Recession likely in Australia

Hi Kenneth,

I wouldn't be buying property that returns 4% while interest rates are 7% but @ 5% interest or 7% yield, I'll be buying property again.

Alternatively, if I can get a loan @1.5% overseas, & stable rental of 4-5%, I'll buy.

The rate cuts have already slashed my interest payments by a thousand a month. Better than a pay rise. My IPs are now slightly better than neutrally geared.

Can't find property at the price that makes sense. Shares are looking more attractive.

KY
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Dear KY,

Congratulations! Good for you, then!

Cheers,
Kenneth KOH
 
Dear All,

1. The RBA has said that Australia is likely to escape falling into an Official Recession in 2009 and 2010. Please see the following news article extract as follows:

***************************************
Australia set to dodge recession: RBA
Chris Zappone
WAToday.com.au
February 6, 2009 - 3:17PM

The Reserve Bank has slashed its growth and inflation forecasts, but predicts Australia will avoid a recession, while warning the jobless rate will rise significantly as the nation suffers fallout from the global financial crisis.

The central bank says its round of cash interest rate cuts since September - which this week cut the rate to a 45-year low of 3.25% - and a further large fiscal stimulus proposed by the Federal Government should help cushion the economy.

The RBA sees GDP growth remaining positive, albeit at just 0.25% for the year to June 30, before ticking up to an annual pace of 0.5% by the end of 2009 and quickening further to 1.25% by the June quarter of 2010, according to its quarterly monetary policy statement released today.

The bank's estimate that the economy can dodge a recession is a ''little surprising,'' Nomura International economist Stephen Roberts said. ''My view would be that we're not going to escape without one or two negative quarters.''

http://business.watoday.com.au/business/australia-set-to-dodge-recession-rba-20090206-7zhj.html

2. For your comments and further discussion, please.

3. Thank you.

regards,
Kenneth KOH
 
I think it might be interesting to remember that this is the same RBA that was raising rates quite recently in attempt to combat the threat of inflation. If they completely missed what was about to happen then I'm not sure why they should be any better this time around.
 
I think it might be interesting to remember that this is the same RBA that was raising rates quite recently in attempt to combat the threat of inflation. If they completely missed what was about to happen then I'm not sure why they should be any better this time around.

if you are going up a hill you don't apply the brakes just because you know you will soon be going down the hill
 
Dear Quoll,

1. While I do agree with you to a certain extent;- though on hindsight wisdom, I wonder why the RBA choose to deliberately "ignore" the risks of the impending financial tsunami that the ex-Treasurer, Peter Costello was warning Australians well in advance, in the first place?
2. This is especially so when the Federal Treasury and RBA are presently having different growth estimates for the same Australian Economy in 2008.

3. Not to mention the existing internal professional differences about the need to cap the Deposit Gaurantee between the Australian Federal Treasury and the RBA, in the first place and Wayne Swan, as the new Treasurer, having barked at the wrong tree regarding the possibility of a runaway inflation risk in early part of 2008.

4. Likewise, it seems to me that the present Federal Finance Minister, Lindsay Tanner seems overly optimistic about the follow-on good effects on Australia arising from the China's impending $855 Million Economic Stimulus Package, when the basic fundamental question is why does China needs to introduce such a hugh Economic Stimular Package for its fast-growing 9% Chinese Economy, in the first place?Spot on, things are never as they seem on the surface, the last several years of china's expansion was heavily in fixed industry to cater for the export market to the west, no west no export market. I cant remember the source, but if the opportunities are so good now in China, why are the wealthy mainland Chinese trying to move their profits overseas (especially now with the stronger Renminbi against non-US westernised currencies). My Chinese friends constanstly warn me that as a 'guai loh' we have to be very careful of extrapolating western statistical models onto asian economies.

5. Pragmatically and realistcially speaking, what exactly does the Rudd Government intend to use to fund the A$60 Billion monies Stimulus Package, to re-vitalise and to inject into the local car manufacturing industry in the first place so as to prevent the high job loss there?

6. For your further comments and discussion, please

7. Thank you.


regards,
Kenneth KOH

Guys many people on this forum seem so ready to bag the RBA, but step back for a moment. Sure the RBA got it wrong in early 2008, but at least by being cautious maybe the RBA has mitigated us following the same path as the US and the UK, investment flows are so much more complicated than we give it credit for. Just two years ago Allen Greenspan was held in wonder, now is he being blamed for causing this whole crisis. Personally i prefer our bank to act on the side of caution, than to come up with willy nilly new economic paradigms, such as the 'we think you make' relationship between the US and China
 
Dear Quoll,

1. While I do agree with you to a certain extent;- though on hindsight wisdom, I wonder why the RBA choose to deliberately "ignore" the risks of the impending financial tsunami that the ex-Treasurer, Peter Costello was warning Australians well in advance, in the first place?

2. This is especially so when the Federal Treasury and RBA are presently having different growth estimates for the same Australian Economy in 2008.

3. Not to mention the existing internal professional differences about the need to cap the Deposit Gaurantee between the Australian Federal Treasury and the RBA, in the first place and Wayne Swan, as the new Treasurer, having barked at the wrong tree regarding the possibility of a runaway inflation risk in early part of 2008.

4. Likewise, it seems to me that the present Federal Finance Minister, Lindsay Tanner seems overly optimistic about the follow-on good effects on Australia arising from the China's impending $855 Million Economic Stimulus Package, when the basic fundamental question is why does China needs to introduce such a hugh Economic Stimular Package for its fast-growing 9% Chinese Economy, in the first place?

5. Pragmatically and realistcially speaking, what exactly does the Rudd Government intend to use to fund the A$60 Billion monies Stimulus Package, to re-vitalise and to inject into the local car manufacturing industry in the first place so as to prevent the high job loss there?

6. For your further comments and discussion, please

7. Thank you.


regards,
Kenneth KOH

Personally i think the government needs to be careful of
An Bing Bu Dong
ie dont fire all your guns at once, bide your time.
 
I think it might be interesting to remember that this is the same RBA that was raising rates quite recently in attempt to combat the threat of inflation. If they completely missed what was about to happen then I'm not sure why they should be any better this time around.
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Dear Andrew_A,

1. RBA will probably become more experienced, after learning from its various mistakes. The Australian Economy did not officially fallen into a Recession in 2008, unlike many of the existing OECD countries.

2. The Kevin Rudd's ALP Federal Govt, as "ably-guided" by the Australian Treasury, were, even further out in its own assessments previously in 2008, having publicly advocated the need to urgently tame the rising inflation then, so as to avoid a "ran-a-way inflationary Economy" Scenario previously in March 2008 and in less than 12 months, it took the other extreme view of rushing to urgently implement the A$10.2 Billion Economic Stimulus Package in October 2008, which has already been spent in December 2008, without any job savings.

3. It has inherited a strong A$22 Billion Budget surplus from its predeccessor Liberal-National Coalition Federal Govt under the John Howard-PeterCostello times, and yet within less than one year, its first Budget is likely to turn in a deficit by June 2009.

4. Given the various incidents about not properly consulting the RBA in advance over the implementation of the A$10.2 Billion Economic Stimulus Package and the Unlimited Gaurantee for the Bank Deposits in Australia, all these incidents, certainly do not speak of good economic management skills by the Kevin Rudd's ALP Government, as far as the present "planned" slowing down of the Australian Economy is concerned.

5. There is no doubt that professional judgement for the Kevin Rudd's ALP Federal Govt and the RBA has been less than desired than what the Australian Peoples would like to see, in this case.

6. However and perhaps, it has all to do with putting in a new team to be officially in charge of Australia during this particularly challenging times, as both Wayne Swan and Glenn Stevens have both been recently/newly appointed into their present appointments, as the Australian Treasurer and the RBA Chairman, for less than one and two years respectively, when the global financial crisis started to unfold itself.

7. For your further comments and discussion, please.

8. Thank you.


regards,
Kenneth KOH
 
Personally i think the government needs to be careful of
An Bing Bu Dong
ie dont fire all your guns at once, bide your time.
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Dear Chiilaa,

1. While I fully agree with you that this is the appropiate economic response for the time being as far as the present proper management of the Australian Economy is concerned, however I doubt the Kevin Rudd's ALP Federal Government can "afford" to take this position, at this point in time, politcally speaking.

2. To do so, would mean that Kevin Rudd would be seen as a political "lame-duck" once the Australian Economy has fallen into an official Recession subsequently, for having failed to proactively saved jobs and prevent the Australian Economy from falling into the Recession, in the first place.

3. Consequently, the present "desperateness" and "urgency" to rush in and implement the second and bigger A$42 Billion Economic Stimulus Package, which is more "politically motivated" move than an economic necessary measures, at this point in time.

4. The key issue at stake is will the Australian People continue to vote in his own ALP Party as the next ruling Federal Government in Australia once their present office term expires in 2011.

5. For your further comments and discussion, please.

6. Thank you.

regards,
Kenneth KOH
 
Dear All,

1. Is an Australian Recession Looming, as indicated by the Westpac-Melbourne Institute Economics Leading Index, please? Please the u/m news article from Singapore below.

2. For your further comments and discussion, please.

3. Thank you.


Regards,
Kenneth KOH
++++++++++++++++++++++++++++++++++++++
Feb 18, 2009
The Straits Times Newspapers
Australian recession looming
http://www.straitstimes.com/Breaking+News/Money/Story/STIStory_339851.html

MELBOURNE - A MONTHLY economic index compiled by one of Australia's largest banks posted its second negative reading in December, suggesting the country may be headed for recession, economists said on Wednesday.

The monthly Westpac-Melbourne Institute leading index, which predicts the likely pace of economic activity three to nine months into the future, was -1.2 per cent in December, down from -0.4 per cent in November.

Westpac chief economist Matthew Hassan said the reading was well below its long-term trend of 3.5 per cent and had fallen sharply from the 4.5 per cent recorded last July.

Hassan said the fact that the index has stayed in negative territory for two consecutive months may be significant. 'In the past this has been a useful indication of a likely recession in Australia,' he said.

Hassan said the leading index has successfully predicted the last three recessions in Australia, in the mid-1970s, early 1980s and early 1990s.

He said the December reading would have been worse had the government not pumped some A$10.4 billion (S$10.15 billion ) into the economy through a stimulus package that boosted retail spending.

The government approved a second stimulus package worth A$42 billion last month, which is expected to take a few months to filter into the economy.

The package includes A$28.8 billion in spending on schools, housing and roads over four years, tax breaks for small businesses and cash handouts totalling 12.7 billion dollars to eligible workers, farmers and students.

The Treasury estimates the plan will boost economic growth by 0.5 percentage points in 2008-09 and 0.75-1.0 points in 2009-10, supporting up to 90,000 jobs. -- AFP
 
There are recessions and then there are recessions.
Who really cares at this point if we have a mild technical recession, we are pricing things for much worse.
 
Hassan said the leading index has successfully predicted the last three recessions in Australia, in the mid-1970s, early 1980s and early 1990s.
Erm.... yes, that's the truth, but not the whole truth......

Their leading index actually predicted 5 of the last 3 recessions :rolleyes:.

From the Westpac release.....

Westpac and not some journo said:
Australia has experienced three recessions since 1965 – defined as a contraction in economic activity over the course of a year. These were in the mid 1970s, the early 1980s and the early 1990s. On each occasion we saw the growth rate in the Leading Index turn negative about a year before a recession was confirmed. There have only been two occasions in which the growth rate in the Index turned negative but the economy avoided a fullblown recession – in the mid-80s and in 2000-01. And even these episodes saw a notable weakening in economic activity, including a quarterly decline in GDP, a slowdown in through the year growth to around 1% and significant falls in domestic demand in through the year terms.

And on the other bench St Georges economists feel that after todays relatively good retail trade figures....

St George said:
Today’s result also has implications for GDP in the December quarter (with retail spending accounting for around 40% of GDP and household consumption around 60%). Today’s data suggests that there is a chance that Australia skirts a contraction in Q4.
 
Quote:
Originally Posted by Westpac and not some journo

Mathew Hassan isn't "some journo"

Westpac chief economist Matthew Hassan said the reading was well below its long-term trend of 3.5 per cent and had fallen sharply from the 4.5 per cent recorded last July.

Dave
 
Mathew Hassan isn't "some journo"
No, but the point I was making is that 'some journo' chose to quote only part of what Hassan said. The journo implied that the leading indicator was 100% accurate, when in fact it is only 60% accurate based on a v. small sample of recessions.

So in response to Kenneths Q 'Is an Australian Recession Looming, as indicated by the Westpac-Melbourne Institute Economics Leading Index ?', maybe, but it's not a sure thing, which is not what the quoted journo implies.
 
Hi, don't know what to think. One day this, another that.

The shares I wanted to buy all went backwards except for Navitas. Today, Srv dropped 19 cents, not much except that it's 40+% of its price.

Just sitting on my thumbs has saved me a stack of money.

A big accounting firm [one of the big three] fired 100 people in Sydney last week.

I've seen some promising properties but ...

Will sit on my thumbs for a while yet I guess but what to do with the FD maturing soon? Cash also needs to be invested. AUD no good, USD even worse.

I do feel better after airing that.

KY
 
Hi, don't know what to think. One day this, another that.

The shares I wanted to buy all went backwards except for Navitas. Today, Srv dropped 19 cents, not much except that it's 40+% of its price.

Just sitting on my thumbs has saved me a stack of money.

A big accounting firm [one of the big three] fired 100 people in Sydney last week.

I've seen some promising properties but ...

Will sit on my thumbs for a while yet I guess but what to do with the FD maturing soon? Cash also needs to be invested. AUD no good, USD even worse.

I do feel better after airing that.

KY[/QUOT


Hi KY

Have you ever thought about following the market trend and going short,
it is not written in stone that you must only invest long.

Ask yourself, would you go short in a strong bull market?

Cheers

Pete
 
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