Interest Rates to Drop?
- Thread starter HomeBuyAU
- Start date
unchanged: this is bad very bad, a bad decision by the RBA.
Watch the AU$ skyrocket over the next few days,
Watch the air deflate from consumers,
Watch the property market start to deteriorate again, people were expecting this decrease
Watch the retail sector deflate on this, they were really hanging out for this cut, many retail going to go under now, watch this space.
Watch the AU$ skyrocket over the next few days,
Watch the air deflate from consumers,
Watch the property market start to deteriorate again, people were expecting this decrease
Watch the retail sector deflate on this, they were really hanging out for this cut, many retail going to go under now, watch this space.
Wow that sucks.
The east coast of Australia really needed this cut.
The AU$ is already a popular currency of choice for international investors because of
(a) high yld vs international currencies
(b) inherent safety of the AU$ compared to the major currencies: Euro, US$ and Yen.
Put (a) and (b) together and you have a catalyst for the AU$ to keep increasing higher. AU$ currency is only a small currency relative to the big players. People want the currency, yet there is only a small amount of it. Changes in popularity have a significant effect on the movement. International hedge funds have the AU$ on their radar, this is very unusual because of the tiny size of Australia relative to the world.
So thats the currency, but whats the effect of the currency on Australia?
The Australian economy is not 'built' to be trading at such high exchange rates. Look at our labour rates vs Europe and the especially the US.
Whats important is not the direct labour rates, but the exchange rate adjusted labour rates.
This will have a flow on effect right through the economy, and the longer it lasts, the more devistating its going to be.
Retail:
Retail is doing it very very tough. Even with two interest rate cuts, december retail sales were stagnant. Now stagnant is bad, because
(a) retail sales are expressed in $ values, not margin adjusted sales. If sale prices are declining, margins are being compressed, yet overall sales are not increasing (because we know the total retail sales numbers are stagnant), yet costs (such as labour and rents, utility bills etc) are rising (which fall beneith the margin level, so this is even worse), you have a receipe for disaster. Weaker retailers are on their last straw, they were hanging out for this cut.
This will have a huge flow through effect onto the wider community (think the truck driver who delivers the products, to the accountant who prepares the tax/gst statements, etc etc)
tourism/international student services (another big contributor to the east states): likewise
All of this has a flow on effect to the government in the form of reduces taxation revenue. Less profits around, less tax money.
So thats just the currency impact.
The interest rate setting also has a direct effect on the income side of the equation through cost of debt. Higher interest rates, higher cost of debt, less money for other things.
Now we know people are already struggling, the two interest rate deductions so far have helped to alleviate the pressure, but as indicated by poor retail sales and credit growth figures, consumers still stuck in their holes, they are not venturing out. Without this latest interest rate cut, they will just be digging their hole a little bit deeper.
Residential Property:
the big cat in the bag is employment. All the justification for stable property prices is based on things such as demand/supply etc etc. However if unemployment really starts to creap up, demand/supply is irrelevant. A person who looses their job and has a mortgage will find it very hard to meet the mortgage obligations.
Does that sound like a healthy economy & property market to you? So leveraged up that .25 makes all the difference?
+1
No surprising when you consider Westpac is yet to pass on Nov and Dec drops.
I think the RBA held off as it was very nervous the Banks would keep some of the drop, thereby adding to the concern that the World Economy matters more than RBA.
For all the Gov's threats there is little they can do if the Banks say no drop.
Peter 14.7
I think the RBA held off as it was very nervous the Banks would keep some of the drop, thereby adding to the concern that the World Economy matters more than RBA.
For all the Gov's threats there is little they can do if the Banks say no drop.
Peter 14.7
I don't think the RBA holding this month will make much difference. If anything, confidence will improve, as people expect the cuts are still to come. Better to believe there are more cuts ahead, rather than believing rates have bottomed.
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On the basis that many believe that any cash rate lowering won't be passed on in full by the big four, is today's decision likely to see them actually raise rates by a token 0.10 % or 0.15 % ?
Will ANZ be the first in it's independent monthly rate review?
Doing so will tarnish their image more than a little.......however, who knows what the skeletons in the closet are on funding costs.
Will ANZ be the first in it's independent monthly rate review?
Doing so will tarnish their image more than a little.......however, who knows what the skeletons in the closet are on funding costs.
Macquarie to cut jobs by 10 per cent
Full article here
Well, we all know retail is hurting and there is definitely going to be job cuts there. But even Financial Services is not doing great either.
Except mining and mining services sector most other sectors are doing it tough.
Markets definitely didn't appreciate RBA's decision, it was up 0.25% and fell 0.75% to -0.50% after the news.
Let's hope we get a bigger cut next month, possibly 50bps.
Cheers,
Oracle.
Full article here
Well, we all know retail is hurting and there is definitely going to be job cuts there. But even Financial Services is not doing great either.
Except mining and mining services sector most other sectors are doing it tough.
Markets definitely didn't appreciate RBA's decision, it was up 0.25% and fell 0.75% to -0.50% after the news.
Let's hope we get a bigger cut next month, possibly 50bps.
Cheers,
Oracle.
AUD smashed back through USD107c, combine this with a slip in Au prices means aussie gold is under $1600oz and the yanks are paying over $1700.
stack the smack.
stack the smack.
Why are you quoting me as tech support you weirdo? Did you see I work in IT from my profile? lol
Confidence will improve? What measurement/survey are you referring to here so we can check on this later?
What's a werido? Are you trying in vain to abuse me?
I guess you'll be writing another blog about me soon?
Sure, let's go for the Westpac Melbourne Index of Consumer Sentiment.
PS... would it be very hypocritical for someone to join up and post on a forum they claim to despise? Just a hypothetical question...
Will try to rememer to keep an eye on that index then.
I already said in this thread that I read APF every now and again:
http://www.somersoft.com/forums/showpost.php?p=876867&postcount=247
Not something I'm proud of, but hey its entertaining
And you already got a post today, let's not be greedy
http://www.bullionbaron.com/2012/02/debunking-shadow-property-margin-calls.html
you know better than that hobo-jo. Its not a case of a small proportion of highly leveraged residential property owners/investors.
Its how the reverse multiplier ripples through the economy.
A 25basis point cut would not re-create the pre-GFC animal spirits, there has been a structural shift in the mindset of the use of debt. This wont be quickly restored.
Time will tell, but i think the RBA acted incorrectly. If things get significantly worse, then they will have to cut even further in the future (which is also not good).
The above sums it up for me.
