Recession/Interest rates. This is going to end badly!
- Thread starter topcropper
- Start date
Agree,
All current Labor party are doing is raping the situation, by paying for their next term in office.
Pretty crap, but the heard will follow @ the booths in 2011
Funny how it was supported by Turnbull. The Libs would have joined in the world stimulus party, no doubt.
Keating did what had to be done. He was never one to worry about being liked. Or being a sneaky liar like little Johnny.
Keating did what had to be done. He was never one to worry about being liked. Or being a sneaky liar like little Johnny.
yes, lower interest rates have stimulatory effect on the economy with the cost of having more debt that will weigth on future growth, in any case the more debt you take doesn't have anymore that much stimulus on the economy as you can see from this graph from US
I think after this economic contraction one thing CB will learn is that monetary policy shouldn't be used as economic growth tool and to be used to keep the system stable and inflation under control and prevent bubble to form.
I'm not a Labor voter but I don't have an issue with Keating - he knew a lot and his economic reform record is better than anyone else I'm aware of. We have been trading off the success of those reforms for more than a decade now and the only thing that comes close since is the GST which is a pretty small effort in comparison.
On the contrary, the current bunch (on both sides of the fence) inspire no confidence at all. No real ideas, just throwing money away because they can in the name of "stimulus". And everything else is going backwards - the WorkChoices wind back is just the tip of the iceberg. I am surprised at Turnbull - I was hoping for a much more credible alternative for how to get through this but instead we get this cautious "maybe" response to everything the govt says, which is not much at all. It's a worry...
On the topic of the thread, I am of the view that we are more protected than most, although it will still hurt going into -ve growth for a while. We have fewer govt subsidies / tariff protections (although we're going in the wrong direction with cars) and a much more competitive economy than most so we should manage it better and with more flexibility.
If only we used this opportunity to impose some more economic reform and tough medicine instead of taking the easy way, we may be able to get some infrastructure built and provide a solid foundation for enduring value into the future... sigh... here's hoping!
Yes and under which scenario is it easer to survive: one where interest rates have staid the same and one in which interest rates are dropping signficantly.
The whole point is that as interest rates drop the marginal ability to save to pay off debt increases, and the marginal interest of buyers increases.
Those sellers might be in denial but the chances of them becomming forced sellers reduces as interest rates drop.
Thats my key point as to why i dont think residential property will crash.
Topcropper and Boomtown. Slight correction. Topcropper you are also involved in bulk. Wheat, barley, sorghum etc is shipped in bulk like iron ore coals etc etc. Also If boomtown is in Queeensland he likely to be in coal or bauxite as the west is where the iron ore is. Not all coal and iron ore is sold on contract rates. There is a huge spot market involving your major suppliers with alot of smaller mining countries keeping the *******s honest (so to speak). This is part of the issue - the players know the current spot market (because it is open knowledge when you trade the commodity) and they also know the contract rates. Hence the chinese have started reneging and trying to restructure current contracts. Rio. bhp etc dont know what to do and while they hold out for later contract negotiations they remain in trouble trying to deal with the chinese trying to run away.
In my opinion 60 percent of the mining industry is in trouble. We will see/have seen closures, mergers and takeovers. Falling prices, no cash and no credit = trouble. The biggest and the most liquid will survive.
Topcropper your industry also looking at huge changes. ABB / AWb aint gonna happen - AWB still too many hidden problems. Watch the huge multinational trading companies start to take over. Aussie companies need to grow fast in order to stave off the threat.
Having said all that overall I completely agree with topcropper. Let it all happen, let the workd get back to some equalibrium. People have a fear of the unknown.
cheers
Aussie
In my opinion 60 percent of the mining industry is in trouble. We will see/have seen closures, mergers and takeovers. Falling prices, no cash and no credit = trouble. The biggest and the most liquid will survive.
Topcropper your industry also looking at huge changes. ABB / AWb aint gonna happen - AWB still too many hidden problems. Watch the huge multinational trading companies start to take over. Aussie companies need to grow fast in order to stave off the threat.
Having said all that overall I completely agree with topcropper. Let it all happen, let the workd get back to some equalibrium. People have a fear of the unknown.
cheers
Aussie
hey i'm not saying for a MINUTE that the current crop of liberals are anything better - far from it - but at least Costello had a clue about macro AND micro economics.
i think the one thing that's forgotten here is that with the micro side of things, lower IRs don't instantly equal higher debt levels. i dont see anyone out there buying a car, or plasma, or clothes at the post christmas sales. in a bullish economy - yes - it would equal inflation, high debt and higher property prices. we are seeing the total reverse of what is "supposed" to hapen under a micro-economic model (yes, i've been reading!) with stupid low IRs.
people are squirrelling the extra relief away, paying down their credit bills.
hell, even i am.
*edit* sorry - what i'm trying to say is that Labour are looking micro at the expense of macro, keating looked macro at the expense of micro, costello had the ability to sort out both at once.
i think the one thing that's forgotten here is that with the micro side of things, lower IRs don't instantly equal higher debt levels. i dont see anyone out there buying a car, or plasma, or clothes at the post christmas sales. in a bullish economy - yes - it would equal inflation, high debt and higher property prices. we are seeing the total reverse of what is "supposed" to hapen under a micro-economic model (yes, i've been reading!) with stupid low IRs.
people are squirrelling the extra relief away, paying down their credit bills.
hell, even i am.
*edit* sorry - what i'm trying to say is that Labour are looking micro at the expense of macro, keating looked macro at the expense of micro, costello had the ability to sort out both at once.
If we would be talking about EU, Japan or others country with positive external position I would say that low rates are not stimulatory as it would be just shifting spending capacity from lender like superfund, pensioner, or any saver to borrowers like businesses and homeowners.
In the case of Australia (and US and UK) you have a point as you would shift wealth from overseas investors to Australians borrowers and that would be a positive stimulus for the economy. But I believe in the medium-long term there is no way the system will be stable, specially if inflation in these country is higher then interest rates. After all, investors are not idiot and they are not going take losses in real term for long time.
I am with topcoper. The commodity boom is over nobody says it is dead. supply greater than demand. Over the last many years, the bubble has been blown up too big and need time to deflate. US keeps their printing machine running without stop at other country's expense. The US dollar is still appreicating than others. How strange it is. Such as now, pertrol at US$40 a barrel, we are paying $1.20 a little which is supposed to be 90c . If I were Obama, I would keep bailing out everything and build 10 more print factories to print US $.
My alternative is parking my cash in a different currency.
But if you want to keep your money in Australia, property, shares or your business (if you have one) is a good alternative. Shares and property will do well in AU$ term if the system destabilise and the AU$ will drop further.
Not everyone is up to their eyeballs in debt. You are ignoring the most vulnerable of our population. Many pensioners rely on the interest from their savings to provide income to live. Rudd is happy to dole out money to "hard working Australian families" but what about the poor pensioners who have suffered with the drop in interest rates. He has basically ignored them. But I suppose the ones with any savings are likely to be Liberal voters so stuff them.
In the medium-long term you are quite correct but then over the medium to onger term i can nearly guarantee that the RBA wont be keeping interest rates at these sought of depressed levels (and as you pointed out their hand will be played for them by the need to finance our foreign debt). However in this environment where do investors park their money, with risk aversion so high government debt is still the preferred option (hence why the US can borrow at such low interest rates). The time at which investors start looking at investments other than government debt is when confidence is rising again, risk taking will increase (but not to the levels of prior to 2008 for many years to come) and interest rates will rise.
This is also one of the reasons why i am not bullish (note: also not very bearish) on residential property. Once interest rates revert to a 'normal' level, we will again have the housing affordability issue, especially if, as i suspect, housing will only see a slight down turn. Housing prices had a massive downturn in the early 90's in australia (and note here: the US and UK didnt have the same level of housing downturn in the early 90's that australia had) which provided for the excess returns we have seen in capital appreciation over the last 15yrs.
I've never voted labor, never will, and I've never met another farmer who voted labor but I'm sure there is one out there. I also regard Keating as some mungrel who tried to take my farm off me and my family over 20 years ago with 20%+ interest rates.
However, I just heard him talk on ABC's lateline, and I agree with most of what he said. I think he had a very good idea of what he did all those years ago, and I believe he is right on top of what's happening now.
The main point he made was that the deficite countries, as in the US, UK, Oz, etc need to reduce spending and save to fix things up, and the surplus countries, as in China, Russia and the Middle East need to do the opposite
See ya's.
I dont know if anyone has noticed but CBA's preliminary interim profit was announced after market. Half year cash profit came in at $2billion a drop of 16% compared to the 08 half year, but more importantly 20% above analyst expectations.
As human beings we condition ourselves according to our immediate environment. Just as in good times we dont adequately account for risk and apply appropriate discount factors to future profits, in bad times we start to over discount.
As human beings we condition ourselves according to our immediate environment. Just as in good times we dont adequately account for risk and apply appropriate discount factors to future profits, in bad times we start to over discount.
If you can buy CF+ properties now with good Capital growth for the future, what's all the fuss about? Good times ahead for us investors. Won't end up badly in my books.
