CBA, Telstra, Wesfarmers hit highs; rate cut likely; super fight

CBA, Telstra, Wesfarmers hit highs; rate cut likely; super fight

News in brief

Several of Australia’s biggest companies, including Commonwealth Bank, Wesfarmers, Telstra and Coles are trading near new records, or multi-year highs, as investors look beyond global turmoil and inflation to find winners in the market.

 

The Reserve Bank heads into its second day of meetings, and this afternoon is tipped to announce a reduction in the cash rate from 4.1pc to 3.85pc, which in turn would push down mortgage and deposit rates by about the same amount.

 

Prime Minister Anthony Albanese is overseas following the inauguration of Pope Leo XIV but back home a fight is brewing over the government's plans to increase tax on large superannuation balances.

 

Telstra is facing allegations it misled customers by inflating claims of how far its network reaches across the country.

 

Global leaders including Anthony Albanese have offered their best wishes to former US President Joe Biden who has been diagnosed with an aggressive form of prostate cancer.

Fear-o-meter

While most of us are delighted that interest rates are likely to fall today, spare a thought for those that lose out when rates drop.

 

People who put money in term deposits top that list. The value of term deposits is at a ten-year high, according to the banks, and while the funds already invested won’t be affected, future term deposits will be.

 

First home buyers can also lose out if the lower rates trigger more buyers in the market. Also, people who have fixed rate loans might lose out if the floating rate charged on mortgages drops below the fixed rate.

 

Retirees often lose out. Older people tend to have their retirement savings in safer assets, like bonds. Lower rates can hurt their returns.

 

Banks also tend to lose out from lower rates because fewer term deposits increases their cost of funding. It gets a bit more complicated but that is the theory.

Who's talking today?

On interest rates, property prices, and housing affordability:

 

"You've got strong demand for housing, not enough supply of it. So house prices go up, lo and behold, less people can afford it. And what we've got is a decline in home ownership. If you actually look at the numbers, you really have to go back to the 1950s to see a lower number than when we are today.

 

That's of course not the only implication. That's the ability of people to get into the market. A second consequence is that your ability to pay off the mortgage is not as easy, because the mortgage is so big, so it takes you a lot longer to do so. So the proportion of people who's actually got a home, that proportion of them who've actually got a mortgage is pretty high.

 

And the third thing obviously is that if you do have a mortgage, because it is so big, then the proportion of your income going to serve that mortgage is actually quite high right now."

It’s Tuesday the 20th of May and some of Australia's biggest companies are trading near record levels, the RBA is tipped to cut interest rates this afternoon, and a political fight breaks out over superannuation. Plus, Telstra is alleged to have inflated coverage areas, and Joe Biden is diagnosed with an aggressive cancer.

Greed-o-meter

	Location	Petrol Price
1	Kojonup, WA	$1.26
2	Adelaide	$1.57
3	Melbourne	$1.60
4	Perth	$1.60
5	Hobart	$1.66
6	Canberra	$1.75
7	Darwin	$1.77
8	Sydney	$1.63
9	Brisbane	$1.85
10	Alice Springs, NT	$2.56

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Source: FuelPrice.io