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DIRECTORS : CHRIS BURRELL ROGER BURREL ( Acting Chairman ) IAN DAVEY ROBERT CHAN ELAINE ANDERSON ALICIA KENDALL MARI ASHTED

ASSOCIATE DIRECTORS : LYNDA MYERS MICHAEL BURRELL

ASSOCIATES : JAMIE ELGAR ERIC HARRISON DYLAN KATZER BRUCE McLEARY SHAUN MINAHAN

SENIOR INDEPENDENT DIRECTOR : GREG VICKERY AO email : clientcare @ burrell . com . au internet : www . burrell . com . au

The domestic economy ’ s recovery from its brief 2020 recession has been better than most developed countries , including the US , UK , Germany , Canada , and Japan . By 1Q21 , domestic GDP had regained the combined losses of 1Q and 2Q20 . Subsequently , Australia achieved 3 consecutive quarters , albeit slowing , of GDP growth , to edge just above the prepandemic level of 4Q19 . Further progress has been achieved in 2Q21 , the extent of which will be announced in early September . The consensus GDP growth forecast for 2021 is near 5 %, slowing to 3 % in 2022 . Household consumption will be the headwind , although private sector investment , including dwelling and business investment , will provide solid support . The continued absence of inbound tourism and international students will hurt service exports , offsetting the strong goods trade surplus dominated by iron ore exports . Budgetary tax incentives lifted business investment , while dwelling investment shows signs of peaking .

The 7.1 % month-on-month decline in residential building approvals in May , led by a 10.3 % fall in detached houses is perhaps confirmation . Further declines in detached housing are likely given they are 56 % above pre-pandemic levels of February 2020 . May ’ s decline is the first since the HomeBuilder stimulus program ended in March . The growth in dwelling approvals is significantly higher than declining population growth and household formation . Support from the interest rate cycle has , or is , coming to an end .

JUNE , 2021

Turning our attention to monetary policy , the RBA board has made a slight change to its policy at its recent meeting . It retained the April 2024 bond to set the yield target at an unchanged 0.10 %, and the current $ 100 billion program will continue at the existing weekly rate of $ 5 billion ending in September . Purchases will continue at a weekly rate of $ 4 billion until at least mid- November - a modest taper . The cash rate was maintained at 0.10 %. However , a change in the terminology around the timing of the conditions required to be met for a tightening has opened the door slightly . From the previous “ unlikely to be met until 2024 at the earliest ” to “ will not be met before 2024 ”. Governor Philip Lowe re-emphasised , “ the condition for an increase in the cash rate depends on the data , not the date ; it is based on inflation outcomes , not the calendar .”

The final drawdown of the $ 200 billion Term Funding Facility which ended on 30 June was $ 188 billion . This facility offered authorised deposit taking institutions 3- year funds at a fixed rate of 0.10 %. Despite the current 3-year fixed-rate principal and interest loan at around 2.00 %, the full $ 200 billion was not taken up , most probably due to :

� the amount of surplus capital on bank balance sheets , � 3-6 months term deposits are 0.10 %; and � at-call deposits are paying even less . .

Despite the strength of the economic recovery , credit demand , while improving , is still moderate . Demand

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