Fears of falling house prices - SMH

[BearTrap]

Agreed Shadow.

Funny thing is (on a side note), I just realised I have been banned by GHPC as well! I dont remember saying anything worthy of getting banned, other than not agreeing! Oh well, I guess they just want members who kiss each others a***!

I really feel sorry for them though, they have linked these articles to their forums, but many are still "recommending" a 0.5% increase....poor souls....

Good news is bad news for them.

Eek ! Shadow.. MoreIPs.. I'm a recent GHPC (and Somersft) member too.. they are discussing this (the interest rates) on GHPC today..

I'm in broad agreement with you fellas BTW..

The RBA mandate is..

the stability of the currency of Australia
the maintenance of full employment in Australia
the economic prosperity and welfare of the people of Australia

fighting inflation is the way they achieve the mandate sometimes.. but the mandate is not to fight inflation.. fighting inflation is not always the way to achieve the mandate..

IMHO.. Stevens shall cut sooner not later.. Oct. or Nov.

 

[DCI]

The question is, if it does happen, will the banks pass them on?

Do the banks send you a Christmas card????

 

[Shadow]

Agreed Shadow.

Funny thing is (on a side note), I just realised I have been banned by GHPC as well! I dont remember saying anything worthy of getting banned, other than not agreeing! Oh well, I guess they just want members who kiss each others a***!

I really feel sorry for them though, they have linked these articles to their forums, but many are still "recommending" a 0.5% increase....poor souls....

Good news is bad news for them.

Hi MoreIPs,

Indeed. I did notice that you got banned over there... I thought it was strange, but then as I found out myself, they don't really need a reason to ban 'property bulls' on GHPC. Anyway, I'd probably better not derail this thread by talking about GHPC. Moderators - please feel free to delete this comment if you wish.

Back on topic, yes I really can't understand why anybody would call for more interest rate rises. What would be the point of deliberately crashing the economy, when inflation is expected to fall anyway... nobody really benefits from a recession. It seems strange to actually want more rate rises and want a recession!

Personally, I think the RBA has done quite a good job of slowing the economy to the degree they wanted, without causing a total collapse.

Eek ! Shadow.. MoreIPs.. I'm a recent GHPC (and Somersft) member too.. they are discussing this (the interest rates) on GHPC today..

possible rate cut next week or not

I'm in broad agreement with you fellas BTW..

The RBA mandate is..

the stability of the currency of Australia
the maintenance of full employment in Australia
the economic prosperity and welfare of the people of Australia

fighting inflation is the way they achieve the mandate sometimes.. but the mandate is not to fight inflation.. fighting inflation is not always the way to achieve the mandate..

IMHO.. Stevens shall cut sooner not later.. Oct. or Nov.

Hi BearTrap,

Spot on. The RBA mandate is not to keep raising rates until the economy crashes! Sometimes lowering rates is the best way to achieve their objective.

Shadow.

 

[MichaelW]

IMHO.. Stevens shall cut sooner not later.. Oct. or Nov.

I'm sticking to my guns and calling a Nov rate cut as I called it here:

http://www.somersoft.com/forums/showpost.php?p=436481&postcount=121

That's only a few weeks back, but the tide has turned significantly since then. A lot of folk here were still talking rate rises then, but more and more are moving into my 2008 rate cut camp now.

Cheers,
Michael

 

[WinstonWolfe]

there are two property market observations this softening is clarifying:

- the relative influence of 50,000 annual migrants

- the relative influence of the housing shortage

People do adapt.
Migrants delay coming if they can't sell their house back in the UK or NZ for a reasonable price relative to Aussie property.
People form larger households when they can't afford to buy or rent alone.

 

[Francesco]

I'm sticking to my guns and calling a Nov rate cut as I called it here:

http://www.somersoft.com/forums/showpost.php?p=436481&postcount=121

That's only a few weeks back, but the tide has turned significantly since then. A lot of folk here were still talking rate rises then, but more and more are moving into my 2008 rate cut camp now.

Cheers,
Michael

I thought I was being an outsider by sticking my head out and arguing for a hopeful 25 pt IR cut by the end of the year one or two months ago. I can't find the postings, but recall seeing some of them and I wonder whether the mods have censored them. Anyway, we should see IR reductions within 6 months at the rate the economy is impacting on financial, housing, retail, hospitality and beginning now on the associated manufacturing sectors.

 

[Francesco]

I have found it in this thread started on 12 June 2008 to try and dispel some gloom:

http://www.somersoft.com/forums/showthread.php?t=42870&highlight=Trifecta

What a lucky country when you can still see silver lining!

 

[FHB]

it is also interesting to see that WBC, and CBA have not been as hardly hit as ANZ and NAB.

thats a different story though.

The NAB is the first to bank in the world to recognise off sheet conduits in their writedowns, I don't think they are alone, other Oz banks could well be hit, they just haven't told us about it yet. Banks with falling profits will most likely look to margins to recoup, not sure if a drop in the OCR will be passed on.

I think most over at GHPC are in cash, so they would prefer to see interest rates keep going up, as I would, although falling interest rates will help me gear up without fear of rising costs.

I do find it hard to believe RBA will drop now, perhaps if we see the current consumer demand trend continuing and unemployment rise a little. They won't want to risk stimulating demand with unemployment and inflation a ~4%. The current slowing of the economy was their aim, will they really want to undo it?

I still think there is a good (<50%) chance that consumer demand could rebound later in the year with tax cuts yet to filter through, and petrol prices possibly falling. In this case the RBA will look silly and lose credibility if they had cut too early, particularly if inflation accelerates up above 5% and wage claims follow.

The other possible consequence of the slowing demand is that the govt may start to reduce immigration quotas, particularly if employment decreases, a quick way to fix our current housing supply problem?

Bear Trap, the RBA will let inflation run high in the short term, but they won't ignore it in the quest for short term growth. If inflation keeps heading up and wages start to spiral, they will need to act.

PS. More IPs, not sure why you got banned, I think I was away at the time. I can ask Consa.....

 

[Shadow]

If inflation keeps heading up and wages start to spiral, they will need to act.

Two big 'ifs' there. Inflation is not heading up, and appears to be stabilising. Wages are also steady. The economy is slowing as the RBA desired. That's what they've got to work with right now...

 

[FHB]

I was responding to Bear Traps comment:

fighting inflation is the way they achieve the mandate sometimes.. but the mandate is not to fight inflation.. fighting inflation is not always the way to achieve the mandate..

I'm saying that in a scenario where inflation is rising it is the priority for the RBA to restrain demand, they don't target short term growth over inflation, particularly when inflation is feeding through to wages, ie, business costs.

 

[BearTrap]

Bear Trap, the RBA will let inflation run high in the short term, but they won't ignore it in the quest for short term growth. If inflation keeps heading up and wages start to spiral, they will need to act.

I concur.. I don't think the RBA is in the quest for short term growth.. but I do think they will act to avoid further slowdown amid signs that rates are too high ( if the commercial banks own rises are included )
If inflation was heading up and wages spiralled they would have a tougher decision to make.. but now in the absence of those.. they can cut.. IMHO.

 

[warmed_cockles]

I concur.. I don't think the RBA is in the quest for short term growth.. but I do think they will act to avoid further slowdown amid signs that rates are too high ( if the commercial banks own rises are included )
If inflation was heading up and wages spiralled they would have a tougher decision to make.. but now in the absence of those.. they can cut.. IMHO.

Agreed. I think at the moment, a lot of what is being said and published is a massive overreaction to what could be one bad month. The fact that after only a sniff of a downturn there's such hysteria suggests this country is very dangerously leveraged.

 

[FHB]

Yep, they could cut, but as I said before, the risks are still there for a rebound in demand. Stimulating with CPI and unemployment at ~4% is risky for the RBA. They will hold to see if the trend continues, IMO. We've had these types of events before through this current tightening cucle, and commentators have called peak many times. It will be interesting to read the next minutes to see what Stevens is thinking.