http://www.news.com.au/business/miners-face-billions-in-new-taxes/story-e6frfm1i-1225857676969
I am afraid I have to repeat what I have told many times.
Since 2008 RBA managed to maintain highest in the world interest rates. It is crear as a whistle that current level of rates is way above unsustainable.
First, some primitive explanations. Lifting rates is a way of removing money from the economy (it is just a form of variable tax on a new money supply). When economy heats up, central banks sells money they "print" at higher price (by lifting rates), when economy slows down new money sold cheaper (by cutting rates).
In alast few decades RBA adopted (highly irresponsible) approach of lifting rates to the extremely damaging levels. 1990s they lifted rates to 16.5%, killed the economy, and then (surprise-surprise) wound them back very quickly.
History was repeated 2008, when they lifted it even higher to 7.25% - and again (surprise-surprise) they had to cut rates extremely quickly to the lowest level in the history.
If someone thinks that I am mad telling that 7.25% is higher than 16.5% - take a long hard look at the mirror. Yes it is higher.
Thing is that in 1990s for every dollar earned we had 45c in debt, while in 2008 that ratio was $1.65 of debt per every dollar earned. In other word, every percentage point in 2008 removed from the economy 3.7 time the money it did back in 1990s. Accordingly, 2008 rates were equalling 26.5% in 1990s terms.
I know it will come a surprise (for some obscure reason) for people who were jumping over themselves yelling "deleveraging! deleveraging!" - but during the slump individuals and (mostly) businesses had to borrow even more - so current debt/income ratio got very close to 1.8. Which means that in terms of rate we again went higher than 1990s.
What allows blockheas from RBA to do this insanity? Simple - phenomenon that is known as "two-speed economy", in simpler terms- "resource bubble".
From one side multinationals robbing our mineral resources 24/7 leaving us breadcrumbs in form of "state royalties", form the other side is the rest of the country who gets nothing but high rates.
In other words, manufacturing, agriculture, education (everything that is not mining) and ordinary people pay the price of us being resource appendix of the third world.
Curing resource bubble with interest rate hikes is the same thing like curing acne by strangling a person.
Now finally we have some clearasil applied to this pimple - resource tax is more than doubling. Not enough I would say - but it is step in right direction.
And this is not only good because it makes RBA completely toothless. It is good because every ton of ore and coal we do not sell today we sell tomorow at higher price. It is good because every ton of coal we do not sell to the countries with backward technologies means less greenhouse emissions.
The next best thing would be sharemarket crash, but theoretically current sucker's rally is set to continue until indexes reach 90-95% of 2007 level - although can happen at any moment.
BTW, yesterday's auction clearance rate in Sydney was at 73%, so new leg of the property boom that is coming is going to set market ablaze. For those with short memory - back in 2008 I warned that mother of all property booms arrived. Now she is dressed up and ready to party.
I am afraid I have to repeat what I have told many times.
Since 2008 RBA managed to maintain highest in the world interest rates. It is crear as a whistle that current level of rates is way above unsustainable.
First, some primitive explanations. Lifting rates is a way of removing money from the economy (it is just a form of variable tax on a new money supply). When economy heats up, central banks sells money they "print" at higher price (by lifting rates), when economy slows down new money sold cheaper (by cutting rates).
In alast few decades RBA adopted (highly irresponsible) approach of lifting rates to the extremely damaging levels. 1990s they lifted rates to 16.5%, killed the economy, and then (surprise-surprise) wound them back very quickly.
History was repeated 2008, when they lifted it even higher to 7.25% - and again (surprise-surprise) they had to cut rates extremely quickly to the lowest level in the history.
If someone thinks that I am mad telling that 7.25% is higher than 16.5% - take a long hard look at the mirror. Yes it is higher.
Thing is that in 1990s for every dollar earned we had 45c in debt, while in 2008 that ratio was $1.65 of debt per every dollar earned. In other word, every percentage point in 2008 removed from the economy 3.7 time the money it did back in 1990s. Accordingly, 2008 rates were equalling 26.5% in 1990s terms.
I know it will come a surprise (for some obscure reason) for people who were jumping over themselves yelling "deleveraging! deleveraging!" - but during the slump individuals and (mostly) businesses had to borrow even more - so current debt/income ratio got very close to 1.8. Which means that in terms of rate we again went higher than 1990s.
What allows blockheas from RBA to do this insanity? Simple - phenomenon that is known as "two-speed economy", in simpler terms- "resource bubble".
From one side multinationals robbing our mineral resources 24/7 leaving us breadcrumbs in form of "state royalties", form the other side is the rest of the country who gets nothing but high rates.
In other words, manufacturing, agriculture, education (everything that is not mining) and ordinary people pay the price of us being resource appendix of the third world.
Curing resource bubble with interest rate hikes is the same thing like curing acne by strangling a person.
Now finally we have some clearasil applied to this pimple - resource tax is more than doubling. Not enough I would say - but it is step in right direction.
And this is not only good because it makes RBA completely toothless. It is good because every ton of ore and coal we do not sell today we sell tomorow at higher price. It is good because every ton of coal we do not sell to the countries with backward technologies means less greenhouse emissions.
The next best thing would be sharemarket crash, but theoretically current sucker's rally is set to continue until indexes reach 90-95% of 2007 level - although can happen at any moment.
BTW, yesterday's auction clearance rate in Sydney was at 73%, so new leg of the property boom that is coming is going to set market ablaze. For those with short memory - back in 2008 I warned that mother of all property booms arrived. Now she is dressed up and ready to party.