ANZ Bank Tips 2 More Interest Rate Cuts - More Fuel For Positivity

[sanj]

Even if you say the transport component for $100 of groceries is $1 instead of $0.18 a 50% drop in fuel prices still only means a max saving $.10, based on the stay ypu quoted that fuel makes up 20% of a transport company's costs

 

[Marty McDonald]

Any real reson as to why drop?

Or are we just keeping up (down) with the Singaporeans?

There seems to be a worldwide worry that deflation is on the way and central bankers often move in lock step ala the GFC. We also had Canada move their rates down last week.

That all said I had a look at the futures market just now and the March 90 day bank bills are trading at 97.41. This implies a yield of 2.59% so the money market is not convinced rates will be lowered tomorrow as the cash rate is 2.50%.

http://www.asx.com.au/prices/asx-futures.htm

 

[Freckle]

Ok, assume you're right; which price ranges are these evil price-wrecking investors buying in, mostly?

At a guess I would say that 'evil price-wrecking' investors don't actually constitute any significant portion of the market and I wouldn't have the foggiest where they might be investing.

 

[Freckle]

There seems to be a worldwide worry that deflation is on the way and central bankers often move in lock step ala the GFC.

Deflation's already in the system primarily in the form of bulk commodity prices and some services. That's lowering the price of goods (and some services).

The reality is though that an economy has inflation, disinflation and deflation all at the same time. Each components percentage effect varies as do the parts of the economy they impact.

In 1985 an F&P toploader washing machine cost me NZ$990 and I got it at a discount. My income was around $12k/yr which was about average for the time.

It is probably more accurate to say (that on average) we are in a period of disinflation with deflationary pressures increasing.

 

[BayView]

At a guess I would say that 'evil price-wrecking' investors don't actually constitute any significant portion of the market and I wouldn't have the foggiest where they might be investing.

My apologies, Freckle - I just realised I should be directing this conversation more at Wategos:

I don?t know how you can think this, many markets in Australia are now dominated by investors and speculators (aided by NG). They are the force pushing prices up, nothing else.
The most powerful emotional force in all bubbles, Greed.

I remember some years ago a boom in Tassie due to extremely high rental returns of the day.

Many of those properties were bought by investors; I even offered full asking price on one place and missed out.

But, since then, the returns have diminished due to rising rents and slowing/retracting values, so the investors are not there in any quantity any more.

Given that many of the City suburbs show dismal rent returns (Sub-5%) as a general rule, one can only conclude that most investors are not lurking and pouncing on properties left, right and centre...the entry level is higher than regional or country, and the returns are crap - lots of neg cashflow for most investors - who are usually also borrowing heavily.

How many can saddle-up for that gig?

I'll tell ya how many; 3/5ths...

The odd high income earner who has a tax bill to worry about, and a few developers in some instances depending on zoning.

Of course; the investors will still be lurking, waiting for that bargain that comes up every so often that everyone else misses...but then; everyone has access to that same below-value bargain if they are willing to do some work and wait a while..

Hardly pushing up the prices.

 

[Rolf Latham]

I guess whats really going to happen in the larger more exxy cities we will have more of the Euro model

70 % rental/ 30 % ownership

To me at least I can see a clear transition to that over time.

Currently ASIC APRA and others that are looking to provide stability, arent really going to get in the way of that in the long term.

Its a train thats coming amd whether you have ticket or not, we are all on that train............ no wrecks pls

ta
rolf

 

[plusnq]

Deflation's already in the system primarily in the form of bulk commodity prices and some services. That's lowering the price of goods (and some services).

The reality is though that an economy has inflation, disinflation and deflation all at the same time. Each components percentage effect varies as do the parts of the economy they impact.

In 1985 an F&P toploader washing machine cost me NZ$990 and I got it at a discount. My income was around $12k/yr which was about average for the time.

It is probably more accurate to say (that on average) we are in a period of disinflation with deflationary pressures increasing.

We have been in a long period of deflation due to technological advances. The costs of production have dramatically decreased and will continue to do so with the advent of 3D printing, lower energy costs and information being free. It will have a dramatic effect on employment and quality of life. A good read amongst many is this book.

http://www.amazon.com/Zero-Marginal-Cost-Society-Collaborative/dp/1137278463

It's worth a read.

Cheers

Shane

 

[unloadmymind]

There seems to be a worldwide worry that deflation is on the way and central bankers often move in lock step ala the GFC. We also had Canada move their rates down last week.

That all said I had a look at the futures market just now and the March 90 day bank bills are trading at 97.41. This implies a yield of 2.59% so the money market is not convinced rates will be lowered tomorrow as the cash rate is 2.50%.

http://www.asx.com.au/prices/asx-futures.htm

But this one says 67% chance.
http://www.asx.com.au/prices/targetratetracker.htm

And the AUD has dropped to from 80c to 77c in anticipation. That's when the "Shadow Governor" wrote something on Herald Sun and circulated on Twitter in the banking circles.

 

[Freckle]

But this one says 67% chance.
http://www.asx.com.au/prices/targetratetracker.htm

Interesting. In the space of 10 days 20 Jan - 30 Jan the odds of a cut went from 18% to 67%. That's a fairly radical shift in thinking.

My guess is the SNB unpegging from the Euro and the Greek election has rattled a few in the game.

I was reading an article the other day that suggested that the falling oil price is worth 2 rate cuts. If so I would imagine the RBA would take falling commodity prices into the equation and its effects on consumer costs. If consumer costs are falling then that begs the question of why does the economy need a rate cut at this time.

I'm struggling to see any part of the economy that would actually benefit from a rate cut or in such dire straits that it needs one.

The only logical conclusion I can make is that a RBA cut is a currency play to keep downward pressure on the AUD against its major trading partners not a direct spur for increased activity.

 

[natedog]

Interesting. In the space of 10 days 20 Jan - 30 Jan the odds of a cut went from 18% to 67%. That's a fairly radical shift in thinking.

My guess is the SNB unpegging from the Euro and the Greek election has rattled a few in the game.

I was reading an article the other day that suggested that the falling oil price is worth 2 rate cuts. If so I would imagine the RBA would take falling commodity prices into the equation and its effects on consumer costs. If consumer costs are falling then that begs the question of why does the economy need a rate cut at this time.

I'm struggling to see any part of the economy that would actually benefit from a rate cut or in such dire straits that it needs one.

The only logical conclusion I can make is that a RBA cut is a currency play to keep downward pressure on the AUD against its major trading partners not a direct spur for increased activity.

I sorta think likewise Freckle

 

[unloadmymind]

The reason why we "need" a rate cut is the mining bust.

To counter the effects of the bust, we need a lower AUD.

Captain Stevo aka Governator wants it at 75c US.

The forex markets priced in a rate cut, therefore the AUD dropped to 77c.

If Stevo doesn't cut rates or does not change his statement to more dovish tone, expect the AUD to go back to 80c +. Not good for our exports in the face of sudden falls in iron ore price.

It's not as much as trying to help consumers spend more. It's about bringing down the value of the currency as well as avoiding lowflation which is gripping the world economy.

Interesting. In the space of 10 days 20 Jan - 30 Jan the odds of a cut went from 18% to 67%. That's a fairly radical shift in thinking.

My guess is the SNB unpegging from the Euro and the Greek election has rattled a few in the game.

I was reading an article the other day that suggested that the falling oil price is worth 2 rate cuts. If so I would imagine the RBA would take falling commodity prices into the equation and its effects on consumer costs. If consumer costs are falling then that begs the question of why does the economy need a rate cut at this time.

I'm struggling to see any part of the economy that would actually benefit from a rate cut or in such dire straits that it needs one.

The only logical conclusion I can make is that a RBA cut is a currency play to keep downward pressure on the AUD against its major trading partners not a direct spur for increased activity.

 

[plusnq]

Yep. Its the currency wars race to the bottom. Problem is if we have a high interest rate differential then we will have funds flowing into the AUD. I wouldn't like to be Glenn Stevens trying to balance on the edge of the knife.

 

[unloadmymind]

Yep. Its the currency wars race to the bottom. Problem is if we have a high interest rate differential then we will have funds flowing into the AUD. I wouldn't like to be Glenn Stevens trying to balance on the edge of the knife.

Captain Stevo actually has a misch easier job than many other central bankers in the world.

 

[Shadow]

I'm struggling to see any part of the economy that would actually benefit from a rate cut or in such dire straits that it needs one

House prices outside Sydney and Melbourne aren't doing much. Brisbane and Adelaide will begin to boom when rates are cut.

 

[Aaron Sice]

I guess whats really going to happen in the larger more exxy cities we will have more of the Euro model

70 % rental/ 30 % ownership

To me at least I can see a clear transition to that over time.

Currently ASIC APRA and others that are looking to provide stability, arent really going to get in the way of that in the long term.

Its a train thats coming amd whether you have ticket or not, we are all on that train............ no wrecks pls

ta
rolf

quoted for truth.

then we can expect rent controls and swedish-style leases for occupants with french tenancy rights.

and Dazz thought retail looked bad...

 

[Marty McDonald]

and 0.25 cut

 

[willair]

http://www.abc.net.au/news/2015-02-...est-rates-for-first-time-in-17-months/6066676

Interesting times ahead now,.

 

[Aaron Sice]

There seems to be a worldwide worry that deflation is on the way and central bankers often move in lock step ala the GFC. We also had Canada move their rates down last week.

That all said I had a look at the futures market just now and the March 90 day bank bills are trading at 97.41. This implies a yield of 2.59% so the money market is not convinced rates will be lowered tomorrow as the cash rate is 2.50%.

http://www.asx.com.au/prices/asx-futures.htm

stagflation is the worry - especially in Australia where our dollar buys less (inflation) but are wages are not moving with it.

 

[MTR]

House prices outside Sydney and Melbourne aren't doing much. Brisbane and Adelaide will begin to boom when rates are cut.

But will Syd and Melb continue to rise now that we have a IR cut ??? cheaper to buy than rent

 

[Phar Lap]

lock in your good tenants with a sweetener.

The pendulum slowly swings their way now.