100 basis points RBA cut

Mooze said:
Doesn't this mean they believe the economy is going to more of hell in a handbasket than the analysts had believed?

(yes happy though!)
Click to expand...

Yep.

Interesting point...problems in the US economy are arguably a function of the Fed Reserve using *extremely* low interest rates to bolster an economy faltering after the tech wreck and not having the gonads to stop administering the pain killers. Low rates plus ready markets to buy debt led to a borrowing boom which - as expected - drove consumer spending etc.

So, it would appear that the RBA has balked at weaning Australian's off their debt binge for fear of bringing on a correction. I suspect 100 bp this is a move too far and we have delayed a minor correction in favour of a major one down the track.
 
Token Funder said:
Yep.

Interesting point...problems in the US economy are arguably a function of the Fed Reserve using *extremely* low interest rates to bolster an economy faltering after the tech wreck and not having the gonads to stop administering the pain killers. Low rates plus ready markets to buy debt led to a borrowing boom which - as expected - drove consumer spending etc.

So, it would appear that the RBA has balked at weaning Australian's off their debt binge for fear of bringing on a correction. I suspect 100 bp this is a move too far and we have delayed a minor correction in favour of a major one down the track.
Click to expand...

Agreed. Extremely poor policy by the RBA.
 
That should make things a bit easier for some...great day for RBA to be considering rate cuts with 7.85% falls in London stockmarket overnight and 3.5% fall in the Dow.

Sort of explains the rapid fall in the Australian dollar against $US...fell under 70c at one point in the last 24 hours now around 74c.

www.oanda.com

Tuesday, October 7, 2008

1 Australian Dollar = 0.74402 US Dollar

1 US Dollar (USD) = 1.34405 Australian Dollar (AUD)

Interbank rate +/- %

This means:
You buy 1 Australian Dollar : 0.74402 US Dollar
You sell 1 Australian Dollar : 0.74348 US Dollar
You buy 1 US Dollar : 1.34405 Australian Dollar
You sell 1 US Dollar : 1.34503 Australian Dollar

Median price = 0.74348 / 0.74402 (bid/ask)
Minimum price = 0.69875 / 0.69915
Maximum price = 0.77337 / 0.77437
 
WOW - way way way better than expected

Second lot of good news today.

The first good news bit was from a REA in one of our regional investment areas in NSW. He has been really D&G for a little while now. He didn't think the market would pick up for another 4 or 5 years. Last week he sold 8 properties. He said the market is coming back and next year is going to be a very good year. Looks like I will win the little wager we had going on!!

Happy days for us - but trying to contain myself until we hear what the banks will pass on - nah bugger it anything right now is good.

:D:D:D:D

Sunshine
 
And this will make the AUD less attractive for foreign investors. Hence there will be selling pressure on the aussie, making it drop. And this will make imports more expensive, hence inflation will increase. Although oil is dropping, the AUD is dropping even faster, which will mean things like petrol will become more expensive.
 
I may be the only one on this site to think "that cant be good" but I can honestly say that I am now a little nervous. Can one be happy and nervous at the same time? :eek:
 
I think a falling Australian dollar is good for our economy...increases our revenue from exports (helps the terms of trade) making us more competitive globally. Might also offset falls in global commodity prices to some extent.

Is also good for our local tourism industry.

I understand that we are a net debtor nation when financing is included and so our net borrowings from overseas will become more expensive to repay.

Must say I'm a little hesitant too...what can the RBA see coming that we (and financial bookmakers and money markets pricing the size of the possible rate cut) couldn't see?
 
Hi all,

Here is an interesting bit about the rate cut. The SP500 futures rose 6 points on the news. The Aussie initially fell, then rose 2 cents :confused:

I think world markets are cottoning on to the idea that there could be a co-ordinated effort by CBs around the world. Would not be surprised to see other countries dropping their rates tonight.

bye
 
Ajax said:
I think a falling Australian dollar is good for our economy...increases our revenue from exports (helps the terms of trade) making us more competitive globally. Might also offset falls in global commodity prices to some extent.

Is also good for our local tourism industry.

I understand that we are a net debtor nation when financing is included and so our net borrowings from overseas will become more expensive to repay.

Must say I'm a little hesitant too...what can the RBA see coming that we (and financial bookmakers and money markets pricing the size of the possibel rate cut) couldn't see?
Click to expand...

what exports? resources will fetch what they fetch. we shoul dbe concerned about what we pay for imports, a falling AUD will cost us all dearly in living standards
 
Rob S said:
And this will make the AUD less attractive for foreign investors. Hence there will be selling pressure on the aussie, making it drop. And this will make imports more expensive, hence inflation will increase. Although oil is dropping, the AUD is dropping even faster, which will mean things like petrol will become more expensive.
Click to expand...

I'm loving the current exchange rate, my earnings have increased as I'm paid in US Dollars :D:D

As for rate drop, it's always been said the latest cut would not likely be passed on by banks and thats when they were thinking it'd be 0.5%
 
like i said, the banks will hold AT LEAST 25bp, but i was only expecting a 50bp cut.

that 5h1t is incredible - however, they have been overvaluing the AUD for a long time now, maybe in buffer for what's to come, and now we see the benefits of this policy.

or not....

inflation running close to 5% - but the oil @ $90p/b isn't factored into the flow-on economy yet so that may drop now.

XAO up 1% already.
 
Bill.L said:
Hi all,

Here is an interesting bit about the rate cut. The SP500 futures rose 6 points on the news. The Aussie initially fell, then rose 2 cents :confused:

I think world markets are cottoning on to the idea that there could be a co-ordinated effort by CBs around the world. Would not be surprised to see other countries dropping their rates tonight.

bye
Click to expand...

Yep, I agree, looks like co-ordinated action. We might have even had some local action in preventing the AUD from falling too far. As other CBs cut, the ex rates will balance out.

I think the RBA will chip in with the other CBs to get the credit markets moving again. Then after the crisis has passed they will turn their attention back to inflation. Seems a risky move to reduce the return on credit in the current environment.
 
Don't think I read any analyst or econ journo who predicted 1%.

Bill, you might be a bit right about the rate cut knocking the AUD, but commodities came down a lot too, oil 6.2%.

An economist on ABC market update at lunchtime was saying the AUD has been everywhere between 0.50 and $1USD in the last 6 years but it hasn't impacted our economy significantly. He added, Australia is just a sensitive barometer for global gdp, in that we are heavily reliant on commodity exports and run a big current account deficit.

But maybe he is overlooking the effect of those seeking shelter in US Treasuries strentghening the USD..
 
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