has run way ahead, with the fear of missing out becoming a powerful psychological driver as government incentives and low interest rates have encouraged first-home buyers and home builders into the market in a rush,” he said.

The result of slow supply and increased demand is a timing mismatch.

The auction crowd for 21 Bangalore Street, Kensington - for herald sun real estate

The auction crowd turnouts are becoming insane.


“Market forces must eventually slow the pace of demand, but we are going to have to see an increase in property listings to get us to that point. Supply must come from investors who will be feeling the heat as first-home buyers leave a further vacancy behind, but investors can walk away with a tidy capital gain and no pressing housing need,” he said.

“Buyers will be feeling a lot of pressure before this all plays out and the Reserve Bank will be looking for a circuit breaker,” he added.

It all sounds great, but there can be a downside to low interest rates.


What goes down, must go up

Anyone who entered a mortgage in recent years would have felt the positive effects of falling interest rates. But considering the typical home loan lasts 30 years, there is every chance rates could climb much higher during the life of the loan.

Canstar has crunched the numbers and just 10 years ago the average variable rate sat at 7.21 per cent. That heftier rate on a $500,000 loan would be $3,397 a month – far from the $1,848 repayments on a present day loan at 2 per cent.

Photos for impact of rising interest rates. Picture: Supplied

Photos for impact of rising interest rates. Picture: Supplied


Nerida Conisbee, chief economist at realestate.com.au, said people need to be mindful that interest rates can go up quickly.

“It’s like house prices, when they’re falling people think they’ll fall for ages, but then suddenly they can start shooting up again. The same thing can happen with interest rates. People need to be prepared and put in place a buffer so they don’t find themselves getting into distress,” she said.

Rise above the bank’s buffer

Billie Christofi is finance director with Reventon and has 21 properties. She said savvy investors should plan for the eventuality of rising rates by going above and beyond the 2.5 per cent serviceability buffer banks calculate when lending.

“Those buffers are great because they take into consideration changes to your living expenses and cater for changes in the interest rate. But I advise people put buffers in other areas as well,” she said.

Photos for impact of rising interest rates. Picture: Supplied

Billie Christofi is a finance director with Reventon Picture: Supplied


“Put a buffer in the vacancy rate of your investment property, don’t expect it to be rented out for 52 weeks of the year, put a 10 per cent buffer in there as well.”

Ms Christofi added that even if interest rates do start to creep up, it’s not all negative.

“If they do rise four or five years down the track, you need to take into consideration that rents will increase too,” she explained.

“So plan for interest rate rises, but know that circumstances do change in your favour as well. “Also, if it’s an investment property, that interest you’re paying is tax deductible.”

Alternative scenario

“I think we’ve still got at least a couple years, where interest rates are going to be quite stable. Right now is still a really good time to get into the property market. And if you feel uncertainty about what’s going to happen with interest rates, look at fixing your loan instead of keeping it variable,” Ms Christofi said.

Before the RBA increases interest rates, Ms Conisbee said there could be other initial steps taken.

“That could include a return of greater scrutiny on tax incentives and maybe negative gearing might come up again as a hot topic. Probably a lot of the first-home buyer grants will also be reviewed over the coming 12 months,” she said.

“There might also be a focus on the responsible lending rules that were previously relaxed. When they eased up, it was much easier to get finance and banks started offering a lot of incentives; not just low interest rates. I think if the RBA is right and they don’t believe inflation will take off for a few years, then it will be some other form of intervention that will be looked at to slow things down.”

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Heard the one about interest rates rising? Don’t be so sure


Having thus woken up, investors have suddenly begun to demand a lot more to lend to governments over the longer term.

Indeed, the interest rate payable on 10-year US Treasury bonds has crept up from 0.5 per cent in the middle of last year to around 1.4 per cent now. The longer-term average is around 4 per cent.

Illustration: Dionne GainCredit:

Similarly, in Australia, the yield on 10-year Australian government debt has increased from a low of 0.7 per cent last year to around 1.7 per cent.

Over shorter-term lending horizons, like three years or five, the pressure has been less intense, but still there. Our Reserve Bank had to go into the market to buy up more three-year government bonds last week to meet its pledge to keep the cost of this debt at an ultra low 0.1 per cent.

Amid this financial market frenzy, it’s only fair for punters to wonder if mortgage rate rises may also be on the cards.

And when you see positive news about our economic recovery, as contained in Wednesday’s national accounts, it’s easy to get carried away.

But don’t.

The good news is the total volume of goods and services produced by Aussies shot up by 3.1 per cent in the final three months of last year, as Melburnians were released out of captivity and went on a mini spending spree.

It’s a stellar performance compared internationally, thanks largely to our success in controlling the spread of the virus, which has allowed life to return much closer to normal here than elsewhere.

Australians are spending again and our household savings rate – having reached 22 cents out of every dollar of income mid last year – fell back to 12 cents in the December quarter.

Shrinking savings is due to a combination of both rising spending and falling income. The first part is good news: we feel more confident and able to spend.

The RBA has outlined why it extended its bond purchase program.

The RBA has outlined why it extended its bond purchase program.Credit:Dominic Lorrimer

The second part is ominous, reflecting the fall away in government support for household incomes via JobKeeper, JobSeeker, cash payments and early withdrawal of super.

This fall in the household savings rate, then, is partly a confidence story, but also partly a story of necessity for some cash-strapped households. As government support payments continue to fall, economists are hoping the first part of the story will outweigh the later. We’ll see.

As fiscal support is withdrawn – albeit with some likely top-ups around budget time – the onus will fall more heavily again on monetary policy and the Reserve Bank’s determination to keep interest rates low.

Reassuringly, the coronavirus crisis has only sharpened our central bank’s resolve to fulfil its mandate of achieving “full employment” in Australia, or something close to it.

Even before COVID, it was struggling to do this. Wages growth was tepid; inflation well below target. Companies were not investing. Workers did not have sufficient power to demand significant pay rises. And productivity figures were hardly backing their case for one.

I called it the “econo-meh”.

Importantly, even in this pre-COVID economy, inflationary pressures were insufficient to justify interest rate rises any time soon.

COVID only makes a return to sustainably higher wages and inflation even harder.

It will be mid-year before we’re even back to the level of economic output we had before the pandemic struck – longer still before we’re where we would have been absent a pandemic.

Bad for business: airports were empty for much of 2020, as travel restrictions curbed flights.

Bad for business: airports were empty for much of 2020, as travel restrictions curbed flights. Credit:Kate Geraghty

Of course, for economic life to return to normal, we still need international borders open again.

But the true task of rebuilding our economy after COVID goes well beyond that.

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It goes right back to the same problems we were grappling with before the pandemic, of sluggish business investment and wages growth.

To really see inflationary pressures back on the agenda, we’d have to complete our original task of unleashing significantly more innovation and investment in our economy. Whether through radical tax reform or huge increases in investment in education and knowledge, that’s all likely to take time.

The task was huge before COVID. It’s even bigger now.

It’s true that, given bond market moves, fixed-term interest rate loans may not fall much further from here. Now is a good time to look at the potential savings from fixing in at ultra low rates.

But variable-rate borrowers can remove interest rate hikes from their list of things to worry about. That’s good news for household budgets.

But it’s a concerning sign about the strength of our economy in the years ahead. The road to true economic recovery is looking as long and bumpy as ever.

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March interest rate announcement: RBA holds cash rate at record lows, fueling property price surge


Interest rates are set to stay at the same historically low levels, the Reserve Bank of Australia announced at its March meeting on Tuesday, despite the fact they’re further fuelling the “frenzied” housing market.

The official interest rate is being held at its record rock bottom 0.1 per cent – a rate expected to continue well into the foreseeable future – in a decision that comes as no surprise to market experts.

“They can see how low interest rates are feeding into the economy in a number of different ways in lowering the cost of people’s mortgages and giving them more disposable income,” said HSBC chief economist Paul Bloxham.

“But the RBA is fairly unconcerned about the pick-up in the housing market as they see the housing mechanisms as one of the ways they are supporting the economy. The governor has said before that we’ve had a four-year pause in national housing prices, so they’re comfortable if they rise even further from here.”

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More worrying, however, has been the sharp rise in bond yields, which on Friday prompted a sell-off in global equity markets. The RBA stepped in three times last week to buy bonds in an attempt to push the yield down, but it moved only slightly, and is still sitting higher than the policy target of 0.1 per cent.

It’s led to speculation that, while low interest rates will stay for a while yet, they certainly won’t last the three years that the RBA has previously predicted.

While the RBA has repeatedly said the cash rate won’t be increased until inflation is sustainably within the 2 to 3 per cent range — conditions requiring significantly higher wage growth and gains in employment not expected until 2024 — some experts believe a rise will come earlier than that.

“The interest rate will be put up sooner than the late 2023 they indicated,” said Propertybuyer.com.au chief executive Rich Harvey. “The long-term bond yield has started to pick up and is having an effect on the economy.”

“The economy is picking up more quickly than everyone expected, there’s a lot of optimism around and the vaccine is now being rolled out. The RBA may have to adjust its thinking before too long.”

With local business investment bouncing back, and iron ore prices strengthening, the rebound in consumer confidence has caught many economists unawares.

But that optimism is now being felt across Australia, in both metropolitan and regional areas, according to Elders head of home and commercial finance Debbie Ettridge. She believes the RBA’s expectations that the economy will expand 3.5 per cent in both 2021 and 2022 look sound, and the ensuing confidence has led to both first-home buyers and investors flooding back into the market.

“Demand is outstripping supply across the sectors of the market, yields are up and there is a spring in the step,” she said. “From a finance perspective, we are seeing some lenders coming to the party with policy and postcode restrictions being eased both in the residential and commercial sectors.”

“It is fair to say that on the back of the global and national economic outlook, which is cautiously optimistic given quantitative easing and COVID-19 being harnessed through vaccines, we can at least now take a breath and move forward.”

Many indicators suggest it’s onward and upward from here. Australian online marketplace Oneflare, for instance, has released new consumer data that suggests the property market shows signs of further heat while interest rates remain at their current level.

Its latest study has found real estate agent bookings are up 80 per cent, property management bookings are up 63 per cent and – in an indication that people are even keener to upsize, downsize or right-size – removalist bookings are up 82 per cent.

“Never before have we seen this size uptick in property-related jobs on our platform,” said Oneflare chief executive Billy Tucker. “With the Australian Bureau of Statistics recently revealing that a record 8192 loans for home building were approved nationally during December – an extraordinary increase of 15.3 per cent over the previous month’s record result – the property market is showing no signs of slowing down.”

“You really can see the impact of a buoyant housing market play out through our bookings. If people are incentivised to buy, sell and build, it creates thousands of jobs for our nation.”

With unemployment figures less than feared, and hopes that the end of JobKeeper on March 28 and JobSeeker on March 31 will prove no more than a blip on the radar of the long-term health of the nation, inflation is still well below the RBA’s target band, says Mr Bloxham.

“But to get it to lift we still need unemployment to keep falling a lot further to put pressure on sluggish wages growth and flow through into inflation since we have little population growth with no new migrants or foreign students.”

Meanwhile, it’s up to the low cash rate, and rising confidence, to push the housing market on.

“The low interest rate is driving up a frenzied level of activity and we’re seeing some very aggressive buying tactics encouraged by FOMO,” said Mr Harvey.

“We’re now seeing unprecedented numbers at auctions and some desperate buying since there’s limited stock in prime areas, like Sydney’s eastern suburbs, northern beaches, inner west and lower north shore. That will continue as long as we have such cheap money.”

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Interest rates are rising and tech stocks are likely to head in the other direction


We live in strange and ridiculous times. Nowhere is this more evident than on financial markets.

After blithely trading on to record highs while the seeds of a pandemic germinated in China in January and February last year, supposedly forward-looking share markets cratered when the obvious became apparent in late February and March last year.

Then, with almost as much panic as the sell-off, shares came roaring back in a speculative frenzy, leaving many markets (notably the US) hitting fresh records, even as the nations they were based in suffered their sharpest recessions since at least the Great Depression.

As is often the case, once the buying started, it seemed the less connected a stock or other asset was to an identifiable income stream the faster and higher it rose. Bitcoin anyone.

Why?

In part, it was the forward-looking nature of markets, with early bets on the vaccines, which are only now just being rolled out, ending the pandemic.

But the biggest driving force was the unprecedented flood of money and record-low interest rates from central banks that has left the world awash with ultra-cheap cash with few financially rational places left to invest it.

When the real rate of return on ‘safe’ assets, like AAA-rated government bonds, is deeply negative — you are losing money holding them — the cost of parking money in assets that offer no income but the potential for speculative gains falls and the temptation rises dramatically.

Along with growing disquiet and distrust around the central bank actions that have pushed interest rates so low, these negative rates are a major reason why professional investors have been right in there with amateurs throwing money at bitcoin and other cryptocurrencies, as well as tech companies that either make no profits or generate earnings that are a fraction of their soaring share market valuations.

For more conservative investors, the perceived safety of bricks and mortar has been the investment of choice.

Rate trigger for a ‘long overdue correction’

So, now that these benchmark bond rates have begun rising, sharply, it’s no wonder many investors are starting to sweat.

For some, the heat is getting too much and they’re fleeing the kitchen, causing sell-offs in the most vulnerable markets, such as tech stocks and cryptocurrencies.

AMP Capital’s head of investment strategy Shane Oliver says we could see further sell-downs but not, he thinks, a crash.

“Bond yields [interest rates] could still go a lot higher in the short term before they settle down again and this could cause the long overdue correction in equities,” he says.

As we’ve seen in the sell-offs so far, companies that don’t make profits and speculative assets with no income streams are the most vulnerable, but others are also at risk.

“Because these stocks rely on more earnings in the future, they are seen as ‘long duration’ stocks and so they are more vulnerable to an increase in the bond yield used to discount those earnings.

“Also at risk, but less so, are yield plays [higher dividend stocks] that benefited from the ‘search for yield’ flowing from falling interest rates and bond yields — e.g. telcos and utility stocks.

“Cyclical stocks like materials [miners/energy producers], retailers, industrials and even financials are less at risk as their earnings will rise more with economic recovery and so are more likely to see earnings upgrades.”

And this is exactly what we’ve seen on share markets over the past 24 hours, with the tech-heavy Nasdaq down but Australia’s commodity and banking dominated ASX 200 index rising solidly.

Will central banks again soothe investor nerves?

This may prove to be a short-term hiccup, with central banks once again moving in to soothe the jitters.

The Reserve Bank tried to do this on Monday after the three-year bond yield rose above its 0.1 per cent target, but the market practically laughed off its billion-dollar intervention.

Most RBA watchers expect it to follow singer Janis Joplin’s advice to “try just a little bit harder”.

“The most likely response from the RBA is a show of resolve, with significantly increased YCC [yield curve control] buying in coming days and weeks,” say CBA’s rate watchers.

The US Federal Reserve chairman, Jerome Powell, now has his turn, with the opportunity to offer soothing words talking down the risk of rising interest rates during two days of public congressional testimony.

That’s exactly what Rabobank’s head of financial markets research in the Asia-Pacific, Michael Every, expects will happen.

“Indeed, if those magicians have to face a choice between rising real rates and levitating markets, which one do you think they will make disappear? Obviously rising yields, through outright yield curve control.

“At which point, almost all price discovery will follow through the hidden trap door.”

In other words, if money is free for big investors and they think central banks will keep the party going indefinitely the sky is no limit for asset prices.

When good news again becomes bad news

The irony is that the rising bond yields are a sign that economies are recovering from COVID-19, that firms will be able to increase both sales and prices, and that profits should rise.

They should be welcome good news after the worst year for most economies since the 1930s.

But investors are simply petrified that any recovery in economic growth and profits won’t keep up with the rise of interest rates from rock bottom levels.

Remember, at current levels with US 10-year bond yields still below 1.5 per cent, a return to something even approaching a more normal rate of 3 per cent would see interest rates more than double.

That’s one of the traps of ultra-low rates — a small percentage point increase is a massive percentage rise in interest costs.

‘Bringing down the house’

But, while central banks may move to keep a lid on rising rates in the short term to buy markets a bit more time, it’s unlikely they can keep doing that indefinitely.

“It is again magical thinking to believe this trick can be pulled off without literally bringing down the house,” argues Michael Every.

Bond interest rates often jump at the beginning of an economic recovery
Bond interest rates often jump at the beginning of an economic recovery.(Supplied: AMP Capital, Bloomberg)

Shane Oliver is less dramatic in his forecast, but still sees a return to the gravity of higher interest rates as inevitable.

“There is a strong case to be made that the disinflation seen since the 1970s is coming to an end and that the long-term trend in inflation is at or close to bottoming,” he observes.

“Central banks are now throwing the kitchen sink at beating deflation and disinflation just as they threw it at high inflation in the 1980s and early 1990s.

“There is a good chance — that helped along by massive government spending, governments becoming more interventionist in economies, a reversal in globalisation and a decline in workers relative to consumers — they will win this time, ultimately resulting in a sustained rise in inflation, but that’s probably still a few years away.”

Hopefully, enough time for policymakers, investors and consumers to figure out how they are going to survive financially in a world of higher interest rates.

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Brisbane Broncos not blindsided by Cronulla Sharks’ interest in Craig Bellamy


That revelation hasn’t dampened the enthusiasm of officials at Red Hill, which will soon include incoming chief executive Dave Donaghy, the former Storm boss who will replace Paul White within weeks.

Kevin Walters has a big job to restore the Broncos to their former glory.Credit:Getty

Even with the ongoing drama around player behaviour and an unwanted first wooden spoon, the Broncos believe they still have the financial clout and stature to make Red Hill an attractive destination for Bellamy as a one-two punch with new head coach Kevin Walters.

The Storm are still in the equation, too, and want to keep Bellamy on in a consultancy capacity, which would allow him to return to Queensland to be closer to family while helping the Storm in a fly-in, fly-out role.

They would love him to simply continue as head coach but Bellamy spoke before the grand final of his fatigue in the role given its round-the-clock demands and the intensity he applies to it.

Bellamy has spoken of a desire to base himself on the Gold Coast but the Titans already have Mal Meninga in the kind of role Brisbane, Cronulla and the Storm envisage for Bellamy. At the very least, the Gold Coast have shown how effective a figurehead can be in the football department. Meninga was central to the club’s capture of Brisbane’s star edge forward David Fifita.

The option of another club in Brisbane has given Bellamy more food for thought. The Redcliffe Dolphins, who would likely trade as the Brisbane Dolphins, are favourites to be granted the next NRL licence.

The Dolphins have targeted Wayne Bennett as their inaugural coach, if he is available, but having an iconic figure like Bellamy on the books would be just as much of a boost – if not more – when building their first roster.

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Dolphins chairman Bob Jones said he had yet to make contact with Bellamy but that discussion was on his radar as the bidding process progresses.

“We haven’t spoken to Craig yet but we probably will when the time is right,” Jones said.

Given Redcliffe’s strong financial base, which even the Broncos acknowledge makes them the frontrunner as a local rival, they would be in a good position to offer Bellamy a deal that would set up his semi-retirement.

And Bellamy may enjoy the idea of working with a blank canvas, rather than trying to revive the fortunes of clubs like the Sharks or Broncos.

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WA lockdown continues, potential UK COVID strain found in Melbourne quarantine hotel, Captain Tom Moore dies from COVID, RBA holds interest rates


About two million people in the Perth, Peel and South West areas of WA were plunged into a five day lockdown on Sunday in order to stop any potential spread of the virus from the guard.
Mr McGowan said he was not afraid to apologise for the saga but defended the swift action taken after they found out about the case.

“I’m very sorry for what’s occurred,” he said.

“This has been debilitating for lots of people. Obviously we went for 10 months without a single case and everyone in WA was very happy about that, this has been a shock to all of us.

“We have swung to action very quickly , [on Sunday] within a matter of hours we put in place a huge number of rules.”

WA Premier Mark McGowan says Perth’s lockdown will remain in place until at least 6pm on Friday.Credit:Getty

Mr McGowan also admitted he would have been wearing a mask if he was in the hotel but did not place blame on the guards who had just been following health advice given to them by authorities.

“If I had been in a hotel I would’ve worn a mask,” he said.

“Obviously the security guards have been following the rules that have been put in place by the infectious disease experts.”

Mr McGowan defended the health advice given to the state, which he said had held the state in good stead for the past 10 months.

“Over the last year we have had the best outcomes of anywhere in the world, obviously this has been a significant setback,” he said.

Outside of the existing lockdown mask requirements quarantine security guards will now also be required to wear masks at all times while working.

If WA continues to record no new cases over the next two days it is likely the lockdown will end by Friday but Mr McGowan said some restrictions including gathering limits would likely remain.

He said it was expected the government would announce the new restrictions by Friday morning.

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WA lockdown continues, Captain Tom Moore dies with COVID, RBA holds interest rates, AstraZeneca COVID vaccine data suggests transmission reduction


Similar scenarios are unfolding around the country as states expand eligibility for the shots. Although low-income communities of colour have been hit hardest by COVID-19, health officials in many cities say that people from wealthier, largely white neighbourhoods have been flooding vaccination appointment systems and taking an outsized share of the limited supply.

People in underserved neighbourhoods have been tripped up by a confluence of obstacles, including registration phone lines and websites that can take hours to navigate, and lack of transportation or time off from jobs to get to appointments. But also, scepticism about the shots continues to be pronounced in Black and Latino communities, depressing sign-up rates.

Early vaccination data is incomplete, but it points to the divide. In the first weeks of the rollout, 12 per cent of people inoculated in Philadelphia have been Black, in a city whose population is 44 per cent Black.

In Miami-Dade County, just about 7 per cent of the vaccine recipients have been Black, even though Black residents comprise nearly 17 per cent of the population and are dying from COVID-19 at a rate that is more than 60 per cent higher than that of white people.

In data released last weekend for New York City, white people had received nearly half of the doses, while Black and Latino residents were starkly underrepresented based on their share of the population.

We want people regardless of their race and geography to be vaccinated, but I think the priority should be getting it to the people who are contracting COVID at the highest rates and dying from it,” said Kenyan McDuffie, a member of the City Council whose district is two-thirds Black and Latino.

Alarmed, many cities are trying to rectify inequities. Baltimore will offer the shot in housing complexes for the elderly, going door-to-door.

Officials in Wake County, North Carolina are first attempting to reach people 75 and older who live in nine postcodes that have had the highest rates of COVID.

Fixing the problem is tricky, however. Officials fear that singling out neighbourhoods for priority access could invite lawsuits alleging race preference. To a large extent, the ability of localities to address inequities depends on how much control they have over their own vaccine allocations and whether their political leadership aligns with that of supervising county or state authorities.

The New York Times

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Interest Rates Have Soared. That Could Put a Dent in Stocks Soon.


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There’s global interest in Tasmania’s wind farms — but can foreign ownership laws cope?


On the south-east corner of Australia, the winds known as the Roaring Forties whip across from the Indian Ocean.

As they cross Tasmania they lick its mountainous ranges, making the island one of the best spots in the world for wind farms.

And overseas investors have caught on. The majority of turbines on the island have some form of Chinese ownership.

But the foreign interest is starting to raise eyebrows, because Tasmania doesn’t necessarily need the extra energy.

The majority of its power famously comes from hydro-electricity.

The remaining 10 per cent has been supplied from either a small amount of gas or a power cable from the mainland known as Basslink.

“A lot of the big plans for wind farms in Tasmania are far in excess of Tasmania’s need for energy,” energy analyst Marc White told 7.30.

The turbines are springing up because of a proposal called Marinus Link.

It’s a $3.5 billion project to build a second power cable across the Bass Strait to Victoria, to allow energy to be exported to the mainland.

It would mean hydro-electricity and wind farms join forces to become a so-called “Battery of the Nation” and solve some of the country’s energy woes.

Tasmania has an extensive system of hydro-electricity dams.(Supplied: Hydro Tasmania)

The Federal Government has promised millions to help fast-track this power cable but energy analysts have growing concerns about the proposal.

Since the wind farms started feeding into the grid, Hydro Tasmania has been pumping the brakes on its hydro-electric dams to keep the grid under control.

Wind farms made up 37 per cent of the state’s power at one point in March last year, and hydro had to be scaled back.

Now, with the rise of battery technology, experts are also not convinced a second expensive cable is necessary.

Mr White believes if the business case for Marinus Link was there, the private sector would already be involved.

“Market players could have come forward and funded this project for the last 10 years. And nobody’s come forward,” he said.

Consumers could bear the cost

Marc White, wearing a suit and looking at the camera, sits in front of a laptop in an office.
Energy analyst Marc White is not convinced of the benefits of the proposed Marinus Link.(ABC News: Mitch Woolnough)

Mr White’s other major concern is that the structure of the current system means it would be up to Tasmania’s energy consumers to pay for Marinus Link.

“The problem is, they’re not the beneficiaries of the link,” Mr White said.

“Consumers could be asked to pay for a product that really benefits other parties such as wind farms and generators.”

Then there’s the possibility that too many wind farms could paradoxically lead to higher power bills.

“When the wind blows, the price goes very low,” Mr White said.

“But when the wind doesn’t blow, the price goes very high. Consumers have to pay for that market volatility.

“We’re not convinced that the numbers stack up.”

Premier Peter Gutwein told 7.30 the mainland wanted renewable energy and the Marinus case was sound.

“The initial business case indicates that it will be able to stand on its own two feet,” he said.

“We’ll get to a point where Marinus is a project that can get up.”

China-backed wind farm confident on Marinus Link

Wind turbines under a cloudy sky, with dead trees and an animal skull in the foreground.
Power generated at Cattle Hill Wind Farm is fed into the state’s energy grid.(ABC News: Alison Branley)

Others, like John Titchen from Cattle Hill Wind Farm, are equally optimistic.

The Chinese-owned farm in central Tasmania came online with 48 turbines earlier last year.

Mr Titchen, who is Goldwind Australia’s general manager, is reluctant to entertain any suggestion that Marinus Link might not go ahead.

“I expect that Marinus Link will proceed, there’s pretty significant federal and state support for the project,” Mr Titchen said.

He said the farm’s turbines weren’t at risk of becoming a stranded asset because they were already helping to make up the 10 per cent gap in the state’s power supply.

At the Cattle Hill Wind Farm headquarters in Waddamana, there’s an office for their major investor and 80 per cent shareholder PowerChina.

However, the reason for Chinese investment in this remote piece of infrastructure could be more to do with the turbines themselves than Tasmania’s energy needs.

Jeffery Wilson, research director at the University of Western Australia’s PerthUSAsia Centre, said China had a well-documented “over-capacity” problem.

“Now that China has largely industrialised, most of its country has an industrial capacity overhang problem,” Dr Wilson said.

“Too much steel, too many automobiles, too much construction equipment.

“What we’ve seen with China’s Belt and Road initiative launched in recent years is an attempt to export that capacity.”

Mr Titchen said the Cattle Hill project included turbines manufactured in China, with “locally manufactured sections”.

He said Goldwind had a variety of investors across Australia, including some from the Middle East.

“Whoever’s got the most competitive source of capital will be attracted to projects,” he said.

While cheap money is great for developers, Dr Wilson said Chinese companies don’t necessarily invest in feasible projects.

“They combine both normal commercial incentives but they also often bring policy or strategic goals on behalf of the Chinese government.”

A man and a woman in orange high-vis stand next to a car in front of some large wind turbines.
John Titchen says government support for Marinus Link means it is likely to proceed.(ABC News: Alison Branley)

Wind farm not popular with some green groups

The renewable energy from wind farms in Tasmania has raised the ire of Tasmania’s green groups.

Veteran campaigner and former Greens leader Bob Brown has been a vocal opponent for many reasons, including their impact on the state’s threatened eagle populations.

One particular farm that’s causing outrage is the proposed Robbins Island Wind Farm in the north-west of the state.

It includes 270-metre tall turbines that are roughly double the size of the famed Stanley Nut headland nearby.

Pat and Len Doherty have run six tourist cabins in the Loongana Valley for 40 years.

A high-voltage power line that will connect the Robbins Island proposal to Marinus Link will run alongside their property in central Tasmania.

Pat and Len Doherty stand in a lush Tasmanian property, with mountains and escarpment behind them.
Pat and Len Doherty say the plan to run power lines near their property will ruin their business.(ABC News: Mitch Woolnough)

Their private nature reserve has been a drawcard for walking groups and international tourists who want to view Tasmanian Devils and platypuses in their natural surrounds.

“It’ll ruin our business,” Mr Doherty said.

While there, tourists also visit the world renowned Leven Canyon nearby.

The proposed power lines will pass to the south of the Canyon and take out a 60-metre-wide clearing as they pass through.

“You’ll go to the Leven Canyon, look out, you’ll be looking at towers coming across from one side to the other,” Mr Doherty said.

As the couple questioned: What good is renewable energy that destroys natural habitat?

An aerial view of Leven Canyon, lined by green and gold trees under a blue sky dappled with clouds.
TasNetworks wants to run high-voltage powerlines near Leven Canyon to connect to the proposed Robbins Island Wind Farm to the proposed Marinus Link.(ABC News: Mitch Woolnough)

“Renewable energy is great, but this is not the best way to go about it,” Mr Doherty said.

“It could be all one huge white elephant.”

TasNetworks, which is planning the powerline route, said in a statement it was “listening to local communities and working with landowners and local residents to minimise potential impacts and explore the benefits”.

British Virgin Islands is base for Tasmanian wind farm

The Robbins Island Wind Farm is being proposed by UPC Renewables, which is headquartered in Hong Kong.

It’s got a complex company structure which the ABC traced to the British Virgin Islands but not beyond.

Aerial shot of Robbins Island in Bass Strait.
Robbins Island sits in the Bass Strait, off Tasmania’s north-west tip.(ABC News: Henry Zwartz)

A spokesman said in a statement: “UPC Renewables Australia is majority owned by US, UK, Netherlands and Philippines interests (AC Energy) and the management team is 100 per cent Australian-based.”

Upon further inquiry the company said UPC Asia Pacific Holdings Limited was approximately owned 64 per cent by US shareholders, 21 per cent by a Dutch shareholder, 13.5 per cent by British shareholders and 1.33 per cent by a Canadian shareholder.

That’s news to Len and Pat, who said they’d been repeatedly told UPC was an Australian company.

Chinese dairy purchase gone wrong sounds warning

Evan Rolley is among those who are urging caution with foreign ownership, particularly given the role of the Foreign Investment Review Board.

Mr Rolley, himself an advocate of foreign investment, said the board was not well structured to govern conditions attached to sales.

He ran Van Diemen’s Land Dairy for two years after it was bought by a private Chinese investor.

Evan Rolley, a man with a grey-and-black beard and a hat, looks at the camera in front of a vineyard.
Evan Rolley says the Foreign Investment Review Board did not properly enforce the conditions of purchase when a Chinese investor bought the dairy.(ABC News: Mitch Woolnough)

The dairy is made up of 25 farms on Tasmania’s north-west coast and is the largest grass-fed dairy in the country.

“The regional community of the north-west coast were given this very glowing investment proposal,” Mr Rolley said.

“It included investing $100 million into the farm, 95 new jobs, an air bridge between Tasmania and China along with a commitment to invest in the Aboriginal and environmental heritage of the farms.

“These were very important in community support.”

The review board approved the sale on the basis the promised conditions were met, but Mr Rolley said none of them were delivered.

Mr Rolley said local businesses felt that they had been misled.

Five non-executive board directors quit in 2018, and he left soon after.

“That’s where people, I think, lose faith that foreign investment is delivering,” he said.

Van Diemen’s Land representatives did not respond to the ABC’s inquiries.

Mr Rolley said the Foreign Investment Review Board didn’t adequately enforce the conditions it attached to sales.

The Federal Government says it has a suite of reforms to enhance its compliance regime.

It says it is spending $54 million on reforms that include stronger and more flexible enforcement options such as increased penalties.

But analysts like the Perth USAsia Centre’s Jeffrey Wilson aren’t convinced.

“China dominates the Foreign Investment Review Board’s work at the moment,” Dr Wilson said.

“In this new context, with new powers and new obligations to do so. It’s going to need a big investment in its enforcement capabilities.”

The Productivity Commission agreed, saying in a report earlier in the year that the board, based in Treasury, wasn’t “well-suited to being a regulator”.

The board’s annual report said it has just 55 staff. Dr Wilson estimates they would need at least 200.

The Federal Government says it has increased staffing, including contractors.

Watch this story tonight on 7.30.

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