So why are IR dropping??

Discussion in 'Property Finance' started by MTR, 13th May, 2013.

  1. MTR

    MTR Bling Bling

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    I know, perhaps a silly question, but I am really not sure why interest rates are dropping.
    Comsec reported that our economy is doing very well and US/Europe figures improving.
    However a Aus$ too high and this in part is why IR need to drop?

    Be interested on views regarding this, and how low could/will it go?? IR have never been this low since 1959, not complaining as I am getting a pay rise with each drop:)

    MTR
     
  2. Aaron_C

    Aaron_C Finance Broker

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    It's because the economy is going badly in the Eastern States and is starting to filter through elsewhere. The high dollar is one factor in the decision too - since a high dollar kills the Australian export industry such as manufacturing and tourism. Tourism isn't just people coming here to visit - it also applies to international students who choose Australia as a destination for studies. This is being impacted heavily as now it can be cheaper to go to the USA/UK to study - although universities are to blame for this too as they whacked up prices unscrupulously. All these things point to a lowering of rates to increase business confidence and so we can remain competitive in the export market.
     
  3. tobe

    tobe Mortgage Broker

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    not sure, but some of the commentary Ive been reading lately referred to low rates and low credit growth as the 'new normal', which immediately makes me sus.... thats what everyone was saying prior to the GFC about company earnings, PE ratio's, subprime lending etc etc
     
  4. INVSTOR

    INVSTOR O+

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    I don't think economy is that good in the West either - layoff's at hubby's work last week and hubby is getting paid less here than over East.
     
  5. nhg

    nhg Member

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    My opinion is not based on hard facts, I however do not believe the economy is doing any good at all.

    Usually my industry (construction) is a good indicator of the health of an economy, and all i'm seeing are redundancies, bankrupcies, and wage cutting.

    Retail is dead.

    I do not know what the politicians are talking about when they smell roses.
     
  6. Aaron_C

    Aaron_C Finance Broker

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    The current crop are smelling the roses at their political graves. ;)
     
  7. santaslayer

    santaslayer Member

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    Some of the decision was based on what the RBA thought would happen to fiscal policy on budget night. Especially when the government have already forewarned the public on its intentions.
     
  8. Dazz

    Dazz Banned

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    Business confidence is non-existent.

    The decision makers out there in business are thoroughly sick and tired of this governing regime and they want them out. Until they are, they have drawn the purse strings closed and everything (construction / retail / housing) is slowly grinding to a halt.

    Everyone in business who employ people seems to be hunkered down like some snail waiting for the storm to pass.

    We've got 4 more months of heavy storms before there is the chance of a clearing.
     
  9. Propagate

    Propagate Member

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    I'm a commercial draffy, we have ran out of work. We are tendering plenty but no one seems to want to green-light anything.

    My partner works for the Australian Industry Group, from the various indicators they produce, the economy stinks. Calls to their Business Info Line regarding procedures for laying people off have gone through the roof in recent times, and AIG themselves have slashed internal budgets as companies have cut back on spending on such things as memberships to the like of AIG, training and consulting etc.
     
  10. Ausprop

    Ausprop Member

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    by balancing the budget it means govts are either spending less or stealing more from the productive part of the economy in the form of taxes and levies. This is a serious reduction in aggregate demand.

    throw in the fact that our IRs have been ridiculously out of whack with the rest of the real world for quite some time

    then you have an election on the horizon and everyone seems to be sitting on their projects pending this

    inflation appears benign, allowing the RBA room to cut rates

    real funding costs are also dropping apparently... but who knows the tructh there, that's according to our monopolistic state backed big 4 banks.
     
  11. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    MTR, in all seriousness, the only viable answer anyone can give you is 'I have absolutely no idea'. There are lots and lots and lots and lots of theories, but no one can give you a definitive answer. It's like asking 'How big is the universe?'. Lots of people might give you an idea of what they think is the correct answer, but no one actually knows.
     
  12. The Fence

    The Fence Banned

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    Pfft, no idea, what nonsense!

    How about reading why from the Governor Of RBA Glenn Stevens himself.

    You simply cannot get any other viable answer other than fromm the horses mouth, so to speak.
     
  13. The Fence

    The Fence Banned

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    Been the new normal in Japan for yonks and now the US.

    Guess we all follow on dont we...?
     
  14. Rolf Latham

    Rolf Latham Member

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    coz finally, the Rose Coloured glasses with the golden carbon frames are well and truly off.

    Been saying it for a long time.

    Lots of noise with middle and short term swap rates on fixed rates distracting from the reality.

    The good thing is that there is a lot of space between 3 and 0 %

    ta
    rolf
     
  15. Sylvester

    Sylvester Member

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    hahaha....I vote German resi or commercial property is a good hedge...or Brazilian Govt bonds...

    problem is Australia is the white trash of asia. Labor and Greens have been successful in fostering entitlement mental illness into almost 3 generations now....and don't boat people know it.
     
    Last edited: 13th May, 2013
  16. Ausprop

    Ausprop Member

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    Dazz you mean? he's still here (post 8)
     
  17. INVSTOR

    INVSTOR O+

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    My N@b manager is my best friend in disguise, whenever I've cracked and tried to fix interest rates in the past 18 months paperwork and emails have gone missing. No complaints from me.
     
  18. jonmardell

    jonmardell Mortgage Broker

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    haha, i love this post!
     
  19. Corey Batt

    Corey Batt Finance Broker

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    Are you going to hassle him now? Or wait for potential further drops?
     
  20. INVSTOR

    INVSTOR O+

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    I'm going to wait. If I paid out my loans in the first 4 years I was up for extra fees and that time is up in 7 weeks and contemplating developing so better to hold off from fixing for now in case I want to shop around.