Interest Rates to Fall Yet Again. Good News For Property Owners.

[C Stewart]

Solid analysis Redom, you've stepped out the 'soft touch' regulatory responses really clearly - thanks for your post, really helpful!

I tend to agree with your general themes, to me it makes sense. From a regualtors perspective, the soft approach is almost always preferrable. Legislation and regulations are clunky, difficult to implenent, difficult to change etc. etc. If the outcome can be avhieved through issuing 'guidence', giving lenders a bit of a talking too, conducting stress tests etc. that seems like a much more effective an more efficient way to get the outcome, provided you back yourself (as the regulator) to make it stick!

 

[Freckle]

If the outcome can be avhieved through issuing 'guidence', giving lenders a bit of a talking too, conducting stress tests etc. that seems like a much more effective an more efficient way to get the outcome, provided you back yourself (as the regulator) to make it stick!

I'm of 2 minds as to whether you're winding us up or serious.

 

[VYBerlinaV8]

I'm of 2 minds as to whether you're winding us up or serious.

It's a very common approach across government. Remember, we're talking 'macro' here. Pulling a few levers by a little bit can often correct the problem before it becomes too big.

One of the reasons Australia fared so well during the GFC is because of the level of regulation our banks were subject to, even when their overseas counterparts were not.

 

[C Stewart]

I'm of 2 minds as to whether you're winding us up or serious.

Haha, definitely serious Freckle. What's the narrative around the charts you posted - there's a lot of squiggles there but I'm of two minds as to whether it tells a story or whether they were the first result on google images?

 

[Freckle]

One of the reasons Australia fared so well during the GFC is because of the level of regulation our banks were subject to, even when their overseas counterparts were not.

I'd have to rate that as one of the most successful propaganda operations by banks to date. To convince everyone that regulation and regulatory bodies have everything under control and can withstand anything that may come down the pike.

Nothing could be further from the truth.

The idea that AU banks withstood the GFC without any difficulty is a myth.

 

[Freckle]

What's the narrative around the charts you posted - there's a lot of squiggles there but I'm of two minds as to whether it tells a story or whether they were the first result on google images?

The narrative is a sure but steady decline in fundamentals even with umpteen trillion in red hot printed money.

So when economies, and the AU's is no exception, is predicated on a growing mountain of debt to just reduce the deceleration let alone repair and restore core economic drivers then we have a problem Houston.

 

[Lord Shanghai]

To me, the prospect of a rate cut is a joyful thing indeed. Even if it does not transpire, its very clear that there will be no further rises for a long, long time. As JMK would say, that should bring out the animal spirits in us.

 

[The Fence]

She'll be right.

 

[VYBerlinaV8]

I'd have to rate that as one of the most successful propaganda operations by banks to date. To convince everyone that regulation and regulatory bodies have everything under control and can withstand anything that may come down the pike.

Nothing could be further from the truth.

The idea that AU banks withstood the GFC without any difficulty is a myth.

I'm not suggesting they had no difficulty, but rather that they came through with far fewer problems than many of their foreign counterparts.

It's a complicated area, but as I said, it's quite normal for government to engage with large businesses (and even small ones) to assit in compliance and get good outcomes.

You can be a pessimist if that's what blows your hair back, but I have found that reality usually occupies the boring middle ground.

 

[Freckle]

I'm not suggesting they had no difficulty, but rather that they came through with far fewer problems than many of their foreign counterparts.

QUOTE:

"One of the reasons Australia fared so well during the GFC is because of the level of regulation our banks were subject to, even when their overseas counterparts were not.

You implied that regulatory oversight and the strength of regulation played a part in AU dodging the bullet.

Rudd dropped $200B into the economy, backstopped banks and guaranteed deposits. Why? Because regulation and oversight had failed to provide adequate mechanisms to cope with the degree of stress experienced even though warnings about a potential GFC event had been sounded for some years preceding the actual event.

In simple terms AU regulation and regulators were no better or worse than international financial systems. In short woefully inadequate and it's even worse today.

It's a complicated area, but as I said, it's quite normal for government to engage with large businesses (and even small ones) to assit in compliance and get good outcomes.

You're kidding. Resource rent tax ring a bell, carbon tax etc etc etc

You can be a pessimist if that's what blows your hair back, but I have found that reality usually occupies the boring middle ground.

I may be pessimistic but I'm not living in a fantasy world.

 

[The Fence]

You're kidding. Resource rent tax ring a bell, carbon tax etc etc etc



I may be pessimistic but I'm not living in a fantasy world.

All I know is the present govt was elected on promising to get rid of these taxes because the previous govt didnt consult or at least ignored consultation with business.

Seems they were living in fantasy land, no?

Them's the breaks in politics.

 

[VYBerlinaV8]

QUOTE:

"One of the reasons Australia fared so well during the GFC is because of the level of regulation our banks were subject to, even when their overseas counterparts were not.

You implied that regulatory oversight and the strength of regulation played a part in AU dodging the bullet.

Rudd dropped $200B into the economy, backstopped banks and guaranteed deposits. Why? Because regulation and oversight had failed to provide adequate mechanisms to cope with the degree of stress experienced even though warnings about a potential GFC event had been sounded for some years preceding the actual event.

In simple terms AU regulation and regulators were no better or worse than international financial systems. In short woefully inadequate and it's even worse today.



You're kidding. Resource rent tax ring a bell, carbon tax etc etc etc



I may be pessimistic but I'm not living in a fantasy world.

Disagree. The GFC had a number of causes, and many responses. Rudd tipped a big pile of money into the economy to avoid a technical recession. If we had actually had a recession the banks would still have survived. You're confusing different aspects of response, and indeed government policy.

Based on the remainder of your post I think you need to do some more reading to research the difference between ecnomic control and politicking. There's a big difference.

Finally, when someone accusing others of living in a fantasy world, I tend to switch off. Being ridiculously negative rarely pays off, and blinds you to the reality of the situation, which is that we have both positive and negative factors interreacting with each other.

Do you believe Australia is about to collapse economically?

 

[Freckle]

Disagree. The GFC had a number of causes, and many responses. Rudd tipped a big pile of money into the economy to avoid a technical recession.

They tend to be a byproduct of financial crashes hence the stimulus package to support economic activity.

If we had actually had a recession the banks would still have survived.

The GFC was about the blockage of interbank liquidity as fear mounted as to who was solvent and who wasn't. So what does that tell you. The banksters understand their own operations and how fragile they are. If they're dancing with the devil they know other banks are too.

CBA was secretly at the FEDs back door holding its hand out for a cool billion to keep the pumps going. As far as I know no one has got to the bottom of that one.

Basel III was supposed to improve bank reserves and strengthen their ability to withstand GFC events. Like all regulation it ends up a watered down shell of its original design. AU banks currently back per $100 of mortgage lending with $1.4 in real assets. Jeez 1.4% in reserves!!! So if a property market turns south they're effectively insolvent.

Guess who's going to be bailing them out....

You're confusing different aspects of response, and indeed government policy.

ROFL...

Based on the remainder of your post I think you need to do some more reading to research the difference between ecnomic control and politicking. There's a big difference.

By definition perhaps, by action they're joined at the hip. Politics is all about 'control'.

Being ridiculously negative rarely pays off, and blinds you to the reality of the situation, which is that we have both positive and negative factors interreacting with each other.

'ridiculously negative'... interesting phrase

Do you believe Australia is about to collapse economically?

Australia will hold it's own 'if' and that's a big if the rest of the global financial system can stay intact. Given the rate at which economies are falling off the perch and the continued deterioration in virtually all large economies excuse me if I'm not too optimistic on that front.

Watch the banks. They're now pushing for bail-ins. There's something in the wind.

 

[z611143]

On a different note.

As a learner, when do the RBA look at their rates each year and how often. My understanding was quarterly and at the start of that 3 month period or the end of the previous 3 month time?

 

[Redom]

On a different note.

As a learner, when do the RBA look at their rates each year and how often. My understanding was quarterly and at the start of that 3 month period or the end of the previous 3 month time?

First Tuesday of every month - they take a break over December/January though.

Realistically they look at information as it comes out daily and feed this through to their expectations/narrative.

Cheers,
Redom

 

[Lord Shanghai]

Spot on Redom. You've obviously had a decent education.

Very occasionally, the RBA has emergency meetings. If I recall correctly, during the GFC rates were targeted for lowering on a day other than the 1st Tuesday of the month. I think this was the first and only time in recent history that such an incident occurred.

 

[Lord Shanghai]

I created this thread to rejoice the fact that rates are not headed up any time soon. The situation now is totally dissimilar to 87/88 when rates were slashed and increased within a 7 month period.

Enjoy the benefits folks. Make the most of it.

 

[Redom]

Spot on Redom. You've obviously had a decent education.

Very occasionally, the RBA has emergency meetings. If I recall correctly, during the GFC rates were targeted for lowering on a day other than the 1st Tuesday of the month. I think this was the first and only time in recent history that such an incident occurred.

Thank you!

If you've heard the story 'behind' that meeting - pretty fascinating (at least for econ geeks like myself). Pretty sure there were very fast moving developments internationally over that weekend. Everyone (board members) walked in expecting an 0.5% cut to be announced - and then the Governor (I think it was Macfarlane) put the case for a full percentage point - coming out very strong and 'sending a message'.

Its pretty unusual for meetings to have such a big difference in views as to where the rate should go to.

A 1% cut was announced and the rest worked out relatively smoothly!

Cheers,
Redom

 

[Redom]

I created this thread to rejoice the fact that rates are not headed up any time soon. The situation now is totally dissimilar to 87/88 when rates were slashed and increased within a 7 month period.

Enjoy the benefits folks. Make the most of it.

Definitely on you with this. Its great guns for the industry and investors - for a while yet too!

 

[Freckle]

Definitely on you with this. Its great guns for the industry and investors - for a while yet too!

Globally liquidity is drying up. I wonder how long it will be before banks have to pay more for funds and then start the winge for higher rates to offset borrowing costs.

RBA is only one aspect of rates.