There has been a lot of talk lately about some of the forecasts being made by, in particular, BIS Shrapnel when it comes to interest rate movements.
So, lets take a step back and ask ourselves a few simple questions which might just help put this all in perspective.
Question 1 - Who are BIS Shrapnel?
http://www.bis.com.au/
They describe themselves as:
"Australia's leading provider of research, analysis and information-based consultancy services. We help our clients to better understand their markets and to make the best possible business decisions."
Question 2 - Ok, a bit of self promotion never goes astray... So what else do they do??
One of their services is "Market Forecasting" on which they say:
We provide "a reliable and clearly explained outlook for the industries and economies in which you operate.
Over our 38-year history, we have built up a strong level of expertise in a large number of industry sectors. We directly gather information on these industries and markets, we analyse strategic issues, we seek to understand key drivers and produce thoroughly researched forecasts"
Sounds impressive, doesn't it?
However, nowhere on their site do they say that they are in the business of lending money.
Regardless, this is what BIS Shrapnel have recently had to say:
http://www.news.com.au/common/story_page/0,4057,7153339%5E421,00.html
* * *
"Sydney's BIS Shrapnel's economist Dr Frank Gelber....
...said that, by 2006, housing interest rates would rise above 10 per cent, which would "kill the housing market" and unemployment levels would fall towards 5 per cent but blow out to 8 per cent by 2008"
* * *
Question 3 - So who does lend money then?
Duh!
Banks lend money (are you sure you did economics at uni??)
They do other things as well of course, but lending money is a CORE part of their business and not only to they lend a lot of money - they make very good profits on that money
Question 4 - So what do these people, whose job it is to lend money, have to say about interest rates?
That's a very good question and I am glad you asked!
Lets just have a look shall we.
Interest rates on offer from the major banks as at 9 am 4/9/03 - as usual subject to change:
[Full hyperlink references are below]
ANZ:
Interest Rate Comparison Rate
1 year 5.75% 6.53%
3 years 6.10% 6.49%
5 years 6.40% 6.54%
7 years 7.05% 6.90%
10 years 7.30% 7.16%
CBA:
Interest rate Comparison Rate
1 year 5.89% 6.63%
3 years 6.19% 6.59%
5 years 6.49% 6.66%
No 7 or 10 year fixed rates.
NAB:
Fixed rates, interest only - no comparison rates provided
Interest Rate
(in arrears) (in advance)
1 year 5.95% 5.75%
3 years 6.30% 6.10%
5 years 6.60% 6.40%
No 7 or 10 year fixed rates.
Westpac:
Fixed Rate Investment Property Loan (fixed rate lock-in option is available)
Interest rate Comparison rate
1 year 5.85% 6.73%
3 year 6.19% 6.67%
5 year 6.49% 6.73%
7 year 6.99% 7.00%
10 year 6.99% 7.05%
Well, this is VERY interesting - all these EXPERTS ON LENDING MONEY have something different to say than that which BIS Shrapnel says.
Question 5 - Do you think the major banks would have such LOW fixed rates if they, like BIS Shrapnel, believed that "by 2006, housing interest rates would rise above 10 per cent"??
There can be only one answer - No!
Question 6 - So who should you listen to?
For me, there is a simple answer to that question.
I listen to the banks.
On the one hand you have a bunch of economic consultants whose core business is not lending money - saying that interest rates will go through the roof.
And on the other you have the 4 biggest, and probably most prudentially sound, banks in this country - whose business it is to lend money at a profit - saying that rates will go up, but not by much and that they certainly cannot see any major rises in the near future.
I am firmly of the belief that the banks are the experts on this matter.
Question 7 - What do the banks know, they're not economists like BIS Shrapnel?!
Ahhh.... wrong!!
Banks employ economists as well.... in fact banks hire extremely well qualified and experienced economists.
For example:
- Alan Oster, Chief Economist at the NAB, was formerly Head of Economic Forecasting at Commonwealth Treasury
- Saul Eslake, Chief Economist at ANZ, is also ex-Treasury.
- Dr John Edwards, Chief Economist at HSBC, was formerly Paul Keating's Principal Economic Adviser.
- Dr David Morgan, CEO of Westpac, is a former Treasury Deputy Secretary (ie. one level below signing your $20 bills).
So you see, really by paying more attention to what the banks are doing you get the expertise of expert economists, combined with the nouse and practical experience that can only come with having to lend money for a living and make a profit on it.
Make your own minds up of course.
MB
Those links I referred to earlier are:
ANZ:
http://www.anz.com.au/australia/support/general/rates.asp#Section100
CBA:
http://www.commbank.com.au/personal/other/rates_and_fees/homeloans.asp
NAB:
http://www.national.com.au/downld/int_rates_pers_lending_01092003.pdf
WBC:
http://www.westpac.com.au/internet/publish.nsf/Content/PBHLHCPI+Interest+Rates
So, lets take a step back and ask ourselves a few simple questions which might just help put this all in perspective.
Question 1 - Who are BIS Shrapnel?
http://www.bis.com.au/
They describe themselves as:
"Australia's leading provider of research, analysis and information-based consultancy services. We help our clients to better understand their markets and to make the best possible business decisions."
Question 2 - Ok, a bit of self promotion never goes astray... So what else do they do??
One of their services is "Market Forecasting" on which they say:
We provide "a reliable and clearly explained outlook for the industries and economies in which you operate.
Over our 38-year history, we have built up a strong level of expertise in a large number of industry sectors. We directly gather information on these industries and markets, we analyse strategic issues, we seek to understand key drivers and produce thoroughly researched forecasts"
Sounds impressive, doesn't it?
However, nowhere on their site do they say that they are in the business of lending money.
Regardless, this is what BIS Shrapnel have recently had to say:
http://www.news.com.au/common/story_page/0,4057,7153339%5E421,00.html
* * *
"Sydney's BIS Shrapnel's economist Dr Frank Gelber....
...said that, by 2006, housing interest rates would rise above 10 per cent, which would "kill the housing market" and unemployment levels would fall towards 5 per cent but blow out to 8 per cent by 2008"
* * *
Question 3 - So who does lend money then?
Duh!
Banks lend money (are you sure you did economics at uni??)
They do other things as well of course, but lending money is a CORE part of their business and not only to they lend a lot of money - they make very good profits on that money
Question 4 - So what do these people, whose job it is to lend money, have to say about interest rates?
That's a very good question and I am glad you asked!
Lets just have a look shall we.
Interest rates on offer from the major banks as at 9 am 4/9/03 - as usual subject to change:
[Full hyperlink references are below]
ANZ:
Interest Rate Comparison Rate
1 year 5.75% 6.53%
3 years 6.10% 6.49%
5 years 6.40% 6.54%
7 years 7.05% 6.90%
10 years 7.30% 7.16%
CBA:
Interest rate Comparison Rate
1 year 5.89% 6.63%
3 years 6.19% 6.59%
5 years 6.49% 6.66%
No 7 or 10 year fixed rates.
NAB:
Fixed rates, interest only - no comparison rates provided
Interest Rate
(in arrears) (in advance)
1 year 5.95% 5.75%
3 years 6.30% 6.10%
5 years 6.60% 6.40%
No 7 or 10 year fixed rates.
Westpac:
Fixed Rate Investment Property Loan (fixed rate lock-in option is available)
Interest rate Comparison rate
1 year 5.85% 6.73%
3 year 6.19% 6.67%
5 year 6.49% 6.73%
7 year 6.99% 7.00%
10 year 6.99% 7.05%
Well, this is VERY interesting - all these EXPERTS ON LENDING MONEY have something different to say than that which BIS Shrapnel says.
Question 5 - Do you think the major banks would have such LOW fixed rates if they, like BIS Shrapnel, believed that "by 2006, housing interest rates would rise above 10 per cent"??
There can be only one answer - No!
Question 6 - So who should you listen to?
For me, there is a simple answer to that question.
I listen to the banks.
On the one hand you have a bunch of economic consultants whose core business is not lending money - saying that interest rates will go through the roof.
And on the other you have the 4 biggest, and probably most prudentially sound, banks in this country - whose business it is to lend money at a profit - saying that rates will go up, but not by much and that they certainly cannot see any major rises in the near future.
I am firmly of the belief that the banks are the experts on this matter.
Question 7 - What do the banks know, they're not economists like BIS Shrapnel?!
Ahhh.... wrong!!
Banks employ economists as well.... in fact banks hire extremely well qualified and experienced economists.
For example:
- Alan Oster, Chief Economist at the NAB, was formerly Head of Economic Forecasting at Commonwealth Treasury
- Saul Eslake, Chief Economist at ANZ, is also ex-Treasury.
- Dr John Edwards, Chief Economist at HSBC, was formerly Paul Keating's Principal Economic Adviser.
- Dr David Morgan, CEO of Westpac, is a former Treasury Deputy Secretary (ie. one level below signing your $20 bills).
So you see, really by paying more attention to what the banks are doing you get the expertise of expert economists, combined with the nouse and practical experience that can only come with having to lend money for a living and make a profit on it.
Make your own minds up of course.
MB
Those links I referred to earlier are:
ANZ:
http://www.anz.com.au/australia/support/general/rates.asp#Section100
CBA:
http://www.commbank.com.au/personal/other/rates_and_fees/homeloans.asp
NAB:
http://www.national.com.au/downld/int_rates_pers_lending_01092003.pdf
WBC:
http://www.westpac.com.au/internet/publish.nsf/Content/PBHLHCPI+Interest+Rates
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