Hoorah a few more of these stories before Feb should do the trick!
Sorry its not much of a hoorah for plenty of other people I shouldn't feel glad when I read these but we need these cuts to keep on coming!
Is it too early to take bets on the interest rate cut in February?
- Thread starter Perth Investor
- Start date
Hoorah a few more of these stories before Feb should do the trick!
Sorry its not much of a hoorah for plenty of other people I shouldn't feel glad when I read these but we need these cuts to keep on coming!
Markets still think 100BP at the moment, but it's been cooling in the last few days, maybe 75BP?
http://www.asx.com.au/sfe/targetratetracker.htm
http://www.asx.com.au/sfe/targetratetracker.htm
After today's November new housing approval figures "shocker", I'm convinced that the rate cut will be a minimum of 75 points.
You are absolutely right. Falls in housing approvals and housing construction point to falls in new house commencements in 3 month time, i.e. by the end of February. Fall in new house commencement point to huge fall in GDP by May 2009. If that happens, that will mean catastrophic collapse for the whole economy.
Before building industry picks up, we need at least 50% rise in home values, as builders do not have decent margins that can really boost construction.
Under the conditions RBA's behaviour is nothing short of childish. Rate rises in Feb/March 2008 when they in fact should have lowered interest rates, sitting on their hands in August when they should have shaved at least 1% and January holidays - country will pay dearly for this.
Expect 2% rates by the end of May and it is more than certain that next Christmas we will enjoy 0% (or near 0) interest rate.
Yup after reading this article http://www.news.com.au/business/story/0,27753,24890654-462,00.html Im now persuaded that we will get at least 75 basis points.
http://business.smh.com.au/business/sales-outlook-unflattering-20090108-7cuw.html
This is for those who thought interest rate cuts might stall because of surging December retail Data.
In a nutshell - retail fell across the board except for food sales.
There are two ways to interpret this:
- consumers despite hefty Government bonus decided to indulge only in basic luxuries
OR
- surge of food sales is due to retailers ripping off consumers by hiking up grocery prices (just like petrol companies do)
Perhaps, there was combination of both factors, but it can only mean one thing -
If RBA board has had any brains, they should have shaved off 0.75% off interest rates yesterday, followed by two 0.75% -1% cuts in Feb and March.
If we do not see immediate action, then the following scenarios will unfold:
- RBA will simply let economy collapse (then lets put them in jail right now)
- RBA will need to come up with more than 1% rate cuts in Feb, march and April - scaring the socks off the markets and posibly sending economy into tailspin
- RBA between Feb and May will have to call extraordinary meetings to cut rates more often than monthly, scaring markets and sending economy into tailspin
- Government will be forced to deliver SERIOUS stimulus packages to offset RBA's inaction
Whichever way - music to property investors' ears.
This is for those who thought interest rate cuts might stall because of surging December retail Data.
In a nutshell - retail fell across the board except for food sales.
There are two ways to interpret this:
- consumers despite hefty Government bonus decided to indulge only in basic luxuries
OR
- surge of food sales is due to retailers ripping off consumers by hiking up grocery prices (just like petrol companies do)
Perhaps, there was combination of both factors, but it can only mean one thing -
If RBA board has had any brains, they should have shaved off 0.75% off interest rates yesterday, followed by two 0.75% -1% cuts in Feb and March.
If we do not see immediate action, then the following scenarios will unfold:
- RBA will simply let economy collapse (then lets put them in jail right now)
- RBA will need to come up with more than 1% rate cuts in Feb, march and April - scaring the socks off the markets and posibly sending economy into tailspin
- RBA between Feb and May will have to call extraordinary meetings to cut rates more often than monthly, scaring markets and sending economy into tailspin
- Government will be forced to deliver SERIOUS stimulus packages to offset RBA's inaction
Whichever way - music to property investors' ears.
Its interesting that much of the cause for this global slowdown has been at the feet of the overstretched and over-geared consumer.
If that's the case, the de-leveraging process which will take some time to complete (as others have mentioned on this website), will mean that the only way economies will grow will be from business investment & government spending (combination of infrastructure spending, tax cuts and increased benefits). The consumer will not be contributing to any growth in the forseeable future. If approximately 60% of all economic activity (ie consumption) will not provide any growth, then we have a very weak basis for even business to invest.
Funding costs need to reflect this reality, if there is any chance we move out of our impending recession as quickly as possible. Here's hoping the RBA are on the same page.
Its interesting that the RBA have mentioned they are waiting to see the effect of the reduction in interest rates has on the economy. But when they were raising rates, banks were also independently raising theirs as well. They were pretty quick on the rise.
Last year's 3% reductions aren't small, but they will not be enough.
If that's the case, the de-leveraging process which will take some time to complete (as others have mentioned on this website), will mean that the only way economies will grow will be from business investment & government spending (combination of infrastructure spending, tax cuts and increased benefits). The consumer will not be contributing to any growth in the forseeable future. If approximately 60% of all economic activity (ie consumption) will not provide any growth, then we have a very weak basis for even business to invest.
Funding costs need to reflect this reality, if there is any chance we move out of our impending recession as quickly as possible. Here's hoping the RBA are on the same page.
Its interesting that the RBA have mentioned they are waiting to see the effect of the reduction in interest rates has on the economy. But when they were raising rates, banks were also independently raising theirs as well. They were pretty quick on the rise.
Last year's 3% reductions aren't small, but they will not be enough.
I acknowledge that our posts are based on a little more information than the first few...and Happy New year everyone-
However, based on the above info which I have also read elsewhere- I will go all out and say at LEAST 1%.
We still have to consider that the US is not out of it's downward spiral and our stockmarket is slumped. Although the unemployment rate was better than expected yesterday, at least three people I directly know were retrenched in December. There is worse to come and the RBA know it.
For those of you interested...our workload in the Surveying industry is steady and still keeping husband at work until 6.30 at night.
Regards JO
(Quite the optimist lately)
Bump.
Does anyone want to up the ante on their bets, based on the recent CPI figures, and the wonderful work of the Reserve Bank NZ?
I'm pretty sure my initial bet was 50 points, but I'm willing to accept defeat on that already.
100 is where the smart money is now. (that assumes I'm the smart money, which is perhaps a tad optimistic)
Anyone want to update?
Does anyone want to up the ante on their bets, based on the recent CPI figures, and the wonderful work of the Reserve Bank NZ?
I'm pretty sure my initial bet was 50 points, but I'm willing to accept defeat on that already.
100 is where the smart money is now. (that assumes I'm the smart money, which is perhaps a tad optimistic)
Anyone want to update?
Initial thoughts were 0.75%. Now suspecting that 1% is more likely.
With a 1% reduction, cash rates go to 3.25%, which given our economy is now in recession, it is still far too high IMO when compared to other major economies.
They waited relatively too long to reduce rates in the early 90's, they are in danger of doing the same thing if they aren't as aggressive as they were last year.
With a 1% reduction, cash rates go to 3.25%, which given our economy is now in recession, it is still far too high IMO when compared to other major economies.
They waited relatively too long to reduce rates in the early 90's, they are in danger of doing the same thing if they aren't as aggressive as they were last year.
I'm not a gambler but I have gone on record earlier with my hunch of 125pts. I'm sticking with that but I'm an optimist. Hard to be disappointed also if you're out by 25 /50 pts.
Im now starting to reconsider aswell. . with most economists predicting half a percent earlier Im now thinking 1-1.25% but not sure how much will be passed on to consumers, I'll go .75-1%
