Return of the 2 tier economy

I have posted previously how I see things panning out for the economy and rates in the medium term. The return of the 2 tier economy could see rates rise sharply - else the new economy states will run out of control. If you are buying into the south eastern corner there is a danger of falling house prices amidst rapidly rising rates - a property investors nightmare. Tread with caution!

This article sums it up succintly....

"A new commodities boom could force the Reserve Bank into lifting official interest rates "very quickly" to almost 8 per cent"

http://au.news.yahoo.com/thewest/bu...ew-resources-boom-to-spark-faster-rate-rises/

NB: the implications for the AUD are enormous.
 
I saw an article saying that China is back to pre 2007 boom production which would bear out the commodities boom. The trouble being of course the effect on the AUD. Anything over 1.05 seems by consensus to be unsustainable and one view is that if it over runs to 1.10 it will rapidly drop back to 80 before rising again slowly. A commodities boom could do just this of course.

I'm not agreeing with all the writer says. Growth predictions for the AU economy are still low and with a high value dollar there's even slower growth to consider. Punishing home owners with interest rates would be very counter productive if they're seeking a return to 'normal growth'.

Reports out of China seem to indicated bubbles in every commodity and rampant consumer debt and loose lending - similar to most countries pre-GFC. Not a good portent but in the short term it's a chance for Australia to really consolidate programs and works.

I'm hoping that this time the government will do more with their windfalls than bribe voters to stay in power and actually do some long lasting change - and I don't mean another Future Fund in the Cayman Islands. Managed correctly the next 4 or 5 years could fulfill the promise of Australia as 'the lucky country'. Crossing fingers here.
 
I have posted previously how I see things panning out for the economy and rates in the medium term. The return of the 2 tier economy could see rates rise sharply - else the new economy states will run out of control. If you are buying into the south eastern corner there is a danger of falling house prices amidst rapidly rising rates - a property investors nightmare. Tread with caution!

This article sums it up succintly....

"A new commodities boom could force the Reserve Bank into lifting official interest rates "very quickly" to almost 8 per cent"

http://au.news.yahoo.com/thewest/bu...ew-resources-boom-to-spark-faster-rate-rises/

NB: the implications for the AUD are enormous.
Good time to get the passport out,I think the aussie dollar will break the US very shortly,the only worry with commodities is the price-and who controls the mine,and the rates will go above 8%,imho..willair..

On a $300,000 mortgage, a lift in rates towards 8 per cent would add $327 to average monthly repayments:rolleyes:.
 
Article is talking about " Reserve Bank...lifting official interest rates "very quickly" to almost 8 per cent".

8% RBA rates will mean variable rates around 10.5% (which would still be middle range of rates over long term) .

I can see this happening quite easily and hope that Sydney and Melbourne financial centres receive flow on benefits from resources booms in WA and QLD.
 
Article is talking about " Reserve Bank...lifting official interest rates "very quickly" to almost 8 per cent".

8% RBA rates will mean variable rates around 10.5% (which would still be middle range of rates over long term) .

I can see this happening quite easily and hope that Sydney and Melbourne financial centres receive flow on benefits from resources booms in WA and QLD.

much like WA and QLD receive their fair share of GST revenue...?:rolleyes:
 
I am starting to think that with continued USD weakness the AUD could reach for $1.50 plus. It is tempering my move into gold.
 
much like WA and QLD receive their fair share of GST revenue...?:rolleyes:

Ha. It does have an impact. I know five people who work at Olympic Dam in South Australia and reside around Lake Macquarie in New South Wales. That's just shy of 900k that's coming into a different part of the economy. Chicken feed in the scheme of things, but its also a small sample.

Cheers
Greg
 
AusProp if we hit $1.50 then it will mean that the USA has gone the way of Russia when the Wall came down, and the world will be in such misery that it will remake society into something unrecognisable. If that happens then gold will hit the fabled $5000 an ounce at least and will probably be unbuyable.

The problem is that nobody has a clue about what's happening to the world economies, save that they are falling over one by one at an ever increasing rate, and that ones that can are refloating on debt, The people who could actually be preparing Australia for a possible financial winter are focussed entirely on being reelected, so we remain tied into the wobbly world economy with zero contingency plans and massive household debt. At $1.50 the two tiers will mean 'very rich' and 'very poor' I'm afraid.

It's very much 'good old days' but if AUD went back to about 80c we'd all be better off.
 
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hi
I would say I agree and I disagree with the idea
yes the eastern states could fall
but with a fall comes a gain so the areas that will gain will be place that people what to invest in
question who or what investors will want to invest.
the ones making the money.
so if the west income increases they want to invest because they have income
so where do tey want to invest
simple somewhere they like.
so a fall in the east but a rise in the west gives a rise I say gold coast
airlie beach
islands
and property in the 800 to 1.5 mil mark
even the toaster at the quay in sydney
because with cash flow comes demand and demand pushs price
so is that a good thing
for me yes
so if your idea is correct
where would you invest
read above
I like a fall as it give or brings to the surface an opportunity that would not be there similar to a storm blowing off sand to show treasures
do I think it will happen
have not got a clue but would take an each way bet
as long as the bet was head I win tails you lose
 
AusProp if we hit $1.50 then it will mean that the USA has gone the way of Russia when the Wall came down, and the world will be in such misery that it will remake society into something unrecognisable.

hmm I completely disagree. the demand pull on our dollar from the volume of our resources exports combined with the ludicrous imbalance in our IRs could see it happen quite easily even if there were no changes for the US. In fact a strenghtening US economy could see it happen sooner (the Chimerica symbiotic relationship).

alas the US is a sinking ship regardless. I admit this empire has been a short one and there will be a playout over many decades with many ups and downs and pros and cons along the way, but you don't have to scratch too deep to see that the US empire is living well beyond its means and on borrowed time. Perhaps there is something in that theory about fighting multiple fronts?? Paper, paper.... too much green paper.
 
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