What do you think the Reserve Bank will do with interest rates March 01 2005?
- Thread starter always_learning
- Start date
I state that the property market in Sydney is in slow-leak mode. The market in my opinion is drifting down.
The government has changed the rules (increased both land and exit taxes), interest rates are looking up. And the media is talking property down. High prices are a real turn off for international/interstate migration. I for example didn't accept a job offer in Sydney simply because the perfectly decent salary in other parts of Australia wasnt enough cover the heavy burden of a big mortgage in Sydney. (Mrs AL wants "MY own home <big sad eyes>"...which somehow I guess that means I can live in it with her if I ask nicely and agree to the mortgage repayments)
As I said most who are selling are not flustered about it, buying a selling a PPOR on the same market over lets say a 2 month period the market is flat enough not to make a difference. Actually for firsthomers, and upgraders lower prices are just good news! For downgraders it's just not a good as it was, but it's there is no need for tears!
The government has changed the rules (increased both land and exit taxes), interest rates are looking up. And the media is talking property down. High prices are a real turn off for international/interstate migration. I for example didn't accept a job offer in Sydney simply because the perfectly decent salary in other parts of Australia wasnt enough cover the heavy burden of a big mortgage in Sydney. (Mrs AL wants "MY own home <big sad eyes>"...which somehow I guess that means I can live in it with her if I ask nicely and agree to the mortgage repayments)
As I said most who are selling are not flustered about it, buying a selling a PPOR on the same market over lets say a 2 month period the market is flat enough not to make a difference. Actually for firsthomers, and upgraders lower prices are just good news! For downgraders it's just not a good as it was, but it's there is no need for tears!
Hi All
My comment is that whilst it may seem to be much anti rate rise opinion out there. HIA this and Retailer Group that, I think you have to look at the source of the information.
As an ex member of the HIA they do a great job of representing their members. Hence the HIA will find, legitamently, any statistic to support lower rates as in building, it is pretty simple, low rates equals jobs.
The economy is strong IMHO. Anyone with any skill can get a job. Personally as a teenager in the 80's you picked your future career based on whether it had any prospects. Todays world is very different.
The RBA has engineered an almost miraculous run of postive growth in our country. Not too hot and not too cold, we really have not seen any radical swings for almost 9 years.
No crashes, no booms ( like 90 say in RE)
So Will they raise. Yes?
WHY? 0.25% will not cause mass job losses but will remind those who are spending like no tomorrow that tomorrow does come.
We are consuming at a massive rate. Our new Subaru is coming from Queensland to meet the spec of plain white, demand is that high. Apple IPODS are everywhere and I would be surprised if one of the Forum members did not have a mobile phone.
Time will tell of RBA is right but they are pretty good so far.
Peter 147
My comment is that whilst it may seem to be much anti rate rise opinion out there. HIA this and Retailer Group that, I think you have to look at the source of the information.
As an ex member of the HIA they do a great job of representing their members. Hence the HIA will find, legitamently, any statistic to support lower rates as in building, it is pretty simple, low rates equals jobs.
The economy is strong IMHO. Anyone with any skill can get a job. Personally as a teenager in the 80's you picked your future career based on whether it had any prospects. Todays world is very different.
The RBA has engineered an almost miraculous run of postive growth in our country. Not too hot and not too cold, we really have not seen any radical swings for almost 9 years.
No crashes, no booms ( like 90 say in RE)
So Will they raise. Yes?
WHY? 0.25% will not cause mass job losses but will remind those who are spending like no tomorrow that tomorrow does come.
We are consuming at a massive rate. Our new Subaru is coming from Queensland to meet the spec of plain white, demand is that high. Apple IPODS are everywhere and I would be surprised if one of the Forum members did not have a mobile phone.
Time will tell of RBA is right but they are pretty good so far.
Peter 147
I'm amazed that 30% of forum members don't beleive the rate rise is coming. Thommo must be right about the optimists in this place.
Spending figures just out show Australians went on a buying splurge of imported goods in January (mainly cars and clothes) and home loans are taking off again.
I still don't believe that we'll get 0.5% in one hit - we'll get it in two successive hits as a reminder that the RBA can keep tightening for as long as it chooses.
Spending figures just out show Australians went on a buying splurge of imported goods in January (mainly cars and clothes) and home loans are taking off again.
I still don't believe that we'll get 0.5% in one hit - we'll get it in two successive hits as a reminder that the RBA can keep tightening for as long as it chooses.
At last some interesting figures from a survey in progress by the SMH.
Out of Total Votes: 4136 the results as to how will you be if rates rise 0.25 to 0.5% is.
Can't afford it at all - 10%
Will hurt badly - 14%
Will pinch - 18%
Can cope - 19%
Can cope easily - 29%
Don't know - 6%
So 42% will pinch or worst. But the highest percentage of 29% is can cope easily. I guess you need to know the area they live and such but one assumption you can make is they must be mostly whote collar workers with acess to cinternet to vote. Not necessarily down and out types??
Peter 147
Out of Total Votes: 4136 the results as to how will you be if rates rise 0.25 to 0.5% is.
Can't afford it at all - 10%
Will hurt badly - 14%
Will pinch - 18%
Can cope - 19%
Can cope easily - 29%
Don't know - 6%
So 42% will pinch or worst. But the highest percentage of 29% is can cope easily. I guess you need to know the area they live and such but one assumption you can make is they must be mostly whote collar workers with acess to cinternet to vote. Not necessarily down and out types??
Peter 147
Thorpey said:I'm with Les,
anyone thought of how this will raise the A$ and therefore increase the reasons for not raising rates.?
Just a thought. It's very interesting times indeed.
Thorpey
Thorpey,
I voted that way too.
Not good that high AUD.
Quiggles though should be getting some value buying US properties with AUD.
A86
Grant is a working economist who sometimes posts detailed economic comment. As this is always original work, out of courtesy I am slow to cut'n'paste but I assume that with due credit, it's OK.agent 86 said:
Subject our current account dilemma
Posted 01/03/05 19:20 - 50 reads
Posted by Grant62
Post #98196 - start of thread - splitview
Today, the Current Account Deficit (CAD) figures for the December Quarter were published by the ABS. Officially, the figures demonstrated that our external imbalance has now hit 7.1% of GDP.
The likely March Quarter figure could top out at 7.5% (for the reasons explained, below).
This is significant as it comes on top of yesterday's 2nd worst trade deficit result (ie: the $2.7B January trade deficit).
Chiefly, our CAD is made up of 2 primary components:
1.
the trade balance (or deficit); and
2.
the net income balance.
Traditionally, the net income balance has been a negative figure whereas our trade balance has, at times, traded in surplus (as well as deficit).
The trend revealed by the December Quarter CAD was, however, somewhat worse than expected.
In the main, this was due to the rapid and accelerating deterioration in our net income balance.
12 months ago (ie: 4q03), this stood at 3% of GDP, whilst our trade deficit stood at 2.8%. At the time, our CAD was 5.9% of GDP.
Today, our income balance (deficit) stands at 3.8% of GDP, whilst our trade deficit is 3.2% of GDP. Our CAD is 7.1% of GDP.
Throughout 2004, our income balance averaged 3.3% of GDP, vs our trade deficit average of 3.0%. During the same period, our CAD averaged 6.4% of GDP.
What, however, is quite disconcerting is the rapid deterioration in the net income balance, measured as a proportion of GDP, as the following demonstrates:
PERIOD INCOME BALANCE TREND
% OF GDP
2Q03 2.8% Stable
3Q03 2.7% Stable
4Q03 3.0% Deteriorating
1Q04 2.7% (3.3%) Improving (one-off)
2Q04 3.0% (2.9%) Deteriorating
3Q04 3.5% (3.1%) Deteriorating
4Q04 3.8% (3.3%) Deteriorating
In the same time period, our trade deficit has been relatively stable, as the following demonstrates:
PERIOD TRADE BALANCE TREND
% OF GDP
2Q03 3.4% High
3Q03 3.3% Improving (gradual)
4Q03 2.8% Improving (strong)
1Q04 3.2% (3.2%) Deteriorating (one-off)
2Q04 2.5% (3.0%) Improving (one-off)
3Q04 3.2% (2.9%) Deteriorating
4Q04 3.2% (3.0%) Stable
Given yesterday's January trade deficit, it now seems quite likely that the March Quarter trade deficit will grow to ~$7.5B.
It is likely that the net income balance will further deteriorate to ~$8.6B.
Overall, the March Quarter CAD will likely deteriorate to $16.3B (including miscellaneous adjustments).
As a proportion of GDP, this suggests that the March Quarter CAD could well top 7.5%, of which:
1.
net income balance = 4% of GDP; and
2.
the trade deficit = 3.5%.
The future direction of our CAD, therefore, seems to be reflected in a net income balance (or deficit) of >4% of GDP, and an oscillating trade deficit averaging well above 3% of GDP.
Once all this becomes apparent to the markets, it is quite likely that a sharp and sustained $ adjustment will be required and that the RBA and the Federal Government together will need to carefully address the situation.
So-called higher export prices for our extracted commodities from April onwards, however, is simply not going to do the trick.
Australia's external imbalance is much worse than that of the USA, and our capacity to redress it is that much more constrained.
Our imbalance is now heavily structural (ie: income balanced) in nature and nothing short of running sizeable trade surpluses in the future will re-dress that problem. Canberra indeed has a problem brewing up.
All the best,
Grant62
Bye Bill
My emphasis.
Thank you for that, Thommo, and thanks also to Grant62.
A couple of points -
The most direct way to improve the trade balance is to make goods more competitive across the board. That is can be done by reducing the value of the $A, which in turn can be done by lowering interest rates (so speculators won't come in buying Govt and other bonds and fixed interest securities).
When they trade (say) US$ for $A to buy Austtralian investments, that pushes up the value of our currency (demand and supply) and ours is a thinly traded currency making it somewhat volatile. When they find more attractive (higher interest) places, the currency goes down. Note that this happens alrgely at the margin - the hedge funds have a set amount or range of exposure to each country. However, our volatility exaggerates the effect.
But the RBA has implied that it won't use the interest rate to manipulate the exchange rate and that the inflation target is its primary concern. It is also open to the Government to retire from the bond market - it is sufficiently solvent to do so unlike the US. By not issuing bonds, you'd certainly cut down on the demand for $A They are unlikely to do this, as the local market begged them not to close the bond market, and I suspect to limit it to Australian players only may breach the free trade agreement.
It is, as Grant62 says, a real conundrum and one can only wonder how it will turn out.
A couple of points -
The most direct way to improve the trade balance is to make goods more competitive across the board. That is can be done by reducing the value of the $A, which in turn can be done by lowering interest rates (so speculators won't come in buying Govt and other bonds and fixed interest securities).
When they trade (say) US$ for $A to buy Austtralian investments, that pushes up the value of our currency (demand and supply) and ours is a thinly traded currency making it somewhat volatile. When they find more attractive (higher interest) places, the currency goes down. Note that this happens alrgely at the margin - the hedge funds have a set amount or range of exposure to each country. However, our volatility exaggerates the effect.
But the RBA has implied that it won't use the interest rate to manipulate the exchange rate and that the inflation target is its primary concern. It is also open to the Government to retire from the bond market - it is sufficiently solvent to do so unlike the US. By not issuing bonds, you'd certainly cut down on the demand for $A
They are unlikely to do this, as the local market begged them not to close the bond market, and I suspect to limit it to Australian players only may breach the free trade agreement.It is, as Grant62 says, a real conundrum and one can only wonder how it will turn out.
Quiggles,quiggles said:
That shouldn't surprice you.
We all base our opinion on various factors.
Some of these are:
The information we acquire from media outlets,
The state of our economy, our trade deficit
The value of the AUD$, the state of the housing markets
australia wide, and ofcourse the inflation rate which is still low.
The RBA must be very brave increasing interest rates right now
as there is no real reason for it and because it will have a significant negative
affect on the housing market and on our trade deficit which has now started
ringing alarm bells.
IMHO they should be lowering our already high interest rates
and if they want to stop house prices from rising too fast they
should come up with other measures .
Cheers,
Nothing should surpise me, everything does. I wander though my world in Candide-like innocence, touched by the beauty of the flowers, the butterflies and the superb RE deals in the US.BV said:
The poetry of the stars, the moon's effulgence and the crystalline elegance of the interest rate structure's impact on the trade balance fill my soul.
A jug of wine, a loaf of bread and a good hard look at the GDP, t'were heaven enough.
I hold the opinion that devaluing ones currency does not result in increased exports. Banana republics don't suddenly start exporting high end electronics just because their currency is worthless. Farmers and miners are the main proponents of weak currency. How about this for a suggestion - we nurture industries that produce goods that the rest of the world is actually willing to pay a premium for. I bought a present for a friend today - a $279 saucepan made in Denmark, ceramic coating, indestructible blah blah blah... a pity Australia couldn't produce anything like that. Nope... hopefully we can pay our bills by exporting more ore or wool.
