So why are IR dropping??

I did mention some of this sort of thing before:

http://finance.ninemsn.com.au/newsbusiness/aap/8660268/worleyparsons-cuts-profit-guidance

Not to mention the vast majority of mining contractors right now. UGL, Boart Longyear, the SKMs and GHDs, etc etc etc. It has been in the news a bit.

Of course this is just because new projects have been canned or pushed to the right several years. Examples include:
OPR - Mitsubishi
Crosslands Jack Hills - Mitsubishi
Extension Hill
Southdown - Sojitz
Outer Harbour and associated mining expansions by BHPBIO - Dreampie
API West Pilbara - Baosteel
Anketell Port - CITIC?
Rio further expansion projects - Dreampie?
North Star - unimportant all along
Browse - Dreampie again

And that's just off the top of my head sitting here in front of the keyboard.

Of course this is offset by the very large investments already locked in (Gorgon, Wheatstone, Citic Pacific, Rio projects, etc) which will tide us over for awhile yet. But what was a pipeline of new investment that looked like bursting under the pressure now looks like a trickle...

No one took these projects seriously, except for Asian SOEs (who invested in them). See above.
 
I heard something again today that really resonated with me

1. The economy and the perception of same is between your 2 ears

2. There is "the economy" and your "personal economy", dont confuse the2

Sage words I feel

ta

rolf
 
Interested in your thoughts Rolf, on this from Chris Joye

Particularly his closing:
NORMALISING RATES COULD START IN NEXT 12 MONTHS
While it is convenient for everyone long banks, equities, housing and fixed-rate bonds to argue that rates will remain around century lows for as long anyone can see, the truth is the process of normalising them will probably start in the next 12 months.

The concern, of course, is that investors are not stupid – and will “front-run”, or anticipate, government decision-making. The US dollar is already doing this. Interest rates on three-year Australian government bonds are back up around the RBA’s cash rate, and could easily soar 100 to 150 basis points higher. And as investors and sovereigns start racing for the exits to dump assets that fare badly when rates climb, markets could become disorderly.

The good news is that Australia’s economy is now benefiting from extraordinary, and unexpected, policy stimulus. You can get variable and fixed-rate home loans from banks with a “4-handle” in front of them. The slump in our currency is profoundly powerful for exporters as it helps to protect them from commodity price declines. It also makes importing competing industries, like tourism, more attractive.

The one major cost is that core inflation is almost certain to increase. Blind Freddy figured out that it was deflation in the value of internationally-priced consumer items, driven by our currency’s ascent, that was the principal reason Australia’s inflation rate has remained low, at around 2 to 2.5 per cent in recent years. This dynamic will now work in reverse.

How do you see rates in the mid term, as you have been pretty spot on for quite awhile now, along with Bill Evans from Westpac..?
 
Interested in your thoughts Rolf, on this from Chris Joye

Particularly his closing:


How do you see rates in the mid term, as you have been pretty spot on for quite awhile now, along with Bill Evans from Westpac..?

thanks for the kind words......... im just a punter on this stuff,if I was any good Id be sitting on decent boat in the Whitsundays and not my Half Cab on the Nerang River this chilly time of year. Fair bit of luck all round.

I see further redns in variable retail rates.

And we will see a sub 5 % fixed for 5...................... maybe not for long, but many of the fund managers are running scared for their middle term cash holdings. Most of my clients taking fixed rates havent taken the "Lock it in" noise offered by most lenders

Why ?

I expect the hole(S) in the general national economy to be significantly larger than expected and currently being "manned up for".

You cant have a stable unemployment rate when you lose 60 000 jobs, but a redn in the participation rate balanced the numbers so that unemployment remained stable - there are similar sanity checks that the ANSETT auditors missed for many years......... 20000 employees and suddenly one day she sank - and no one had a clue- I doubt it.

Im fortunate to have a lot of clients across diverse industries........that provides for some interesting insights into leading economic indicators before the statistical process and seasonal adjustments take place, blurring what is pretty obvious stuff that you dont need rocket science to see.

We are having such structural change in the world economy while we continue to stick our head in the sand - Our Motor Vehicle industry is a good example, and the politically bipartisan idealogy of "knowledge nation" is another.

I will leave it at that, dont want to start a political discourse, because its NOT about that.

Lastly most of us have the capacity to choose to be responsible for our own personal economies and live a financially prudent life while being very very grateful for what we actually have.

Globally, locally, and personally we all have much bigger and specifically personal issues than economics.

ta
rolf
 
Thanks Rolf, I see that Bill Evans also agrees with your sentiments.

I also think there will be some staggering numbers revealed on a change of Govt. but enough of that for now.;)

Simply put, you agree that getting ones own affairs(economic) in order to satisfy ones own agenda is priority and filter out the noise and simply live on...!

I like it!:)


.
 
The interest rate drop has certainly helped with regards to the Aus$, I see it is now at 95, not seen it this low for a while.
 
The interest rate drop has certainly helped with regards to the Aus$, I see it is now at 95, not seen it this low for a while.

how will it help you out of interest?

for me, pain from a falling dollar is offset by lower interest costs. Most people don't carry my debt load tho, so there is no offset for the blowout in their living costs.


a quote below talks about Blind Freddy.... I don't think it is at all obvious int he public arena:

"Blind Freddy figured out that it was deflation in the value of internationally-priced consumer items, driven by our currency’s ascent, that was the principal reason Australia’s inflation rate has remained low, at around 2 to 2.5 per cent in recent years. This dynamic will now work in reverse. "
 
how will it help you out of interest?

for me, pain from a falling dollar is offset by lower interest costs. Most people don't carry my debt load tho, so there is no offset for the blowout in their living costs.


a quote below talks about Blind Freddy.... I don't think it is at all obvious int he public arena:

"Blind Freddy figured out that it was deflation in the value of internationally-priced consumer items, driven by our currency’s ascent, that was the principal reason Australia’s inflation rate has remained low, at around 2 to 2.5 per cent in recent years. This dynamic will now work in reverse. "

Hi Aus
I have been waiting for the Aus$ to drop so I can bring my funds back from USA and take advantage of the exchange when selling.

MTR
 
I guess IR are continuing to drop cos our economy is having a little blip at the moment. Usually this means doom and gloom and property markets fall back.

Why are certain property markets rising, my guess is it is cheaper to buy than rent, anything else??
 
Why are certain property markets rising, my guess is it is cheaper to buy than rent, anything else??

Perhaps that is the perception. Not often the case though....

BUY
Interest: 5%
Other: 1-3% depending on repairs, etc.
TOTAL: 6-8%

RENT: 3-6% depending on area, etc.
 
I originally posted this thread 12 months ago, so it now looks like no more further interest rates drops and my loans are all around 4.7% which is very nice.

What the experts are now saying is that IR will remain on hold this year and perhaps next year we will start to see IR rise as economy is starting to pick up, building has taken over from mining and job numbers improving. However, another concern is the Aussie $ is still remains relatively high.

I am still clueless as to where our economy is heading as there is so much conflicting information?

Your thoughts

MTR:)
 
Sideways, for a long time.

Chris Joye said this time last year that rates will begin to "normalise" in 12 months. Those 12 months have passed with nothing but rates falling and remaining low.
 
The way I see it is we are currently in a holding pattern, which is keeping rates unchanged.

The problem is the economy does well and interest rates go up. Or the economy go's bad and interest rates go down.

Personally I think the current position is as good as it gets (rates that are stable and relatively low, economy trundling along). With a stable/upward bias at the moment on interest rates, I don't think you'd really want to deal with economic effects that would justify further cutting.

The only problem with them remaining low for to long is more and more people start to leverage up and up over time, which means a greater impact from rising rates.

I do worry about the unemployment rate in 2015 but.
 
MTR, I wouldn't focus on this stuff too much if I was you. The only honest answer anyone can give you to the question 'What is going to happen with interest rates?' is: 'I have absolutely no idea'.

No one can see the future.

My guess is we will see a relatively high Aussie dollar for a while. With Bernanke's 'fast and loose' monetary policy, it is going to take decades for the U.S. to recover, if at all. I genuinely believe we are witnessing the fall of the American Imperialist Empire and the rise of China as the world's lone superpower.

That's all just freewheeling speculation, though. The only honest answer I can give you is: 'I have absolutely no idea'. Also, I would strongly advise you (and anyone else) to ignore economists outright. Glorified fortune tellers, the lot of them. There are two groups of people in the world that, if they were to all disappear without a trace today, the world would go on just as it always has without them, without the slightest disturbance. Economists are one of those groups.
 
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