rba cuts 0.25

[Phar Lap]

Depends on who wants to be the "lowest Rate" Bank.

Id say there is room for the big 4 to drop further than the 0.25.

They didnt pass on the full wack on the way down earlier rates drops and pushed their margin back out.

Will be interesting to see, but think they will all follow thru with .25

 

[Aaron Sice]

You've lost me...

You said monetary policy the only lever to support growth. That's not true.

And pretty sure you're reply to Redom was along the "smart a.r.s.e." lines...

how about you go back and read everything again, in context.

it's either that, or drop dead holding your breath waiting for me to spell it out for you.

 

[Aaron Sice]

Depends on who wants to be the "lowest Rate" Bank.

Id say there is room for the big 4 to drop further than the 0.25.

They didnt pass on the full wack on the way down earlier rates drops and pushed their margin back out.

Will be interesting to see, but think they will all follow thru with .25

i call 0.20.

 

[Phar Lap]

Yeah you'd think that would be the least theyd "give".

We are talking Banksters

 

[jackbak]

how about you go back and read everything again, in context.

it's either that, or drop dead holding your breath waiting for me to spell it out for you.

Sorry who was the smartarse?

 

[euro73]

I doubt the banks will pass on the cut

There is no defensible argument the banks can make for not passing it on, in full. Their funding costs , which was the excuse used after the GFC to;
1. Not pass on all cuts in full when the aggressive cuts came from the RBA
2. Increase above RBA when rates started nudging back up
have settled into a very stable pattern for the past 18-24 months. The volatility has long gone from securitisation markets. Any failure to pass on the cut in full is a pure gouge.

I do however expect to see a new 3-5 year fixed rate war start to evolve. 3 years is already at 4.69% or less with several lenders . Could we see sub 4.5% fixed rates??? For those with large portfolio's in particular, that would be very attractive.

And just quietly, NRAS yields just got even better!

 

[Brady]

Post ruined by NRAS plug at the end, all yields will get better with a rate drop.

Agreed that hard for banks to find an reason this time, only thing I could think of was keeping some reserve if things were to go south. But I'm tipping fully passed on.

 

[Phar Lap]

Nothing like the word from the horses mouth. (not calling Brady a horse)

Of course!

 

[Redom]

Banks, maybe not but we should wait and see. Other lenders are already jumping in to pass on the full 0.25%


http://www.theaustralian.com.au/bus...kly-to-cut-rates/story-fn91wd6x-1227206555557

5.13% variable isn't a great deal. 4.59% for a 3 year fixed is more attractive today but that could all change in a week.

Their variable rate has always been poor. They are near market leading for their fixed rates though.

They want to ensure that everyone at MEbank is on the same rate ('bank fairer'), so there's legacy issues associated with reducing the variable in line with others.

Cheers,
Redom

 

[euro73]

Post ruined by NRAS plug at the end, all yields will get better with a rate drop.

Agreed that hard for banks to find an reason this time, only thing I could think of was keeping some reserve if things were to go south. But I'm tipping fully passed on.

I would imagine the RBA wants the full reduction to flow through, and if they held any genuine concerns for the banks taking a clip , they may have gone for 0.5%. In any event - deed is done now. 0.25% it is- and the banks will make their announcements across the next days. I personally believe 0.25% off already low rates was kind of unnecessary and they should have kept their powder dry for a time when they really needed it, but 0.25% wont exactly tilt things much anyway.

Whats more interesting is if there's another 0.25% in a month or three, how the RBA will deal with keeping the dollar down/ stimulating the broader economy while keeping the cuts from simply converting into speculation/ crazy surges in resi property prices. Cuts are always stimulatory to property prices - always. They need to tread carefully, lest we end up with Sydney median prices well above $1 mil within 12 months - which (even as a double digit club investor) I think is a very dangerous house of cards to be building, should a recession come along one day down the road.

Which leads to a segway- Govt should be borrowing right now and rolling out a 10-20 year infrastructure program to create a driver for growth for the next 2-3 decades. They can raise debt at below CPI numbers right now. Any competent CFO would be borrowing all they could right now. Ludicrous how as individuals we are all prepared to gear up to many many multiples x income, but if a Govt wants to carry far more conservative multiples of debt we consider them irresponsible.

 

[Redom]

Which leads to a segway- Govt should be borrowing right now and rolling out a 10-20 year infrastructure program to create a driver for growth for the next 2-3 decades. They can raise debt at below CPI numbers right now. Any competent CFO would be borrowing all they could right now. Ludicrous how as individuals we are all prepared to gear up to many many multiples x income, but if a Govt wants to carry far more conservative multiples of debt we consider them irresponsible.

This would be great! Most policymakers have been trying to push this policy mix for years, in Australia and around the world.

Difficult to do, especially from a government that came in with a 'debt debt debt = bad bad bad' mantra. If you gave Hockey a clean slate and a willing public, pretty confident he'll jump on this (asset recycling programs, incentives to states, setting up the GIF, etc).

There may also be issues with finding viable, 'shovel ready' infrastructure initiatives too.

 

[Richard Feynman]

I had a feeling this would happen:

 

[Phar Lap]

when was that bet placed please Richard?

 

[want2bewealthy]

Happy days people!

Those with concerns of .25 being unnecessary at this point in time. Just remember: the US have had near zero percent interest rates for a while now and just because Australia is used to (insert rate here) does certainly not mean it has to, or will stay close to where it was is the past.

Some of you may remember me saying for a while now that I believe we won't see rates as high as they've been for a very long time because of affordability and the total economy. Rates jumping back to 7% (let alone 17% we saw in the 90's) would be disastrous because low rates have now become the norm and people are leveraged with that

Time will tell and we're all technically writing fiction for now. So far my prediction has been good though and I still believe it. In fact even more so now. Economy up the shitter. House prices considered 'high'. No end in sight. Roll with it and make lemonade

 

[Aaron Sice]

Rates jumping back to 7% (let alone 17% we saw in the 90's) would be disastrous because low rates have now become the norm and people are leveraged with that.

okay sure.

remind me to jump in the tardis and go back in time to remind Paul Keating of that so my parents don't have to sell our family home.

 

[want2bewealthy]

And people wonder why I left SS

 

[Richard Feynman]

when was that bet placed please Richard?

Today.

It dawned on me that I could probably put some money on the decision somewhere, so I had a squiz, found the site, noticed the ridiculously favourable odds and the rest is history.

 

[Phar Lap]

Well done then !

Wow, those odds should have been 2 weeks ago.

I thought it a moral ever since Terry MCrann mad that "decisive" statement thursday. never thought of having a punt on it.
Congrats!

 

[euro73]

This would be great! Most policymakers have been trying to push this policy mix for years, in Australia and around the world.

Difficult to do, especially from a government that came in with a 'debt debt debt = bad bad bad' mantra. If you gave Hockey a clean slate and a willing public, pretty confident he'll jump on this (asset recycling programs, incentives to states, setting up the GIF, etc).

There may also be issues with finding viable, 'shovel ready' infrastructure initiatives too.

This is an interesting read. http://www.theguardian.com/business...ent-debt-it-all-depends-on-how-you-look-at-it

Always amazes me how intelligent Australian's fell for the slogans about how bad our debt position is as a nation, rather than seeing it for what it is - low, and comfortably able to be increased - particularly in the interest of smart nation building projects.

Perhaps a new man ( or woman ) in the PM's chair would have the opportunity to start afresh - take a bold, nation building plan to the country and make a case for taking on debt to invest in strong projects - and they don't need to be shovel ready right now. We certainly have the capacity to do it. Do do we have the vision ( as a nation, I mean- because pollies wont do this unless we give them comfort that we wont slaughter them for it) and then, even if we have those things, do we have the kind of leaders anymore with the gravitas and balls to make it happen?

I'm personally a believer in a much bigger Australia - and the much larger tax base and economies of scale a country/ continent of our size could benefit from. But I'm not a believer in that equating to only a much bigger Sydney and Melbourne. I think Australia has lots of space and should seek to grow the populations of 2nd tier cities and regional centres in particular - and generate new opportunities from that - and in particular I thinkw e are being flat out dumb by not seeking to become a major food producer for Asia and the rest of the world. And I dont mean cattle, wheat and other land intensive products. I mean fruit and vegetables - expanding areas like the Riverina, making regional areas "wet" , so they can farm something other than cattle and sheep and drought tolerant products. But the availability of water (which Australia receives plenty of, but harnesses and captures very little of - in fact we only capture 3% of Australian rainfall and use it for agriculture) has always been the impediment. Industry needs strong water supply to be guaranteed before they will invest in relocating to regional centres - and we need that in order to generate the employment required to sustain the increases to population. So a project like this would be transformational to Australia I think http://en.wikipedia.org/wiki/Bradfield_Scheme
But it would require a 20 year plan, and it would require a politician willing to borrow to see it happen, and more importantly ( and this is much more of a reflection on us than them - we make them govern short term ) it would require a politician willing to see it realised well after he or she was no longer in office

 

[perthguy]

Always amazes me how intelligent Australian's fell for the slogans about how bad our debt position is as a nation, rather than seeing it for what it is - low, and comfortably able to be increased - particularly in the interest of smart nation building projects.

I didn't fall for it. I figured it was just political rhetoric. I was more interested in policies like the public schools policy or public hospital funding and managment. Of course, since the election there has not even been a whisper about the implementation of these policies

Perhaps a new man ( or woman ) in the PM's chair would have the opportunity to start afresh - take a bold, nation building plan to the country and make a case for taking on debt to invest in strong projects - and they don't need to be shovel ready right now. We certainly have the capacity to do it. Do do we have the vision ( as a nation, I mean- because pollies wont do this unless we give them comfort that we wont slaughter them for it) and then, even if we have those things, do we have the kind of leaders anymore with the gravitas and balls to make it happen?e

Short answer is no, we don't have those kind of leaders anymore. It's a huge shame really. The previous PMs wasted so many opportunities. The current PM isn't even creating the opportunities to waste.

I'm personally a believer in a much bigger Australia - and the much larger tax base and economies of scale a country/ continent of our size could benefit from. But I'm not a believer in that equating to only a much bigger Sydney and Melbourne. I think Australia has lots of space and should seek to grow the populations of 2nd tier cities and regional centres in particular - and generate new opportunities from that - and in particular I thinkw e are being flat out dumb by not seeking to become a major food producer for Asia and the rest of the world. And I dont mean cattle, wheat and other land intensive products. I mean fruit and vegetables - expanding areas like the Riverina, making regional areas "wet" , so they can farm something other than cattle and sheep and drought tolerant products.

It's been done in the past and could be done again. It just takes political will that goes beyond the 24 hour news cycle or 3 year election cycle. One example I can think of is a dense population in the Amazon where the people built up the relatively poor soil to support significant agriculture without degrading the environment (1). I know some promising research into this area was previously conducted in Australia with impressive results. CSIRO recently undertook a review the opportunities and constraints for biochar technology in Australian agriculture (2). It's interesting because research into biochar technology arose from research into Amazonian Black Earth (terra preta).

Basically, if we want to increase the population significantly, we will need to improve the productivity of our soils/growing practices in an environmentally sustainable way. Pouring increasing amounts of fossil fuel based fertilisers onto ever diminishing crops is not the answer (3). There are better ways of producing food. Mostly, we don?t use them.

(1) http://www.scielo.br/pdf/bgoeldi/v8n1/v8n1a02.pdf
(2) http://www.publish.csiro.au/?act=view_file&file_id=SR14112.pdf
(3) http://www.resilience.org/stories/2006-06-11/implications-fossil-fuel-dependence-food-system