PRESSURE is mounting on the Reserve Bank to slash interest rates when its board meets later today, after major industry groups joined the chorus for the cut to be as wide as half of 1 per cent.

The housing sector last night pleaded for a cut after woeful new home figures showed sales had collapsed to their lowest levels in more than a decade.

Sales of detached houses tumbled 9.7 per cent to 4824 nationally in March, compared with 5344 a month earlier, according to Housing Industry Association research. It is the lowest number of monthly sales since December 2000.

“The Reserve Bank now needs to act boldly (today) and cut the official cash rate by 50 basis points,” the HIA’s Harley Dale said.

The bank has kept the cash rate on hold at 4.25 per cent all year. But an overwhelming majority of pundits have predicted a cut today after recent consumer price index data showed inflation was weaker than expected.

Financial markets have now priced in a 30 per cent chance the central bank will lower the cash rate to 3.75 per cent.

The Australian Chamber of Commerce and Industry yesterday also released its latest business expectations survey, warning the bank that it needed to act to ensure many small businesses remained above water.

“Uncertainty still prevails across the Australian business landscape, particularly in the small business sector,” the ACCI’s Greg Evans said.

“This is a crack of light and there is a long way to go.”

Economists last night agreed, with Citigroup’s Josh Williamson saying: “We believe the RBA can deliver an important message to economic agents by announcing a 50 basis point cut (today).”

If delivered, it would be the first outsized cut in interest rates by the Reserve Bank since the height of the global financial crisis in 2008.

Westpac yesterday announced it would offer its standard variable discount of 0.70 percentage points to home loans from $150,000 effective from today.

The 0.70 per cent discount was previously only eligible for home loans above $250,000.

Westpac also announced it would drop its one-year fixed rate by 15 basis points to 6.34 per cent, as well as its three-year fixed rate by 14 basis points to 6.39 per cent.

Meanwhile NAB yesterday also revealed a $2.05 billion net profit in the six months to March.

Westpac and ANZ are expected to announce their results later this week.

Speaking to The Adviser, National Mortgage Company’s chief executive Angelo Malizis said that while the Global Financial Crisis forced many mortgage managers to scale backm, a number of groups are now looking to re-enter the industry and compete for market share.

“Mortgage managers and non-bank lenders are definitely ready to compete again,” Mr Malizis said.

Last month, National Mortgage Company launched Independent Mortgage Managers (IMM) in response to the growing demand for balance sheet bank funding and loan servicing support.

“One month after our launch and we have been inundated with positive feedback. We have already had 21 mortgage managers tell us that they would like to come on board and we hope to grow that number to 100 within the next six months,” Mr Malizis said.

Mr Malizis said the positive feedback highlighted the resilience of the mortgage management sector and suggested this market is ready to once again compete with the majors for market share.

“I have had a lot of mortgage managers thank us for setting up IMM. It gives them a chance to compete once again in the lending space, without having to front all the costs and do all the back-end work.”

Mr Malizis’ comments are supported by a recent The Adviser straw poll which found a majority of brokers are happy to recommend non-bank products to all clients.

When asked who mortgage brokers would recommend non-bank products to, 64.5 per cent said all clients, while just 7 per cent said no clients.

Of the 372 respondents, 25.8 per cent said they would offer non-bank products to clients who fall outside the banks’ criteria.

FAMILIES are paying as much in veterinary bills for sick pets as it would cost them to buy a new car.

Some are plunging into financial stress trying to find the money for surgery and other procedures for their animals that cost as much or more than treatment for humans.

One family was slugged $18,000 for a Weimaraner that was hit by a car, only to lose the pup following surgery.

Others faced vet bills of $19,900 for a spoodle hit by a car, $14,000 for a tumour in a Boston terrier and $13,000 for an Airedale terrier with a tick.

Animal welfare groups say one in three pets will need urgent veterinary care each year, with the average claim more than $1000. Bills exceeding $10,000 aren’t uncommon.

But while Australians spent $2.2 billion on veterinary bills in 2009, according to the Australian Companion Animal Council  up from $1.2 billion in 2007  fewer than 5 per cent had pet insurance.

The figures come as charity Guide Dogs Australia enters the insurance market, challenging established players, such as Medibank Pet Insurance, Pet Insurance Australia and the RSPCA.

Director of insurer Pet Plan Doug Ford said take-up was slow in Australia, exacerbated by rising costs of living.

“I would say pet insurance to a lot of people is a discretionary spend and where there is hard economic times, obviously people think twice about buying insurance anyway,” he said.

He also said owners were simply unaware how costly a vet trip can be. “A lot of people don’t understand this is going to cost potentially tens of thousands of dollars. We have a maximum benefit of $20,000 and on several occasions that has been met,” he said.

Brisbane Veterinary Specialist Centre specialist vet Dr Rod Straw said most pet owners he saw did not have pet insurance, which made dealing with a pet’s injury or illness much harder. “If they did have an insurance policy … they would be able to take that stress and worry away and focus on the illness or the injury.”

Although treatments such as radiation and chemotherapy were the same as those used in adults, they were not subsidised by the Pharmaceutical Benefits Scheme.

Analysis by consumer advocate Choice found that the average pet insurance claim was $1048 across a range of common ailments, and average claims for some ailments had gone up 500 per cent between July 2009 and June 2011. The most expensive was for bone fractures that had an average claim of $2564….

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RBA

The Reserve Bank of Australia has left the official cash rate on hold for the third consecutive month.

The official cash rate remains at 4.25 per cent, which is in-line with forecasts from leading economists that rates will stay on hold until mid-year

In the minutes of the Monetary Board Meeting, the Board said that “[The RBA’s] judgement has been that, with growth expected to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate,

“The Board’s view was also that, were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy.”

“The world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring,

“In Australia, growth in domestic demand ran at its fastest for four years in 2011, driven by private spending. Nonetheless the balance of recent information suggests that output growth was somewhat below trend over the year.”

The RBA also acknowledged the heavy reliance on the mining sector, and the under-performing of industries such as construction.

“There are differences in performance between sectors, and considerable structural change is occurring. Labour market conditions softened during 2011, though the rate of unemployment has been little changed for some time,”

Cameron Kusher, researcher at RP Data told The Adviser that he isn’t surprised.

“I think [the RBA] will be pretty happy with these sets of figures. House values fell last year, they are still four and a half odd per cent down over the year. But the first two cuts improved stability.”

DISABILITY groups are “relieved and excited” the government plans to fund the National Disability Insurance Scheme in the budget, a process they say could cost more than $3 billion over the next four years.

This money would cover the $550 million cost of setting up the National Disability Insurance Agency to run the scheme and the $900m a year to run several launch sites to test the operation of the scheme from next year.

Julia Gillard yesterday fuelled the hopes of those trying to get the scheme off the ground by describing it as “a great Labor reform which we do want to deliver”.

National Disability and Carers Alliance spokeswoman Kirsten Deane said the disability community had two goals for the 2012-13 budget: the establishment of the NDIA and the announcement of the launch sites.

Former NSW Labor MP John Della Bosca, who heads the Every Australian Counts campaign, said once the launch sites were established and funded, “people will see how it makes services so much better everyone will want one”.

He said those concerned about how the government would fund the scheme, estimated to cost up to $8bn a year when it is fully operational in 2017, should be aware that by 2020, the cost of doing nothing would be greater.

“The cost to the health and community services and mental health system if you do nothing would be a lot worse,” he said.

National Disability Services spokesman Ken Baker said it was “very promising” that the scheme would be funded in the budget.

“The government will get enormous credit if it does fund the NDIS in the budget,” he said. “The current system is a crisis management system which doesn’t deal with early intervention.”

Once the NDIS was established, he said, the costs would be offset by tax revenue from an extra 35,000 jobs created by giving people with a disability the support they need to get work, and creating the opportunity for their carers to work.

Australian Federation of Disability Organisations chief Lesley Hall said it was “terrific” news the government was looking to fund the NDIS in the budget, but there was frustration that the states were refusing to negotiate over the scheme until the federal government put money on the table.

The Greens have complained that disability groups have not been included in early consultations over the NDIS.

The study is based on research conducted by RGA Reinsurance Company of Australia and compares life cover premiums based on a particular scenario across nine countries. Australia faired well when compared to their overseas counterparts, including the United States, the UK and Canada.

The study revealed Australians provide the cheapest life insurance cover, the second cheapest adviser and direct life cover premiums, and the fourth cheapest consumer credit life cover premiums.

A straw poll conducted last week found that 17 per cent of the 300 respondents said they do not have a web page to promote their business.

Interestingly, of those that do, the majority said they do not generate leads from their web presence.

Of the bokers surveyed, 52 per cent said their web page provides them with zero leads, while just 31 per cent said they do generate business from their online presence.

Complete Home Loans Steve Bowers said he wasn’t surprised to hear most brokers fail to generate leads from their web presence.

By his own admission, 90 per cent of Mr Bowers’ business comes from existing clients and referrals from established networks.

“People may like to shop around online, but as far as I’m concerned people tend to want to talk to somebody as a referral,” he told The Adviser.

Mr Bowers said most broker web pages are cluttered and impersonal, which ultimately confuses and deters any potential leads.

“If you give most average people too much information it can overload them, that’s why they come to us in the first place to decipher and distil that information into what is relevant for them,” he said.

But while Mr Bowers generated most of his business through existing cluients and referral partnerships others are generating significant revenue in a largely untapped online space.

Finance Made Easy’s Tony Bice said while there was an excuse not to be online a decade ago those without a web presence in 2012 are behind the eight ball.

“I guess the main thing I’m seeing is people are time poor and tech savvy. This means they need a faster method of finding information, and they’re going to look online for it,” he said.

Up to 80 per cent of Mr Bice’s business comes from his online presence.

“Brokers need to know about search engine optimisation.

“Without an SEO strategy you’re in the dark. Most brokers only have two options, referrals or playing in the online space. They understand referrals because they have dealt that way for years and are more comfortable with them. But many don’t understand the power of the net.”

Zoran Malesevic from Harzed Finance told The Adviser that brokers who aren’t online will not be able to effectively compete for business down the track.

“As the next generation of borrowers comes through, we’ll see a huge shift towards online services. If you don’t have an online presence, you will miss out on potential business opportunities.”

But while brokers without a web presence are closing themselves off to new business opportunities, Mr Malesevic said these people should not be written off just yet.

“Having a website is not something required to be a good broker. Even things like having an email with your own domain name is no indicator of how good a broker you are. I know plenty of great brokers with @Hotmail.com emails,” he said.

theAdviser

“We believe the Financial Services Council’s (FSC) views on the topic of churning are ill-placed and wrong,” he said. “Yet the Government seems likely to press ahead with regulation.” Mr Trapnell says any regulation to control churning will unfairly penalise honest advisers who act in the best interests of their clients.

The Future of Financial Advice (FOFA) reforms are proposing a substantial repayment of the upfront commission if a client terminates the policy within two years and flat commissions for advisers if they move a client within five years. Mr Trapnell says advisers are expected to review clients’ insurance within five years and make recommendations where it is appropriate.

“Under FOFA, there will be a financial penalty if they don’t.” He says moving clients from one policy to another is done for a variety of reasons that don’t involve gaining more commissions.

“During the past few years, all the life companies have had a very strong push to try to reduce their lapse rates and increase their rates of retention of the policies on their books,” he said. “To aid them in this cause, the FSC appears to have taken statistics relating to lapse rates to the Government and convinced them that they are evidence of adviser churning.”

Mr Trapnell says life insurance companies count any policy that discontinues, for any reason, as part of their lapse rate, including policies that have run their course and death claims. “Policies which lapse for these reasons cannot possibly represent churning because they are not rewritten,” he said.

It is the second consecutive month the central bank has taken a cautious approach to safeguarding the economy leaving the official cash rate at 4.25 per cent – among the highest of the developed nations.

And despite the decision not to lift rates, borrowers could be slapped with even more pain, with lenders refusing to move in lockstep with the RBA.

Last month, 45 financial institutions ignored the RBA’s decision to leave rates on hold instead taking it as a green light to increase borrowing costs.

Among them, all four major banks – Westpac, Commonwealth, NAB and ANZ – opted to raise their standard variable rates by between 6 and 10 basis points, citing higher funding costs.
Today’s RBA decision met the expectations of all 24 economists in a Bloomberg News survey predicting no change.