Next Interest Rate Movement down?

[sash]

The below stories are going to get the RBA re-thinking their expectations. The Big 4 are really exposed to the Housing market...if it goes belly up so does the Oz economy.

I think the next move is down....so hopefully we will be able to surf the wave of another

Though I think this will be only be felt around 2013-2014...and it will be modest a rise of 10-15% in select areas like Western Sydney, Hunter, and Illarwarra where the market is affordable. Perth will continue to suffer.....

http://www.theage.com.au/business/real-estate-slump-will-leave-banks-in-pain-too-20110516-1epx9.html

http://www.news.com.au/money/intere...conomy-struggles/story-e6frfmn0-1226057249365

 

[Aaron Sice]

bluestorm's timing may indeed be right, but i still don't think we're in for drops in house prices between then and now, just zero anything except rent rises.

i'm putting my money where my mouth is and cashing out.

 

[Ausprop]

"
"There's no question we're in a two-speed economy. There's no question that outside of major (mining) activities and infrastructure activities our economy is not very well at all," he said."

have said it for a long time now - if you are not in resources or live in a resource recipient area then prepared to get smashed for as long as the commodities boom continues. The RBA has no choice but to contain this monster. If commodities tank, then we should all prepare to be smashed.

 

[Ausprop]

Sash how you got an indication of a rate cut out of those articles I really don't know?!

 

[Intrinsic_Value]

thanks for the links Sash.

In my opinion, they provide further support for the RBA to 'jawbone' the market with threats and do NOTHING.

They are in their 'sweet spot' with a mild restrictive policy, and this gives them lots of time to sit back and just watch the data flow.

But i very much doubt that the RBA will be dropping interest rates just because housing is comming under pressure.

 

[buzzlightyear]

Again?

The demand for our commodities by China is only matched by the insatiable debating of this and related issues on SS

 

[dan c]

Sash how you got an indication of a rate cut out of those articles I really don't know?!

Agree. The RBA notes from the last meeting indicated the next move would be up. And soon. The Age article talks of a rates rise being less likely than the RBA indicated, but it seems to me that the next move is more likely to be up, rather than down.

 

[oracle]

This is another article with a different perspective

The Reserve Bank of Australia (RBA) has given a strong indication that it will overlook weakness in some sectors of the economy when it sets interest rates in coming months, as the mining boom continues to put upward pressure on inflation.

Members noted that the significant divergences between different sectors of the economy presented challenges for policy-making, but that monetary policy had to be set for the needs of the overall economy

In this respect, members judged that if economic conditions continued to evolve as expected, higher interest rates were likely to be required at some point if inflation was to remain consistent with the medium-term target.

Read full article here

To me it clearly states RBA's strong bias towards raising rates than lowering them as long as nothing catastrophic happens that forces RBA to change it's thinking about inflationary pressures.

Cheers,
Oracle.

 

[Ausprop]

"Retailers and home builders have been warned by the Reserve Bank it will push ahead with interest rate rises even if it sends them to the wall."

 

[silverx]

bluestorm's timing may indeed be right, but i still don't think we're in for drops in house prices between then and now, just zero anything except rent rises.

i'm putting my money where my mouth is and cashing out.

yeah i think the world of pain is coming

i am seriously thinking of cashing in however it would take really long to cash it in this market (gold coast)

it would probably go down really badly, taking me along with it

 

[sash]

Well...the articles inidcate an inherent weakness in the housing market...this represents 30% of Oz's GDP!

I think the elephant in the room is unemployment....I think this is going to rise rather than go down further. As this is lagging indicator (economic speak for number which are the last to be affected).....this will stay the RBA hand and then cause drops.

As someone else has said this talking down of the economy is a classic strategy used by the RBA. Increasing rates would add further fueling of inflation....the RBA know this.

I also feel that food prices and Oil prices will stabilise in the next few months.

Only time will tell....I have left all my loans variable in preparation to lock in lower rates in late 2012!

Sash how you got an indication of a rate cut out of those articles I really don't know?!

Agree. The RBA notes from the last meeting indicated the next move would be up. And soon. The Age article talks of a rates rise being less likely than the RBA indicated, but it seems to me that the next move is more likely to be up, rather than down.

 

[bluestorm]

Increasing rates would add further fueling of inflation....the RBA know this.

Only time will tell....I have left all my loans variable in preparation to lock in lower rates in late 2012!

I don't get this sash. How will increasing rates add fuel to inflation
The common view is that things work the other way.

 

[Intrinsic_Value]

Well...the articles inidcate an inherent weakness in the housing market...this represents 30% of Oz's GDP!

QUOTE]

Yes but the RBA has stated repeatedly that its not in the business of 'proping up the property market'.

The RBA WANTS the property market to cool off. But it wont structure its interest rates specifically to target this, it is looking at the 'big' picture and if a side effect is a cooling off in residential property, then all the better.

On a positive note for you Sash, i honestly dont see the RBA increases rates much further, so with your cash flow positive position, you should be able to ride things quite comfortably (along with Nathon, lol).

Just dont structure your affairs with the belief that interest rates will have a significant drop.

 

[the.j]

good point

Well...the articles inidcate an inherent weakness in the housing market...this represents 30% of Oz's GDP!

QUOTE]
Yes but the RBA has stated repeatedly that its not in the business of 'proping up the property market'.

The RBA WANTS the property market to cool off. But it wont structure its interest rates specifically to target this, it is looking at the 'big' picture and if a side effect is a cooling off in residential property, then all the better.

In my opinion (apologies for being so naive) - complaints of a 'blunt instrument' from commentators & RBA by means of interest rate control is blunt if it is broad based.

Adopting a discrete view for the cost of finance for sectors - eg. 5% finance for credit card (aka consumerism in retail & manufacturing); 10% finance for (gasp!) housing; 3% for SME & business; might be the way to be 'fair' to all who participate in a 2 speed economy?

When things perk up in Oz manufacturing, we have then invested in innovation and productivity, the cost of finance swings around at the RBA's discretion for the good of the whole of Australia.

Cheers
J

 

[sash]

Aaahhh...patience little Grasshopper!!

Pushing up rates in the current evironment prior to unemployment numbers heading down will push further wage rises. This fuels further inflation.

Also....higher cost to housing also translates to higher house prices and rents which also add to inflation.

If the RBA really wanted to increase they would have done it by now.

They know the economy is in poor shape and know that inflation this time around is going to be harder to control with just a blunt instrument like rates.

As I said time till tell.......

I don't get this sash. How will increasing rates add fuel to inflation
The common view is that things work the other way.

 

[Rolf Latham]

; 3% for SME & business

yes pls : )

Most guys and girls are paying that with a 1 and a bit on the front


ta rolf

 

[Aaron Sice]

In my opinion (apologies for being so naive) - complaints of a 'blunt instrument' from commentators & RBA by means of interest rate control is blunt if it is broad based.

Adopting a discrete view for the cost of finance for sectors - eg. 5% finance for credit card (aka consumerism in retail & manufacturing); 10% finance for (gasp!) housing; 3% for SME & business; might be the way to be 'fair' to all who participate in a 2 speed economy?

When things perk up in Oz manufacturing, we have then invested in innovation and productivity, the cost of finance swings around at the RBA's discretion for the good of the whole of Australia.

Cheers
J

that's a great idea! seriously.

but one snag.

show me the legislation that forces banks to pass on the savings in full.

 

[MrCrumbpacker]

Well here are a few lines for the bright ones amongst you to read between.

http://www.smh.com.au/business/moodys-downgrades-ratings-for-big-four-banks-20110518-1eso8.html

 

[FormerLurker]

bluestorm's timing may indeed be right, but i still don't think we're in for drops in house prices between then and now, just zero anything except rent rises.

i'm putting my money where my mouth is and cashing out.

Are you selling up then Aaron?

 

[Deltaberry]

Interest rates are going one way and that's up... I'm not sure why some of you keep thinking it'll come down. Maybe re-read the RBA publications literally rather than thinking they're trying to be coy, because they're not...

In the meantime all our $1m+ salaried forecasters continue to predict rate rises...