Recession likely in Australia

[WinstonWolfe]

USA borrows from China
to consume goods made from the Chinese
paying them back with the money it has borrowed
which China uses to buy our iron ore (and other minerals)

So when China asks us, Australia to put ore shipments on hold (which it did this week) because it is slowing production in its factories (which are producing to 12 month forecasts)

Because the US is not buying

Where do you think that leaves us?

Yep - at the bottom of the sh*t pile.

Agree with your general view Greedy....

I hadn't heard China had asked Aussie to hold ore shipments, but that fits with BDI trends which have dropped 75% since May and 50% in the last month. This is a massive pullback on near future Chinese production. Of course, China has large ore stockpiles, and is working its way through them now.

The BDI figures fly in the face of anyone who thinks Chinese domestic consumption will not be effected by a global or US/Euro recession. I get sick of people saying 80% of Chinese GDP is consumed domestically, and only 20% is exports. Many say a large portion of that 80% domestic goes towards supporting exports.

People also go on about only 20% of Chinese exports go to the USA. Well that is countered by 60% going to other Asian nations who primarily export to the USA. And much of the rest goes to europe which is also slowing.

So, imho, the staggering pullback in BDI is a sobering slap in the face for "she'll be right mate" ignoramuses. I presume Swan has been briefed about these things, but Rudd and he are just trying to stop a run on the banks and/or stop rapid asset deflation. You could tell the other day when Kerry O'Brien was interviewing Rudd the slippery bugger knew the $hit is going to hit the fan re Aussie asset values.

Sorry, TC, but I can't see commodities recovering anytime soon.....and I hold energy stocks that have been raped (but have been making up for that by day shorting the cr@p out of XOM and COP. )

We are seeing the end of a global economy propped up by borrowing from the future, and the assets we have spent the borrowed dollars on (domestic dwellings and stocks) have not been increasing our income (GDP) at the rate we have been inflating their values at. WIthout increasing GDP, we have no reserve debt serviceability to keep asset values where they are. The central banks will keep printing money to blow out the terms of our loans further into the future, but keeping asset prices at current values is doing nothing to increase GDP.

We are doomed to having to contract credit fueled consumption, and that'll come with asset deflation.

The Austrian School explanation fits perfectly today....We are in the midst of a Minsky Moment.

 

[topcropper]

Sorry, TC, but I can't see commodities recovering anytime soon.

Yeah, neither can I. I was just being speculatively hopefull.

I would say Australia deserves a 50c dollar. Imagine letting everything depend on a resource boom for flips sake?.

It's interesting to look at resource prices in A$ though. Very interesting.



See ya's.

 

[Kennethkohsg]

Yeah, neither can I. I was just being speculatively hopefull.

I would say Australia deserves a 50c dollar. Imagine letting everything depend on a resource boom for flips sake?.

Hold onto your hats. Property about to tank just like shares.

See ya's.

*********************
Dear TopCropper and Greedy Saffa,

1. Can we know when was the last time that Australia is having it so badly as both of you seem to be projecting for Australia in the coming future, with your abovementioned earlier posts presently, please?

2. Property about to tank just like shares?? Not when the Australian property have been overly and excessively over-priced by some 60%-80% in the first place! Neither have the local construction costs and materials costs come down yet at this point in time.

3. I believe that both the IMF and OECD are saying that the Australian properties are presently over-priced by some 15% only, though it may be higher - about 25%v- according to the present Demogrpahia's projection

4. If the US is presently coming out with legislation to help home-owners retain their houses instead of allowing them to be foresclosured, why can the Australian Govt do similar things to similarly protect the local home-owners too?

5. For your further comments and discussion, please.

6. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

We are doomed to having to contract credit fueled consumption, and that'll come with asset deflation.

The Austrian School explanation fits perfectly today....We are in the midst of a Minsky Moment.

&&&&&&&&&&&&&&&&&&
Dear WW,

1. Can you share with us the actual article whereby the Austrian School of explanation has been documented, please.

2. Thank you

Cheers,
Kenneth KOH

 

[topcropper]

*********************
Not when the Australian property have been overly and excessively over-priced by some 60%-80% in the first place! Neither have the local construction costs and materials costs come down yet at this point in time.

Dear Kenneth.

All just fun speculating on my part. Although I'm thinking like a few others on here that the top end of property markets may get a fair hit, but not the bottom end. For example, the bottom end properties can now be bought for about cost of construction, and construction costs are rapidly rising, and this will excellerate with the collapsing A$. Basically, the land is free. This would apply in many areas, and includes western Sydney, and most rural areas.

See ya's.

 

[Ausprop]

kiyosakis theory whereby the plunge in asset values will be met with a flood of liquidity and hyperinflation could well play out. I cant see this in australia tho, which would suggest a collapse of the USD against the AUD. it's confusing to see where this may go. certainly high leverage seems to be more appealling so long as interest rates are being aggressively dropped and inflation is rising

 

[RumpledElf]

Alternatively, take it on the chin, watch terrestrial TV channels

Oi, some of us live behind mountain ranges and can't get terrestrial TV. We only get that satellite stuff.

Has its moments, but we miss the adverts ... oh, the adverts ... so when we do get near the good ol commercial stations we fast-forward the programs

 

[boomtown]

fortunately there is still more than ample demand for energy due to dwindling global reserves and the greenhouse effect (in the case of uranium). now if only we were smart enough to produce uranium from cradle to grave i.e. dig it up, ship it, return and store. The world would be our oyster. Unfortunately the public is nearly as scared of that prospect as west aussies are of daylight savings.

The half life of Uranium 235 is 713 million years. Thats a very long tail liability. If we are going to take on toxic waste from the rest of the world - how much are you planning on charging the world for storage fees and security guards for the next 713 million years?

 

[Kennethkohsg]

Dear Kenneth.

All just fun speculating on my part. Although I'm thinking like a few others on here that the top end of property markets may get a fair hit, but not the bottom end. For example, the bottom end properties can now be bought for about cost of construction, and construction costs are rapidly rising, and this will excellerate with the collapsing A$. Basically, the land is free. This would apply in many areas, and includes western Sydney, and most rural areas.

See ya's.

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Dear Top-Cropper,

1. Thank you for your kind clarification.

2. I agree with what you have posted here as this is already happening in Australia at this point in time.

3. This is based on what I have personally observed in the Perth Property market.

4. As to the South-Western parts of Sydney, it has also been widely reported/known since 2006.

5. For your further comments and discussion, please.

6. Thank you.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Dear All,

1. It was reported in the Singapore Business Times today that

a. "... But even if China and India boom, they cannot come close to compensating for a US slowdown: a mere 20 per cent reduction in consumption in the US wipes out the equivalent of all of the consumption of China and India combined. Add in a European slowdown as well and the problem is multiplied."

b. "Not even China; while its growth rate will probably still be respectable at around 7-8 per cent, the economy of the coastal provinces, where hundreds of thousands of factories have to depend for their livelihoods on the American consumer, will be devastated. Thousands of SMEs in China have gone bust already this year."

http://www.businesstimes.com.sg/sub/storyprintfriendly/0,4582,300807,00.html?

2. If what is reported by the Singapore Business Times Newspapers today is factually correct and true, then, I forsee an heightened risk for the present slowing down Australian Economy to fall into an Recession soon unless the RBA is able to timely and pro-actively further introduce more interest rate cuts sufficiently to quickly re- stimulate local demand and consumer spending in order to properly re-jump-start the Australian Economy, in the near future.

3. For your further comments and discussion, please.

4. Thank you.

regards,
Kenneth KOH

 

[BV]

Kenneth

please double check the URL in your post above

Cheers

 

[Ace73]

Agree with your general view Greedy....

I hadn't heard China had asked Aussie to hold ore shipments, but that fits with BDI trends which have dropped 75% since May and 50% in the last month. This is a massive pullback on near future Chinese production. Of course, China has large ore stockpiles, and is working its way through them now.

Hey Winston, here is the link to China asking us to hold ore shipments.

http://business.smh.com.au/business/jitters-as-china-hit-by-metals-fatigue-20081009-4xn9.html

Jitters as China hit by metals fatigue

"AUSTRALIA'S best shield from global economic turmoil - the high value of its commodity exports - is under threat with news that China has told suppliers to slow iron ore shipments and predictions that iron ore and coal prices could fall by 20 per cent next year.

Australia's fifth-largest iron ore exporter, Mount Gibson Iron, shocked the sharemarket yesterday by warning that its Chinese customers were asking it to delay shipments as demand slowed due to economic uncertainty and the tightening of credit facilities.

This announcement came hours before Kevin Rudd said he had received reassurance from the Chinese Premier, Wen Jiabao, on Monday that China's growth forecasts remained strong."

Its a pretty good truism that you shouldn't believe what the Pollies are saying. They must think we are all mindless drones that can't think for ourselves. I think Australia is in a shocking position, as previously mentioned we are totally reliant on raw commodities, never mind about value adding anything,, no we are too stupid and lazy for that. We have some very bright scientist and researches but they by and large end up heading overseas to get funding, because our Govt is not far sighted.
I think those involved in the currency exchanges can see the Australia economies predicament and are pricing our currency accordingly.

You would have thought we learnt our lesson from previous recessions and diversified a bit more.

 

[Ausprop]

yet amongst all this D&G, China is forecast to grow at 9%+, the world at 3% roughly, and Oz is forecast to avoid recession and grow at 3% i think I read?

we can be harsh on ourselves and maybe our holdens aint no BMW, but when it's all washed up we are a highly educated, stable and democratic country with an abundance of natural resources that others also desire along with fertile land and water supplies. All the funny money in the world can't be worth more than that surely. When I see the AUD collapsing as investors 'take flight to safety' I scratch my head - I sure wouldn't want USD, Sterling, Euro or any of that similar toilet paper. burning it could keep you warm over the northern winter i suppose.

 

[nonrecourse]

World financial chaos "but its different here" I don't think so.

yet amongst all this D&G, China is forecast to grow at 9%+, the world at 3% roughly, and Oz is forecast to avoid recession and grow at 3% i think I read?

we can be harsh on ourselves and maybe our holdens aint no BMW, but when it's all washed up we are a highly educated, stable and democratic country with an abundance of natural resources that others also desire along with fertile land and water supplies. All the funny money in the world can't be worth more than that surely. When I see the AUD collapsing as investors 'take flight to safety' I scratch my head - I sure wouldn't want USD, Sterling, Euro or any of that similar toilet paper. burning it could keep you warm over the northern winter i suppose.

The old anology its the economy stupid should be rephased to its the world economy stupid. If you listened to Wayne Swan's interview from Washington this morning on the a.m. you would realise that the soft depression has arrived we are going to see negative growth for at least a decade. They are now saying that China and India's growth will be a fraction of what it has been this is softening the public up for the inevitable "D" word

For almost a year now I have been accused on this site as being a D&Ger. Wake up we are 21 million consumers in a world of 6 billion people all the rest of the western world is in free fall. My deceased fathers comment as an uneducated self made business man that there was no bigger fool than an educated one and that common sense isn't very common has been so true. The last year's financial comment during this lead up to what now a world depression as been laughable.For over a year its been staring us in the face. You want proof?

The last depression all of the gang of five on wall street survived. This depression has seen them all swept away. The privately owned Federal reserve is now bankrupt. The US government is now acquirring most of the assets. Unlike 1907 when Morgan was able to get the money men together to stop the crash this generation has watched trillions spent to no avail. Not even Warren Buffet can stop what is happening.

 

[Kennethkohsg]

Kenneth

please double check the URL in your post above

Cheers

&&&&&&&&&&&&&&&&&
Dear BV,

1. Thank you for your feedback.

2. The Singapore Business Times Newspapers' URL can only be accessed publicly by non-subscribers, after office hours from 1900-2359 hours Singapore/Perth Time.

3. I have extracted the relevant key points for our discussion in my post. The article is entitled "Facing Up to Recession".

4. Thank you.

regards,
Kenneth KOH

 

[Aaron Sice]

yet amongst all this D&G, China is forecast to grow at 9%+, the world at 3% roughly, and Oz is forecast to avoid recession and grow at 3% i think I read?

we can be harsh on ourselves and maybe our holdens aint no BMW, but when it's all washed up we are a highly educated, stable and democratic country with an abundance of natural resources that others also desire along with fertile land and water supplies. All the funny money in the world can't be worth more than that surely. When I see the AUD collapsing as investors 'take flight to safety' I scratch my head - I sure wouldn't want USD, Sterling, Euro or any of that similar toilet paper. burning it could keep you warm over the northern winter i suppose.

me too - i just don't understand how people can have such a doomngloom long term view of Australia.

china need house 200mil people in the next 10 years - or australia's population EVERY YEAR. how's that for demand, at even 50% of that number?

what about india? sure, we won't sell them uranium...yet.

where is this "safe haven" that investors are parking their money? i'll tell you the safe haven - doing absolutely nothing and ignoring conflicting advice on the strong fundmentals of this country.

 

[Kennethkohsg]

yet amongst all this D&G, China is forecast to grow at 9%+, the world at 3% roughly, and Oz is forecast to avoid recession and grow at 3% i think I read?

******************
Dear Ausprop,

1. Very well said indeed!

2. Interestingly, like you, The Singapore Business Times Newspapers has similarly reported that the Singapore Economy has fallen into a technical recession after the local GDP has successively contracted by some 6%plus and 5% plus during its last 2 quarters but Singapore is still projected to grow at 3% pa in 2008 and 2009 respectively, with full employment status i.e with existing unemployment rate at less than 5% pa.

3. Yes, I further agree with you that Australia is indeed blessed with the various natural resources found on its soils.

4. For your further comments and discussion where neccessary, please.

5. Thank you.


Cheers,
Kenneth KOH

.

 

[redwing]

Govt to announce stimulus package

Govt to announce stimulus package

Clicky Link

Federal cabinet is meeting to sign off on a massive financial stimulus package reportedly worth billions of dollars.

A spokeswoman for Prime Minister Kevin Rudd confirmed the meeting to AAP.

It is expected the government will announce its plans ahead of the opening of the ASX at 10am (AEDT).

The plan will include a doubling of the first home buyers grant from $7,000 to $14,000 while the total cost of the plan could be as much as $5 billion, it has been reported.

It may also include a one-off payment for aged pensioners struggling with the rising cost of living.

Treasurer Wayne Swan was to arrive home on Tuesday morning from a trip to the US where he met with world financial leaders about the global financial crisis.

The stimulus plan comes after an earlier government announcement that the commonwealth would guarantee all bank deposits to help ease increasing nervousness in the wider economy.

Opposition Leader Malcolm Turnbull has offered broad support for the government's plan.

"What we hear is that at long last they're going to provide some additional resources to pensioners," Mr Turnbull told ABC Radio.

Liberal frontbencher Joe Hockey said Labor could thank the coalition for leaving a surplus that could be used to help offset the current global financial crisis.

"Kevin Rudd must wake up every day thanking God for the coalition surplus," he told reporters in Canberra.

Nationals senator Barnaby Joyce said he hoped any stimulus package would identify money from the infrastructure fund towards projects that would "deliver a fiscal stimulus now".

"Things such as inland rail and redevelopment of ports," Senator Joyce told reporters.

The government could provide money to pensioners as well as for building projects.

"You can have the money for pensioners that goes immediately into the economy, but you must also make sure that you don't waste the money, that you start looking at projects the nation needs over the long-term."

 

[greedy saffa]

So the idea is to kickstart the "global economy" (oh God not another of those tiresome cliches) by getting Australians to spend Asian savings.

It used to be the Americans spending Asian savings (post 9/11 when the flood of cheap Asian credit hit the USA) - is KR and co. taking our heads to the table?

So after we have bought the 3rd new plasma in a row (post baby bonus plasmas) and gorged ourselves on another gas guzzler (that should help get the oil price back up again - we're just doing our bit)...

what will we really have contributed/produced vs. CONSUMED ??

Instead of giving tax breaks Mr PM, why don't you invest the money in building new industries/jobs - sustainable energy, better water management infrustructure, etc. This will naturally increase spending anyway, but we will be spending Australian money on Australian national priorities.

(Actually that is a rhetorical question - it is because his horizon is only the next election)

p.s. Other tiresome cliches - I'm making a list:

"Can I just say..." (well bloody say it!)

"Working families" (that would be all of us mate, except the buggers collecting Centrelink...who I suspect you are really appealing to)

"The Global Financial Crisis" (Let's just call it the "GFC" so we can shorten your rhetoric)

"The Uncertain Economic Times" (Just the "UET" (pronounced "ute") will do actually)

"On a go forward" (well until they invent a time machine, it's the only way open to you)

Thank heavens for Pollies - I get a smile out of every day

 

[WinstonWolfe]

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Dear WW,

1. Can you share with us the actual article whereby the Austrian School of explanation has been documented, please.

2. Thank you

Cheers,
Kenneth KOH

Ken, Here is one explanation from Dan Amoss from the Daily Reckoning and another from Nouriel Roubini.