# Interest Rates



## Largesse (5 August 2008)

A number of scenarios:

Hold-Lower-Lower

Hold-Hold-Lower

Hold-Hold-Hold

Lower-Lower-Lower

If the guvna holds this month and strongly indicates that he will lower in coming months where should i move my cash immediatly? financials?


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## ROE (5 August 2008)

hold-hold-hold
Australia need a recession to stop people borrowing and pay off some debt
we been through on a debt boom ... it's pay back time folks.

All those Billion of dollar spent on properties it's all debt money ... now the people lend you the cash want it back


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## gfresh (5 August 2008)

aww.. but I really thought my mcmansion in the outer suburbs that I paid $500k for would double to $1m in 5 years


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## Temjin (5 August 2008)

ROE said:


> it's pay back time folks.
> 
> ... now the people lend you the cash want it back





huh???? I never knew we have to repay our debt back??? I thought those economists from news.com.au told me that spending is the key to a healthy economy. And then the banks also told me that I should borrow as much as possible because it's good for the economy!!!!


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## Uncle Festivus (5 August 2008)

They don't want you to pay it back - they want to write it off then 'create' some more 'IOU's' into the economy, then it all starts over again


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## pepperoni (5 August 2008)

Why would banks cut???   They have their fangs in most of the suckers out there now they just need to bleed them as dry as possible without killing them for 30 years.


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## ROE (5 August 2008)

Temjin said:


> huh???? I never knew we have to repay our debt back??? I thought those economists from news.com.au told me that spending is the key to a healthy economy. And then the banks also told me that I should borrow as much as possible because it's good for the economy!!!!




No they dont want you to pay it back..they want you to be their slave for the next 30 years and your kids and grand kids born slave bound and work for them to paid off interest only debt


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## ROE (5 August 2008)

gfresh said:


> aww.. but I really thought my mcmansion in the outer suburbs that I paid $500k for would double to $1m in 5 years




you will get your million  the good old argument of supply and demand and we have a supply problem dont we?

if everyone has a million in the bank you probably sold it pretty quick but most people dont have a million in the bank...so they go to the bank themselves and try to get it  but banks dont have too much capital these day to hand out
and the guys the banks want to borrow from doesn't feel like lending out either
and if he does he want his 12% to compensate for the risk.

Until such time keep sitting on it for a while and enjoy it


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## bvbfan (15 August 2008)

RBA will be too soft, when they should have gone 50bp in November they were too soft due to the election. Probably would have saved the other two in 2008.

They'll go 25bp in September and wait to see Oct CPI, then perhaps 25bp in November.

Really they should probably go 50bp in September and will allow them to hold off cutting again until at least February after 2 lots of CPI.


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## YELNATS (20 August 2008)

"Mr Evans said high borrowing costs would make a 50 basis point official interest rate cut in September more likely."

www.news.com.au/dailytelegraph/story/0,,24211703-5014099,00.html

If the RBA cuts 50 bps, surely this will mean the retail banks will cut something like 70-80 bps off our mortgages. After all, they added to the RBA's increases on the way up, so they need to add to the RBA decreases on the way down, given that the banking sector is as price-competitive as that industry tells us it is.


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## Nyden (20 August 2008)

YELNATS said:


> "Mr Evans said high borrowing costs would make a 50 basis point official interest rate cut in September more likely."
> 
> www.news.com.au/dailytelegraph/story/0,,24211703-5014099,00.html
> 
> If the RBA cuts 50 bps, surely this will mean the retail banks will cut something like 70-80 bps off our mortgages. After all, they added to the RBA's increases on the way up, so they need to add to the RBA decreases on the way down, given that the banking sector is as price-competitive as that industry tells us it is.




I've read just the opposite. Banks may not pass on the rate cut at all - or only partially pass it on. 

I'm hoping for no rate cuts; I believe Australia needs to deflate after our little boom there; property first


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## Bushman (20 August 2008)

Nyden said:


> I believe Australia needs to deflate after our little boom there; property first




A-grade commercial property will 'deflate' when vacancy rates and rents per square metre drop ie if we hit a recession. The 'credit crunch' will not deflate A-grade as cash rich private investors will snaffle up the fully let stuff. I mean what does historically low vacancy rates represent to you good folks? This supply crunch will get worse as more projects are shelved. For it to deflate would be dumb.  

There is however a strong case for the guff that was being flogged at the same cap rates as A-grade will drop ie your neighbourhood shopping centres, B-grade office and old industrial. With that I do agree. 

Housing will drop in the short term due to 'affordability' in the face of a crisis in consumer confidence due to high interest rates and petrol prices. However the underlying trends of full employment and strong immigration means that ressie is a good bet in the long run.


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## gfresh (20 August 2008)

Place your bets  

 I think RBA will cut 50 basis points. The banks will cut only 30 points, knowing full-well things overseas are still getting nastier and they really need to keep a decent buffer "just in case". Then there will be the biggest load of whining and finger pointing seen for a long time.


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## CanOz (20 August 2008)

gfresh said:


> Place your bets
> 
> I think RBA will cut 50 basis points. The banks will cut only 30 points, knowing full-well things overseas are still getting nastier and they really need to keep a decent buffer "just in case". Then there will be the biggest load of whining and finger pointing seen for a long time.




25 bps cut.

CanOz


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## Julia (20 August 2008)

Nyden said:


> I'
> I'm hoping for no rate cuts;




Me too.  I have a term deposit coming up for renewal next month.


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## CanOz (20 August 2008)

Chuck Butler from Everbank had this to say about the RBA decision in his newsletter "The Daily Pfennig":

"The Reserve Bank of Australia (RBA) printed their last meeting minutes, and they revealed what the markets had priced into the A$... A forthcoming rate cut. Probably at the Sept 2nd meeting. The A$ has rebounded a bit, as the markets had begun to price in a 50 BPS rate cut, whereas the meeting minutes point to a 25 BPS rate cut. However, what I read in the minutes tells me that a follow up rate cut of 25 BPS in October is _probably_ in the books."

Cheers,


CanOz


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## wayneL (20 August 2008)

Real rates to go even more negative. Savers screwed again.


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## nioka (20 August 2008)

Julia said:


> Me too.  I have a term deposit coming up for renewal next month.



I renewed one today and had to take a 25 point cut. The banks are allowing for the drop now according to my info.


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## Kauri (3 September 2008)

you can't beat our top-flight financial journos... they are up and down more often than a huas drawers..

Terry McCrann was the journalist who beat the drum the loudest one month ago when he declared that the RBA would lower rates in September and might even go 50 pips. In today"s newpapers he is saying that the RBA easing cycle that started yesterday "could prove to be the shortest cutting cycle we have seen, in size and number of cuts, and also their time- span." 

Cheers
..........Kauri


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## aleckara (3 September 2008)

wayneL said:


> Real rates to go even more negative. Savers screwed again.




Double whammy in my opinion for the people outside the housing market. They now have less power to save for a deposit, and the interest rate easing will help prices of houses rise, or fall less than they would. In other words the real impact is the -0.25% - housing appreciation effects.

In other words a boon for people sitting on housing wealth, a bad for people just starting out. In theory if houses are capped by affordability then interest rates shouldn't matter as much to people outside the housing market and are actually worse off under interest rates falls. (i.e if interest is high, and property is depreciated accordingly they can save, get in, and the likely way for interest rates is down making them money).

Edit: Forgot to add that it will reduce our dollar making petrol, and imported goods expensive making living costs are bit harder for people not in the market.


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## gfresh (3 September 2008)

aleckara said:
			
		

> Edit: Forgot to add that it will reduce our dollar making petrol, and imported goods expensive making living costs are bit harder for people not in the market.




:iamwithst exactly.. 

1. Dollar falls much more than 0.25%
2. Cost of imports rises (helping retail to continue suffering)
3. Petrol costs will probably rise (there goes much of that $20/30/wk saving)
4. Cost of credit cards, other forms of finance will probably still will remain expensive for those still in debt. 
5. Overseas funding still expensive for longer term finance. Banks still need to source a lot of their funding from there. 
6. RBA cannot keep lowering rates due to above inflationary pressures.
7. There is probably a point whereby even if the RBA lowers, the banks cannot lower due to 5. Not sure where that point is, but it won't be pretty for confidence. 

This is false cheer, and the reality of such will soon set in a few months.


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## pepperoni (3 September 2008)

Agreed - people in the market will get squeezed more than the $40 a month they save ... and the drop wont encouraging people to enter the market ... 

They will need many drops before they stoke the flames again ... and still there wont be any new wood on the fire for years!


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## Julia (3 September 2008)

nioka said:


> I renewed one today and had to take a 25 point cut. The banks are allowing for the drop now according to my info.



And I bet they take this opportunity to drop deposit rates further.


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## noirua (4 September 2008)

Interest rates remain much too high. They should have been lowered to 5% about 1 year-a-go. Rudd & Co have been to slow off the mark.


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## aleckara (4 September 2008)

noirua said:


> Interest rates remain much too high. They should have been lowered to 5% about 1 year-a-go. Rudd & Co have been to slow off the mark.




Firstly Rudd and Co don't really control interest rates, other than through the budget and its effects. The RBA does. In fact with a lot of their tax measures being blocked in the Senate I don't see how they can really do anything to the interest rate right now. They might just get elected out simply because they can't implement anything.

Second of all why are they too high? If the incentive to save doesn't match the incentive to borrow (i.e we have to constantly source our capital from overseas) I would argue that maybe they have been too low for awhile unless we are still a growing economy (and to be honest I think we have passed that stage). But of course it isn't a floating market, the RBA manipulates it for economic purposes. And I'm sure they are more qualified than you to make that decision.


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## noirua (4 September 2008)

aleckara said:


> Firstly Rudd and Co don't really control interest rates, other than through the budget and its effects. The RBA does. In fact with a lot of their tax measures being blocked in the Senate I don't see how they can really do anything to the interest rate right now. They might just get elected out simply because they can't implement anything.
> 
> Second of all why are they too high? If the incentive to save doesn't match the incentive to borrow (i.e we have to constantly source our capital from overseas) I would argue that maybe they have been too low for awhile unless we are still a growing economy (and to be honest I think we have passed that stage). But of course it isn't a floating market, the RBA manipulates it for economic purposes. And I'm sure they are more qualified than you to make that decision.



Thanks very much M8, that's given me a good kicking.


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## noirua (4 September 2008)

aleckara said:


> Firstly Rudd and Co don't really control interest rates, other than through the budget and its effects. The RBA does. In fact with a lot of their tax measures being blocked in the Senate I don't see how they can really do anything to the interest rate right now. They might just get elected out simply because they can't implement anything.
> 
> Second of all why are they too high? If the incentive to save doesn't match the incentive to borrow (i.e we have to constantly source our capital from overseas) I would argue that maybe they have been too low for awhile unless we are still a growing economy (and to be honest I think we have passed that stage). But of course it isn't a floating market, the RBA manipulates it for economic purposes. And I'm sure they are more qualified than you to make that decision.



Hmmmmmmmm, I've had further time to ponder the ifs the buts and the maybes. Many Governments in the World don't fix interest rates anymore but members of it open their mouths to put pressure on those who do. Or perhaps cleverly address one or two, who in a vote, could swing it to their way of thinking.

President Bush gave the Fed no options really and they followed what he said.  The UK Chancellor has just done the same to the Bank of England: Will they cave in?

Kevin Rudd & Co opened their mouths continuously over inflation and their influence pushed rates up. 
I think the rates went far higher than they should/would have done.  What do I know?  How qualified am I?  There yah goes, you can't know for sure?


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## noirua (6 November 2008)

United Kingdom have just announced a 1.5% reduction in interest rates from 4.5% to 3%. Lowest since May 1954.
Car sales down 23%, house prices down 15% and a raft of very poor data seems to have pushed the Bank of England into making a move.
Bank of England reports a severe economic contraction. UK in a very sharp recession.


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## doctorj (6 November 2008)

Wow.

The markets had only priced in a 50bp move...


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## noirua (6 November 2008)

The Swiss have surprisingly lowered their libor rate from 2.5% to 2%.


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## noirua (7 November 2008)

European Central Bank has cut the Eurozone rate by 0.5% to 3.25%.
UK FTSE falls 5.7% and sterling by 3.24 US cents.


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## Aussiejeff (7 November 2008)

OK. So now the scuttlebutt is that central banks are "racing to see who will be the first to reach zero" in the Great Rate Race.

Hmmm. I'm not sure about the economic wisdom here.

Can someone please tell me what will happen IF after slashing their rates to *0.0%*, the global financial crisis actually keeps getting worse?? 

Is there something "up their sleeves"?

Or is that it.

Game over?

P.S. What about the $Trillions kept worldwide in "safe" cash accounts for retirees and super? Plummeting interest rates surely aren't going to help the value of those accounts? With shares worth bugger-all and super apparently heading the same way, what then?


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## Largesse (7 November 2008)

Aussiejeff said:


> P.S. What about the $Trillions kept worldwide in "safe" cash accounts for retirees and super? Plummeting interest rates surely aren't going to help the value of those accounts? With shares worth bugger-all and super apparently heading the same way, *what then?*


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## Aussiejeff (7 November 2008)

Largesse said:


>




Blast!

I was hoping for some sound FX too!

LOL

On second thoughts, the Fed might have to sell all their nukes to them pesky Russkies to pay for their retirement plans....


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## BradK (7 November 2008)

Gulp.... interest rates of 4% to the consumer? Out of the question by mid-2009?

Steeling myself for the pokies and plasma attack! 

Could we have a go at young, uneducated, single mothers on welfare too??? 

Brad


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## Aussiejeff (8 November 2008)

Yet again, today, is more of the typical babble-speak spouted by many media outlets:

*"EUROPEAN stock markets have closed sharply higher, getting a boost from gains on Wall Street as investors bet that a very weak US jobs report would prompt more interest rate cuts".*

Since when do "*investors*" make "bets"? I'm pretty sure that making dailly "bets" on the markets is more the domain of "speculators" or "gamblers" - NOT "INVESTORS"!

Crikey. Why anyone in their right mind would want to throw wads of cash at company shares when the economy is heading south at a great rate of knots on the _speculative presumption_ that "an interest rate cut" will fix everything is a quite startling assumption - especially so given the _pathetic_ and _mostly negative_ response by the financial and stock markets to a plethora of "massive" interest rate cuts ALREADY.

How can these media wankers get away with this totally blinkered, over-optimistic faith in the "positive-effect-of-interest-rate-cuts-on-the-stockmarket-CRAP"?? Do they really believe what they are printing / saying?

What's to cheer in a succession of boingo-boingo dead cat bounces?


*sigh*

End anti-mass-media rant.

For now.


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## Geoff (8 November 2008)

Aussiejeff said:


> Can someone please tell me what will happen IF after slashing their rates to *0.0%*, the global financial crisis actually keeps getting worse??




-1% interest.  The bank pays you to borrow money.  Thousands of struggling middle age families take out huge loans and spend big, stimulating the economy dramatically.  RBA has to throw interest rates back up to limit inflation, everybody forecloses on their loans and THEN we get the big bada boom :


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## noirua (27 November 2008)

China has reduced interest rates for the third time in recent months, from 6.66% to 5.58%.
The Banks minimum deposit requirement has come down to 15.5%.


Have you voted at the link below yet?

Here's your chance as time is getting short: http://www.thebull.com.au/the_stockies/forums.html

thank you very much, you're a ***


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## noirua (3 December 2008)

Reports that the UK may reduce interest rates from 3% to 2% on Thursday. Some forecast rates below 1% in 2009 and the RPI inflation figure, and growth, moving to -2%. This follows continuous job cuts at more and more major companies. Country looks to be in trouble after tax cuts last month and the British Pound crumbling fast.


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## Aussiejeff (4 December 2008)

noirua said:


> Reports that the UK may reduce interest rates from 3% to 2% on Thursday. Some forecast rates below 1% in 2009 and the RPI inflation figure, and growth, moving to -2%. This follows continuous job cuts at more and more major companies. Country looks to be in trouble after tax cuts last month and [size=+1]*the British Pound crumbling fast*[/size].




Ahhh, I love the smell of EuroPoms in the morning....


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## noirua (5 December 2008)

Aussiejeff said:


> Ahhh, I love the smell of EuroPoms in the morning....



Thanks Aussiejeff for that kind comment, acceptable only from Wodonga or is it expected.

...anyway, interest rates have come down 0.75% in the Eurozone to 2.5% and 1% in the UK to 2%.
Australia looks out of line at 4.25% and we may be living in hope things won't tank as they have in America and Europe, some hope. Property prices down 16.1% on the year in the UK and Spain has reversed suddenly and so seriously that many property companies have moved from boom to bust in a matter of a few months.


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## Aussiejeff (5 December 2008)

noirua said:


> Thanks Aussiejeff for that kind comment, acceptable only from Wodonga or is it expected.
> 
> ...anyway, interest rates have come down 0.75% in the Eurozone to 2.5% and 1% in the UK to 2%.
> Australia looks out of line at 4.25% and we may be living in hope things won't tank as they have in America and Europe, some hope. Property prices down 16.1% on the year in the UK and Spain has reversed suddenly and so seriously that many property companies have moved from boom to bust in a matter of a few months.




*sniff* Hi noirua  

So, following the latest IR dive what's the current typical depositor's savings rates in UK and Eurozone? Must be getting to a point where holding money in a cash account is going to cost depositors money over time?

In fact, how effective are GuvMint "bank deposit guarantees" around the planet going to be at retaining much needed depositor's funds in banks, if depositor's savings rates approach 1 or 2%? I haven't yet seen any "expert" commentary on that rapidly approaching scenario. Oh, but then GuvMints want everyone to SPEND their cash. But that would hurt the banks assets base? Oh, I'm confussed!

Anyone care to offer their view?

**STAMPEDE!!!!**


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## noirua (5 December 2008)

Aussiejeff said:


> *sniff* Hi noirua
> 
> So, following the latest IR dive what's the current typical depositor's savings rates in UK and Eurozone? Must be getting to a point where holding money in a cash account is going to cost depositors money over time?
> 
> ...



Hi Aussiejeff, I hold about a quarter of my cash in British Pounds so I'm feeling concerned, and equally worried about the Aussie.
The main banks in the UK seem to have so many accounts that it's difficult to follow what goes on. They have ISA accounts that pay interest which is not liable to tax and these pay from 2.5% to 5.5% (Post Office accounts pay 2.6% or 3.3%) depending on how big the bank or building society is and whether it meets certain standards, terms, bonuses etc., etc., .
Other rates vary from 0.1% to 6.1%, depending on the above and whether the account has cash cards, cheque books etc., etc., 
I guess they'll all go down again shortly. 

It's all a mess and totally confusing


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## Aussiejeff (10 December 2008)

noirua said:


> Hi Aussiejeff, I hold about a quarter of my cash in British Pounds so I'm feeling concerned, and equally worried about the Aussie.
> The main banks in the UK seem to have so many accounts that it's difficult to follow what goes on. They have ISA accounts that pay interest which is not liable to tax and these pay from 2.5% to 5.5% (Post Office accounts pay 2.6% or 3.3%) depending on how big the bank or building society is and whether it meets certain standards, terms, bonuses etc., etc., .
> Other rates vary from 0.1% to 6.1%, depending on the above and whether the account has cash cards, cheque books etc., etc.,
> I guess they'll all go down again shortly.
> ...




Works for me! 

Well, Canada has just chucked the towel and "officially" announced it is in Recession, at the same time slashing IR's to 1.5% - the lowest since 1958.

Lil Ozzie Bleeder might have to be bled a bit more.....and soon!


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## Aussiejeff (10 December 2008)

On the subject of IR's, if I had say, 50 million cash and wanted to borrow a further 150 million to develop a manufacturing business, what's the best IR's for an investment loan of that size atm?

Would I get an investment loan at all?

Obviously I'm dreaming and haven't a clue, so I'm waiting for an expert (or two) to set me straight.


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## noirua (8 January 2009)

The UK has reduced interest rates to 1.5% from 2%. This is the lowest in the Bank of England's 315 year history: Founded in 1694.
Interest rates have come down from 5% last October.


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## Glen48 (9 January 2009)

Word is we will see a .75 - 1% drop next month..I agree and then not long after we will be about the same as the rest of the World.
Japan is looking a rates of less than 0%

Essentially, quantitative easing is a monetary policy tool that central banks use when they run out of room to cut interest rates. "Quantitative" refers to the money supply, and easing money supply means to increase it. So, quantitative easing basically involves printing money to buy a variety of securities with the end goal of flooding the financial markets with cash or liquidity. This increases the amount of currency in circulation, reducing the currency’s value and increasing inflation

 Think of it this way: Imagine there were just 100 of a football star's autographed jerseys in the world and each is worth USD $1,000. Suddenly, another 1,000 autographed jerseys are discovered, and (as you might expect) each is now worth a lot less. Having more jerseys in the market at lower prices hopefully spurs more activity in the market. In many ways, the goal of quantitative easing is the same. By flooding the market with liquidity, the central bank aims to promote lending and prevent a shortage in the future. Of course, quantitative easing is much more involved than the example given above. 

From GFT report.


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## Glen48 (9 January 2009)

In 1929 the depression started now in 2009 the same thing????


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## Wysiwyg (9 January 2009)

noirua said:


> The UK has reduced interest rates to 1.5% from 2%. This is the lowest in the Bank of England's 315 year history: Founded in 1694.
> Interest rates have come down from 5% last October.





And a link here too for those that want a read or listen ....

Text ... http://www.bankofengland.co.uk/publications/news/2009/001.htm


Video ... http://forex.fxdd.com/trading-news/...-rates,-how-does-affect-your-trading?-find-ou


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## dalek (9 January 2009)

CBA reduced their interest rate offer on 90 day deposit from 5.5% to 4.8% yesterday !!
I guess in anticipation of a .75% Reserve Bank move ??


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## skyQuake (9 January 2009)

Aussie rates are priced in to hit 2.6% by Jul.


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## Go Nuke (9 January 2009)

I think the reserve bank will just keep cutting until the banks pass on cuts to an "acceptable" level or where the RBA would like to see them at.

I do get a bit annoyed at all the hype surrounding IR being at all time lows etc.
I have an investment property that came out of a 3 yr fixed interest rate and has now gone to the variable rate....and guess what...my repayments are HIGHER today than what they were 3 years ago.

Alot of people are shocked to hear that actually.

The RBA will definitely cut again in Feb and I think by 50 basis points.
The news just keeps getting worse from new housing starts and manufacturing still well and truely contracting plus many more factors.

I could be wrong here but its better to be holding share in a bank stock today and making more money of the dividend yields, than it is to have your money in the bank with current interest rates

As for interest on savings accounts...wow, since when are Australians good at saving?? lol


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## Smurf1976 (9 January 2009)

One thing I don't understand is how lowering interest rates is supposed to immediately help consumers?

I have a mortgage with the minimum payment being $650 as of November 2007. Then they put it up in two steps to $693 as interest rates went up. 

Now interest rates have fallen, but the minimum payment is still $693. The lower rates are certainly helping me pay off the debt faster (I pay more than the minimum anyway) but Ã­t's done absolutely nothing to put more money in my pocket to spend right now. 

Am I unusual? Do most people's payments drop when interest rates drop? It's one of the major banks and a pretty standard loan.


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## Julia (9 January 2009)

dalek said:


> CBA reduced their interest rate offer on 90 day deposit from 5.5% to 4.8% yesterday !!
> I guess in anticipation of a .75% Reserve Bank move ??



Bet they didn't similarly reduce their lending rate!


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## mayk (10 January 2009)

Julia said:


> Bet they didn't similarly reduce their lending rate!





I have a simple question. In fractional reserve banking. Suppose I put $100 in the bank, and fractional banking is say 1:10, so the bank can lend ten times this amount. So the bank can lend up to $1000. 

Now  suppose the bank is giving me 5% on my $100, but they are charging interest on $1000 say at 5.5%. So the bank can earn up to $55, while giving me only $5. 

From my understanding it is not just the spread of .5% between the lending and borrowing, but the fraction simply multiplies their profits. 

Can someone shed some light on this. Correct me, if it does not work this way.


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## Aussiejeff (10 January 2009)

Go Nuke said:


> I could be wrong here but *its better to be holding share in a bank stock today and making more money of the dividend yields, than it is to have your money in the bank with current interest rates*




Maybe that is one of the major bank's strategies by rigging the rates in their favour (ie maintain relative high lending rates while forcing deposit rates down)? 

The way things are going, the only stocks with any sort of government-backed guarantee in the short to medium term are MAJOR BANKS. They have made enough gains in deposit bases to allow them to cut deposit rates and start to pressure people inot converting to bank shares. 

Would I be correct in thinking that since they have bolstered their deposit base sufficiently for now, they would prefer heaps more investing in their shares again, where the dividends can be nicely manipulated "just so", rather than having to pay interest back on deposit accounts?


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## kotim (10 January 2009)

Mayk, your basically correct but what is most important is to understand what a deposit is.  When you go for a home loan, you give the bank power of attorney and what the bank does is create a promissory note based on your promise to pay back the loan etc, so for eg, if you go for a 300 grand loan and get it they create a 300 grand promisory note which while on their books shows that in asset and liability column as being equal 300 grand out and 300 grand in, but waite, the promisory note they create actually is a deposit, so therefor the promisoory note they create in your name is actually a 300 grand deposit and with fractional reserve banking they can then lend out multiples of that 300 grand.  

Now that is why property/asset values are so important.  If you use 10-1 lending ratio and the 300 grand loan against the 300 grand house and the house drops to say 250 grand then they are not allowed to have 300 grand lent out against a 250 grand value so they have to bring the amount of loan out there down.  They do this accross the whole book.  Ultimately in the good old USA that is why their plunging proprty market result in the near collapse of most of their bank etc.

Ultimatley it comes down to what is a deposit.

At least that is why my study reveals.


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## wayneL (10 January 2009)

mayk said:


> I have a simple question. In fractional reserve banking. Suppose I put $100 in the bank, and fractional banking is say 1:10, so the bank can lend ten times this amount. So the bank can lend up to $1000.
> 
> Now  suppose the bank is giving me 5% on my $100, but they are charging interest on $1000 say at 5.5%. So the bank can earn up to $55, while giving me only $5.
> 
> ...




No it doesn't work that way. Wiki article => http://en.wikipedia.org/wiki/Fractional-reserve_banking


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## noirua (10 January 2009)

South Korea reduced their key interest rate from 3% to 2.5% yesterday. Rates have come down in the last three months in five steps from 5.25%.


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## mayk (10 January 2009)

wayneL said:


> No it doesn't work that way. Wiki article => http://en.wikipedia.org/wiki/Fractional-reserve_banking




Thanks for the link, I think my example will be true if there is only one operating bank and all the people deposit the money back in to the bank. 

Theoretically it is still possible, and the probability of it occurring approaches 1, as the number of banks in the system approach 1. 

A lower number of banks in a monetary setting can share larger chunks of profit (like in Australia). For example, there is a 1/4 chance of deposits coming back to the same bank (considering main big four banks).


----------



## noirua (16 January 2009)

Eurozone interest rates fell 0.5% Thursday to 2.0%.

Annual inflation in the 15 countries making up the zone, fell from 2.1% to 1.6% in December. ( this rate reduction also affects Slovakia, the recent 16th member to adopt the euro currency, in January 09).

It was confirmed that the Eurozone has been in recession since September 2008.


----------



## GumbyLearner (16 January 2009)

noirua said:


> Eurozone interest rates fell 0.5% Thursday to 2.0%.
> 
> Annual inflation in the 15 countries making up the zone, fell from 2.1% to 1.6% in December. ( this rate reduction also affects Slovakia, the recent 16th member to adopt the euro currency, in January 09).
> 
> It was confirmed that the Eurozone has been in recession since September 2008.




Until the methods of any politically backed (LEFT or RIGHT) starts really reporting figures (minus food or oil inputs, well I could be wrong but arable land and produtive wells are both in a percentage decline from realiable sources ala Jim Rogers research or the UN) So where should I invest?


----------



## sinner (19 January 2009)

Hi guys,

Does anyone have any idea what the real inflation rate for Aus currently stands at? Do we really trust the RBA data?

Seems to me that in the sectors that matter to your average Joe, inflation is still going strong.

One from today:

http://business.smh.com.au/business/inflation-slides-to-lowest-since-2005-20090119-7k8j.html

A snippet



> Don Harding from the Melbourne Institute said the inflation gauge suggested the official consumer price index (CPI) had fallen by around 0.64% over the fourth quarter.
> 
> That would bring the annual pace down sharply to around 3.3%, from 5.0% in the third quarter, which had been the highest since 2001.
> 
> ...


----------



## Aussiejeff (23 January 2009)

Now predictions of cash interest rates below 2% in Oz by mid 2009....



> *Australian Central Bank May Cut Key Rate Below 2%, Fraser Says*
> 
> By Gemma Daley
> 
> Jan. 23 (Bloomberg) -- Australia’s central bank may more than halve its benchmark interest rate as the nation enters a long and deep recession, former Governor Bernie Fraser said.



http://www.bloomberg.com/apps/news?pid=20601087&sid=av_BWw.cwneI&refer=home

0% by Xmas?


----------



## investorpaul (23 January 2009)

I think interest rates will definately fall to 3% or less given the increasingly bad news being released/published almost daily at the moment.

My concern is that house prices (in most parts of aust) have not dropped by hughely significant levels yet. I fear that these low interest rates will continue to prop up house prices at these unsustainable levels and at some point the penny must drop. 

The US and Uk's house prices as a percentage of income are now much lower than Australias and it is unrealistic to believe we can defy that forever.


----------



## SenTineL (25 January 2009)

Article in The west australian quotes someone saying the rate will fall to below 2% after the February meeting ?!?!

Paper is in bin now so I don't have details, just came across this thread and though I'd mention it


----------



## skyQuake (25 January 2009)

From the ASX website:
http://www.asx.com.au/sfe/targetratetracker.htm

3rd 'click here' link.


----------



## SenTineL (25 January 2009)

nice link thanks for that, i wish i'd kept the paper


----------



## Calliope (29 January 2009)

The inflation rate is down. Well not really. Take petrol out of the equation and the quarterly CPI actually went up. So we are paying higher prices for most things and the  interest rates look like coming down as a result.

A double whammy for retirees, who don't use much petrol anyway. Higher living expenses and lower interest for money in the bank.


----------



## sinner (29 January 2009)

Calliope said:


> The inflation rate is down. Well not really. Take petrol out of the equation and the quarterly CPI actually went up. So we are paying higher prices for most things and the  interest rates look like coming down as a result.
> 
> A double whammy for retirees, who don't use much petrol anyway. Higher living expenses and lower interest for money in the bank.




Here are the latest figures:

http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0/

6401.0 - Consumer Price Index, Australia, Dec 2008 Quality Declaration
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 28/01/2009


----------



## SenTineL (21 February 2009)

So what's the verdict on the next move?

Futures markets have always been accurate within a week or two of the RB announcement. It's currently tracking at 100% for a 0.5% cut to 2.75%.

Yet there's speculation from the RB's minutes that they will hold off on another cut in March


----------



## SenTineL (23 February 2009)

revised figures today only at 91% for a 0.5% cut, might keep going down further this week?


----------



## sinner (23 February 2009)

If they hold interest rates, the market will punish AUD.

Just look at ZAR and the Mexican Peso when they didn't cut interest rates as much as futures expected.


----------



## Aussiejeff (24 February 2009)

sinner said:


> If they hold interest rates, the market will punish AUD.
> 
> Just look at ZAR and the Mexican Peso when they didn't cut interest rates as much as futures expected.




Agreed. They are now between the rock and a very hard place. No more deep sleep nights for Mr Stevens.


----------



## hotbmw (2 March 2009)

what do u think guys? a cut by* 0.5%* with the banks only passing on *0.40%???*

thoughts?

very interesting article below:

http://www.businessspectator.com.au...-recession-as-firms-slash--PR3YY?OpenDocument


----------



## MRC & Co (2 March 2009)

SenTineL said:


> revised figures today only at 91% for a 0.5% cut, might keep going down further this week?




No rate cut and the market may hit new lows tomorrow, if it doesn't already beforehand.


----------



## Julia (2 March 2009)

News today that inflation is up, largely due to rising petrol prices.
This may influence the RBA to hold off on a cut tomorrow.


----------



## hotbmw (2 March 2009)

*Recession looms as companies slash inventories; boosts case for rate cut*

Australian firms ran down inventories at the fastest pace in 22 years last quarter, dramatically increasing the risk of an outright contraction in the economy and adding to the case for more rate cuts.

Monday's figures from the government also showed company profits sank 6.5 per cent in the fourth quarter, while a private survey showing Australian manufacturing activity hit record lows in February as demand slumped.

"The figures were awful," said Rob Henderson, chief economist markets at nabCapital.

"We calculate that inventories took around 1.3 percentage points from growth. Without a huge rise from net exports, gross domestic product (GDP) will be negative."

Inventories fell 1.9 per cent in the fourth quarter, confounding expectations of a 0.3 per cent rise and the biggest drop since 1986.

This represented a subtraction from GDP of $3.6 billion ($US2.3 billion), or about 1.3 percentage points, when analysts had looked for a drag of just 0.2 percentage points. That was a hard blow since GDP had been expected to have risen by 0.1 per cent in the quarter, from the previous quarter. The data are due out on Wednesday, just a day after the Reserve Bank of Australia (RBA) holds its monthly policy meeting.

"It's ugly on the face of it," said John Peters, a senior economist at Commonwealth Bank. "It means all the risks are to the downside and GDP could be substantially weaker now."

The risk of a sizable fall in GDP could prompt the central bank to cut its 3.25 per cent cash rate at its meeting on Tuesday, even though it has been hinting it would like to pause after lowering its cash rate by 400 basis points since September.

Why wait?

"We had thought they might skip March and move again in April," Mr Peters said.

"But with numbers like these, and dismal news abroad, you have to wonder why they would wait."


----------



## gfresh (3 March 2009)

Unchanged.. stick that up ya clacker media monkeys 



> 3 March 2009
> At its meeting today, the Reserve Bank Board decided to leave the cash rate unchanged at 3.25 per cent.




p.s. not directed at anybody here, just the usual media b.s. over the last couple of days that it was a "certainty" of at least a 25bps cut.


----------



## waz (3 March 2009)

I for one, was surprised.

I wonder if the case would have been different if the Fed stimulus package was a few $bil less.

I havnt read the full statement yet, will be interesting to see what their expectations for inflation are. 

Id be pretty annoyed if they used the January house sales figures to justify this.
The volume of property being sold is often always incorrectly assumed to mean higher prices. In a bull market this is normally correct 99% of the time. But not in a Bear market.

Take MQG over the last few days for eg, higher volumes, lower price.


----------



## Aussiejeff (3 March 2009)

gfresh said:


> Unchanged.. stick that up ya clacker media monkeys
> 
> p.s. not directed at anybody here, just the usual media b.s. over the last couple of days that it was a "certainty" of at least a 25bps cut.




It certainly has the market confused... Up? Down? Sideways?

DOH!!


----------



## Aussiejeff (3 March 2009)

> *"The Reserve Bank is giving a tick of performance to Australia,"* CommSec chief economist Craig James told Sky Business News.



http://www.news.com.au/business/money/story/0,28323,25132946-5016110,00.html

Ever the optimist, ain't he?


----------



## nizar (3 March 2009)

Aussiejeff said:


> http://www.news.com.au/business/money/story/0,28323,25132946-5016110,00.html
> 
> Ever the optimist, ain't he?




Shane Oliver from AMP makes this guy look like an pessimist lol


----------



## Nyden (3 March 2009)

About blooming time. I've gotten tired of losing bank interest each month! Perhaps our dollar may finally stabilise now as well, as our yield is now more certain.


----------



## MRC & Co (3 March 2009)

No cut and market rallies, WTF?  Didn't see that one coming, but didn't overly expect anything different after the recent Japan GDP and machinery order figures and US non-farms and their markets reactions.......

The news reports say this is due to the potential that our economy is strong in some way?    What an after the fact BS reason to explain market movements as always.  

RBA purely wants some ammo in the bank for a later date which will be needed.


----------



## Aussiejeff (4 March 2009)

MRC & Co said:


> *No cut and market rallies, WTF?*  Didn't see that one coming, but didn't overly expect anything different after the recent Japan GDP and machinery order figures and US non-farms and their markets reactions.......
> 
> The news reports say this is due to the potential that our economy is strong in some way?    What an after the fact BS reason to explain market movements as always.
> 
> RBA purely wants some ammo in the bank for a later date which will be needed.




After the carnage on Wall St a few hours before, mebbe some of Buffet's nauseated henchmen decided to buy up Ozzie stocks bigtime for some light relief? Or mebbe the Chinese? The Japanese? The Brits? Cheap Ozzie chips?

Certainly, the massive turn-around in the ASX shortly after the morning's brief but equally massive post-opening plummet of around 75 points in the first 15 mins on the ASX would have taken a lot of big bucks in a very short space of time to initiate - so I suspect more than just wee Oz investors were involved. So, what outstanding Oz news caused the turnaround? I saw none at THAT time of the day so inspiring as to justify a huge rally?

Meh.

It's all smoke and mirrors


----------



## noirua (5 March 2009)

The UK Bank of England have reduced interest rates from 1% to 0.5%. The lowest rate ever.  Interest rates have now been reduced six times since October 2008.
This followed a further slump in property prices of 2.3% in February to an annual rate of 17.7%. Sales of new cars in February fell 22% compared with February 2008.
The B of E are now boosting money supply.


----------



## noirua (6 March 2009)

noirua said:


> The UK Bank of England have reduced interest rates from 1% to 0.5%. The lowest rate ever.  Interest rates have now been reduced six times since October 2008.
> This followed a further slump in property prices of 2.3% in February to an annual rate of 17.7%. Sales of new cars in February fell 22% compared with February 2008.
> The B of E are now boosting money supply.



The Eurozone also decreased their interest rates from 2% to 1.5%.


----------



## MR. (30 March 2009)

http://www.news.com.au/heraldsun/story/0,21985,25259667-664,00.html
30/3/08


> From this morning, National Australia Bank will slash the rate it pays on three month fixed term deposits from 4.2 per cent to 2.1 per cent.
> 
> The NAB move comes after more aggressive repricing by Commonwealth Bank in recent weeks in which it slashed its three month fixed term deposit rate from 4.2 per cent to 1.5 per cent.
> 
> According to market research firm, Infochoice, CBA has also crunched its one year fixed rate offer to 1.5 per cent from 3.5 per cent.




Suncorp (QLD) continues (including today) to offer 3 years at 6% and 3 months at 4.4% which they are really pushing still today. 3 years at the CBA has been sitting in the mid 4's, not sure if it's moved today. 

With all deposits being Gov' backed where would you put your money? 2.1 NAB, 1.5 CBA or 4.4 SUN.  Suncorp must still have a lack of local funds.  Their bottom line still can't be good offering those rates. 

All banks are playing on a level field with the gov' backed deposits. However some banks might be driving themselves into the ground in the process to acquire local funding. Growth of some were going gang busters before on cheaper foreign funding?  

Wonder how long the gov will con't to back these deposits?


----------



## kincella (30 March 2009)

think suncorp has the most exposure to commercial lending..or was it the riskiest exposure to commercial...another is offering 7%  one of those pop up ads somewhere today...bankwest 5% if no transactions or 3.5% if there are
:sheep::sheep:


----------



## Julia (30 March 2009)

Bank of Queensland are offering 4.5% for five months.  Presently waiting to hear if Wide Bay Australia will match this.


----------



## MaverickTrader (30 March 2009)

4.5% is a good rate. Wish i could jump on that


----------



## gristle (14 April 2009)

Hi guys, just came across this thread. Worked in interest rates years ago so tend to keep track of them (devoted shareholder of MAK now). On the Suncorp rate I heard they were offering amazing rates for 3 years. The guarantee ends in 2 and a half years though so the last 6 months aren't covered. Someone I use for my SMSF is Curve Securities (www.curvesecurities.com.au) who can get rates from a whole lot of banks and can track down the best rate- not Suncorp though. I get the feeling they have a $250k minimum but I'm not sure.

For what it's worth I think we still have a couple of easings coming down the track. 

G


----------



## Julia (19 April 2009)

Has anyone had any experience of using Citibank?   They are offering 4.6% on term deposit which is better than most.


----------



## MS+Tradesim (19 April 2009)

Julia said:


> Has anyone had any experience of using Citibank?   They are offering 4.6% on term deposit which is better than most.




Just check which version of Citibank. One of them is covered by the govt. guarantee, and the other (Citibank N.A.) is not, IIRC.


----------



## tech/a (19 April 2009)

How'd you like to lock in these rates.


----------



## Julia (19 April 2009)

MS+Tradesim said:


> Just check which version of Citibank. One of them is covered by the govt. guarantee, and the other (Citibank N.A.) is not, IIRC.



Thanks for pointing that out, MS+T.   The advt says government guaranteed.

It's for 24 months so if I use it, it will be in multiples of just $20K to minimise loss of interest for early withdrawal if the market roars away.

I see Suncorp has increased their 36 month t.d. to 6.2%.
Not sure whether this reflects their suggestion of where interest rates will go, or a need to haul in more deposits.


----------



## MR. (19 April 2009)

Julia said:


> I see Suncorp has increased their 36 month t.d. to 6.2%.
> Not sure whether this reflects their suggestion of where interest rates will go, or a need to haul in more deposits.




Thinking down the same lines Julia.  I am amazed at this rate as well.  Went into Suncorp Friday and questioned how the bank was able to make money at providing depositors 6.2%.  The reply was "just looking after their customers". (that's a new one)  So I went on and pointed out how Suncorp used to have alot of their deposits from overseas depositors and how I thought it appear Suncorp now was very short of funds. Anyway the teller couldn't tell me anymore. 

I have been wondering over the past days if they expect inflation sooner rather than later?  

Interesting how that 3 year term with the Suncorp over a period of 0.75% drop by the reserve increased Suncorps term deposits by more than 0.75%. Was around 5% then jumped to 6% when the reserve dropped 0.5% then to 6.2% while the reserve dropped a further 0.25%

The Commonwealth over the same period and terms have gone from 5.5% to 5%.


----------



## Largesse (19 April 2009)

is suncorp backed by the govt. AAA guarantee?

as in, are they able to borrow our govt. soverign rating to borrow in the O/S markets?

if not, this could be the reason they are offering such attractive deposit rates, as cost of borrowing is higher for them compared to big 4 banks


----------



## robots (19 April 2009)

hello,

noticed this one reading the paper today:

http://www.bankwest.com.au/Personal/Savings_and_Investment/Regular_Saver/index.aspx

thats a pretty good rate for people who are saving, 6 big ones

thankyou
robots


----------



## Julia (19 April 2009)

MR. said:


> Thinking down the same lines Julia.  I am amazed at this rate as well.  Went into Suncorp Friday and questioned how the bank was able to make money at providing depositors 6.2%.  The reply was "just looking after their customers". (that's a new one)  So I went on and pointed out how Suncorp used to have alot of their deposits from overseas depositors and how I thought it appear Suncorp now was very short of funds. Anyway the teller couldn't tell me anymore.



"Just looking after their customers", huh!   Yeah, right.





> I have been wondering over the past days if they expect inflation sooner rather than later?
> 
> Interesting how that 3 year term with the Suncorp over a period of 0.75% drop by the reserve increased Suncorps term deposits by more than 0.75%. Was around 5% then jumped to 6% when the reserve dropped 0.5% then to 6.2% while the reserve dropped a further 0.25%
> 
> The Commonwealth over the same period and terms have gone from 5.5% to 5%.



Yes, I moved one TD from CBA to BOQ because a TD of 7.5% would have rolled over to 3.5%!





Largesse said:


> is suncorp backed by the govt. AAA guarantee?
> 
> as in, are they able to borrow our govt. soverign rating to borrow in the O/S markets?
> 
> if not, this could be the reason they are offering such attractive deposit rates, as cost of borrowing is higher for them compared to big 4 banks



Largesse, Suncorp deposits are backed by the government guarantee, but said guarantee comes at two levels - one for the big four, and a less favourable rate for the second tier banks.

It's pretty likely that this is the reason for the smaller banks offering more on retail deposits, further born out by Robots post below re Bank West.





robots said:


> hello,
> 
> noticed this one reading the paper today:
> 
> ...



Sure, but presumably it's a variable rate so they can suck in some new customers and then drop the rate I suppose.


----------



## Julia (20 April 2009)

Further to Robots' link re Bank West offering 6%, I notice in today's paper they are offering a rate of 4.99% on "The Bankwest Business Fighting Fund" which appears to be a business loan.

It's obviously a variable rate but the advt offers it for 12 months.

????


----------



## Aussiejeff (20 April 2009)

Well, well.

*CBA to raise interest rates on fixed mortgage loans by 20-45 basis points on Tuesday.*

http://www.thebull.com.au/articles_detail.php?id=2164

LOL

Those lovely low rates didn't last too long eh? Watch the rest follow suit......


----------



## Julia (20 April 2009)

Any bets as to whether they'll likewise raise deposit rates?
(Yes, I know I'd have to be joking.)

Amongst a conversation with Suncorp today their representative said the SUN 6.2% td rate for 3 years "represents where they feel interest rates will likely be at that time".

I think it's much more likely that they need to haul in more funds.


----------



## tech/a (20 April 2009)

Aussiejeff said:


> Well, well.
> 
> *CBA to raise interest rates on fixed mortgage loans by 20-45 basis points on Tuesday.*
> 
> ...





Getting too much business and expecting rates to stay low.


----------



## MR. (20 April 2009)

Questioned Suncorp again today at length regarding their 6.2% tds.

Suncorp is about to launch a new advertising campaign. The object is to make known to all that Suncorp is a bank and not a building Society. Appears some potential deposit customers are by passing Suncorp and are just looking at rates of the big 4's.
Suncorp is Australia's 5th largest bank.  there ya go....... been dun out of some of the loot...... Lack of funds. 

CBA is raising borrowing rates! oooh..... Lack of funds again? Sounds like it......  How do you attract depositors away from other banks?  By offering higher interest rates to depositors.........  but if we don't raise loan rates we ain't makin profits!!!! Wonder where this could go?   then .. Rud bank to the rescue........


----------



## Aussiejeff (21 April 2009)

There will be a rapid response to the banks PWNING Ozzies in the rate war, no doubt.

That response will likely be in the form of a week full of *soothing*, *placating*, *over-optimistic* speeches including "statements of excellent Oz economic performance " by those 2 Amigos Swann-ee & Puff-Daddy Stevens.

Believe, brothers & sisters... believe....


----------



## Julia (21 April 2009)

MR. said:


> Questioned Suncorp again today at length regarding their 6.2% tds.
> 
> Suncorp is about to launch a new advertising campaign. The object is to make known to all that Suncorp is a bank and not a building Society. Appears some potential deposit customers are by passing Suncorp and are just looking at rates of the big 4's.
> Suncorp is Australia's 5th largest bank.  there ya go....... been dun out of some of the loot...... Lack of funds.



It might have something to do with their poor telephone staff.  First you get one of those ghastly voice recognition things which never actually recognises anything you say, so repeats the process multiple times.   When finally spitting "Operator:" and you get a person, she directs your enquiry to the wrong area.  This person on being asked if a SMSF is considered by SUN as a 'business' or 'personal' enquiry insists that said SMSF is a vehicle owned by SUN and what is my account number.   Finally she understands  request and transfers the call.  I ask if e-options flexirate is available to SMSF's and am assured yes.  Begin reading the PDS and discover it is not.

Phone back, go through the voice thing again.  Eventually get operator.
Explain requirement.  Puts me through to 'Wealth Management' purely on the basis that my enquiry is about a SMSF.  Ask if td available online.  She doesn't know.  Goes away for a while.  No.   Is SMSF classified as business or personal.  Doesn't know.  Goes away again to ask.   Five minutes later, informs me it's business and directs me to IBus Flexirate which will be the perfect solution she says.   Find this on the website and interest rate is less than available at BOQ.

I'm reminded of why I don't want anything to do with this company.





> CBA is raising borrowing rates! oooh..... Lack of funds again? Sounds like it......  How do you attract depositors away from other banks?  By offering higher interest rates to depositors.........  but if we don't raise loan rates we ain't makin profits!!!! Wonder where this could go?   then .. Rud bank to the rescue........



Ruddbank to the rescue indeed, at least for NAB.
http://business.smh.com.au/business...ank-aid-20090420-acpd.html?sssdmh=dm16.372454


----------



## Trevor_S (21 April 2009)

I have a largish sum I am trying to find a home for within my business.  At the moment it's parked in ING @ 4.25% (cash management not term deposit) that will revert to 3.5% in July (and then the cash will move back to Rabo Bank @ 4%)  I would love to jump on something like the Bankwest 6% rate, even with the conditions attached ) but they all seem to be "personal" only ?  not sure why, surely cash is cash, regardless of it's source ?  

I have no intention of tying it down to anything longer then a 3 month TD so if anyone knows where business might be able to access deposit rates similar to the teaser rates offered to private depositors, let us know 

I did try and get $100,000 in AMP notes but it was obviously well over subscribed as I only got $30K or so off them. (no gov't guarantee of course)


----------



## Julia (21 April 2009)

Trevor, I've found BOQ very prepared to negotiate.  Might be worth talking to your local manager.


----------



## MACCA350 (21 April 2009)

Anyone have any luck negotiating savings interest rates with the bank?
I tried but they would only roll over the account to get their advertised introductory rates......what ever happened to bargaining

cheers


----------



## BradK (21 April 2009)

Looks like the pendulum is swinging back in the favour of savers again... must be some rain dance you guys are doing, because I can feel double digit interest rates in my bones in the next two years. 

Brad


----------



## robots (21 April 2009)

hello,

spoke to BankWest about the 6% IR for the regular saver,

it is a floating rate, goes up & down, but did not go down just recently

this style of account has been around for a while now ie. bonus interest for saving and no withdrawal

great one for savers, although the $500 limit a bit low, only roughly $120/wk, which is nothing these days

thankyou
robots


----------



## helicart (21 April 2009)

I've been pondering whether to fix or not for a couple of weeks. 

Here's a xls I've been using to stab in the dark. 

one wsheet calculates the 5year breakeven variable rate that corresponds to fixing now, in nominal dollars

2nd wsheet calculates same in net present value dollars.

3rd is a whatif where you can change the variable to your heart's content. 
I've already done a comparative scenario of Japan like deflation, middle of the road, and inflation.


----------



## Nyden (21 April 2009)

robots said:


> hello,
> 
> spoke to BankWest about the 6% IR for the regular saver,
> 
> ...




Yes, however; this limit is not faced with the Bankwest eSaver account; offering 5%, so long as you make no monthly withdrawels. This is currently the account I'm using.


----------



## robots (21 April 2009)

hello,

thanks Nyden, yes will be heading that way 

i have a year of tax to save so anything a bonus

thankyou
robots


----------



## MrBurns (22 April 2009)

The news says inflation is down so that paves the way for more interest rate cuts...................to benefit who ?

The banks are raising theirs despite the downward trend.


----------



## glads262 (22 April 2009)

MrBurns said:


> The news says inflation is down so that paves the way for more interest rate cuts...................to benefit who ?
> 
> The banks are raising theirs despite the downward trend.




hey Burnsie,
In fact, core & trimmed etc inflation is still around 4%. Far too high. Doubtful that RBA will drop rates much further. 

Fixed rates are different to variable. The banks set their fixed rates on money market rates out for 1-5 years. And, these rates are higher than todays rates. 

If you have loans, I would seriously look at fixing now. If inflation stays high, and the economy begins to recover, rates could be back at 8% before you know it!!

PS - with all the bank bashing around - think about this one...

In the US, Reserve bank rates have dropped about 5%. their mortgage rate is down about 1%. 
So before you complain... just think that it could always be worse.

the Aus banks would need to raise rates/lower term deposit rates by about 1% to earn the same margin they did 5 years ago. Banks margins are at record lows of around 2%. In the US they are around 3/3.5% at the moment. 
The reason Aus banks are still making more profit?? much higher volumes, plus no longer discounting application fees/monthly fees.


----------



## MrBurns (22 April 2009)

glads262 said:


> hey Burnsie,
> In fact, core & trimmed etc inflation is still around 4%. Far too high. Doubtful that RBA will drop rates much further.
> 
> Fixed rates are different to variable. The banks set their fixed rates on money market rates out for 1-5 years. And, these rates are higher than todays rates.
> ...




I dont have debt but am teetering on property as money in the bank is a waste of time, at the moment however, as a "wait and see" strategy, it's not so bad, just dont want to have to wait forever.


----------



## darnsmall (23 April 2009)

Is anyone else other than the government dirty about the banks not passing on the RBA interest rate cuts to their variable home loan customers? 
I'd be pretty happy that rates are well under 10%, thats a win isn't it?

I'm wondering why the banks haven't actually raised the rates with the increase in demand for home loans, I would have though this would have pushed rates back up and I would have thought the banks would be having more probs trying to borrow from overseas pushing rates up more...are they getting all the money from RudBank?

Why doesn't RudBank get into loaning to small businesses the other banks won't?


----------



## Aussiejeff (23 April 2009)

darnsmall said:


> Is anyone else other than the government dirty about the banks not passing on the RBA interest rate cuts to their variable home loan customers?
> I'd be pretty happy that rates are well under 10%, thats a win isn't it?
> 
> I'm wondering why the banks haven't actually raised the rates with the increase in demand for home loans, I would have though this would have pushed rates back up and I would have thought the banks would be having more probs trying to borrow from overseas pushing rates up more...are they getting all the money from RudBank?
> ...




Yeah. On ABC last night there was a fair bit on how the Big 4 are giving small businesses the cold shoulder. Investment loans from the Big 4 for the 100's of 1,000's of small businesses are as rare as hens teeth ATM.

SupaKRudd should set a deadline on removing the bank deposit guarantees for end of June if the ba$tid$ won't lend to small business.

Then lend directly to small businesses from KRuddBank from 1 July, bypassing the 4 Ba$tid Bwank$. *GASP*

Imagine what the Big 4 bullyboys would do then, with a 5th Pillar Bwank to compete with!!

*$HLOCK - HORRORRR!!*



Of course, I'm only dreaming....


----------



## glads262 (23 April 2009)

darnsmall said:


> Is anyone else other than the government dirty about the banks not passing on the RBA interest rate cuts to their variable home loan customers?
> I'd be pretty happy that rates are well under 10%, thats a win isn't it?
> 
> I'm wondering why the banks haven't actually raised the rates with the increase in demand for home loans, I would have though this would have pushed rates back up and I would have thought the banks would be having more probs trying to borrow from overseas pushing rates up more...are they getting all the money from RudBank?
> ...




The banks don't increase rates due to increased demand. 
They have been more selective in approving borrowing at the moment - you cannot get a loan with a greater than 95% LVR at the moment - and only if you have a proven savings history.

Ruddbank to small business?? This is Chinese style communist banking. If the banks are not willing to take the risk lending to some of these small businesses, then why should the government?? This just sets up a book of government loans which have a much higher probability of going bad. 

Its the same with commercial property. If a development is too high risk, then it should not be funded.


----------



## MR. (25 April 2009)

BradK said:


> I can feel double digit interest rates in my bones in the next two years.




Appears to be swinging that way. 



MrBurns said:


> The news says inflation is down so that paves the way for more interest rate cuts...................to benefit who ?
> 
> The banks are raising theirs despite the downward trend.






MrBurns said:


> I dont have debt but am teetering on property as money in the bank is a waste of time, at the moment however, as a "wait and see" strategy, it's not so bad, just dont want to have to wait forever.




It's hit the fan in October and everything changed.

The CPI in OCT NOV and DEC 08 was -0.3%.
The following 1/4 JAN, FEB and MARCH 09 WAS +0.1%

So for the past 6 months there has been negative inflation (-0.2%)
and interest rates on deposits are now 3%.   
Still makin money there.   But not as much as some. Ol well........


----------



## jono1887 (12 June 2009)

Looks like rates are back on their way up, even if the RBA isnt planning in increasing the overnight cash rate.

http://www.brokernews.com.au/contents/news/cba-under-fire-as-it-pushes-up-rates/35574


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## Soft Dough (12 June 2009)

Aussiejeff said:


> Yeah. On ABC last night there was a fair bit on how the Big 4 are giving small businesses the cold shoulder. Investment loans from the Big 4 for the 100's of 1,000's of small businesses are as rare as hens teeth ATM.




Well it was Rudd and Swann and their stupidity which has lead to businesses finding it hard to borrow, on a few fronts.

1. Talking down interest rates on homeloans makes banks recoup their margin from businesses.   <- massive mistake for growth, but sure as heck wins votes.

2. Implementing policies to keep gearing high in the bubble of the housing market, removing funding from businesses and putting it into unproductive assets.  <- massive mistake for growth, but sure as heck wins votes.

3. Stuffing up Industrial relation laws, making businesses less competitive / profitable.   <- massive mistake for growth, but sure as heck wins votes.

4. Giving money to people to buy Plasma TVs and to gear into property instead of directing it to business initiatives to keep the people employed, and provide revenue for the country in the future.  <- massive mistake for growth, but sure as heck wins votes.


I am getting the feeling that the management of this government is to win votes rather than to improve the country.

But then again why do I care..... I am against majority of people who own their homes, want a plasma and think that work choices was a bad thing.

Typical in their short-term, self focused viewpoints.  Hypocrits, whingers and economically uneducated, the pollies and the voters.


----------



## Smurf1976 (12 June 2009)

Soft Dough said:


> But then again why do I care..... I am against majority of people who own their homes, want a plasma and think that work choices was a bad thing.



Those who own their own homes wouldn't be too worried about interest rates unless they've got a loan for something else. It's those who have a mortgage that will be more concerned about it. 

Always makes me laugh when I hear something about "rising interest rates affecting home owners". Sadly, we've become a society where many think that having a mortgage means they "own" the house. Nope - the bank owns some, you own some and you're hoping to buy it via a large number of monthly / fortnightly / weekly payments. But you don't own it now. Try missing a few payments and this reality will hit rather hard.

For the record, the bank owns my house. In other words, I've got a mortgage - one that I'm paying off as fast as I can.


----------



## Julia (12 June 2009)

Another typically populist gesture today from Rudd and Swan, rushing to the airwaves when the CBA raised rates, protesting their outrage at the move.

Presumably they figure it will persuade the electorate that the kind government is all on their side against the nasty big banks.

But oh how they do love to trumpet the profitability of our banks when swanning about on the world stage.

What hypocrisy!


----------



## Trevor_S (12 June 2009)

Soft Dough said:


> I am getting the feeling that the management of this government is to win votes rather than to improve the country.




How is that different to any other Government ?  The only time anything decent happens is if occasionally, serendipitously both those two happen together ie win votes and country improves.

I don't blame the Government, it's like blaming a cat for wandering into your yard, that's what cats do, it's the idiot owner that is the true villain... the blame lies squarely with the nut jobs that put them in power 



Soft Dough said:


> But then again why do I care..... I am against majority of people who own their homes, want a plasma and think that work choices was a bad thing.




Well I care  I own my own home and an IP (as in I have no mortgages) and I was only against Workchoices because it was overly complicated (1000 pages long) not for any stupid reasons espoused by Union or Labour party apparatchik and don't have a TV at all   Employees had it good under Workchoices. I was audited 3 times ! including one field audit (passed all 3) under workchoices.  This NEVER happened in the previous 14 years as a business owner/employer.  Between this federal labour Government and the doofus state labour Government and their changes to employment laws (and the plethora of other red tape), I have had enough and started to sell my various businesses.  Hopefully an over eager Gen Y'er or a recently made redundant Gen X'er will be keen to buy the rest (in bits)


----------



## noirua (19 May 2010)

The UK is in an increasingly bad state and only looking marginally acceptable due to the rest of Europe doing very badly.
UK annual inflation has hit 5.3% with the Bank of England's minimum lending rate set at 0.5%.

House prices are starting to accellerate upwards.

There is a nasty smell of burnt brake linings as the Bank of England tries to push the economy forward whilst standing on the interest rate brake.

The £ is falling steadily against the US Dollar. Down from US$2.05 to US$1.43 to the £1. This will increase the costs of imports, though exports are at last improving.

The Government consists of Conservatives wanting to get on with cutting the deficit whilst it's known the LibDems real agenda is quite different; though they are forced to tolerate the position for 5 years.

Strong rumours that the V.A.T. rate will go up to 20% from 17.5% shortly, thus accellerating inflation. Taxes are expected to rise sharply next year.

Europe as a whole are basically in a pickle. UK deficit is about £1.5 trillion with total debt nearer £3 trillion. Maybe high inflation is a plan to cut the value of the deficit.


----------



## trainspotter (19 May 2010)

Sums it up really. Too fast, too quick and they have overcooked it. 

THE Australian dollar closed lower after the Reserve Bank of Australia (RBA) indicated it might keep its benchmark interest rate on hold for the forseeable future. 

At 1700 AEST, the Australian dollar was trading at $US0.8766/68, down slightly from its close of $US0.8773/76 on Monday.

Since 0700 AEST on Monday, the local unit traded between $US0.8780 and $US0.8703.

During the domestic session, the RBA hinted it might not lift the cash rate again for some time.

In the minutes of its May 4 board meeting, the central bank said its decision to raise the cash rate 25 basis points to 4.5 per cent "would leave monetary policy well placed for the present''.

Commonwealth Bank associate economist Sara Hoenig said currency traders interpreted the comment to mean the RBA had reached a pause in its rate hike cycle.


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## drsmith (19 May 2010)

trainspotter said:


> At 1700 AEST, the Australian dollar was trading at $US0.8766/68, down slightly from its close of $US0.8773/76 on Monday.



It's now close to $US0.84.


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## Wysiwyg (7 February 2012)

Rates kept at 4.25%. Forecast was correct for the last 12 months (4.00% this month) yet different this time. Lost $76 so kind of grinning this time that I got tagged for such a small amount.


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## joea (7 February 2012)

Hi.
The interest rate remains the same.
In 12 minutes the AU$ moved from 107.06 to 107.92.
I am wondering if a "rates merven" can explain why the government is allowing the high Australian dollar wound our export side of the economy.?
I realize the high australian dollar means a safe haven for investment in this country.
(or think I do)
What is the benefit of the high dollar to politics?

Its just that I always thought it would be more beneficial down around 98-99 cents.
joea


----------



## pixel (7 February 2012)

joea said:


> Hi.
> The interest rate remains the same.
> In 12 minutes the AU$ moved from 107.06 to 107.92.
> I am wondering if a "rates merven" can explain why the government is allowing the high Australian dollar wound our export side of the economy.?
> ...



 I'm not a "rates merven" (or did you mean Merlin? I'm not he either  ).
But I'll try and add my  in reply:

A higher AUD makes imports cheaper, thus helping our retailers. Or so it seems.
Given that our Gov'mint seems to hold the opinion that Miners have it far too easy and must be punished with more taxes, concern for exporters doesn't seem to enter the field. But every cent that the AUD gains on the USD adds abut 1% to Harvey Norman's profit margin. And Dick Smith's. And JB Hifi's, David Jones', ... you get the drift.

It makes it also somewhat more expensive for "Overseas Interests" to buy Australian farms. businesses, and other assets.


----------



## Calliope (7 February 2012)

pixel said:


> I'm not a "rates merven" (or did you mean Merlin? I'm not he either  ).




I think joea may be referring to "Mervyn" King, Governor of the Bank of England. Otherwise I am intrigued.



> The Bank said that it would leave its official rate at its historic low of 0.5 per cent for the 32nd month in a row. Traders are now betting that the rate will not rise until 2013.




http://www.theaustralian.com.au/new...f-looming-crisis/story-e6frg6so-1226160958874


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## sptrawler (7 February 2012)

I think the RBA is just taking the opportunity, to squeeze the gonads and drop the ones who are too geared.
Just a great situation for the RBA, plenty of money around, no one is spending it.
Sorts out our overpriced retail sector, sorts out banks throwing money around like it is confetti, sorts out real estate ponzi schemes.
Ayone can make money selling crap to people who are just borrowing more and more.
It is a long overdue reality check, we were just lucky the U.S and Europe had a crash we could watch. We were only one step behind them.
I think the RBA is doing a great job, with no help from the goon show.
Interest rates will go up before they go down IMO.


----------



## Smurf1976 (7 February 2012)

joea said:


> What is the benefit of the high dollar to politics?



High dollar = some people lose their jobs but far more gain from cheap overseas holidays and cheaper petrol, the latter being a highly politically sensitive issue.

Long term, I can't see it doing the country any good whatsoever. But cheap petrol buys votes, people generally seem to think of a high dollar being a good thing, and it also buys cheap overseas holidays. All of that is good news if you're trying to get re-elected.

I saw a statistic about the number of Australians holidaying overseas recently. I don't recall the exact figure, but somewhere not far short of a million Aussies went to the USA last year. 1 million, just to the USA. There's a lot of votes to be lost if the AUD falls.


----------



## Eager (7 February 2012)

Smurf1976 said:


> I saw a statistic about the number of Australians holidaying overseas recently. I don't recall the exact figure, but somewhere not far short of a million Aussies went to the USA last year. 1 million, just to the USA. There's a lot of votes to be lost if the AUD falls.



Maybe they got sent there for punishment. 

I'm a little intrigued by the whole issue of the supposed benefit to the economy by cutting interest rates to mortgagees. The theory is that more money will be put into people's pockets and that they will spend it, helping the retail sector and some local manufacturers to the domestic market. The last two interest cuts were largely ineffective in that regard, and what is often ignored is the fact that it is only a minority of people in this country that have a home loan. When the interest rate is cut, the majority of people do not benefit, it seems.

How could it be done better?


----------



## sptrawler (7 February 2012)

If they drop interest rates and get people to spend money to support the shops, which are charging stupid prices to support their stupid rents and stupid car leases and stupid mortages. 
How does that change anything, it just perpetuates the underlying problem that has grown over the last 30 years.
Also that is only one section of the economy, I think if the opportunity presents they will try and adjust other areas


----------



## joea (7 February 2012)

Sorry people the heat is getting to me. spelt it wrong.

"Maven" is a trusted expert in his field who seek to pass knowledge on to others.

Thanks for the answers! I am aware by reducing them too quickly it does not solve the complete problem.
However a number of economist statistics are use to gauge a move in interest rates.
Inflation, gross domestic product, the level of the Australian dollar, international interest rates(particular US), unemployment, housing starts, car registrations, retail sales, wages, fiscal policy and taxes and competition policy.

So with a two speed economy, where one is starving and the other lighting their cigars with $10 dollar notes, I was wondering when the RBA was going to come up with an explanation that I could believe.

The government sets the monetary policy, while the RBA enacts the mechanical aspects of the policy to make the change to rates.

HOWEVER if some of the indicators are not completely correct(or twisted) we have a problem.
i.e. equating part time jobs with full time jobs.
cash for clunkers to get more new cars on the road etc.(people go into more debt)

Anyway I thank you all. I have just been wondering how we get more cylinders working on the "engine" we call the economy. I KNOW IT'S NOT WAYNE SWAN.  and i do not think Peter Costello is coming back.
joea


----------



## ROE (7 February 2012)

joea said:


> The government sets the monetary policy, while the RBA enacts the mechanical aspects of the policy to make the change to rates.




Government job is not monetary policy, that is the RBA job, they have the task of expand and contract money supply...

Government job is fiscal policy, how they spend and collect money....


----------



## Julia (7 February 2012)

Eager said:


> I'm a little intrigued by the whole issue of the supposed benefit to the economy by cutting interest rates to mortgagees. The theory is that more money will be put into people's pockets and that they will spend it, helping the retail sector and some local manufacturers to the domestic market. The last two interest cuts were largely ineffective in that regard, and what is often ignored is the fact that it is only a minority of people in this country that have a home loan. When the interest rate is cut, the majority of people do not benefit, it seems.



Hallelujah!   Someone actually notes that only a minority of Australians have home loans.  To listen to the politicians, one would imagine that 99% of the electorate have massive and crippling home loans, such is the diatribe directed toward the banks if they fail to pass on full interest rate cuts by the Reserve Bank.

Far more people have money in savings accounts, but we never, ever hear about the benefits to this majority of interest rates remaining reasonably high.

Imo David Murray was right today when he accused the government of political interference in bank business.  Swan is way overstepping his role.


----------



## Bintang (7 February 2012)

Swan shouldn't have anyting t complain about. He wanted the bnks to pass on the RBA rate cut in full. Well the rate cut this time is zero and that should be easy for the banks to pass on in full (lol)


----------



## drsmith (7 February 2012)

Wayne Swan is an idiot.

Him and Joe Hockey together don't even rate as a real treasurer's backside.

It's just too depressing to think about.


----------



## McLovin (7 February 2012)

drsmith said:


> Wayne Swan is an idiot.
> 
> Him and Joe Hockey together don't even rate as a real treasurer's backside.
> 
> It's just too depressing to think about.




I'm watching Hockey on Lateline right now and he's just useless. What's worse is that when compared to Swan he seems like a fat version of Adam Smith.


----------



## drsmith (7 February 2012)

McLovin said:


> I'm watching Hockey on Lateline right now and he's just useless. What's worse is that when compared to Swan he seems like a fat version of Adam Smith.



He might be a nice guy and all, but economically, there's less clout there than in a wet one dollar Monopoly note.


----------



## sptrawler (7 February 2012)

But I did notice today Ubank went from 6.11% to 5.91% for 6month deposits. 
Thanks Wayne, the banks did drop their rates. LOL,LOL


----------



## drsmith (7 February 2012)

TED has recently been reducing his Spread a bit.


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## Klogg (7 February 2012)

sptrawler said:


> But I did notice today Ubank went from 6.11% to 5.91% for 6month deposits.
> Thanks Wayne, the banks did drop their rates. LOL,LOL




It's days like this I truly miss Costello...


----------



## tech/a (8 February 2012)

Frankly 
My view is that no interest rate cut is a message to banks
If your not going to cut rates we aren't going to just cut rates for you to take advantage of without passing it on.

The banks are becoming more dictatorial with news this morning that they could rise rates.
Can't wait for more choice.


----------



## joea (8 February 2012)

ROE said:


> Government job is not monetary policy, that is the RBA job, they have the task of expand and contract money supply...




You maybe correct. However I will quote you an extract from "Trading the Sharemarket the ASX way."

"What causes interest rates to change?
Interest rate management is called monetary policy. One of the purposes of monetary policy as used by the Reserve Bank of Australia (RBA) is to control inflation. While the government sets the objectives of monetary policy, it is the RBA that enacts the mechanical aspects of the policy to change interest rates".

The basic objective of the RBA is contained in the Reserve Bank Act 1959(Cth). The act gives the RBA the responsibility of achieving price stability and promoting the economic prosperity and welfare of Australians.

I understand its tough times, but the government should not be bashing everybody and sundry who do not agree with them. (BANKS,VOTERS,COALITION,MEDIA) That's really not a good look....Sort out your own problems(leadership instability).

Personally I believe the weakness is implementing an old act into a "two speed economy). The equation used "is outdated".

joea


----------



## joea (8 February 2012)

tech/a said:


> Frankly
> My view is that no interest rate cut is a message to banks
> Can't wait for more choice.




Tech/a
 I agree.
Actually the banks and Swan have been shadow boxing for some time about the rate
decreases.

Why? Because if you approve 3  - 4 rate decreases in a row of 0.25%, it actually means that somewhere they should have moved 0.5%.
And also if you move 3 - 4 times its means we are not going as well as Swan makes us believe.
And lastly Swan know that the economy is not as good as he states, and the rates have to be passed on to try and help the retail sector to keep jobs.

joea


----------



## McLovin (8 February 2012)

joea said:


> You maybe correct. However I will quote you an extract from "Trading the Sharemarket the ASX way."
> 
> "What causes interest rates to change?
> Interest rate management is called monetary policy. One of the purposes of monetary policy as used by the Reserve Bank of Australia (RBA) is to control inflation. While the government sets the objectives of monetary policy, it is the RBA that enacts the mechanical aspects of the policy to change interest rates".
> ...




The paragraph is a bit poorly worded and could confuse readers. The objectives are defined in the RBA Act as being:



the stability of the currency of Australia;
the maintenance of full employment in Australia; and
the economic prosperity and welfare of the people of Australia.

The Bank then formulates and sets monetary policy based on these three (very) broad objectives defined by the Government.


----------



## joea (8 February 2012)

McLovin.
Thanks for that. There is no alternative to the "real McCoy"
joea


----------



## joea (1 June 2012)

http://www.smh.com.au/business/bank-tips-four-rate-cuts-this-year-20120531-1zkvr.html

No doubt this will be a part of the Labor campaign for re-election.
i.e. "We reduced the interest rates".

joea


----------



## numbercruncher (1 June 2012)

Our American mates are getting an even better deal - and RE at 1/3rd the cost of ours to boot ....



> NEW YORK (CNNMoney) -- Mortgage rates continued to plunge to new lows this week, with interest rates on the 15-year fixed rate mortgage dipping below 3% for the first time on record.




http://money.cnn.com/2012/05/31/real_estate/mortgage-rates/index.htm


----------



## numbercruncher (1 June 2012)

Julia said:


> Hallelujah!   Someone actually notes that only a minority of Australians have home loans.  To listen to the politicians, one would imagine that 99% of the electorate have massive and crippling home loans, such is the diatribe directed toward the banks if they fail to pass on full interest rate cuts by the Reserve Bank.
> 
> Far more people have money in savings accounts, but we never, ever hear about the benefits to this majority of interest rates remaining reasonably high.
> 
> Imo David Murray was right today when he accused the government of political interference in bank business.  Swan is way overstepping his role.





FYI - More _households_ have Mortgages than households who dont ....

So to say the Minority of _Australians_ have Home loans maybe Technically correct its terribly misleading.


----------



## im sparticus (1 June 2012)

numbercruncher said:


> FYI - More _households_ have Mortgages than households who dont ....
> 
> So to say the Minority of _Australians_ have Home loans maybe Technically correct its terribly misleading.




and of the ones with homeloans even fewer are +80%lvr


----------



## Tyler Durden (2 June 2012)

sptrawler said:


> But I did notice today Ubank went from 6.11% to 5.91% for 6month deposits.
> Thanks Wayne, the banks did drop their rates. LOL,LOL




Ubank online 'high' interest savings account now 4.91%


----------



## joea (2 June 2012)

So we would all have to agree now, that the RBA has held the rates up for to long and now they may get into panic mode. The rate decreases are 6 months  behind when it should have happened.
The June sales will now be make or break for some companies.

And as it has been discussed before, a rate decrease(alone) will not solve all the problems we have.

joea


----------



## MrBurns (2 June 2012)

joea said:


> So we would all have to agree now, that the RBA has held the rates up for to long and now they may get into panic mode. The rate decreases are 6 months  behind when it should have happened.
> The June sales will now be make or break for some companies.
> 
> And as it has been discussed before, a rate decrease(alone) will not solve all the problems we have.
> ...




I don't think so, if they had have dropped rates earlier more people may have bought into the housing market which was going to tank anyway.


----------



## young-gun (2 June 2012)

joea said:


> So we would all have to agree now, that the RBA has held the rates up for to long and now they may get into panic mode. The rate decreases are 6 months  behind when it should have happened.
> The June sales will now be make or break for some companies.
> 
> And as it has been discussed before, a rate decrease(alone) will not solve all the problems we have.
> ...




I've come into this late, but MO on rate cuts is they achieve sweet f/a. if you can name me one person who is sitting there going, you know what, if the cba cuts rates by 25 basis points im gonna do it! im gonna go and buy that thing that I want. it just doesnt work like that. and its the same reason stimulus wears off so fast. you CANNOT make people spend. if you're already looking at spending, then the stimulus may trigger you to do so, or a couple of rate cuts PERHAPS may be a slight influence to tip you over that purchase line. but in no way does it make people want to spend when they already didn't want to. if an entire generation is sick of spending, there is no changing their minds.

sorry if ive missed any important points, havent read back.


----------



## joea (2 June 2012)

MrBurns said:


> I don't think so, if they had have dropped rates earlier more people may have bought into the housing market which was going to tank anyway.




Jobs key to rates

RBA deputy governor Philip Lowe said today that further interest rate cuts would hinge on the strength of the labour market, a view echoed by economists.

Macquarie senior economist Brian Redican said weakening employment is on the horizon and will likely prompt the RBA to cut again.

"The RBA will cut when unemployment rises above 5.25 per cent," he said. "We think unemployment will rise in next couple of months and so expect a rate cut in May."

"For the RBA, its all about unemployment rather than GDP growth at the moment."

The jobless rate is currently at 5.1 per cent, with a consensus of analysts expecting it to hit 5.2 per cent when the numbers are updated tomorrow by the ABS.

Today's weak GDP growth figures vindicate the central bank's decision to slice borrowing costs at the end of last year, analysts said.

"A 0.4 per cent outcome illustrates the fairly soft growth we saw late last year and justifies why the Reserve Bank cut in November and December, said National Australia Bank senior markets economist Spiros Papadodoulos.

The RBA yesterday opted to leave interest rates on hold for a second consecutive meeting, saying borrowing costs are ''appropriate" for the current conditions. It left open the possibility of further rate cuts if needed to shore up the economy. 

Read more: http://www.theage.com.au/business/g...-cut-chance-20120307-1ujet.html#ixzz1wcT4qAe4
They are concentrating on the unemployment figure which is at least 2-3% too low.
Go to Roy Morgan.
There lies the problem


----------



## Glen48 (2 June 2012)

Think the RBA could now  drop the rate to 1% or less won't make any difference just watch what's going on in USA, 1in 4 in USA is under water  and house prices are going down still.


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## Tyler Durden (2 June 2012)

joea said:


> Jobs key to rates
> 
> RBA deputy governor Philip Lowe said today that further interest rate cuts would hinge on the strength of the labour market, a view echoed by economists.
> 
> ...




So in order for a lot of us to have cheaper mortgages, some of us will need to lose our jobs...


----------



## medicowallet (2 June 2012)

Tyler Durden said:


> So in order for a lot of us to have cheaper mortgages, some of us will need to lose our jobs...




Actually I think the way for us to have cheaper mortgages is to not borrow so much and create a bubble.

Let the bubble pop government, it will be better in the long term.

MW


----------



## Smurf1976 (2 June 2012)

joea said:


> So we would all have to agree now, that the RBA has held the rates up for to long and now they may get into panic mode. The rate decreases are 6 months  behind when it should have happened.
> The June sales will now be make or break for some companies.
> 
> And as it has been discussed before, a rate decrease(alone) will not solve all the problems we have.
> ...



Outside of mining and mining areas, the general economy has been pretty much stuffed for quite a while now.


----------



## cynic (2 June 2012)

Tyler Durden said:


> Ubank online 'high' interest savings account now 4.91%




Knowing you Tyler, I've no doubt that you'll have already been shopping around and found a better deal, but I thought I'd share the following just the same:

When I visited my local CBA branch this morning, they were advertising an interest rate of up to 5.25% p.a. on their "GoalSaver" account - subject to the following conditions:



> *Rate includes a variable bonus interest rate of 3.50% p.a. above the standard variable interest rate of 1.75% p.a., which is paid on account balances up to and including $100,000 if the closing balance on the last day of a calendar month is at least $200 higher (excluding interest earned) than the opening balance on the first day of the same month, with no more than one (1) withdrawal in the same period. The standard variable rate of 1.75% p.a. will apply on any portion of the balance over $100,000. The above rates are current as at 11 May 2012 but are subject to change at the Bank’s discretion.




I believe that the other major banks will probably have similarly competitive account types and interest rates.


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## Tyler Durden (2 June 2012)

cynic said:


> Knowing you Tyler, I've no doubt that you'll have already been shopping around and found a better deal, but I thought I'd share the following just the same:
> 
> When I visited my local CBA branch this morning, they were advertising an interest rate of up to 5.25% p.a. on their "GoalSaver" account - subject to the following conditions:
> 
> ...




Hey! Very interesting!

I actually just assumed Ubank automatically beated everyone else and so didn't think about shopping around. That CBA offer does seem a little tempting, although limiting it to one withdrawal per month is a bit of a downer.

I will think more about it - thanks!!!


----------



## Julia (2 June 2012)

cynic said:


> I believe that the other major banks will probably have similarly competitive account types and interest rates.



Certainly do.  Better than CBA.
www.infochoice.com.au


----------



## MrBurns (2 June 2012)

It's academic really, a bit like petrol prices, people race to save 2c a litre and find it saves $2 a tank.

Not really a life changer.


----------



## Tyler Durden (2 June 2012)

MrBurns said:


> It's academic really, a bit like petrol prices, people race to save 2c a litre and find it saves $2 a tank.
> 
> Not really a life changer.




It is better to have $2 in your pocket than someone else's.


----------



## medicowallet (2 June 2012)

Yeah I think RAMS has the highest at the moment, but could be wrong.

Haven't read the fineprint,

will over the next week as both Usaver accounts are pretty much full and I don't want any more term deposits, even though they are better interest rates than you can get with usaver etc, I want to have the money in case there is a shock to the system

MW


----------



## joea (3 June 2012)

Tyler Durden said:


> So in order for a lot of us to have cheaper mortgages, some of us will need to lose our jobs...




That appears how it supposed to work from that media coverage.
Looks like a "shake out" to release workers to the mining industry. The whole problem is they
do not want to go , relocate or FIFO.
I think the RBA have failed miserably in their " job description", and often wonder why?
It is certainly not explained in their monthly minutes.
One would think that with the Government wasting so much money, the RBA'S timing would need to be spot on.

In attempting to understand the RBA, I can only offer their style is similar to "they rush to shut the gate when the horses have escaped".
joea


----------



## im sparticus (3 June 2012)

MrBurns said:


> It's academic really, a bit like petrol prices, people race to save 2c a litre and find it saves $2 a tank.
> 
> Not really a life changer.





A million ways to save a million dollars.


----------



## Tyler Durden (3 June 2012)

im sparticus said:


> A million ways to save a million dollars.




I like that!


----------



## young-gun (3 June 2012)

MrBurns said:


> It's academic really, a bit like petrol prices, people race to save 2c a litre and find it saves $2 a tank.
> 
> Not really a life changer.




+1, it may be ignorant of me, but I have never gone in search of the best savings rate, as unless you have a sizable amount in there the difference really doesn't matter to me. if you are talking thousands a year difference then im interested, but otherwise...


----------



## Julia (3 June 2012)

MrBurns said:


> It's academic really, a bit like petrol prices, people race to save 2c a litre and find it saves $2 a tank.
> 
> Not really a life changer.



Agree.  And you've spent time and additional petrol running round to get that small saving.


----------



## McLovin (3 June 2012)

Tyler Durden said:


> It is better to have $2 in your pocket than someone else's.




$2/week is $104/year. And what's that, basically a night out. Infact, the way Sydney is now it's about half a night out. It won't change your life. Plus, you waste all that petrol hunting for the cheapest petrol, as Julia pointed out.


----------



## Calliope (3 June 2012)

Those looking to park their money in a safe place to ride out the approaching storm should avoid Spanish Bonds. German Bods are a safer bet, but to be absolutely sure buy Swiss bonds where you have to actually pay them to borrow your money.



> The interest rate on 10-year Spanish bonds stood rose 0.13 percentage points to 6.58 percent in early trading. The rate was more than 5.4 percentage points higher than the equivalent German one, which is considered a safe haven for investors.




http://www.businessweek.com/ap/2012-06/D9V4B8380.htm


----------



## Tyler Durden (3 June 2012)

McLovin said:


> $2/week is $104/year. And what's that, basically a night out. Infact, the way Sydney is now it's about half a night out. It won't change your life. Plus, you waste all that petrol hunting for the cheapest petrol, as Julia pointed out.




It is better to have $104 in your pocket than someone else's.


----------



## young-gun (3 June 2012)

Tyler Durden said:


> It is better to have $104 in your pocket than someone else's.




i somewhat admire your attitude towards saving, but going to this extent is not for me


----------



## numbercruncher (3 June 2012)

Look after your pennys and the pounds will look after themselves -

Ive seen 15c price differences on the Gold Coast - thats 9 bucks on my 60l tank.

I wouldnt go driving around looking for it as my time is worth money , but ill certainly drive straight past the expensive joints never to return ....


----------



## young-gun (3 June 2012)

numbercruncher said:


> Look after your pennys and the pounds will look after themselves -
> 
> Ive seen 15c price differences on the Gold Coast - thats 9 bucks on my 60l tank.
> 
> I wouldnt go driving around looking for it as my time is worth money , but ill certainly drive straight past the expensive joints never to return ....




i can honestly say i have never driven past, nor entered a servo because of price. in fact i rarely ever take notice of the price of fuel. just my laziness i guess. does anyone actually use those discount vouchers?


----------



## numbercruncher (3 June 2012)

young-gun said:


> i can honestly say i have never driven past, nor entered a servo because of price. in fact i rarely ever take notice of the price of fuel. just my laziness i guess. does anyone actually use those discount vouchers?




Really ?

For me its as much as my distain for the unashamed greed of these Petrol dealers as it is to save myself a couple of bucks - typically doesnt cost me extra time or money to drive straight past. Sometimes that guage is getting so low that I have to stop but oh well .....


----------



## McLovin (3 June 2012)

Tyler Durden said:


> It is better to have $104 in your pocket than someone else's.




It really doesn't bother me. It's like saying the key to financial freedom is a owning a piggy bank. I spend money on what I want to (travel mainly). I know a lot of people think that if they save every dollar they earn they will end up retiring at 45 but it doesn't work like that. If you're working a 9-5 job then even with saving your $2/week it will have almost no effect on your financial situation; $104 each year for 20 years @5.5% will be worth about $4,000, so about double what you have contributed. You're far better off trying to increase your earning power.

It's the same as people who put in the extra 1 or 2 cents in when they fill up because it will get rounded down and they have "saved" 2 cents. As though it makes a difference in the grand scheme of things.


----------



## young-gun (3 June 2012)

numbercruncher said:


> Really ?
> 
> For me its as much as my distain for the unashamed greed of these Petrol dealers as it is to save myself a couple of bucks - typically doesnt cost me extra time or money to drive straight past. Sometimes that guage is getting so low that I have to stop but oh well .....




yeah, unfortunately as i said i am quite lazy when it comes to things like this. i could probably save myself 30$-50$ a week just by not being lazy, but i can't be bothered. i dont know how some people can go from coles to woolies in search of bargains, or save up several discount vouchers and go to one particular servo to save 8c a litre. i work on efficiency, i want to get done whatever i have to as fast and efficiently as possible, and if that means paying a little extra ill do it.


----------



## im sparticus (3 June 2012)

McLovin said:


> It really doesn't bother me. It's like saying the key to financial freedom is a owning a piggy bank. I spend money on what I want to (travel mainly). I know a lot of people think that if they save every dollar they earn they will end up retiring at 45 but it doesn't work like that. If you're working a 9-5 job then even with saving your $2/week it will have almost no effect on your financial situation; $104 each year for 20 years @5.5% will be worth about $4,000, so about double what you have contributed. You're far better off trying to increase your earning power.
> 
> It's the same as people who put in the extra 1 or 2 cents in when they fill up because it will get rounded down and they have "saved" 2 cents. As though it makes a difference in the grand scheme of things.




anyone remember "reminisence of a stock operator" where hes interviewing the ceos from different companies one was wasting the expensive note paper to write the figures on and the other one is tearing up envelopes for notepaper in his spare time to write the figures on. find enough places to save afew bucks often enough and it ends up being a substancial amount. but you will never find enough places if you look at them each independently its just not worth it.


----------



## McLovin (3 June 2012)

im sparticus said:


> anyone remember "reminisence of a stock operator" where hes interviewing the ceos from different companies one was wasting the expensive note paper to write the figures on and the other one is tearing up envelopes for notepaper in his spare time to write the figures on. find enough places to save afew bucks often enough and it ends up being a substancial amount. but you will never find enough places if you look at them each independently its just not worth it.




True. But the average person can't come close to the largesse of a big corporation, they just don't generate the income to create meaningful savings.

I have seen plenty of over the top corporate spending, my own salary pre-GFC included!

The best example I've seen of how companies waste money: I worked for Citibank for a couple of years in London. There was a Citi project in Warsaw that some guys I knew loosely were working on. The Warsaw project was a bit behind because of a backlog in mundane data entry. Management in NY decided that the best course of action was to send PwC grads (ie guys straight out of college, earning ~$40k/year) to Warsaw in business class to help out with the data entry and fly them home (in business class) every two weeks for the weekend. These grads were being charged to Citi at about $100/hour + they had to pay their airfare. World's most expensive data entry! 

I left Citi because it was the most dysfunctional corporation I ever worked for.


----------



## Smurf1976 (3 June 2012)

young-gun said:


> i dont know how some people can go from coles to woolies in search of bargains



For many the saving directly translates to more food on the table, or better quality food. For many families, the available budget for food is x and if that doesn't buy enough then so be it - it's either go hungry or switch from fresh to frozen, steak to burgers etc. I can absolutely understand why anyone with spare time but little or no spare money would willingly search for bargains.

As for me, well I don't have time to search for the lowest price between Coles / Woolies but I won't waste money due to being lazy. 

Why pay $125 a tonne for green firewood in June when you can get bone dry wood for $85 (delivered) in the middle of Summer? (For those unaware, you really don't want "green" wood anyway - it takes at least a year (literally) to dry out properly).

Why pay $1.55 for petrol when most days I drive past a servo (major brand) which is selling it for 12 cents less? It may only be a few $, but why pay more when there is no reason to?

I don't drink soft drinks very often, but why pay $3 for 600mL when you can get 2 litres of the exact same stuff for $4, or 1.25 litres for less than the price of 600mL in the same store?

And so on. I see no point in paying more than necessary just for the sake of it.


----------



## Smurf1976 (3 June 2012)

McLovin said:


> The best example I've seen of how companies waste money: I worked for Citibank for a couple of years in London. There was a Citi project in Warsaw that some guys I knew loosely were working on. The Warsaw project was a bit behind because of a backlog in mundane data entry. Management in NY decided that the best course of action was to send PwC grads (ie guys straight out of college, earning ~$40k/year) to Warsaw in business class to help out with the data entry and fly them home (in business class) every two weeks for the weekend. These grads were being charged to Citi at about $100/hour + they had to pay their airfare. World's most expensive data entry!



I don't see anything even remotely extreme about that. Whenever you hear the word "outsource", this sort of thing is usually what is really going on.

Australian taxpayers would be furious if they knew how bad government can be with this sort of thing, outright furious. Government workers leaning on proverbial shovels are one thing, but they are nothing compared to what goes on when contractors get involved. It's much, much cheaper to employ some people and just do the work thus keeping consultants, contractors etc well away from the trough.


----------



## Julia (3 June 2012)

young-gun said:


> i can honestly say i have never driven past, nor entered a servo because of price. in fact i rarely ever take notice of the price of fuel. just my laziness i guess. does anyone actually use those discount vouchers?



Doesn't it come down to how much fuel you use?  Earlier I think you suggested you wouldn't bother switching savings accounts because the small % difference in the interest rate wasn't worth worrying about.  But you then said if you had a lot of money in such an account then of course you'd be more diligent.  (If it was someone else who made this observation, I apologise).

I only fill my car about once in 5 weeks so absolutely am not going to be bothered running round looking for the cheapest price,  Instead I choose a petrol station that is conveniently on my way home.  If it's 1cent more per litre, so be it.
However, if I filled the tank every second day I'd take a different view probably.




numbercruncher said:


> Really ?
> 
> For me its as much as my distain for the unashamed greed of these Petrol dealers as it is to save myself a couple of bucks - typically doesnt cost me extra time or money to drive straight past. Sometimes that guage is getting so low that I have to stop but oh well .....



Gee whiz, NC.  Everyone is out to rip you off, aren't they.  The big miners, and now the dastardly petrol dealers.
Life must be an irritating and upsetting business for you.



McLovin said:


> It really doesn't bother me. It's like saying the key to financial freedom is a owning a piggy bank. I spend money on what I want to (travel mainly). I know a lot of people think that if they save every dollar they earn they will end up retiring at 45 but it doesn't work like that. If you're working a 9-5 job then even with saving your $2/week it will have almost no effect on your financial situation; $104 each year for 20 years @5.5% will be worth about $4,000, so about double what you have contributed. You're far better off trying to increase your earning power.
> 
> It's the same as people who put in the extra 1 or 2 cents in when they fill up because it will get rounded down and they have "saved" 2 cents. As though it makes a difference in the grand scheme of things.



Zackly.  However, I think there's a certain psychological satisfaction for some people in believing they have got a bargain, or at least the best available price.  They will never think it through in the realistic terms you describe above, and will just be happy that they think they've scored.




Smurf1976 said:


> For many the saving directly translates to more food on the table, or better quality food. For many families, the available budget for food is x and if that doesn't buy enough then so be it - it's either go hungry or switch from fresh to frozen, steak to burgers etc. I can absolutely understand why anyone with spare time but little or no spare money would willingly search for bargains.
> 
> As for me, well I don't have time to search for the lowest price between Coles / Woolies but I won't waste money due to being lazy.
> 
> ...




I don't think any of us have said we want to pay more "just for the sake of it".  That's just silly.
But the point is that for many people the tiny dividends obtained for a whole lot of effort just don't make logical sense.


----------



## joea (5 June 2012)

0.25% cut.:bonk:
joea


----------



## numbercruncher (5 June 2012)

Julia said:


> Gee whiz, NC.  Everyone is out to rip you off, aren't they.  The big miners, and now the dastardly petrol dealers.
> Life must be an irritating and upsetting business for you.





Like I said doesnt bother me I drive right past and the reason I as I said is because I see 15c price swings around here, Petrol prices are a rather big issue in the real world.Like you said its of no consequence to you or any retirees really considering the tiny amount of the stuff you need.

And no life isnt irritating or upsetting - you appear to do alot more whinging than I so right back at you.


----------



## joea (7 June 2012)

http://www.theaustralian.com.au/bus...ts-dominate-mood/story-e6frg9qo-1226386761488

I am not sure if the ABS have got it correct.
We will see in a month.

joea


----------



## Tyler Durden (7 June 2012)

Tyler Durden said:


> Ubank online 'high' interest savings account now 4.91%




I just checked my account yesterday and it's back to 5.51%...I swear when I posted it said 4.91%


----------



## Knobby22 (8 June 2012)

Good unemployment results following the good GDP results.
Another rate cut? Wouldn't bet on it.


----------



## drsmith (8 June 2012)

It looks like the rest were waiting for ANZ.

http://www.abc.net.au/news/2012-06-08/anz-cuts-interest-rates-in-line-with-rba/4060452


----------



## Julia (8 June 2012)

I suggest people with funds in at call accounts check them regularly.
I've just done this with my ANZ at call a/c and it has gone from 5.5% to just 3.75%.

If my request to have the 5.5% reinstated (they are still advertising it on Infochoice) is denied, I won't be leaving it there.


----------



## Klogg (8 June 2012)

Julia said:


> I suggest people with funds in at call accounts check them regularly.
> I've just done this with my ANZ at call a/c and it has gone from 5.5% to just 3.75%.
> 
> If my request to have the 5.5% reinstated (they are still advertising it on Infochoice) is denied, I won't be leaving it there.




Oh, thanks for that Julia - my parents have an at call account with ANZ. I'll get them to check their rate.

Cheers


----------



## Jester (8 June 2012)

Julia said:


> I suggest people with funds in at call accounts check them regularly.
> I've just done this with my ANZ at call a/c and it has gone from 5.5% to just 3.75%.
> 
> If my request to have the 5.5% reinstated (they are still advertising it on Infochoice) is denied, I won't be leaving it there.




Whats the best approach to barter for the higher rate Julia?


----------



## Glen48 (8 June 2012)

If you can get a high I rate lock it in for as long as possible cos it can only go down....way down


----------



## cynic (9 June 2012)

Tyler Durden said:


> I just checked my account yesterday and it's back to 5.51%...I swear when I posted it said 4.91%




Perhaps they read your post on ASF and realised that you were about to take your business elsewhere.
Anyway, it's good to hear that you've gotten yourself back to a better rate.




Julia said:


> Certainly do.  Better than CBA.
> www.infochoice.com.au




Thanks for that Julia, that will undoubtedly save me a lot of time in future.

I know that you would already aware of this, but thought I should highlight (for the benefit of other readers of this thread) that a number of the rates mentioned on that infochoice page appear to be introductory offers that will later revert to a lower rate, so one needs to keep a note of the expiry date in order to facilitate a timely renegotiation and/or transfer to a better offer at another institution.

As always, its important to read the fine print.


----------



## Jester (9 June 2012)

cynic said:


> Perhaps they read your post on ASF and realised that you were about to take your business elsewhere.
> Anyway, it's good to hear that you've gotten yourself back to a better rate.
> 
> 
> ...




It's still 4.91 I think, it's only 5.51 if you have the ASP.


----------



## Julia (9 June 2012)

cynic said:


> I know that you would already aware of this, but thought I should highlight (for the benefit of other readers of this thread) that a number of the rates mentioned on that infochoice page appear to be introductory offers that will later revert to a lower rate, so one needs to keep a note of the expiry date in order to facilitate a timely renegotiation and/or transfer to a better offer at another institution.
> 
> As always, its important to read the fine print.



Yes, we very much need to be conscious of when that introductory offer runs out.

Re getting it renewed, I've had this done several times by pointing out to the bank that I'll move the funds elsewhere if it doesn't happen.  It perhaps helps that I've been with this fairly small branch for decades and have  established relationships there.


----------



## drsmith (9 June 2012)

Julia said:


> Re getting it renewed, I've had this done several times by pointing out to the bank that I'll move the funds elsewhere if it doesn't happen.  It perhaps helps that I've been with this fairly small branch for decades and have  established relationships there.



If worst comes to the worst, just open another online saver account under the bonus offer and link it to the master account that the current one is linked to.

With 6-figure sums at least, it shouldn't require too much effort to sustain the bonus offers from the various banks over the longer term. That after all is the going rate.


----------



## Julia (9 June 2012)

drsmith said:


> If worst comes to the worst, just open another online saver account under the bonus offer and link it to the master account that the current one is linked to.
> 
> With 6-figure sums at least, it shouldn't require too much effort to sustain the bonus offers from the various banks over the longer term. That after all is the going rate.



Yes, I have done this a couple of times.   One of the problems, though, is that the offer is actually not now available to SMSFs and I don't want to transfer the funds out of Super into my own name for obvious tax reasons.
So it's better if I can get the bank to just re-apply the current 'new' rate.

Also, if one is continually establishing new accounts with different institutions, it's quite a pain with having to send all the documentation of SMSF Trust Deed etc. each time.  Much more complicated than the very simple process of just opening a new a/c in your own name.


----------



## drsmith (12 June 2012)

Julia said:


> Yes, I have done this a couple of times.   One of the problems, though, is that the offer is actually not now available to SMSFs and I don't want to transfer the funds out of Super into my own name for obvious tax reasons.
> So it's better if I can get the bank to just re-apply the current 'new' rate.
> 
> *Also, if one is continually establishing new accounts with different institutions*, it's quite a pain with having to send all the documentation of SMSF Trust Deed etc. each time.  Much more complicated than the very simple process of just opening a new a/c in your own name.



I was meaning the same institution, but you are correct in that getting the bank to apply the bonus rate to an existing account is the better option.


----------



## Tyler Durden (12 June 2012)

drsmith said:


> If worst comes to the worst, just open another online saver account under the bonus offer and link it to the master account that the current one is linked to.
> 
> With 6-figure sums at least, it shouldn't require too much effort to sustain the bonus offers from the various banks over the longer term. That after all is the going rate.




I have been thinking about this, but is it 'legal' or 'allowed'?

Situation is this: I have a Ubank account where I transfer my savings from my everyday account for the purpose of, well, savings. However, if I get a promotion I have applied for, I want to put my extra income into a separate account so I don't mix my funds. I want to continue living as if I didn't get the promotion and just keep tucking the extra income away.

But can I open another Ubank account under the same name, with the same TFN, and link it to the same everyday account?


----------



## drsmith (12 June 2012)

I don't know about Ubank as I'm with ANZ.

How I see the legality of how the banks operate their savings bonus rates is that it's their concern, not mine as the customer. If I can maintain the bonus rate on a continous basis, then I'm happy. 

The base rate should be viewed by the customer in the same light as the ticket price on an expensive item at Harvey Norman or any other retailer.


----------



## blue0810 (12 June 2012)

Tyler Durden said:


> But can I open another Ubank account under the same name, with the same TFN, and link it to the same everyday account?




Yes ,see link:
https://www.ubank.com.au/ub/web/customer-help/about-usaver#savingsbonus


----------



## Tyler Durden (12 June 2012)

blue0810 said:


> Yes ,see link:
> https://www.ubank.com.au/ub/web/customer-help/about-usaver#savingsbonus




Wow thanks mate! I had a look last week and couldn't find anything - you must have better eyes than me


----------



## Julia (13 June 2012)

drsmith said:


> I was meaning the same institution, but you are correct in that getting the bank to apply the bonus rate to an existing account is the better option.



Success in having the bonus rate applied to existing account.
However, it's obviously important to regularly check the rate as it can alter with no notice and to a substantial extent as from the 5.5 down to 3.75% as posted earlier.


----------



## Tyler Durden (13 June 2012)




----------



## Julia (25 June 2012)

Reminder to everyone to check their deposit rates.  After dropping the rate on their online at call a/c only a few weeks ago, ANZ have just dropped it another .25%.

They do not let you know either.
This is another aspect of Rabodirect's superior customer relations:  they send an email any time they change the rate.  I'm sure a lot of people whack money in a deposit and don't bother to check whether the rate has changed.


----------



## Julia (1 September 2012)

Rabodirect have increased their deposit rate as follows:



> How does it work, you ask yourself... It's very simple. All new money you put into your HISA from today until 31st January 2013 will earn 5.71%p.a. interest rather than previously 4.6%p.a. (on balances up to $250k) that's an increase of 1.11%p.a.!* So, from today, some of your rates are going up and some are going down.
> 
> Check out the table below for a full breakdown of your High Interest Savings Account rates.
> 
> ...


----------



## MrBurns (1 September 2012)

Julia said:


> Rabodirect have increased their deposit rate as follows:




I really don't understand why the more you have to invest the lower the interest rate.


----------



## Julia (18 October 2012)

ANZ have just dropped their interest rate on at call online a/c from 5.25% to 5%, despite claiming, when discussing not passing on the full RB cut to borrowers, that they were precluded from so doing by the pressure to keep deposit rates high.


----------



## ROE (18 October 2012)

comsec cash account drop to 3.5%  that's 0.5% drop
time for the cash to fly and look for yield stock  ....


----------



## Bill M (18 October 2012)

The best cash rates around right now are the Rabodirect HISA and UBANK high interest savings, both offering 5.46%, not bad considering how low the official RBA rate is.


----------



## prawn_86 (18 October 2012)

Bill M said:


> The best cash rates around right now are the Rabodirect HISA and UBANK high interest savings, both offering 5.46%, not bad considering how low the official RBA rate is.




Yep i just transferred a large portion of my 'cash' over to ubank yesterday


----------



## white_goodman (18 October 2012)

telstra is my new ubank, dont get hit nearly as hard by tax+inflation


----------



## MrBurns (18 October 2012)

white_goodman said:


> telstra is my new ubank, dont get hit nearly as hard by tax+inflation




Seems you're not the only one, everyone is in that stock, except me but perhaps soon I'll join in.


----------



## prawn_86 (18 October 2012)

white_goodman said:


> telstra is my new ubank, dont get hit nearly as hard by tax+inflation






MrBurns said:


> Seems you're not the only one, everyone is in that stock, except me but perhaps soon I'll join in.




I personally wont own Telstra due to the amount of times they have screwed me round. MXUPA looks pretty tasty for yeild though


----------



## Bill M (25 October 2012)

Alert, UBank in the last couple days have dropped their High Interest Savings Account rate (with bonus) down to 5.16%.

Rabodirects HISA (with bonus) at 5.46%.

But I think RAMS Saver Account is now the highest at 5.75% (with conditions).


----------



## Julia (25 October 2012)

And as government policies remove potential for growth from the economy, jobs are lost, businesses fail, the RBA will be forced to continue lowering rates in an attempt to stimulate some economic activity.

What a stupid farce.


----------



## prawn_86 (25 October 2012)

Julia said:


> And as government policies remove potential for growth from the economy, jobs are lost, businesses fail, the RBA will be forced to continue lowering rates in an attempt to stimulate some economic activity.
> 
> What a stupid farce.




But according to the government it is due to their prudent fiscal management that the RBA is able to lower rates...


----------



## Smurf1976 (25 October 2012)

The notion that lowering interest rates boosts the economy would seem dependent on interest being a significant cost in the first place.

It's like saying that if the price of petrol drops in half, then that might boost household spending on other things since petrol is, for many people, a significant regular expense. But the same does not hold true if the price of matches or tea towels drops in half since these are not a significant expense for most people. 

Now, if we get to the (fast approaching) point where interest ceases to be a major expense, then any further reduction in rates would seem to be less and less effective. At that point the RBA runs out of "firepower" in much the same way as other central banks already have.

A drop in rates from 10% to 5% might change consumer spending patterns etc. A drop in rates from 2% to 1% would seem little more than a technicality unlikely to produce much in terms of changed behaviour etc. I don't know exactly where that "tipping point" sits, but I get the feeling we may be not too far away from it.


----------



## Julia (25 October 2012)

prawn_86 said:


> But according to the government it is due to their prudent fiscal management that the RBA is able to lower rates...



Well, can you imagine Swannie saying

 "Look, folks, I know we've stuffed things up with our wasteful overspending, introduced a tax that disadvantages Australian companies against their global competitors, made Australia a less attractive place to invest, but hey, don't worry about that because the RBA is helping us out by dropping interest rates to stimulate activity"?

The government's unreasonable political obsession with having a surplus is offsetting any benefit to people with mortgages etc with their cuts to private health insurance, cut to baby bonus etc, not to mention the particular disadvantage to savers who have not tied their funds into long term deposits.

I expect there's considerable anger amongst retirees who were burned in the GFC, moved to cash too late, and who are now seeing their incomes reduced as the rates fall.


----------



## white_goodman (25 October 2012)

prawn_86 said:


> But according to the government it is due to their prudent fiscal management that the RBA is able to lower rates...




the economic literature states that govt running a balanced/surplus budget gives our central bank more leniency/ability to loosen monetary policy without inflation concerns, also some recent stuff coming out from Cochrane at UChicago that inflation is linked to the future expectations of the budget balance. (its long and boring) Problem is we arent in surplus and i dont think anyone genuinely believes we are gonna be in surplus any time soon, the ministry of magic with he who shall not be named as its head has been a terrible manager.

We are lowering rates cause of headwinds in China/Euro and all the associated economic relationships, its hardly to do with Uncle Swanny.


----------



## young-gun (25 October 2012)

Julia said:


> Well, can you imagine Swannie saying
> 
> "Look, folks, I know we've stuffed things up with our wasteful overspending, introduced a tax that disadvantages Australian companies against their global competitors, made Australia a less attractive place to invest, but hey, don't worry about that because the RBA is helping us out by dropping interest rates to stimulate activity"?
> 
> ...




I can't believe they are lowering interest rates at all. If one thing has become evident through other countries and their brilliant 'monetary policy' it's that central bankers should keep their dam noses out of it. We need to cleanse the economy...but no. So here we go on the loong, slow-burning downward spiral that everyone is in. Best we get some more consumer debt pumping through the system.


----------



## Julia (14 November 2012)

Just a reminder to everyone with funds in an at call a/c to regularly check the interest rate.
Just did so tonight and my 5% has suddenly gone to 3.25%, apropos of nothing in particular, except presumably the published offer time running its course.

I've emailed the bank asking for the 5% to be re-applied.


----------



## Tyler Durden (15 November 2012)

Julia said:


> Just a reminder to everyone with funds in an at call a/c to regularly check the interest rate.
> Just did so tonight and my 5% has suddenly gone to 3.25%, apropos of nothing in particular, except presumably the published offer time running its course.
> 
> I've emailed the bank asking for the 5% to be re-applied.




Which bank is this?
Ubank is now 5.16%.


----------



## Aussiejeff (15 November 2012)

Alan Kohler's take on NAB's "shocking" monthly business survey released yesterday...

http://www.abc.net.au/news/2012-11-14/kohler-economic-alarm-bells-should-be-ringing/4370804



> *Economists were shocked yesterday when they saw the survey and the dollar immediately began to fall as they adjusted their thinking on the next rate cut: 150 basis points of rate cuts have done nothing to improve business sentiment and actual conditions have gone from bad to worse. Labour costs have collapsed, but even that hasn't improved things. A record 72 per cent of businesses say they don't need finance now.*
> 
> This is a genuine national crisis, but the problem is that it's going largely undetected and unaddressed because it is not showing in the broad economic data, which is what the Reserve Bank sets interest rates by. That's why rates were left on hold this month, and may be again in December.
> 
> ...




Alarmist?

A quick scan recently of my local Albury/Wodonga CBD's showing an ever-increasing number of empty shops, For Lease and For Sale signs might suggest not...where once was hustle and bustle during business hours is now a quiet stroll down Main Street..


----------



## YELNATS (15 November 2012)

Julia said:


> Just a reminder to everyone with funds in an at call a/c to regularly check the interest rate.
> Just did so tonight and my 5% has suddenly gone to 3.25%, apropos of nothing in particular, except presumably the published offer time running its course.
> 
> I've emailed the bank asking for the 5% to be re-applied.




Julia, some of the banks provide the courtesy of emailing customers of changes in interest rates. eg Rabobank which I have funds with.

Could you let us know how you go with your request and if they agreed, whether they applied the 5% rate retrospectively.

This is the reason I am not so keen on honeymoon offers, unless you have a large amount to invest for only a limited time.

Cheers.


----------



## Julia (15 November 2012)

Tyler Durden said:


> Which bank is this?
> Ubank is now 5.16%.



It's ANZ.



YELNATS said:


> Julia, some of the banks provide the courtesy of emailing customers of changes in interest rates. eg Rabobank which I have funds with.
> 
> Could you let us know how you go with your request and if they agreed, whether they applied the 5% rate retrospectively.
> 
> ...



Yes, Yelnats, I've had funds with Rabo and still have some term deposits with them.  They show more courtesy, as you say, in letting you know if rates change.

As long as ANZ continue to advertise, at least via Infochoice, an at call rate of 5%, the bank has accepted my suggestion that existing customers should not be disadvantaged, and the 5% is re-applied.
My local branch has this morning advised they have so recommended to their head office and I'll receive confirmation (or otherwise) in the next week.

Yes, it's irritating to have to keep checking.  I expect they get away with paying out much less because people forget to check if the rate has changed.  Will post answer when I hear further.


----------



## drsmith (15 November 2012)

Julia said:


> Just a reminder to everyone with funds in an at call a/c to regularly check the interest rate.
> Just did so tonight and my 5% has suddenly gone to 3.25%, apropos of nothing in particular, except presumably the published offer time running its course.
> 
> I've emailed the bank asking for the 5% to be re-applied.



While waiting for a reply, open another online saver account that applies the bonus rate and transfer the funds when active. 

http://www.anz.com/promo/accounts/o...8|online anz savings account||S|b|15562807277

Funds transfer can be easily made online if both accounts are linked to a primary account such as a credit card.

The link above also advises when the bonus rate ends. You need to take note because this information does not appear under account details on their online banking.


----------



## Julia (15 November 2012)

Thanks for the suggestion,drsmith.  I've tried doing this before but the stumbling block is that ANZ don't (or didn't then at least) make their online saver a/cs available to SMSFs.

It's only via a particularly helpful contact at the local branch that my SMSF a/c is getting the same rate.
So far their head office doesn't seem to have woken up to the fact that it's not an individual savings a/c.


----------



## McLovin (15 November 2012)

Julia said:


> Thanks for the suggestion,drsmith.  I've tried doing this before but the stumbling block is that ANZ don't (or didn't then at least) make their online saver a/cs available to SMSFs.
> 
> It's only via a particularly helpful contact at the local branch that my SMSF a/c is getting the same rate.
> So far their head office doesn't seem to have woken up to the fact that it's not an individual savings a/c.




I had no problem doing this with a corporate trustee on an SMSF with ANZ, not sure if that helps.

They ended up putting me on something called a Negotiator Investment Account. Not sure whether that is only for business banking customers, there's actually nothing on their website about it and I've been in to branches and they can't see the balance in the account, but the interest rate is good.


----------



## Julia (15 November 2012)

McLovin said:


> I had no problem doing this with a corporate trustee on an SMSF with ANZ, not sure if that helps.
> 
> They ended up putting me on something called a Negotiator Investment Account. Not sure whether that is only for business banking customers, there's actually nothing on their website about it and I've been in to branches and they can't see the balance in the account, but the interest rate is good.



Can you tell us what the interest rate is?

If they don't this time again reinstate the current 5%, I'm not sure I can be bothered fussing about it too  much.
There is less than $100K in the a/c.  Might actually instead encourage me to dip a toe into the market again.


----------



## Julia (16 November 2012)

The 5% has been re-applied to my account.


----------



## Vixs (16 November 2012)

An interesting industry talk I attended this morning had a great speaker on the AUD and interest rates, and his expectations for the next few years. GDP without the past few years mining related investment which has all but dried up completely has been between 0% and 1.5% growth. We apparently are headed for having a large growth pothole to fill, and thanks to a relentlessly high AUD other industries and sectors are simply not in the position to pick up and fill it.

Another 125 basis points off to 2% in the next 12 months, and mortgages needing to be around 5% to spark some shift in deleveraging trends were his comments, however he also stated that Australia's deleveraging is an attitude that is likely here to stay for a good while.

Regardless, our interest rates can only go down from here surely. I personally don't think we'll see any issues until we need to chop it below 2% - there will definitely be some hesitation there.


----------



## white_goodman (16 November 2012)

Vixs said:


> An interesting industry talk I attended this morning had a great speaker on the AUD and interest rates, and his expectations for the next few years. GDP without the past few years mining related investment which has all but dried up completely has been between 0% and 1.5% growth. We apparently are headed for having a large growth pothole to fill, and thanks to a relentlessly high AUD other industries and sectors are simply not in the position to pick up and fill it.
> 
> Another 125 basis points off to 2% in the next 12 months, and mortgages needing to be around 5% to spark some shift in deleveraging trends were his comments, however he also stated that Australia's deleveraging is an attitude that is likely here to stay for a good while.
> 
> Regardless, our interest rates can only go down from here surely. I personally don't think we'll see any issues until we need to chop it below 2% - there will definitely be some hesitation there.




they cant AUS ZIRP is around 2%

EDIT: well they can but the aud would crash and our ability to fund ourselves would be heavily diminished


----------



## Vixs (16 November 2012)

white_goodman said:


> they cant AUS ZIRP is around 2%
> 
> EDIT: well they can but the aud would crash and our ability to fund ourselves would be heavily diminished




Crash? Or fall? What would you define as a crash?

We can't preserve our AAA rating without returning to surplus or making a redhot go at it in the next few years, regardless of whether the government is spending to keep out of recession. So we can't spend our way out of it or we won't reach a surplus. Monetary policy won't do it, so fiscal policy will have to. 

With deleveraging well embedded it's going to take big moves to kick up spending - the last 125 basis points haven't had the effect desired, just shrunk a bunch of mortgages that are propping up our biggest financial organisations.


----------



## Smurf1976 (17 November 2012)

Vixs said:


> With deleveraging well embedded it's going to take big moves to kick up spending - the last 125 basis points haven't had the effect desired, just shrunk a bunch of mortgages that are propping up our biggest financial organisations.



Thinking of people that I know, I can't see any of them responding to an interest rate cut by increasing their spending. They either don't have debts anyway or would maintain the same rate of payments in the event that rates went down. People are cautious now, and nobody is going to throw money around for the sake of it.

A key driver is that with the notable exception of travel, primarily overseas, there really isn't much worth spending on that people don't already have. Today's 25 year olds are far less interested in owning houses and even cars than was the case until quite recently and, due to the collapse in the price of consumer goods, they already have everything else they could want. That leaves travel, particularly overseas, as the only rational outlet for any increase in spending. Either that or buy a new iPhone which adds little to the domestic economy.

Looking at my own situation (and I'm somewhat older than 25) it's much the same. So far as any discretionary spending is concerned, I've recently been on holidays to the USA but the only thing I have firmly planned looking forward is a trip to Adelaide next year and putting some more solar panels on the roof. None of that is adding anything significant to the economy in my local area (Tasmania) apart from minor things like parking fees at the airport and some courier delivering the solar panels etc. Most of it is going straight out of the state and indeed much of it goes straight out of the country.

It's not interest rates that are holding back consumer spending. The number one issue I hear mentioned by people (just ordinary people, not economists etc) is the price of essentials, particularly the recent huge rises in electricity prices, and to a lesser extent the overall price of food etc. The next issue is the big job losses that keep happening or being threatened - I think Ford is the latest one there but it's certainly not the only tale of woe. Government spending cuts (primarily state governments) come in next as getting people worried, along with the assumed prospect of tax hikes and/or further privatisation and price hikes to essential services. 

In contrast, most seem relatively uninterested in interest rates these days simply because they are no longer top of the list of economic concerns for many. Few expect them to go up to any significant extent whereas loss of employment or substantial increases in non-interest costs are a very real concern.


----------



## Bill M (17 November 2012)

Smurf1976 said:


> In contrast, most seem relatively uninterested in interest rates these days simply because they are no longer top of the list of economic concerns for many. Few expect them to go up to any significant extent whereas loss of employment or substantial increases in non-interest costs are a very real concern.




As a self funded retiree I would like to see higher interest rates. The higher they are the more income I receive, the lower they are the less I tend to spend. Lower interest rates has the direct opposite effect on my household.


----------



## Julia (17 November 2012)

Smurf, great summary.  Perhaps a pity most economists don't have such a logical and commonsense approach.

BillM:  yep, obviously I agree with you.  I feel reasonably protected against further interest rate falls with only a small amount of cash at call, and the rest earning better rates at term deposits when these were available, but it's irritating that whenever rates are discussed by the government, all the emphasis is placed on those who have borrowed money and virtually no mention of the adverse effect on anyone who has been a saver.


----------



## sptrawler (18 November 2012)

Julia said:


> Smurf, great summary.  Perhaps a pity most economists don't have such a logical and commonsense approach.
> 
> BillM:  yep, obviously I agree with you.  I feel reasonably protected against further interest rate falls with only a small amount of cash at call, and the rest earning better rates at term deposits when these were available, but it's irritating that whenever rates are discussed by the government, all the emphasis is placed on those who have borrowed money and virtually no mention of the adverse effect on anyone who has been a saver.




Don't worry, the government doesn't want the interest rate to fall to the point that more and more self funded retirees qualify for the pension.


----------



## Bill M (21 November 2012)

Alert, again!

UBank has now dropped their rates (including bonus) down to 4.91%. The RBA keeps rates steady but UBank continues to drop theirs. I think they will see massive withdrawals.

https://www.ubank.com.au/index.htm


----------



## Julia (21 November 2012)

Bill M said:


> . I think they will see massive withdrawals.
> 
> https://www.ubank.com.au/index.htm



Agree.  But where will those depositors go?  The whole interest rate environment is similar at present.
From the RBA minutes of the last meeting, it sounds like another cut in December too.
Might force more back into the market.


----------



## Aussiejeff (21 November 2012)

Julia said:


> Agree.  But where will those depositors go?  The whole interest rate environment is similar at present.
> From the RBA minutes of the last meeting, it sounds like another cut in December too.
> *Might force more back into the market.*




I don't consider savers/retirees being forced to gamb....er....specula....errr.._.invest _ in the market a healthy state of affairs in Oz. 

Not so long ago (ok, it was the late '50's) when I was a lad, saving for a rainy day was hammered in to all of us kiddies. Wot happened?

Sign of these bleedin' times eh?


----------



## Klogg (21 November 2012)

Aussiejeff said:


> I don't consider savers/retirees being forced to gamb....er....specula....errr.._.invest _ in the market a healthy state of affairs in Oz.




Isn't the intention of lowering interest rates to get people/companies/institutions investing more, rather than hoarding cash? Whether or not it's in the financial markets is a different story (although I'm not personally aware of any other viable alternatives).


----------



## Bill M (21 November 2012)

Julia said:


> Agree.  But where will those depositors go?  The whole interest rate environment is similar at present.
> From the RBA minutes of the last meeting, it sounds like another cut in December too.
> Might force more back into the market.




Currently I am putting my cash in the Rabo HISA which is still paying 5.46% with the bonus. Term deposits are really down now, nothing over 5%. 

I am currently dribbling small amounts into the market on any corrections. Also eyeing off any hybrids, floating rate notes or convertible shares that may get miss-priced. It isn't really easy right now I agree.


----------



## Klogg (21 November 2012)

Bill M said:


> It isn't really easy right now I agree.




Agreed. And to make matters worse, the Basel III capital requirements will only hurt term deposits I'd imagine.


----------



## Julia (21 November 2012)

Klogg said:


> Isn't the intention of lowering interest rates to get people/companies/institutions investing more, rather than hoarding cash?



And to just SPEND in order to stimulate the economy.


> Whether or not it's in the financial markets is a different story (although I'm not personally aware of any other viable alternatives).



This is where many will come unstuck as we've already seen too often, viz Storm Financial, Banksia, City Pacific et al.  Many people will feel they lack the understanding or expertise to invest in the market directly so will take the recommendations of financial advisers (whom they later discover have the interests of the client as very secondary to their own), or be sucked in by advertising for eg City Pacific and ultimately lose much of what they invest.



Bill M said:


> Currently I am putting my cash in the Rabo HISA which is still paying 5.46% with the bonus. Term deposits are really down now, nothing over 5%.



And unlikely that these term deposit rates will improve for some time.  The Rabo HISA is OK now, but the likelihood would be that I'd move some money over there with all the stuffing about that that involves, and whacko, down would go their rate too.

I still have over two years to run on my 8% TD but those at 7% will conclude next March.  That will prompt me into doing something.  When the amount at call is under $100K, I don't worry too much about what it's earning, but when it's a larger amount I guess I'm going to have to pay some attention to the market again.


----------



## Tyler Durden (21 November 2012)

Bill M said:


> Alert, again!
> 
> UBank has now dropped their rates (including bonus) down to 4.91%. The RBA keeps rates steady but UBank continues to drop theirs. I think they will see massive withdrawals.
> 
> https://www.ubank.com.au/index.htm




Isn't it very misleading to continuously reduce the interest rate whilst keeping the 'Money Magazine Winner 2012' sticker? From memory, they had that sticker since interest rate was 6.51% (including bonus) and it deserved such an award. But if they thereafter reduce it to, say, 1%, someone without background knowledge may see it and think it's the best deal out there.



Julia said:


> And to just SPEND in order to stimulate the economy.




I know that's the theory, but can't that reasoning also backfire? Won't savers think "damn, gonna earn less on my money now, so I'll save MORE"


----------



## Ves (21 November 2012)

Tyler Durden said:


> I know that's the theory, but can't that reasoning also backfire? Won't savers think "damn, gonna earn less on my money now, so I'll save MORE"



The jobless rate will go up for a start.  Then all sorts of things start happening that forces enough people to spend.


----------



## Julia (21 November 2012)

Tyler Durden said:


> Isn't it very misleading to continuously reduce the interest rate whilst keeping the 'Money Magazine Winner 2012' sticker? From memory, they had that sticker since interest rate was 6.51% (including bonus) and it deserved such an award. But if they thereafter reduce it to, say, 1%, someone without background knowledge may see it and think it's the best deal out there.



Yes, good point.



> I know that's the theory, but can't that reasoning also backfire? Won't savers think "damn, gonna earn less on my money now, so I'll save MORE"




Quite so, Tyler.  As has been demonstrated with interest rate cuts so far.
Many people have been scarred by the GFC and have become much more conservative as a result.


----------



## Tyler Durden (21 November 2012)

Julia said:


> Yes, good point.
> 
> 
> 
> ...




I'm thinking of writing to the authority that handles misleading advertisements.


----------



## white_goodman (22 November 2012)

Tyler Durden said:


> I know that's the theory, but can't that reasoning also backfire? Won't savers think "damn, gonna earn less on my money now, so I'll save MORE"




thats exactly what has happened, banks have been replacing wholesale funding with domestic deposits, mortgage debt reduction increasing (counted as savings in the data)


----------



## prawn_86 (22 November 2012)

Bill M said:


> the Rabo HISA which is still paying 5.46% with the bonus.




Their website says 'up to' 5.11%


----------



## Bill M (22 November 2012)

prawn_86 said:


> Their website says 'up to' 5.11%




For new customers yes but for existing customers there is a loyalty bonus which is 1.16% above their 4.30% totalling 5.46%.

Check it out under the existing customers heading here:  http://www.rabodirect.com.au/high-interest-savings/default.aspx?lnk=prd-box


----------



## Julia (22 November 2012)

A relevant point I've noticed is that sometimes an offer will appear on www.infochoice.com.au which does not appear on the institution's website.


----------



## Bill M (18 December 2012)

UBank has done it again! They have sneaked in another rate drop, down to 4.66% including bonus. (No notification emails sent) 

https://www.ubank.com.au/index.htm 

The reviews they are getting are nearly all negative now. Click on the link above then on the interest rates, then on reviews to view.


----------



## Bill M (18 December 2012)

Some good news here, new and existing customers can get 5.10% interest for the next 12 Months with ME Bank, might be worth a look.

http://www.mebank.com.au/promotions/HigherForLongerDec2012/index.html?src=WEB_SAVINGSDISPLAY_1212


----------



## Julia (18 December 2012)

Thanks for that, Bill.  I hadn't heard of ME Bank.  Google shows they are owned by Industry Super Funds, Melbourne based, APRA regulated.

Why do you think they are offering a rate considerably higher than most other institutions?
(ANZ last Friday dropped their at call rate to 4.75%.)


----------



## Julia (18 December 2012)

Have just checked with ME Bank.  The offer is not available to SMSFs.


----------



## Bill M (18 December 2012)

Julia said:


> Thanks for that, Bill.  I hadn't heard of ME Bank.  Google shows they are owned by Industry Super Funds, Melbourne based, APRA regulated.
> 
> Why do you think they are offering a rate considerably higher than most other institutions?
> (ANZ last Friday dropped their at call rate to 4.75%.)





My best guess is that for the last 2 years they were no where near the best and they probably lost a lot of customers and now they are mostly likely trying to claw them back. It seems to me all of these banks do own promotions at different times, I guess ME Bank is having their turn now. They also have a competitive home loan rate at present, maybe they need funding?

With customers (like myself) scrounging around for the best rates I think it pays to stay on top with rates. I have no loyalty or hesitation to change banks when the situation arises.

Rabo HISA is still good until the end of January too.


----------



## Julia (18 December 2012)

Bill M said:


> With customers (like myself) scrounging around for the best rates I think it pays to stay on top with rates. I have no loyalty or hesitation to change banks when the situation arises.
> 
> Rabo HISA is still good until the end of January too.



Agree on both counts.  RABO is one of the few banks (as far as I can see) that actually offers existing customers a better rate on the HISA than new customers, currently 5.16%.


----------



## oldpos (18 December 2012)

Julia said:


> RABO is one of the few banks (as far as I can see) that actually offers existing customers a better rate on the HISA than new customers, currently 5.16%.




Julia,   What I see is 4% standard with another 0.81% bonus.


----------



## Bill M (18 December 2012)

oldpos said:


> Julia,   What I see is 4% standard with another 0.81% bonus.




That is for new customers. For existing customers their rate is 5.16%, that is what I was referring too.

Click on the following link and then click on existing customers and you will see that rate, cheers.

http://www.rabodirect.com.au/high-interest-savings/


----------



## Julia (18 December 2012)

oldpos said:


> Julia,   What I see is 4% standard with another 0.81% bonus.



As I initially saw it too, oldpos.  That's the headline on the website.  As Bill has said, you have to pursue the link for "Existing customers".  I'd not have found it had I not phoned Rabodirect because it's been so long since I accessed my accounts there I'd forgotten my PIN, and asked about the various rates on offer at the same time.

It's not unlike ANZ not advertising its at call online a/c on its main website, but just making it available via e.g. Infochoice.
Not sure if that's still the case but it was a year or so ago.


----------



## Garpal Gumnut (18 December 2012)

Julia said:


> Agree on both counts.  RABO is one of the few banks (as far as I can see) that actually offers existing customers a better rate on the HISA than new customers, currently 5.16%.






oldpos said:


> Julia,   What I see is 4% standard with another 0.81% bonus.






Bill M said:


> That is for new customers. For existing customers their rate is 5.16%, that is what I was referring too.
> 
> Click on the following link and then click on existing customers and you will see that rate, cheers.
> 
> http://www.rabodirect.com.au/high-interest-savings/






Julia said:


> As I initially saw it too, oldpos.  That's the headline on the website.  As Bill has said, you have to pursue the link for "Existing customers".  I'd not have found it had I not phoned Rabodirect because it's been so long since I accessed my accounts there I'd forgotten my PIN, and asked about the various rates on offer at the same time.
> 
> It's not unlike ANZ not advertising its at call online a/c on its main website, but just making it available via e.g. Infochoice.
> Not sure if that's still the case but it was a year or so ago.




Thanks all.

Am going to cash and looking to a 12 mo bedding.

Much appreciated.

Ain't ASF a good forum for info.

gg


----------



## prawn_86 (24 December 2012)

Citi has an account with 5.1% for the first 4 months for new customers. BEst i can find at the moment as i am moving my funds away from Ubank

http://www.citibank.com.au/aus/banking/savings_accounts.htm


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## Bill M (4 February 2013)

Be on your guard ladies and gentlemen, for the customers that opened their *RaboDirect HISA* before  30 September 2012 *your interest rates have just dropped to 4%*. No bonuses are going to be paid.

I am transferring all mine out to MEBank, they are paying 5.1% and it is the best online rate I can find, cheers.


----------



## Julia (4 February 2013)

Bill M said:


> Be on your guard ladies and gentlemen, for the customers that opened their *RaboDirect HISA* before  30 September 2012 *your interest rates have just dropped to 4%*. No bonuses are going to be paid.
> 
> I am transferring all mine out to MEBank, they are paying 5.1% and it is the best online rate I can find, cheers.



Thanks for that, Bill.  I've just checked and mine has also dropped to 4%.  Thank goodness I didn't transfer at call cash there.
I guess they did only offer that bonus rate for a set period and that has now expired.
Gives a good indication as to how flush with funds the banks are and will push more liquidity into the sharemarket as it looks for a more profitable home.


----------



## Knobby22 (4 February 2013)

I've always put my cash in ME. They treat you honestly and give you a good rate without you having to call them. Big banks are such a pain.


----------



## Serpentis (1 March 2013)

UBank has risen from 4.66% to 4.91% (with savings bonus), making it higher than any other accounts I know of, although they may rise soon as well. 

Seems these accounts are always changing places as they fiddle with the rates. I'm happy to stay with UBank because of the no withdrawal conditions and the high rates don't expire.


----------



## Tyler Durden (1 March 2013)

I have accounts with UBank and ING.

I very recently moved my ING money to ME Bank. I just got sick and tired of seeing all these ING offers for new customers where they get a bonus $50 for opening an account, yet there's barely any loyalty for current customers.


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## Julia (1 March 2013)

Tyler Durden said:


> I very recently moved my ING money to ME Bank. I just got sick and tired of seeing all these ING offers for new customers where they get a bonus $50 for opening an account, yet there's barely any loyalty for current customers.



That's just an obvious means for the banks to attract new customers.  They have to continue to seek growth.

Perhaps consider loyalty to a bank over some years and you might get some benefits back.
I know that will be an unpopular view as most people make it their mission to hate banks, but it has worked for me.


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## FlyingFox (1 March 2013)

Serpentis said:


> UBank has risen from 4.66% to 4.91% (with savings bonus), making it higher than any other accounts I know of, although they may rise soon as well.
> 
> Seems these accounts are always changing places as they fiddle with the rates. I'm happy to stay with UBank because of the no withdrawal conditions and the high rates don't expire.




Noticed this as well. I was thinking about switching to ME Bank but will stick with them for the time being. Maybe they were losing customers?


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## Tyler Durden (2 March 2013)

Julia said:


> That's just an obvious means for the banks to attract new customers.  They have to continue to seek growth.
> 
> Perhaps consider loyalty to a bank over some years and you might get some benefits back.
> I know that will be an unpopular view as most people make it their mission to hate banks, but it has worked for me.




I was with ING for 8 years.


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## Tyler Durden (5 March 2013)

My first impression of ME Bank - although I love the interest rate, I am starting to question their admin. They made a typo error with my account number which prevented linking two accounts together, and they seem to send me mail in duplicates (ie. I get two copies of everything).


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## Julia (5 April 2013)

Just a reminder to people to regularly check their interest rate on at call accounts.  Mine which was at 4.75% has abruptly dropped down to 3%, which is apparently ANZ's standard variable rate.  Infochoice is showing ANZ offering 4.6% at call.  Better rates around but most of them seem unavailable to SMSFs.

Has anyone used ING? They have a "Business Optimiser" for SMSFs offering 4.75% for six months and a few other banks offering 5%.  Who owns RAMS?

Any recommendations?


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## sptrawler (5 April 2013)

Julia said:


> Just a reminder to people to regularly check their interest rate on at call accounts.  Mine which was at 4.75% has abruptly dropped down to 3%, which is apparently ANZ's standard variable rate.  Infochoice is showing ANZ offering 4.6% at call.  Better rates around but most of them seem unavailable to SMSFs.
> 
> Has anyone used ING? They have a "Business Optimiser" for SMSFs offering 4.75% for six months and a few other banks offering 5%.  Who owns RAMS?
> 
> Any recommendations?




I think RAMS was bought out by Westpac.

UBank give about 4.5 term deposit, I think.

Several banks have 4.75% variable at the moment.


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## drsmith (5 April 2013)

Julia said:


> Just a reminder to people to regularly check their interest rate on at call accounts.  Mine which was at 4.75% has abruptly dropped down to 3%, which is apparently ANZ's standard variable rate.  Infochoice is showing ANZ offering 4.6% at call.  Better rates around but most of them seem unavailable to SMSFs.



ANZ have reduced the bonus from 1.75% to 1.6%. This might become a trend depending on how confident the banks are with their sources of funding and interest margins going forward. 

I take note of when the bonus rate is due to expire and contact the bank before it does.


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## stewiejp (5 April 2013)

Julia said:


> Just a reminder to people to regularly check their interest rate on at call accounts.  Mine which was at 4.75% has abruptly dropped down to 3%, which is apparently ANZ's standard variable rate.  Infochoice is showing ANZ offering 4.6% at call.  Better rates around but most of them seem unavailable to SMSFs.
> 
> Has anyone used ING? They have a "Business Optimiser" for SMSFs offering 4.75% for six months and a few other banks offering 5%.  Who owns RAMS?
> 
> Any recommendations?




I've been with ING for about 15 years - at call account, while it pays 0% interest there are also zero fees, so long as you withdraw $200 or more at an ATM (any ATM in Australia) - if there is a fee, accept it and the fee is reimbursed by ING same day. Also if you withdraw $200+ at a supermarket EFTPOS they credit you 50c. Another gimmick they have at the moment is if you pay by pay and wave (Visa Debit) they rebate you 5% of the value. That ends in July I think. Not a lot of money but sure beats paying fees IMO.
Not with ING for Super, but considering switching. It looks good for SMSF, as well as a "regular" super fund. 
ING's online saver isn't bad - 3.25% - 4% (200 deposit/month, no withdrawals), I use this one to put share trading money aside since ComSec ditched the 4% account. 

I'm also with RAMS (Owned by Westpac as stated) online saver - 5.01% providing $200+ is deposited per month (excluding interest) and no withdrawals. Drops to 4.21% if either of that criteria isn't met. 

Pretty happy with both fee free accounts. Both claim to be covered by Government guarantee if that makes a difference.


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## YMI (5 April 2013)

stewiejp said:


> I've been with ING for about 15 years - *at call account, while it pays 0% interest* there are also zero fees, so long as you withdraw $200 or more at an ATM (any ATM in Australia) - if there is a fee, accept it and the fee is reimbursed by ING same day. Also if you withdraw $200+ at a supermarket EFTPOS they credit you 50c. Another gimmick they have at the moment is if you pay by pay and wave (Visa Debit) they rebate you 5% of the value. That ends in July I think. Not a lot of money but sure beats paying fees IMO.
> Not with ING for Super, but considering switching. It looks good for SMSF, as well as a "regular" super fund.
> *ING's online saver isn't bad - 3.25% - 4%* (200 deposit/month, no withdrawals), I use this one to put share trading money aside since ComSec ditched the 4% account.
> ...



 What is your definition of call account? Isn’t the online saver and a call account the same?


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## stewiejp (5 April 2013)

At call (ING Orange Everyday) = ATM card I can withdraw cash with (the one which pays 0% interest, czero fees etc)

Online Savings = No ATM card, (in my eg. ING Savings Maximiser, and RAMS online saver) - to access the funds via an ATM the money needs to be transferred to an account with ATM access. This is instant if transferring to an account with the same bank. 

Not really an issue in my case as I keep enough to live on in my ATM card account (Everyday), and toss the rest of my income into the online saver accounts or share trading accounts. In an emergency funds can be instantly transferred to my linked Everyday/ATM card account and I can withdraw that way.... hope that makes sense.


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## YMI (5 April 2013)

Thanks for enlightening, does make sense now  I don’t think there are many banks that pay significant interest for money in transaction accounts though.


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## Julia (5 April 2013)

drsmith said:


> I take note of when the bonus rate is due to expire and contact the bank before it does.



And as a result do they adjust your rate up to best rate that is currently being offered?



sptrawler said:


> Several banks have 4.75% variable at the moment.



Yes, and more, but few are available to SMSFs.



stewiejp said:


> I've been with ING for about 15 years - at call account, while it pays 0% interest there are also zero fees,



Why would you use an at call account which pays no interest when there are plenty that do pay quite reasonable interest?


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## stewiejp (6 April 2013)

Julia said:


> Why would you use an at call account which pays no interest when there are plenty that do pay quite reasonable interest?




Thanks for the heads up... when I opened the thing (ING) - there wasn't any* fee free* interest bearing accounts with ATM access. Just "did a google" and discovered the Bank West Hero @ 3.5% (is this what you refer to?) which could suit me. Might be time to reshuffle.

Thanks.


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## drsmith (6 April 2013)

Julia said:


> And as a result do they adjust your rate up to best rate that is currently being offered?



They adjust it to their current bonus rate on offer, without argument. 

Given that they've recently reduced the bonus margin (I'm still currently getting 4.75%), I might try and push them a little harder next time, depending on what else is on offer. 

One thing about the ANZ account is that it is unrestricted in terms of deposits and withdrawals whereas some of the others that offer the slightly higher rates have punitive restrictions on the above.


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## Julia (6 April 2013)

drsmith said:


> They adjust it to their current bonus rate on offer, without argument.



Yep, my experience also, at least so far. 



> Given that they've recently reduced the bonus margin (I'm still currently getting 4.75%), I might try and push them a little harder next time, depending on what else is on offer.



I've only ever asked for what's being currently offered via Infochoice.  Would be very interested to know if you're able to push it further.



> One thing about the ANZ account is that it is unrestricted in terms of deposits and withdrawals whereas some of the others that offer the slightly higher rates have punitive restrictions on the above.



Yes, some a/cs require eg $200 to be added every month etc.


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## noirua (3 May 2013)

The European Central Bank cuts its main interest rate to a new low of 0.50% in an attempt to drag the euro zone out of the longest recession in its history.


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## MrBurns (3 May 2013)

I think rates will drop here soon, business is on its knees and the RBA has already said they will act in those circumstances.


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## white_goodman (3 May 2013)

just an fyi there is no zero lower bound, only in theory and if the CB only dictates overnight cash rates... I could forsee the RBA getting to 2.50 then doing unconventional MP


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## satanoperca (3 May 2013)

MrBurns said:


> I think rates will drop here soon, business is on its knees and the RBA has already said they will act in those circumstances.




Agreed that business is getting hit, but alias not our Big Banks, who once again are racking it in. 

Property market is stable and unemployment is still relatively low, inflation dead in the middle of the RBA's target range.

While the rest of the world seems to be falling apart, I see rates on hold for some time in Oz.

We do live in the lucky country.

Cheers


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## MrBurns (5 May 2013)

MrBurns said:


> I think rates will drop here soon, business is on its knees and the RBA has already said they will act in those circumstances.




I think it very likely rates will fall on Tuesday, if not certainly next month.

The race to yield will increase, shares will rise again but which ones to buy beside TLS ? 
Banks seem too high now and not without risk from Europe , perhaps TAH ???


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## Tyler Durden (5 May 2013)

satanoperca said:


> We do live in the lucky country.




And an expensive one.


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## MrBurns (7 May 2013)

> Reserve cuts rates to lowest in five decades
> 
> Posted 1 minute ago
> 
> ...




I knew it 

http://www.abc.net.au/news/2013-05-07/reserve-cuts-rates-to-lowest-in-five-decades/4674944


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## Julia (7 May 2013)

Why are you giving that the thumbs up?   Haven't you got significant funds on deposit?


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## MrBurns (7 May 2013)

Julia said:


> Why are you giving that the thumbs up?   Haven't you got significant funds on deposit?




I guess 2 reasons, one I picked something right for a change  and 2 I'm more interested in the share prices than the TD rate, just locked in for 3 months again last week.


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## baby_swallow (7 May 2013)

The banks have been reducing their fixed rates lately. Which is unusual. 
Does the banks knew something that we don't?


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## MrBurns (7 May 2013)

baby_swallow said:


> The banks have been reducing their fixed rates lately. Which is unusual.
> Does the banks knew something that we don't?




Business is suffering - the RBA said they would reduce rates if that continued = rate cut...


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## ROE (7 May 2013)

The chase for high yield stock will be back on


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## Uncle Festivus (7 May 2013)

The RBA are idiots! All it does is take the savers down to the spendthrifts level so that absolutely no one has any money to spend the economy out of recession. If people can't make a go of it with interest rates where they were they never will because it's not an IR problem - it's a structural global problem. So we join the ZIRP club after all!


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## satanoperca (7 May 2013)

Uncle Festivus said:


> The RBA are idiots! All it does is take the savers down to the spendthrifts level so that absolutely no one has any money to spend the economy out of recession. If people can't make a go of it with interest rates where they were they never will because it's not an IR problem - it's a structural global problem. So we join the ZIRP club after all!




Agree. Why save, why work, why be efficient, just borrow, borrow and borrow on housing as you have little chance of getting a business loan to do something productive.



> One question however is whether a home loan rate cut is what is really needed now. Home prices are already recovering after a slight dip last year. The place where more aggressive bank interest rate cuts is most needed is in the business sector, and in the industrial, retail and other non mining business sectors in particular.
> 
> Read more: http://www.theage.com.au/business/t...uts-to-come-20130507-2j5ao.html#ixzz2SarLfHz1


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## Klogg (7 May 2013)

Uncle Festivus said:


> The RBA are idiots! All it does is take the savers down to the spendthrifts level so that absolutely no one has any money to spend the economy out of recession. If people can't make a go of it with interest rates where they were they never will because it's not an IR problem - it's a structural global problem. So we join the ZIRP club after all!




That's a little harsh - all they've done is lowered the cash rate as a result of a 'stubbornly high' currency.

Their other option of course is to start the printing presses and go through a US style QE, but the effects are very similar - without the housing boom (which, as they've stated, is something they want in order to replace the mining investment drop-off)

And the idea that savers make up the majority of spending, thus 'spend[ing] the economy out of recession' is not entirely accurate...

BTW, joining the ZIRP club will probably help. Lower AUD, get more bang for buck on mining exports, manufacturing can survive once more, etc. 
The ONLY thing stopping them is rampant inflation.


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## Uncle Festivus (7 May 2013)

Klogg said:


> That's a little harsh - all they've done is lowered the cash rate as a result of a 'stubbornly high' currency.
> 
> Their other option of course is to start the printing presses and go through a US style QE, but the effects are very similar - without the housing boom (which, as they've stated, is something they want in order to replace the mining investment drop-off)
> 
> ...




Very high house prices are a drag on the economy so not sure why they would want that, in fact I recall they have said that the housing bubble is in fact a bubble.

From what I can gather, the ratio is about 4 Depositors/Savers to each Borrower, so the effect of the rate cut will reduce the spending power in the economy by reducing the incomes of a large number of people who are retirees or who are on fixed incomes.

Joining the ZIRP club simply means that we can't compete in the currency wars and are destined for a beggar thy neighbor economy like the rest of the world.

2.5% inflation wouldn't be regarded as rampant?


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## Knobby22 (7 May 2013)

I agree Unc. Let's see a little deflation. It all seems to be government or formally government utilities that are causing the inflation in any case. If we start off another housing price surge I can't see it ending well. Talk about distortions in the economy.


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## tinhat (7 May 2013)

Uncle Festivus said:


> The RBA are idiots! All it does is take the savers down to the spendthrifts level so that absolutely no one has any money to spend the economy out of recession. If people can't make a go of it with interest rates where they were they never will because it's not an IR problem - it's a structural global problem. So we join the ZIRP club after all!




The RBA are IMHO only now just catching up with fixing the big blunder they made in putting interest rates up on Melbourne Cup Day 2010. They over-tightened worried about forecasts of a sustained mining investment and terms of trade boom than ended up shorter lived than forecast. They had no reason to raise rates on that occasion. It was a step too far that didn't factor in the external threats to the economy that were lurking.

Banks are not the engine rooms of the economy. I don't see why people expect that depositing money into a bank is going to be a good deal for them or for the economy as a whole. If you want low risk then you've got to expect low risk returns. If you want to be rewarded for putting your money to work then buy shares in a business or an investment fund where the money is put to work generating real business activity. The Aussie banks are just home mortgage lenders. If you need a guaranteed income stream there are annuity products out there that you can invest in.

Furthermore, if people are worried about low rates causing bubbles in the property market, then as I have suggested on these fora before, we should look at credit rationing for mortgages - as we did in the old days. For goodness sake let's get rid of first home buyer grants that only inflate house prices.


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## MrBurns (8 May 2013)

I don't think this will fuel the housing market, I think people have had enough of obviously inflated property prices and will lay back.
However I think the Chinese are coming back into the market.
I agree that this cut is to lower the dollar to assist business.
I do think it will inflate the share market as money in the bank is no longer a proposition for income.


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## Uncle Festivus (8 May 2013)

Klogg said:


> That's a little harsh - all they've done is lowered the cash rate as a result of a 'stubbornly high' currency.




So if, obviously, it's the exchange rate that is the most damaging for local industry, would it be possible or feasible to impose a levy on financial transactions repatriations out of the country such that the rate imposed would negate any benefit of speculators taking advantage of interest rate spreads, calculated by say the same  weightings as the USDX basket?? So if the RBA rate is 5% and the 'basket rate' is 2% then financial 'exports' are levied at 3%? There would be problems with genuine capital inflows to say banks, but that would not be such a bad thing as it would force them to lend sustainably ie not encouraging housing bubbles?

Something has to be done so the savers, who provide the funds for business, don't get shafted.

Jeremey Grantham - 

By keeping interest rates low, you`re transferring money away from retirees who spend every penny and are really hurting. And by the way, there`s far more of them every year now than there ever was when economic theories were being panned out. You take money from them, and who are the beneficiaries -- the guys who run the hedge funds and the banking system in general and speculators and corporations theoretically can use it to build. But they`re building less now than practically in history. There is no major league capital spending boom going on.


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## white_goodman (8 May 2013)

Uncle Festivus said:


> Joining the ZIRP club simply means that we can't compete in the currency wars and are destined for a beggar thy neighbor economy like the rest of the world.




there is no zero lower bound..

although savers do get hit by cash rate cuts, banks are still clamouring for domestic funding so the relative rates are better for savers relative to mortgage rates.. this can be seen in RBA reports on q4 last year


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## Calliope (8 May 2013)

Those of us who joined the flight to safety following the GFC will now have to have a re-think.

*Penny drops: savings are a dud*



> So you’re a self-funded retiree cursing the Reserve Bank for cutting interest rates. Don’t. If the RBA has forced you to realise your term deposits are duds, the mandarins have done you a favour.
> Savers dependent on fixed interest have been poorly advised for decades, not just over the past year as interest rates have tumbled. The dividend flow from a boring portfolio of industrial stocks trounces fixed interest and whatever the best daily rate might be from the on-line banks.
> And right now, even after the market has rallied to start the year, equity yields slaughter the best term deposit rates you could have grabbed last year. Of course the yields aren’t as tasty as they were in January or as extremely tasty as they were a year or two ago, but they’re still fine in the general scheme of things.




Read more: http://www.smh.com.au/business/mark...s-are-a-dud-20130508-2j6p1.html#ixzz2SfdynU36


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## Julia (8 May 2013)

tinhat said:


> I don't see why people expect that depositing money into a bank is going to be a good deal for them or for the economy as a whole. If you want low risk then you've got to expect low risk returns.



Not necessarily.  I don't regard my term deposits earning 8% as being any more risky than the funds at call at a bit under 5%.  Deposit rates at banks have more to do with the banks' requirement for funds at a given time than their relative safety.



> The Aussie banks are just home mortgage lenders. If you need a guaranteed income stream there are annuity products out there that you can invest in.



Annuity products require an absolute commitment in most cases.  Not everyone is happy to commit for such a long time ahead.  



MrBurns said:


> I do think it will inflate the share market as money in the bank is no longer a proposition for income.



Depends on whether you took a chance on fluctuating rates continuing to offer a reasonable return or alternatively locked in a higher rate.

I wouldn't be so sure that the latest rate cut will fuel a stampede into the share market.  It only represents a $250 p.a. drop on a $100K deposit.


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## Julia (8 May 2013)

> So you’re a self-funded retiree cursing the Reserve Bank for cutting interest rates. Don’t. If the RBA has forced you to realise your term deposits are duds, the mandarins have done you a favour.
> Savers dependent on fixed interest have been poorly advised for decades, not just over the past year as interest rates have tumbled. The dividend flow from a boring portfolio of industrial stocks trounces fixed interest and whatever the best daily rate might be from the on-line banks.
> And right now, even after the market has rallied to start the year, equity yields slaughter the best term deposit rates you could have grabbed last year. Of course the yields aren’t as tasty as they were in January or as extremely tasty as they were a year or two ago, but they’re still fine in the general scheme of things.




That's all very fine while the shares are appreciating in value.  Hardly held water for all those who didn't see the GFC coming and lost up to 50% of their invested capital.  I don't think the yield on those shares would have been compensation for that sort of capital loss.


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## Klogg (8 May 2013)

Julia said:


> That's all very fine while the shares are appreciating in value.  Hardly held water for all those who didn't see the GFC coming and lost up to 50% of their invested capital.  I don't think the yield on those shares would have been compensation for that sort of capital loss.




Agreed. The blanket statement "savers dependent on fixed interest have been poorly advised for decades" has so many things wrong with it... Just because fixed interest may not deliver much in the way of returns, it at least has the guarantee (if it's a term deposit with a well-capitalized institution) that you can draw down on the principal amount, and that amount is not at risk.

I couldn't think of anything more problematic than a retiree following this advice and dumping all their savings into bank shares (or any other 'high-yield' shares) and risk their livelihood for slightly larger returns.

Most important rule: Preservation of capital.


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## howmanyru (8 May 2013)

Just wondering what to do with my cash ATM. I see a very long period of low interest rates around the globe and my cash will be chewed away by inflation. It is forcing people to take risks who otherwise wouldn't. I don't want to buy bank or telstra shares because I feel i think they will level off soon, and wont be worth the risk for a 5 or 6% yeild. What to do ?


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## VSntchr (8 May 2013)

Klogg said:


> Agreed. The blanket statement "savers dependent on fixed interest have been poorly advised for decades" has so many things wrong with it... Just because fixed interest may not deliver much in the way of returns, it at least has the guarantee (if it's a term deposit with a well-capitalized institution) that you can draw down on the principal amount, and that amount is not at risk.
> 
> I couldn't think of anything more problematic than a retiree following this advice and dumping all their savings into bank shares (or any other 'high-yield' shares) and risk their livelihood for slightly larger returns.
> 
> Most important rule: Preservation of capital.




Also, if fixed interest is giving returns of 10% but inflation is 8%, they would be happy.
If fixed interest is giving returns of 4% but inflation is 2%, they would NOT be happy.

Its frustratingly simple, but alot of the population think this way..at least thats what Ive come across...


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## white_goodman (8 May 2013)

VSntchr said:


> Also, if fixed interest is giving returns of 10% but inflation is 8%, they would be happy.
> If fixed interest is giving returns of 4% but inflation is 2%, they would NOT be happy.
> 
> Its frustratingly simple, but alot of the population think this way..at least thats what Ive come across...




there is a reason for this and they are in part mostly right to feel happy in first scenario... from my market monetarist/NGDP macro school....

People take out loans/mortgages in NOMINAL amounts, its not a real value loan

www.themoneyillusion.com for all your NGDP targeting needs..


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## Klogg (8 May 2013)

howmanyru said:


> Just wondering what to do with my cash ATM. I see a very long period of low interest rates around the globe and my cash will be chewed away by inflation. It is forcing people to take risks who otherwise wouldn't. I don't want to buy bank or telstra shares because I feel i think they will level off soon, and wont be worth the risk for a 5 or 6% yeild. What to do ?




Well, even in an interest-bearing account around 4%, you're not losing money to inflation. In fact, you're gaining about 1-1.5% over inflation per year (gross - the net amount would depend on your marginal tax rate).

There are the following options though:
- Government bonds
- Corporate notes (fixed, floating and convertible)
- Equities
- A house
- Other derivative products

If it were me and I was reluctant to buy equities but still worried about inflation, I'd simply go for the term deposit/interest bearing account.
It's very hard to justify corporate notes ATM, unless there's a big upside upon conversion.

But, as with all things, get professional advice.


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## Julia (8 May 2013)

Klogg said:


> Most important rule: Preservation of capital.



Agree absolutely.   It's often said that this applies only to those approaching or already in retirement.
I've never understood why.  No matter what your stage in life, surely you're going to primarily focus on preserving existing capital.


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## Klogg (8 May 2013)

Julia said:


> Agree absolutely.   It's often said that this applies only to those approaching or already in retirement.
> I've never understood why.  No matter what your stage in life, surely you're going to primarily focus on preserving existing capital.




Even the best of the best agree (I could fish up a few Munger/Buffett quotes on this) - the easiest way to make money is to avoid mistakes, rather than make amazing calls. Therefore, you only go in when you're sure... Until then, chill on the sidelines and look for the right opportunity.


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## tinhat (9 May 2013)

Julia said:


> Not necessarily.  I don't regard my term deposits earning 8% as being any more risky than the funds at call at a bit under 5%.




Only 8%. Depending on when you made those term deposits that may have been quite a low return compared to the alternatives. As you may recall I was posting on these fora a couple of years ago about the compelling dividend yields on offer from shares in the major banks. A  couple of examples. WBC shares purchased Nov 2010 yielding 12% including franking credits this financial year plus 51% unrealised capital gain. ANZ shares purchased Aug 2011 yielding 11% including franking credits this FY plus 57% unrealised capital gain.

8% is not a bad return (especially compared to what is currently available) but it is a low return compared to the performance of bank shares over the past couple of years. I'm not making any comment about your personal situation as obviously I don't know what it is. I'm just pointing out that my argument is still valid when comparing your term deposit rate to the alternative returns on bank shares over the past couple of years.


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## Uncle Festivus (9 May 2013)

Well that's the real purpose of a central bank then - to make cash so disliked it's either gotta be spent or put into things that are riskier ie stocks? It doesn't necessarily mean stocks, even banks, are better but it's all that's left? Not many are talking about the fact that rates are extra low because of a good reason - the economy stinks. And that's going to hit banks hard eventually as well? The question is then timing when to exit....into boring cash:frown:


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## Klogg (9 May 2013)

tinhat said:


> 8% is not a bad return (especially compared to what is currently available) but it is a low return compared to the performance of bank shares over the past couple of years.




This is of little comfort if you're of the belief that regulatory requirements, especially around housing, are not adequate.
Not that it's the most likely scenario, but should our housing market cop a US style beat-down on prices, bank shares will go down with it. Term deposits will stay.

(I'm not bearish on everything BTW, I'm 60% in equities ATM)


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## inq (9 May 2013)

Klogg said:


> This is of little comfort if you're of the belief that regulatory requirements, especially around housing, are not adequate.
> Not that it's the most likely scenario, but should our housing market cop a US style beat-down on prices, bank shares will go down with it. Term deposits will stay.
> 
> (I'm not bearish on everything BTW, I'm 60% in equities ATM)




The banks haven't suffered too bad considering the significant falls in the property market of late. (10-40% drops in some areas). Not as bad as US, but for the most part bad debt has been slowly removed where possible during the GFC.


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## Julia (9 May 2013)

tinhat said:


> Only 8%. Depending on when you made those term deposits that may have been quite a low return compared to the alternatives.



My comment was in response to your suggestion that returns on bank deposits are low because "low risk = low returns".  I was attempting to point out that imo the risk on my bank deposits was no different now at call earning about half the interest of the term deposit.  I could also have noted the minimal yield offered by some widely held companies, eg BHP et al.  8% for no risk seems OK to me.



> As you may recall I was posting on these fora a couple of years ago about the compelling dividend yields on offer from shares in the major banks.



Sorry.  No, I don't recall.  Don't recall what various posters have said a week ago in most instances.



> A  couple of examples. WBC shares purchased Nov 2010 yielding 12% including franking credits this financial year plus 51% unrealised capital gain. ANZ shares purchased Aug 2011 yielding 11% including franking credits this FY plus 57% unrealised capital gain.



Yes, they were good.  The returns on the banks, however, didn't represent the market as a whole.



> 8% is not a bad return (especially compared to what is currently available) but it is a low return compared to the performance of bank shares over the past couple of years. I'm not making any comment about your personal situation as obviously I don't know what it is.



Obviously your recall of my posts over the last couple of years is as minimal as mine of yours,)) because I've made it pretty clear that my focus is these days on capital preservation and minimal risk.  I spent many years taking some risks, 90% of which paid off well, always with a carefully calculated target of accumulated capital, and the plan that I'd then opt for the peace of mind of a low risk environment.  That target achieved quite a few years ago, I'm happy with not worrying about the potential of the market tanking if I don't bother to follow it for a week.



Uncle Festivus said:


> Well that's the real purpose of a central bank then - to make cash so disliked it's either gotta be spent or put into things that are riskier ie stocks? It doesn't necessarily mean stocks, even banks, are better but it's all that's left? Not many are talking about the fact that rates are extra low because of a good reason - the economy stinks. And that's going to hit banks hard eventually as well? The question is then timing when to exit....into boring cash:frown:



+1.



Klogg said:


> This is of little comfort if you're of the belief that regulatory requirements, especially around housing, are not adequate.
> Not that it's the most likely scenario, but should our housing market cop a US style beat-down on prices, bank shares will go down with it. Term deposits will stay.



Exactly.   And the number of people adversely affected by the GFC indicates few have much idea about how to jump off a trend when it reverses.
I do have some shares also.


----------



## tinhat (9 May 2013)

Julia said:


> My comment was in response to your suggestion that returns on bank deposits are low because "low risk = low returns".  I was attempting to point out that imo the risk on my bank deposits was no different now at call earning about half the interest of the term deposit.  I could also have noted the minimal yield offered by some widely held companies, eg BHP et al.  8% for no risk seems OK to me.




Out of interest, when did you take out the term deposit that is paying 8% and for what term?


----------



## FlyingFox (9 May 2013)

tinhat said:


> Out of interest, when did you take out the term deposit that is paying 8% and for what term?




I'll take a stab, would've been 2008 for 5 yrs??


----------



## Julia (9 May 2013)

tinhat said:


> Out of interest, when did you take out the term deposit that is paying 8% and for what term?






FlyingFox said:


> I'll take a stab, would've been 2008 for 5 yrs??



Wrong, actually.

Look, fellas.  How about you put up a full statement of all your financial decisions over X years?
I have already disclosed more than most people about my personal affairs, and frankly don't feel obliged to answer questions on a public forum that are entirely my business.


----------



## MrBurns (9 May 2013)

Julia said:


> Wrong, actually.
> 
> Look, fellas.  How about you put up a full statement of all your financial decisions over X years?
> I have already disclosed more than most people about my personal affairs, and frankly don't feel obliged to answer questions on a public forum that are entirely my business.




Fair enough Julia, just leave it at that.


----------



## FlyingFox (9 May 2013)

Julia said:


> Wrong, actually.
> 
> Look, fellas.  How about you put up a full statement of all your financial decisions over X years?
> I have already disclosed more than most people about my personal affairs, and frankly don't feel obliged to answer questions on a public forum that are entirely my business.




Apologies Julia, didn't mean to offend.


----------



## ROE (9 May 2013)

Get high get junkies -
Some junk and hybrid bonds with careful research can delivery very good rate
With a possibility of capital appreciation...

I got some westpac hybrid now trading close to 102 on face value of $100 paying 3.2% over 90 days bank bill...


----------



## tinhat (10 May 2013)

Julia said:


> Wrong, actually.
> 
> Look, fellas.  How about you put up a full statement of all your financial decisions over X years?
> I have already disclosed more than most people about my personal affairs, and frankly don't feel obliged to answer questions on a public forum that are entirely my business.




God bless you. I've been quite interested to read most of what you have had to say. I don't know anyone here from a bar of soap. Only here to learn from others. I've been here for about four years. I've learnt so much - so much more to learn. But not from you obviously. I'm not here for titillation. Only to learn.


----------



## Julia (10 May 2013)

FlyingFox said:


> Apologies Julia, didn't mean to offend.



Thanks Flying Fox.  No offence taken.


----------



## Julia (10 May 2013)

tinhat said:


> God bless you. I've been quite interested to read most of what you have had to say. I don't know anyone here from a bar of soap. Only here to learn from others. I've been here for about four years. I've learnt so much - so much more to learn. But not from you obviously. I'm not here for titillation. Only to learn.



:headshake


----------



## sydboy007 (10 May 2013)

I'd argue better to invest in either ILBs of some sort.  From what I can see there's still the opportunity to lock in at over 3.5% + CPI for extended periods - up to 2030.

Considering a lot of balanced super funds target cpi + 3.5% over the long term, seems t be an ILB provides a similar return with little to no volatility in the underlying assets.

I'm really hoping that over the next few years we'll start to see decent corporate bonds listing on the ASX.  Less hybrids crap and more traditional fixed / floating rate / inflation bonds that provide income over the long term.


----------



## MrBurns (10 May 2013)

tinhat said:


> God bless you. I've been quite interested to read most of what you have had to say. I don't know anyone here from a bar of soap. Only here to learn from others. I've been here for about four years. I've learnt so much - so much more to learn. But not from you obviously. I'm not here for titillation. Only to learn.




What ? You could start by not posting when drunk, people have a right to their privacy, haven't learned anything from you either so we're even eh ?


----------



## craft (10 May 2013)

sydboy007 said:


> I'd argue better to invest in either ILBs of some sort.  From what I can see there's still the opportunity to lock in at over 3.5% + CPI for extended periods - up to 2030.




Who's issuing them?

Commonwealth Gov’t 2030 CPI Indexed bonds are only yielding .88% currently.


----------



## Julia (10 May 2013)

ANZ has dropped their home loan by 27 basis points.  Is this going to provoke some more competitive activity on the lending front?
So far they haven't reduced the online at call deposit rate.


----------



## tinhat (10 May 2013)

MrBurns said:


> What ? You could start by not posting when drunk, people have a right to their privacy, haven't learned anything from you either so we're even eh ?




How is the market price of a financial instrument private? Some person who I've never met makes a claim but refuses to back it up. The information she has provided is worthless and the opinions it backs even more so. Just my opinion. Drunk or sober.


----------



## MrBurns (10 May 2013)

tinhat said:


> . Just my opinion. Drunk or sober.




One must be careful not to be drawn into making statements about personal situations if possible, probing questions are a precursor to more probing questions so many think it's wise to draw a line early, I would be wise to do that myself.


----------



## McLovin (10 May 2013)

craft said:


> Who's issuing them?
> 
> Commonwealth Gov’t 2030 CPI Indexed bonds are only yielding .88% currently.




Sydney Airport. (that I know of).


----------



## Julia (10 May 2013)

tinhat said:


> How is the market price of a financial instrument private? Some person who I've never met makes a claim but refuses to back it up.



Just silly.  How would any provision of dates and terms validate anything already said or otherwise?  I could pick any dates and terms out of the air if I were so disposed.  It would prove nothing.  Neither have I any obligation to prove anything to you.

Next, you'd be demanding copies of my terms of deposit from the relevant institution(s).

You can please yourself whether you consider useful what I or anyone else on this forum says.  It's immaterial to me.

"Some person who (sic) I've never met" is demanding details of my personal investments, such details being irrelevant in the context of the general discussion.  Why on earth would I feel obliged to compromise my privacy in response?

Last comment from me to you on this, Tin Hat.  Rant away as you will.


----------



## tinhat (11 May 2013)

Julia said:


> Just silly.  How would any provision of dates and terms validate anything already said or otherwise?  I could pick any dates and terms out of the air if I were so disposed.  It would prove nothing.  Neither have I any obligation to prove anything to you.




It does matter to the conversation when the 8% term deposit was taken out and for what term. Are you implying that the term of a term deposit is immaterial to the investment? Who is being silly now? If the term was immaterial then there would be no difference in the interest rate of an at call deposit and a five month deposit. The yield curve would not exist. What a fool that Ben Bernanke has been with all this "operation twist" carry-on.

As I pointed out in my response to your initial comment about the 8% term deposit, while you may not judge there to be any additional risk to your capital between money on at call deposit and money on long term deposit, the longer a period of time the more uncertainty and the higher the opportunity cost of the investment. This is manifested in the general principle of the yield curve and seems to me to be a consequence of the third law of thermodynamics which is the most fundamental way in which time is manifest in the universe (the "arrow of time").

The longer the term the longer the uncertainty over whether the government bank guarantee (a policy response to the GFC) would be maintained. The more uncertainty about one's own private life and what needs, emergencies, etc may arise in that time.

There is also a general expectation that over the long run money supply will inflate over time, that resources become more scarce in a world with growing demand and growing population and that price inflation is an economic norm. The longer a term deposit the more exposed one is to the uncertainty of what the rate of inflation will be over that period and the risk that inflation will increase over the period.

The illiquidity of a term deposit will raise the opportunity cost of that investment.

A while ago I was looking at hybrids/preference shares as an option as many people were at that time. They seemed to be quite attractive to a lot of investors. I remember looking at a Woolworths hybrid and some of the banks offers and at that time had term deposits been available at 8% I would have considered those too. At the end I made a judgement call to go long in bank shares instead. I find it of interest and of merit to go back over my investment decisions and to review them with the benefit of hindsight. Had you provided us with an idea of when you took out the 8% term deposit and for what term I would have run that as a scenario in my mind and compared that to the risks and pay-offs I have achieved (and in some cases failed to achieve) over a similar time period. I don't have any cash in term deposits. I don't use them although I know they are a major feature of most people's investment strategy. I've changed my investment strategy a couple of times over the past few years. Once in the second half of 2010 that was a period of mistakes for me. Again in 2011 and just these past few weeks I am on the cusp of making a change to my investment strategy again. So, it might have been useful and of interest to know a little more about the timing and the term of your 8% term deposit for me to run it as a scenario. The first thing I would have done is compare the performance of the 8% deposit to the performance of the XAO over the same time.

As this information is something you somewhat condescendingly declined to divulge, as an alternative, I downloaded the historical data on term deposit rates which the RBA provides without any air of conceit at the following URL:

http://www.rba.gov.au/statistics/tables/xls/f04hist.xls

Interestingly, the highest bank deposit interest rate it quotes for this milenia is 8.25% for one year term deposits in July 2008. Interesting because of the shape of the yield curve at that time and that it was right before the start of the GFC. Unfortunately though there are no statistics for five year deposit rates.

Knowing the details of your investments is of little interest to me as we are people with completely different circumstances and needs. Knowing details of your private affairs is of lesser interest as we are complete strangers and I somehow doubt we would find much about each other that would be of mutual interest.



> Next, you'd be demanding copies of my terms of deposit from the relevant institution(s).



This is a fallacious argument and disingenuous as it ignores my earlier statements in this thread.



> "Some person who (sic) I've never met" is demanding details of my personal investments, such details being irrelevant in the context of the general discussion.  Why on earth would I feel obliged to compromise my privacy in response?




Indeed you are the _object_ of the discussion so it seems.

I'm sorry if I have offended you in some way and I don't understand how telling us when and for what term the deposit you mentioned would breach your privacy but that is obviously a judgement you have made based on your personality.



> Last comment from me to you on this, Tin Hat.  Rant away as you will.




I only come here to learn about shares and investing not for the sake of an argument or for the purpose of becoming illuminated by the enigmatic charm of other people's lives. If I had time to idle away engaged in pointless babble I would spend more time wallowing around in the cesspit of political discourse over in general chat.


----------



## Serpentis (11 May 2013)

It's not the most elegant of ways, but you can use http://archive.org/ to poke around at historical snapshots of websites, including the websites of the banks and looking at what rates they were offering back then.

Here's Westpac offering an 8% 5 year Term Deposit on Dec 28, 2009:

http://web.archive.org/web/20091228...s/tools-calculators-rates/term-deposit-rates/

I'd sure love one of those right about now.


----------



## MrBurns (11 May 2013)

tinhat said:


> As this information is something you somewhat condescendingly declined to divulge, as an alternative, I downloaded the historical data on term deposit rates which the RBA provides without any air of conceit at the following
> 
> This is a fallacious argument and disingenuous as it ignores my earlier statements in this thread.
> 
> ...




You're an insulting intrusive personality aren't you 
Why don't you just accept that some people do not wish to be quizzed in any way on any details of their private business.
Are you a teacher or public servant ?
Move on please.


----------



## Julia (11 May 2013)

Perhaps consider that something does not have to be publicly offered to be available.  The particular deposits at 8% were not advertised by the institution with which I have them.   Sometimes asking "will you pay X% for Y Years" pays off.   Banks needed money at that time.  It absolutely wouldn't work now.



> The more uncertainty about one's own private life and what needs, emergencies, etc may arise in that time.



 I doubt any reasonable person would put all their available cash into a long term deposit, and would rather ensure that sufficient was separately available to cover all living costs for that period plus substantial extra for unexpected expenses.

On a forum we can all ask others whatever we see fit.  It is, however, entirely up to those others to decide what they are prepared to offer in response.  In order to answer one of your earlier questions, tin hat, I described pretty clearly my situation which backs up the decision to move into a lower risk environment.
I have reservations about such self disclosure because in the past I - and others - have then been in receipt of snide comments about affluence etc.   Another member, when discussing brokerage, became the target for such remarks about amount invested.   Such is not the business of anyone but that investor.

Potentially the next question could have been "And what will you do with those funds when that term is concluded?" and so on.  

So there comes a point when questions feel intrusive and I decline to give further information.
That should not be a reason for rudeness in response imo, or argument that such information is not in fact private if deemed so by the person responding.

Perhaps we can just move on without the need for rudeness or pejorative descriptors of personality.


----------



## Julia (15 May 2013)

ANZ have followed their variable loan rate drop of 27 basis points with today moving to a 30 basis points cut in their online at call  deposit rate, now down to 4.35%.

Off back to Rabodirect for me with these funds where I can get 4.95%.


----------



## Vixs (15 May 2013)

Julia said:


> ANZ have followed their variable loan rate drop of 27 basis points with today moving to a 30 basis points cut in their online at call  deposit rate, now down to 4.35%.
> 
> Off back to Rabodirect for me with these funds where I can get 4.95%.




TD rates are straight up dismal right now - cash isn't growth though so that's no surprise. Bond funds/ETFs have shown well above cash yields - sure there's capital risk but the yields are pretty decent for rates this low.


----------



## Julia (15 May 2013)

Vixs said:


> TD rates are straight up dismal right now - cash isn't growth though so that's no surprise. Bond funds/ETFs have shown well above cash yields - sure there's capital risk but the yields are pretty decent for rates this low.



Just in case there's any confusion here, I wasn't talking about TD rates, just online at call cash.
Have some existing TDs at decent rates.

Agree about the dismal TD rates currently offered.


----------



## doctorj (15 May 2013)

Julia said:


> Agree about the dismal TD rates currently offered.




Compared to most places this side of Argentina, Russia and Ukraine, Australian deposit rates look very good...

	1yr, LCY
Australia	4.70%
China	3.30%
Spain	2.00%
UK	1.50%
Italy 	1.50%
Canada	1.35%
Germany	1.20%
USA	1.15%


----------



## Julia (16 May 2013)

doctorj said:


> Compared to most places this side of Argentina, Russia and Ukraine, Australian deposit rates look very good...
> 
> 1yr, LCY
> Australia	4.70%
> ...



Our rates are nonetheless dismal compared to what they were a few years ago at about double.


----------



## Ves (16 May 2013)

Julia said:


> Our rates are nonetheless dismal compared to what they were a few years ago at about double.



No reason why they can't halve again in the coming years.   Still no technical recession in Australia for 21 years.  It's bound to happen eventually.  The system needs a shake out.

I'm not so much doom and gloom... but more, waiting for the end of the cycle so the phoenix can rise again from it's ashes.


----------



## Muschu (3 August 2013)

Julia said:


> ....
> So far they haven't reduced the online at call deposit rate.




I just checked, today, on our online saver account rate with ANZ... A massive 2.75%.  They also, some time back, set up a "Negotiator Account" for us.. now down to 3.45%.

Julia, I think it may have been you who posted a link to a website where interest rates, including term deposits, could be compared.

Do you, or someone else, have such a link please?

With thanks

Rick


----------



## ROE (3 August 2013)

I have multiple Commbank Goal Saver paying 4.40% 

each account is limit to 100K providing you put in at least $200 a month and made no more than 1 withdraw

you get 4.4% ...I thought it is pretty good as I mainly stage my cash temporary ....

when the time come I do one large with draw and place on the stock I like...

you can have 2 accounts of Goal Saver per person and 2 Per Join Account 

so taking your wife, you and join account you can have up to 600K of cash earning 4.40 at call


----------



## Julia (3 August 2013)

Muschu said:


> I just checked, today, on our online saver account rate with ANZ... A massive 2.75%.



That seems odd, Rick.  I'm still getting 4.35% on my ANZ online saver, though I won't be surprised to see this dropped soon, especially if the Reserve Banks cuts rates again on Tuesday. 

Julia, I think it may have been you who posted a link to a website where interest rates, including term deposits, could be compared.
Here you are, Rick:
http://www.infochoice.com.au


----------



## Muschu (3 August 2013)

Thanks Roe - that is useful.  I also learned that St George has a 4.55% online saver account.

ANZ online saver is paying 2.75%....


----------



## Julia (3 August 2013)

ROE said:


> I have multiple Commbank Goal Saver paying 4.40%
> 
> each account is limit to 100K providing you put in at least $200 a month and made no more than 1 withdraw
> 
> you get 4.4% ..



Sounds similar to the Rabodirect  Premium Saver.  They also have a Notice Saver where you choose the term of number of days you commit the funds, 30, 60 and 90 I think, with around 4.45% for 90 days.


----------



## againsthegrain (3 August 2013)

Muschu said:


> Thanks Roe - that is useful.  I also learned that St George has a 4.55% online saver account.
> 
> ANZ online saver is paying 2.75%....




My anz still at 4.35% you realise you need to keep re opening the online savings accounts every 3 months to get the bonus rate which am mounts to 4.35 at this time


----------



## Muschu (3 August 2013)

againsthegrain said:


> My anz still at 4.35% you realise you need to keep re opening the online savings accounts every 3 months to get the bonus rate which am mounts to 4.35 at this time




Thanks ATG but surely you don't mean closing the OLS a/c and then re-opening it every 3 months?  Or maybe you do....

I just phoned ANZ and was told I would need to speak to an accounts manager during normal working hours.  I need to see my ANZ business manager anyway so will raise this with him early next week.

Many thanks for the observation.


----------



## Julia (3 August 2013)

Muschu said:


> Thanks Roe - that is useful.  I also learned that St George has a 4.55% online saver account.
> 
> ANZ online saver is paying 2.75%....



Rick, your post may have crossed with mine giving you the link to Infochoice.
Against the grain is correct, your online saver rate only applies for three or sometimes four months before dropping back to the base rate which you say is now 2.75%.

Here is the quote from Infochoice today:


> ANZ Online Saver
> 
> Earn up to 4.35% p.a. until 30 November 2013 if you apply by 7 July 2013.
> This exclusive online offer is only available by applying through the Apply now button/link.
> Your new ANZ Online Saver will need to be linked to an eligible ANZ account.



Although they say 'if you apply by 7 July 2013, so that may not now be available.  If it's not it should be removed from the Infochoice website.

You need to either close that a/c and open a new one, as againstthegrain suggests, or ask your bank contact to reapply the currently available online rate.    Then remember to check in a few months to see if you're still getting the best available rate.

Let us know how you go.


----------



## Muschu (3 August 2013)

Julia said:


> Rick, your post may have crossed with mine giving you the link to Infochoice.
> Against the grain is correct, your online saver rate only applies for three or sometimes four months before dropping back to the base rate which you say is now 2.75%.
> 
> Here is the quote from Infochoice today:
> ...




Thanks Julia. I'll keep you informed.  I imagine if I ask that they will do it... But I'll also tell them that I am annoyed at having to ask... Still, that's banks I guess.

Will send you a brief PM.


----------



## stewiejp (4 August 2013)

Fairly happy with my RAMS saver - 4.76% so long as $200 deposited/month and no withdrawals. Otherwise 3.46%. Max balance $500,000. No fees.


----------



## Julia (4 August 2013)

Do you happen to know if it's available to SMSFs, stewie?


----------



## sydboy007 (4 August 2013)

Julia said:


> Do you happen to know if it's available to SMSFs, stewie?




doesn't look like it 

we can thank the indebted for the financial repression now forced upon savers 

-----------------

Who can apply?

You can apply for a RAMS Saver account if you:

    are an individual, and do not hold the account as a trustee of a trust or a superannuation fund, or on behalf of a deceased estate (two account holders allowed)
    are an Australian resident for taxation purposes with an Australian residential address
    are 18 years of age or over and
    hold a valid email address and Australian mobile number


----------



## Julia (4 August 2013)

Thanks for that, sydboy.  That's the case with several institutions, ie not available to SMSFs.
Appreciate your trouble in posting the details.


----------



## Muschu (4 August 2013)

With interest rates continuing south I wonder what the spin off will be be for the  share market or other forms of investment...  
Maybe the casino and/or the racetrack?


----------



## pixel (5 August 2013)

Julia said:


> That seems odd, Rick.  I'm still getting 4.35% on my ANZ online saver, though I won't be surprised to see this dropped soon, especially if the Reserve Banks cuts rates again on Tuesday.
> 
> Julia, I think it may have been you who posted a link to a website where interest rates, including term deposits, could be compared.
> Here you are, Rick:
> http://www.infochoice.com.au




This is the one I use: http://www.ratecity.com.au/term-deposits/search
But I also check the web pages of all the "usual suspects" from ANZ via BOQ and MacQ to Westpac.


----------



## Julia (5 August 2013)

pixel said:


> This is the one I use: http://www.ratecity.com.au/term-deposits/search
> But I also check the web pages of all the "usual suspects" from ANZ via BOQ and MacQ to Westpac.



This raises an interesting anomaly.  Several years ago when I was flicking through Infochoice, I noted the ANZ online saver advt.  Went to the ANZ website separately and there was no sign of it.
Phoned my bank branch and they knew nothing about it.
Apparently a deal just available via the Infochoice (and probably similar comparison) site.

Crafty, aren't they:  no advertising of an offer to what you'd imagine would be their regular customers, but covering the possibility of acquiring new customers via a competitive site.


----------



## sydboy007 (5 August 2013)

Julia said:


> Crafty, aren't they:  no advertising of an offer to what you'd imagine would be their regular customers, but covering the possibility of acquiring new customers via a competitive site.




This behaviour really ticks me off.  Can't companies get it through their heads that treating current customers well works out better for them in the long run than continually trying to drum up new business with great offers the current customer can't access 

I think I'll stick to buying some AYF in 10K parcels - active management of various hybrids and currently offers 11.25c / qtr for a $6.38 purchase price with around 2.8c franking credits over the year.  Yield is currently over 7% which in this financially repressed environment is a mighty fine yield.


----------



## Muschu (5 August 2013)

pixel said:


> This is the one I use: http://www.ratecity.com.au/term-deposits/search
> But I also check the web pages of all the "usual suspects" from ANZ via BOQ and MacQ to Westpac.




Thanks Pixel.  It seems some of these rates may just be "honeymoon" rates for a few months or so.  My ANZ business manger offered me 3.6% variable on a Negotiated Account (which happens to be a SMSF a/c) - an increase from 3.45%.   This will drop as soon as the RB drops rates.

He also offered to change our Online Saver a/c (which is not a Super a/c) into a separate Negotiator a/c at the same rate.  

I suggested I put the money into ANZ bank shares and (I had to smile) he suggested the market may be too hazardous.

There's no point in shooting the messenger but I don't think it is too much to ask of the banks to let clients know when rates go down.....


----------



## Julia (5 August 2013)

Muschu said:


> There's no point in shooting the messenger but I don't think it is too much to ask of the banks to let clients know when rates go down.....



Rabodirect always do this.  In addition, they're accessible, courteous, helpful and overall really customer friendly.
AFAIK they are still offering 4.76% for new money, Rick, though this rate might be new money for old customers.  I'm not sure.
It's also available to SMSFs for those with that need.  
Like all these offers, it's only available for about four months, and - unlike the ANZ's willingness to reapply the current online rate to an existing a/c, -  Rabo don't do this.

Maybe give them a call on *1800 445 445 *and ask what they can offer you.


----------



## Muschu (5 August 2013)

Julia said:


> Rabodirect always do this.  In addition, they're accessible, courteous, helpful and overall really customer friendly.
> AFAIK they are still offering 4.76% for new money, Rick, though this rate might be new money for old customers.  I'm not sure.
> It's also available to SMSFs for those with that need.
> Like all these offers, it's only available for about four months, and - unlike the ANZ's willingness to reapply the current online rate to an existing a/c, -  Rabo don't do this.
> ...




I had to do a google for AFAIK Julia...... (Still struggling with +1 and considering a thread on +2.. And beyond)

Rabodriect sounds much more transparent (or at least open) than ANZ.  What I don't want is the hassle of moving money around every few months for the sake of a percent or two.... There are so many things I'd rather do (and I suspect the banks know that)....  

Anyway, I will have a look and thank you and others who have contributed.

Goodnight from WA.


----------



## Julia (5 August 2013)

Muschu said:


> I had to do a google for AFAIK Julia...... (Still struggling with +1 and considering a thread on +2.. And beyond)







> Rabodriect sounds much more transparent (or at least open) than ANZ.  What I don't want is the hassle of moving money around every few months for the sake of a percent or two.... There are so many things I'd rather do (and I suspect the banks know that)....



Yes, I agree it's a nuisance.  However, if any institution makes it simple, it's Rabo.  You just use one of your existing ANZ a/c to link and it's very straightforward.
( I might be approaching them for some commission soon, with such recommendations!)


----------



## Bill M (12 December 2013)

ME BANK customers, check your online account. The 4.5% honeymoon for the last 12 Months is over. Mine is back down to only 2.9% yours will most probably be the same.

I have offloaded my whole balance into RAMS Saver 4.23% and UBANK 4.26%. 

Anyone have any other better accounts? I'm not eligible for any promos with Rabo, Bankwest or ING.


----------



## Tyler Durden (21 December 2013)

Bill M said:


> ME BANK customers, check your online account. The 4.5% honeymoon for the last 12 Months is over. Mine is back down to only 2.9% yours will most probably be the same.
> 
> I have offloaded my whole balance into RAMS Saver 4.23% and UBANK 4.26%.
> 
> Anyone have any other better accounts? I'm not eligible for any promos with Rabo, Bankwest or ING.




Hey, thanks for the heads up. I just checked mine and it's still 4.5%, however, I can't remember when I opened it, so maybe I'm still within my 12 months.


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## Bill M (7 April 2014)

UBANK customers take note, I just received an email from UBANK saying their rates are changing, *>DOWN<*

It's suppose to be effective from the 7th. of April 2014.

And I thought the bias was up.

USaver with bonus will be 4.01%

USaver with Ultra and bonus will be 4.37%

USaver SMSF with bonus will be 3.76%

I still find it hard to understand why SMSF accounts are penalised against the standard accounts so much. It's just another account, nothing extra to do for them really, anyone know ?


----------



## sydboy007 (7 April 2014)

Bill M said:


> I still find it hard to understand why SMSF accounts are penalised against the standard accounts so much. It's just another account, nothing extra to do for them really, anyone know ?




Probably partly due to the fact SMSF cash accounts can be quite large and a lot of SMSFs are conservative in their asset allocation so the banks feel they don't need to be so aggressive for the deposits.

I'll stick with AYF for now since they're still offering around the 7% gross yield and the share price has a fairly low volatility.

For those looking for a bit more safety I was looking at the RCB Russell Australian Select Corporate Bond ETF which seems to offering close to 5% which is a reasonable yield in the current financially repressed market.  Wish there was a decent international corporate bond ETF available here.

FIIG still have a number of corporate bonds available to retail investors providing over a 6% yield which is pretty good too, especially if you like something a bit safer than the AYF hybrids.


----------



## Bill M (7 April 2014)

sydboy007 said:


> Probably partly due to the fact SMSF cash accounts can be quite large and a lot of SMSFs are conservative in their asset allocation so the banks feel they don't need to be so aggressive for the deposits.




Yes but money is money, it doesn't matter where it comes from, be it SMSF investors or retail investors, all Australian investors.



> I'll stick with AYF for now since they're still offering around the 7% gross yield and the share price has a fairly low volatility.




I saw a small batch of these cheap last week when it was ex dividend, topped up at 6.36. Nice little earner this one, cheers.


----------



## boofhead (7 April 2014)

Probably no coincidence that CBA revised their headline term deposit rates today. I have no idea what they changed from as they don't seem to publish historical information.


----------



## sydboy007 (7 April 2014)

Bill M said:


> Yes but money is money, it doesn't matter where it comes from, be it SMSF investors or retail investors, all Australian investors.




Well the banks are like the airlines and they do  yield management.  Can't say I like it, but then they dun get much of my money so no loss to me.  My high interest account is used to hit $10K then it's invested.



Bill M said:


> I saw a small batch of these cheap last week when it was ex dividend, topped up at 6.36. Nice little earner this one, cheers.




Seems we had the same idea.  I picked up a 10K parcel last week at 6.36 too.  Dun mind the $628 income each year plus around $78 in franking credits which pays for a fair chunk of the income tax in my SMSF.  If you haven't had a read of their latest update you should give it a perusal.  Some interesting possibilities if interest rates starts to rise - with inflation at 2.7% it may not be too far in the future.


----------



## Julia (7 April 2014)

Bill M said:


> UBANK customers take note, I just received an email from UBANK saying their rates are changing, *>DOWN<*
> 
> It's suppose to be effective from the 7th. of April 2014.
> 
> And I thought the bias was up.



Bill, Rabodirect sent out a similar advice about ten days ago.

It would seem the banks feel pretty flush with cash at present, perhaps a reflection that the share market still represents a big danger sign to many investors who were burned in the GFC.

I don't know what the reason is for fewer advantages for SMSFs either.   In order to meet the requirements of X% of fund value being taken as allocated pension before the end of the year, I'm going to have to move some money back into my own name out of the SF.  This will mean I can open a new a/c with Rabodirect at the advertised rate.

All just an irritation and what seems to be unnecessary stuffing about.


----------



## tinhat (7 April 2014)

Bill M said:


> UBANK customers take note, I just received an email from UBANK saying their rates are changing, *>DOWN<*
> 
> It's suppose to be effective from the 7th. of April 2014.
> 
> ...




It's because they don't need your money. They needed it after the GFC but now they can get cheaper money elsewhere I guess.


----------



## sydboy007 (1 May 2014)

http://www.rabodirect.com.au/notice-saver/

If you're looking for a high rate of interest and don't mind "locking" your money up for 90 days, the RaboDirect Notice Saver 90 might be good for you.

For personal accounts it's offering an ongoing 4.05%.  You can deposit money as you wish, but you have to give 90 days notice to make a withdrawal. 

Seems to offer a better rate than most TDs, with the added flexibility of being able to top up the account with any surplus cash.


----------



## Panaman (1 May 2014)

I use AYF in my SMSF as well, thanks to Sydboy posting and bringing it to my attention  maybe a little more risk than cash but with nearly twice the yield of Term Deposits, well worth it IMO.

Even got my Daughter some, she has a weekend job and I have got her in the habit of saving some of her wage each week, before long she had $5000 but all she got was 2.5% from her savings account, so we had a chat and I explained there may be a it more risk if she invested but it could also grow considerably, she didn’t want too much risk so we bought AYF and a high dividend ETF IHD, she now gets about a 6% yield and her IHD are $1-50 higher, she is chuffed to pieces


----------



## sydboy007 (1 May 2014)

Panaman said:


> I use AYF in my SMSF as well, thanks to Sydboy posting and bringing it to my attention  maybe a little more risk than cash but with nearly twice the yield of Term Deposits, well worth it IMO.
> 
> Even got my Daughter some, she has a weekend job and I have got her in the habit of saving some of her wage each week, before long she had $5000 but all she got was 2.5% from her savings account, so we had a chat and I explained there may be a it more risk if she invested but it could also grow considerably, she didn’t want too much risk so we bought AYF and a high dividend ETF IHD, she now gets about a 6% yield and her IHD are $1-50 higher, she is chuffed to pieces




AYF is definitely hard to resist at 7% grossed up yield.

Just wish there was some decent yield corporate bond funds here.  Most are barely pay much better than TDs


----------



## Tyler Durden (1 May 2014)

I'm looking to move a small amount into a new online savings account as the previous high rate at ME Bank had expired for me. Currently it looks like ING at 4.35% for 4 months, or Bankwest at 4.30% for 6 months.


----------



## Bill M (1 May 2014)

Tyler Durden said:


> I'm looking to move a small amount into a new online savings account as the previous high rate at ME Bank had expired for me. Currently it looks like ING at 4.35% for 4 months, or Bankwest at 4.30% for 6 months.




Yeah, not much more available out there. I closed off a Bankwest account about 10 years ago. When my ME Bank high rate expired I tried to open a new Bankwest Account and I was still on file and couldn't get the bonus rate. I've expired all my bonus rates from various banks so now it's UBank with Ultra and I get 4.37% with them as I full fill their requirements.


----------



## Julia (1 May 2014)

sydboy007 said:


> http://www.rabodirect.com.au/notice-saver/
> 
> If you're looking for a high rate of interest and don't mind "locking" your money up for 90 days, the RaboDirect Notice Saver 90 might be good for you.
> 
> ...



OK, but why would you commit to any sort of term when you can get the same or better at call as other posters have mentioned?

However, what I really like about Rabodirect is that they send you an email when their rates change downward as well as upward, unlike most of the bigger banks who don't apparently find it necessary to remind you when your four month bonus period is up and your interest rate has reverted to around 2%.


----------



## ROE (1 May 2014)

what the best cash at call rate and where.?

I got some cash I want to put a way for a while but at call only ... I want to access it when Mr Market going into a scary frenzy


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## Julia (1 May 2014)

ROE, full comparisons available at
www.infochoice.com.au


----------



## Tyler Durden (1 May 2014)

Bill M said:


> Yeah, not much more available out there. I closed off a Bankwest account about 10 years ago. When my ME Bank high rate expired I tried to open a new Bankwest Account and I was still on file and couldn't get the bonus rate.




Serious? That was one of my concerns and a question I've been wondering about. How exactly is a "new customer" defined? Do different banks define it differently? I recently took up ANZ's $100 offer for new customers, then closed the account after I received it, and now wonder if I would be eligible for any future "new customer" offers from them.


----------



## Bill M (2 May 2014)

Tyler Durden said:


> Serious? That was one of my concerns and a question I've been wondering about. How exactly is a "new customer" defined? Do different banks define it differently? I recently took up ANZ's $100 offer for new customers, then closed the account after I received it, and now wonder if I would be eligible for any future "new customer" offers from them.




Yeah, I am serious. As I had a fair bit to put in I thought I better call them first. I called and said, I had an account many years ago and I was was thinking about opening a new account, but on one proviso, that is that I could get the bonus rate. They asked for my name and birth date and I was still on file, then they said no I wouldn't be entitled so I went elsewhere. I don't know if they are all the same. Pretty bad really, it was at least 10 years ago.


----------



## Julia (2 May 2014)

You can, however, have one 'new' a/c in your SMSF name and another 'new' one in your own name.

Depending on your relationship with your bank, it's also sometimes possible to have the 'new' rate re-applied to an existing a/c.


----------



## sydboy007 (2 May 2014)

Julia said:


> OK, but why would you commit to any sort of term when you can get the same or better at call as other posters have mentioned?
> 
> However, what I really like about Rabodirect is that they send you an email when their rates change downward as well as upward, unlike most of the bigger banks who don't apparently find it necessary to remind you when your four month bonus period is up and your interest rate has reverted to around 2%.




It's the best ongoing rate around.

Good for someone who wants to be on the best standard interest rate without having to move their money every 4 months.

I think it's also close to being the highest interest rate available for an SMSF since it's available for business accounts


----------



## Julia (2 May 2014)

sydboy007 said:


> It's the best ongoing rate around.



It's as variable as any of the other rates, syd.  When they introduced it, all three levels were higher than they are now.
Sure, if you commit for the 90 days, that rate will apply for that time.  But you have no guarantee that you can renew at the same rate.


----------



## sptrawler (7 May 2014)

Tyler Durden said:


> I'm looking to move a small amount into a new online savings account as the previous high rate at ME Bank had expired for me. Currently it looks like ING at 4.35% for 4 months, or Bankwest at 4.30% for 6 months.




Bankwest won't give 4.30% for SMSF's, I was told today


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## Tyler Durden (18 July 2014)

Informed yesterday that Ubank now dropping their base variable rate to 3.76% for amounts up to $5k and 3.11% otherwise.


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## qldfrog (18 July 2014)

Tyler Durden said:


> Informed yesterday that Ubank now dropping their base variable rate to 3.76% for amounts up to $5k and 3.11% otherwise.




or is it 3.76 for the extra I contribute every month bonus yield?
I got the email as well, need to check


----------



## sydboy007 (30 July 2014)

more about bonds than TDs, but I think the info is worth sharing

https://www.fiig.com.au/news-and-re..._campaign=The Wire - 30 July 2014 - Issue 311

Key points:


One important misconception that investors often make is that swap rates are equivalent to the market expectation of forward BBSW rates. For floating rate notes to outperform, rates don’t just need to rise – they need to rise more than expectations
Swap rates represent the weighted average of all the future BBSW rates out to that date
Investors in Floating Rate Notes are required to forego income today in the hope of receiving greater income in future


----------



## Timmy001 (26 September 2014)

Nice Thread.


----------



## sptrawler (27 September 2014)

BOQ are offering 4% for 4 months, anyone seen any other offers?


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## Julia (27 September 2014)

Haven't been looking.  Generally a higher rate is available at call than short period term deposits.
http://www.infochoice.com.au/banking/savings-account.aspx

The way the RBA are talking at present re over-heated property investment, we could see a rise in the official rate sooner than anticipated in which case you might be better not tied to TD.


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## sptrawler (27 September 2014)

Julia said:


> Haven't been looking.  Generally a higher rate is available at call than short period term deposits.
> http://www.infochoice.com.au/banking/savings-account.aspx
> 
> The way the RBA are talking at present re over-heated property investment, we could see a rise in the official rate sooner than anticipated in which case you might be better not tied to TD.




I agree with you, the BOQ offer is at call, the 4% is for the first 4 month period then it reduces to a lower rate.
I have been using these honeymoon offers for the past eight months, it does have the advantage of easy access if opportunity presents.
Terrible time for SMSF's at present, it's hard to get value for your money, with any sort of safety.


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## Bill M (14 October 2014)

Just got notification from UBank, rates are going down again. USaver Ultra account is dropping from 4.17% to 4.02%.


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## Tyler Durden (14 October 2014)

Bill M said:


> Just got notification from UBank, rates are going down again. USaver Ultra account is dropping from 4.17% to 4.02%.




haha you beat me to it, I was going to post the same thing.

Wonder why, given the RBA didn't budge?


----------



## Julia (14 October 2014)

Tyler Durden said:


> haha you beat me to it, I was going to post the same thing.
> 
> Wonder why, given the RBA didn't budge?



Because the banks are flush with money.  Why would they pay you any more than they need to?
And the current market volatility will send even more cash into the banks' coffers as people become more fearful of significant losses.
Fuel to the fire was added today by Guy Debelle, Assistant Governor of the Reserve Bank, who has warned:



> The Reserve Bank's assistant governor Guy Debelle is warning that markets are likely heading for a "violent sell-off".




With this sort of news report, at least across the ABC networks, on top of the recent market losses, there will be increased selling of shares in favour of cash, even with present low interest rates.


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## sydboy007 (19 November 2014)

well worth a read to undersstand the significant regulation changes coming Jan 1

https://www.fiig.com.au/news-and-re...-this-the-end-of-the-traditional-term-deposit

In December 2013, the Australian Prudential Regulation Authority (APRA) released a revised liquidity standard (APS 210) for all Australian Authorised Deposit-taking Institutions (ADIs). This standard encapsulated APRA’s views of the Basel III regulatory changes for global banks. 

A centrepiece of Basel III and indeed APS 210 is the liquidity coverage ratio (LCR). While other countries have transitional arrangements over a number of years for adoption of the LCR, APRA requires the larger Australian ADIs to comply with it from 1 January 2015.

The LCR aims to ensure that an ADI can meet its liquidity requirements in a severe stress or ‘bank run’ scenario. The regulation requires an ADI to hold sufficient unencumbered high quality liquid assets (HQLA) that can be converted into cash within a day to meet all of the ADI’s liquidity needs for a 30-day stress scenario. The ratio of HQLA to the ADI’s expected net cash outflows during this period must exceed 100%.

The three key features (and implications for depositors) of the LCR are as follows:

1.    30 day horizon

The LCR looks at a 30-day liquidity period and any product or deposit with a 31+ day break or notice period intact will not be included in the calculation of liquidity required. ADIs will be required to hold low yielding HQLA for any deposit (or at-call money) which can be repaid or matures within 30 days. This makes these deposits ‘expensive’ for the ADI as it has to tie up a portion of its funds in low yielding HQLA.

Conversely, a deposit that has a 31+ day break or notice period requires no HQLA backing. As such, ADIs will place a higher value on the latter and will pay higher rates to attract those funds. Traditional at-call and short-dated term deposits, particularly from financial institutions, will receive the opposite treatment with rates expected to be significantly lower come 1 January 2015. Corporates will receive slightly better treatment especially where money on deposit can be proven to be ‘operational’.

Come 1 January 2015, the ability to break term deposits will become significantly harder with Product Disclosure Statements and terms and conditions expected to change to prevent the breaking of term deposits, with very few exceptions, the main one being personal hardship.

2.    Depositor classification and ‘run off’ assumptions

There are vastly different ‘run off’ assumptions for various categories of depositors which will have a significant impact on the rates the ADIs will offer these different categories.

At one extreme are the ‘sticky’ retail deposits that APRA assumes will withdraw just 5% of funds in a crisis scenario. At the other end are ‘hot’ wholesale deposits from financial institutions that are assumed to see 100% of funds withdrawn at the first sign of a crisis.

It is important to note that for the purpose of the LCR calculation, this represents a differential of 20 times between the highest and lower risk deposit categories.

Again, the implications are clear. Mum and dad ‘retail’ deposits will continue to be in high demand and hence command higher rates. This typically covers deposits up to the $250,000 government guarantee amount. Self Managed Superannuation Funds up to this limit also attract positive treatment under APS 210.

However, the larger implications are for wholesale deposits and at-call money from larger institutions, particularly those classified as financial institutions. It is here where the traditional deposit product offering looks to be a dying breed, to be replaced by 31+ day break or notice period deposit products.

Corporations that can demonstrate a long term operational relationship will receive a 40% run-off assumption placing them in the middle of sticky retail and hot wholesale money. The focus here will be for corporate and potentially some financial institutions to prove the operational nature of portions of their funds on deposit and to argue for higher rates.

Another clear implication is that all wholesale depositors will have an incentive to do an accurate assessment of their real requirement for very liquid funds such as at-call or short dated term deposits, given the much lower rates expected on these come next year. This low returning portion of an investor’s portfolio should be minimised and as much as possible locked away for a minimum of 31 days to attract a better rate from the new breed of deposit products.

3.    The LCR does not apply to credit unions, building societies and mutual banks, nor  branches of foreign banks

Compliance with the 100% LCR is only required from what APRA terms the ‘scenario analysis’ ADIs. This essentially refers to the major and regional Australian banks and locally incorporated foreign subsidiary banks (such as HSBC Bank Australia Limited and Rabobank Australia Limited).

Branches of foreign banks that operate in Australia (such as Bank of China Limited) are only required to meet 40% of the LCR.

Credit unions, building societies and other mutual banks (technically termed ‘minimum liquidity holding’ or MLH ADIs) are not required to comply with the specific LCR.

As such, we expect the deposit rates from the branches of foreign banks and the MLH ADIs to be more competitive at certain points in time, especially for corporate and wholesale deposits. However, this will still be a function of demand and supply with many MLH ADIs currently very liquid and not in need of extra funding from the wholesale sector.

FIIG will monitor the rates offered by the 60-odd ADIs we raise funding for and advise investors of any opportunities from the branches of foreign banks or MLH ADIs.

What to watch for

The impending changes have already been occurring in the market, with many ADIs releasing 31+ day break or notice period products over recent months. We expect this to gather pace throughout December and early 2015. 

Investors should consider the following list when assessing term despot investments now and into 2015:


Make an accurate and realistic assessment of absolute liquidity needs and minimise the amount placed at-call or in short dated term deposits if the rates on offer are materially below those available with 31+ day break or notice clauses
Where possible, maximise the amount with 31+ day break or notice clause. Possibly combine this with other sources of liquidity such as an allocation to high quality, liquid bonds that can be sold at short notice if emergency liquidity is required
Maximise the amount on deposit through personal/retail or SMSF accounts and minimise the amount through deemed corporate or financial institution accounts. Likewise maximise the amount that can be classified as ‘operational’
As with any regulatory change or new product development, be on the lookout for special rates that may be offered in the early stages to attract investors. Typically, the early adopters receive the best rates and this product is here to stay. It is not a fad.
Don’t discount the branches of foreign banks or MLH ADIs who from time to time may offer competitive rates for the traditional deposit products, given the LCR does not fully apply to those ADIs. There are now over 10 credit unions and building societies that are rated investment grade and considered very safe places to invest deposit or at-call money.
The ease and low cost of breaking term deposits that has prevailed for many years is expected to come to an abrupt halt come 1 January 2015, so be sure to have other sources of liquidity if this is a possibility.
Be aware that ADIs will monitor the behaviour of depositors and over time (later in 2015 and beyond) will reward deposits that remain in place and penalise those that are seen to be ‘hot’ money. Where the difference in rate is small, it may pay to remain loyal in the long run.


----------



## Joe Blow (3 February 2015)

Reserve Bank cuts interest rates for first time in 17 months

http://www.abc.net.au/news/2015-02-...est-rates-for-first-time-in-17-months/6066676


----------



## Glen48 (3 February 2015)

Joe Blow said:


> Reserve Bank cuts interest rates for first time in 17 months
> 
> http://www.abc.net.au/news/2015-02-...est-rates-for-first-time-in-17-months/6066676




Be a few more over time...People will keep buying R/Estate until it pops.


----------



## Klogg (3 February 2015)

Glen48 said:


> Be a few more over time...People will keep buying R/Estate until it pops.




Not that I have an opinon one way or another on RE values/bubbles, but it does remind me of the Ray Dalio video "How the economic machine works"... The part where the Reserve Bank tries to drop the Cash Rate and it's already at 0%.
Everytime I hear of a rate cut, that sound just plays in my head now, lol.


----------



## Bintang (4 February 2015)

Glen48 said:


> Be a few more over time...People will keep buying R/Estate until it pops.




And/or solid dividend stocks like the banks and TLS.
It certainly looks like TLS spiked today after news of the cut.

I didn't expect a cut today. After holding for 17 months I thought the RBA was showing some capacity for thinking independently of other central banks.

As much as I like to see my TLS shares go up I am sorely disappointed that the RBA chooses now to follow the same interest rate policies that have failed in USA, Japan and Europe.
And I feel terribly sorry for retirees trying to make ends meet on their interest income.


----------



## qldfrog (4 February 2015)

Bintang said:


> I didn't expect a cut today. After holding for 17 months I thought the RBA was showing some capacity for thinking independently of other central banks.



+1
with the lower petrol, that should be enough to help a bit  without inflating RE market
I do not complain on a personal point of view: just put a IP unit on sale and the jump in my portfolio value yesterday was great but for Australia, this is really a bad decision:
we only have a few of these cuts available and as soon as oil  start going up we will really need them with the economy in such a bad state.


----------



## pixel (4 February 2015)

The 10% drop of interest rate may be welcome news for people who live "on plastic", but it's a 10% pay cut for self-funded retirees - unless they're actively managing their dividend-paying investments.

In that context, I've come across a couple of shares with imminent ex-div, for which the Franking Credits lift the yield above 6% at present values. Assuming their share price remains steady, or at least regains the dividend within a few weeks - as has happened in the past - it could be a useful play.

Two stocks I'm looking at are OZG and WIC.

any comments?


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## Value Collector (4 February 2015)

pixel said:


> The 10% drop of interest rate may be welcome news for people who live "on plastic", but it's a 10% pay cut for self-funded retirees - unless they're actively managing their dividend-paying investments.




Well that's what you get if you want to sit your wealth in a government guaranteed banking system, and do nothing with it.

I don't think people who are simply sitting on a pile of government guaranteed cash disserve returns to much higher than inflation, I think a system where risk free cash basically earns enough to keep pace with inflation is all they are entitled too.


----------



## qldfrog (4 February 2015)

Value Collector said:


> I don't think people who are simply sitting on a pile of government guaranteed cash disserve returns to much higher than inflation, I think a system where risk free cash basically earns enough to keep pace with inflation is all they are entitled too.



I don't think lenders (banks) who are simply sitting on a pile of government guaranteed cash and are protected by loan insurances (premium paid by the lender) deserve returns much higher than inflation.


----------



## Toyota Lexcen (4 February 2015)

Bintang said:


> And/or solid dividend stocks like the banks and TLS.
> It certainly looks like TLS spiked today after news of the cut.
> 
> I didn't expect a cut today. After holding for 17 months I thought the RBA was showing some capacity for thinking independently of other central banks.
> ...




great post, with the recent change in oil/petrol prices they could of waited a month or 2 as pretty much everybody gets a benefit from lower fuel costs, $50-60/month saving on fuel is same as about the saving on a 300k mortgage with IR cut

the bigger hit for the average aussie is going to be the exchange rate, and the push by the RBA to lower it, many retailers have delayed price increases but they are slowly coming through on goods


----------



## Value Collector (4 February 2015)

qldfrog said:


> I don't think lenders (banks) who are simply sitting on a pile of government guaranteed cash and are protected by loan insurances (premium paid by the lender) deserve returns much higher than inflation.




The banks capital is at risk, they will absorb losses before the depositiors do.

Banks are also offering a service to depositors, keeping their money safe and insured. Better than under the mattress .

Also the banks are the ones working finding borrowers, managing accounts etc, chasing loans etc. not sitting back watching midday movies.


----------



## qldfrog (4 February 2015)

Value Collector said:


> The banks capital is at risk, they will absorb losses before the depositiors do.
> 
> Banks are also offering a service to depositors, keeping their money safe and insured. Better than under the mattress .
> 
> Also the banks are the ones working finding borrowers, managing accounts etc, chasing loans etc. not sitting back watching midday movies.



then obviously the banks shareholders who are watching midday TV should not be rewarded either?


----------



## Value Collector (4 February 2015)

qldfrog said:


> then obviously the banks shareholders who are watching midday TV should not be rewarded either?




Their capital is at risk, they own an operating business, not a government guaranteed senior deposit.

If the depositor chooses to take a bit more risk, and buy a bank hybrid security, they will get a better return.


----------



## qldfrog (5 February 2015)

Value Collector said:


> Their capital is at risk, they own an operating business, not a government guaranteed senior deposit.
> 
> If the depositor chooses to take a bit more risk, and buy a bank hybrid security, they will get a better return.



"they" meaning the banks???
or "they" meaning the bank shareholders?
Very different from the owner of bank hybrid securities which is taking a lot of risk (the risk the banks do not want to take)
I owned hybrids, I am an active shareholder but I found your initial comment quite offensive for people having term deposits as their key source of income,
if you are a retiree( which I doubt, but I am not one either) there is definitively a place for TD to ensure against a GFC like event.

It is pretty hard to agree on your point of banks taking risks when you do try to take a loan.their only risk is that their insurance will fold.Even if RE collapses, the onus is on the borrower, not the lender, we are not in the US (well some states) where you can default and walk away

I have some trouble to see your image of bank/telstra shareholders as entrepreneurs living on the edge. that 's all.
Wait for the winging when the banks collapse if that ever happen, and I bet you my taxes will be used to help them out as per history.
Rates being low indeed are not favoring all australian, this favors reckless investment and absence of saving which is not that good for the long term in a country.
So a very different point of view from yours
There are more cuts ahead and sadly I believe this rate cut was ill chosen and will come to bite us by inflating even more the RE bubble
but hey I sold my IP yesterday most probably thanks to that rate cut so why should I even care for my country.
And my portfolio got a nice jump both on the asx and for my O/S USD shares so very good outcome...for me.


----------



## Value Collector (5 February 2015)

qldfrog said:


> "they" meaning the banks???
> or "they" meaning the bank shareholders?
> Very different from the owner of bank hybrid securities which is taking a lot of risk (the risk the banks do not want to take)
> I owned hybrids, I am an active shareholder but I found your initial comment quite offensive for people having term deposits as their key source of income,
> ...




"They" being the shareholders, have their capital at risk, because they own the banks capital, so any deterioration in the banks capital position will affect them.

Why should a person who's capital is sitting in a basically risk free, extremely senior position, thats guaranteed by the government, be entitled to high returns?

Yes Term deposits have a place in a portfolio, but that part of your portfolio (in my opinion), is only really entitled to earn enough to keep pace with inflation.

In the banks capital structure, there is many layers, and depositors sit at the very top, their money is basically at call, insured, and buffered by the banks capital and the government guarantee. if depositors want to earn a higher rate, then need to have money at risk, in other parts of the capital structure.

The banking system is basically providing a service to the depositor, keeping their money safe from theft and providing some protection from inflation, that's pretty much all they should expect.


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## pixel (5 February 2015)

pixel said:


> The 10% drop of interest rate may be welcome news for people who live "on plastic", but it's a 10% pay cut for self-funded retirees - unless they're actively managing their dividend-paying investments.
> 
> In that context, I've come across a couple of shares with imminent ex-div, for which the Franking Credits lift the yield above 6% at present values. Assuming their share price remains steady, or at least regains the dividend within a few weeks - as has happened in the past - it could be a useful play.
> 
> ...




Slightly off-topic  but does anyone have an opinion about these specific stocks?


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## Julia (5 February 2015)

qldfrog said:


> "they" meaning the banks???
> or "they" meaning the bank shareholders?
> Very different from the owner of bank hybrid securities which is taking a lot of risk (the risk the banks do not want to take)
> I owned hybrids, I am an active shareholder but I found your initial comment quite offensive for people having term deposits as their key source of income,
> if you are a retiree( which I doubt, but I am not one either) there is definitively a place for TD to ensure against a GFC like event.



Agree.  And after the GFC many people are so fearful that they will simply not risk what savings they have left.



> Rates being low indeed are not favoring all australian, this favors reckless investment and absence of saving which is not that good for the long term in a country.
> So a very different point of view from yours
> There are more cuts ahead and sadly I believe this rate cut was ill chosen and will come to bite us by inflating even more the RE bubble



Yes, only a third of the population have mortgages.
But I expect part of the cut justification is rising unemployment, ie the hope that it will drive business investment.



Value Collector said:


> In the banks capital structure, there is many layers, and depositors sit at the very top, their money is basically at call, insured, and buffered by the banks capital and the government guarantee. if depositors want to earn a higher rate, then need to have money at risk, in other parts of the capital structure.



Their money is not at call in that if you break a TD you will lose most of the interest.  When deposit rates are this low it makes more sense to put what you don't want in the market into an online at call a/c.

VC, you're young and smart.  It's a very different position for very old people who are just not up to more actively investing their funds.  Or, for that matter, the significant proportion of the population who are trying to save for a house deposit and unwilling to risk the volatility of the share market.

If there were a greater level of trust in financial advice, more people would access more options, but we all know how highly this industry is regarded overall these days.
(no offence intended to all responsible FPs, etc.)


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## Value Collector (5 February 2015)

Julia said:


> Agree.  And after the GFC many people are so fearful that they will simply not risk what savings they have left.




I am fine with that, my point is just that if you hold your capital in a cash deposit, you have an extremely safe very senior position, where the bank has to lose 100% of it's capital before you lose, your also government guaranteed, so as long as your earning enough interest to cover the inflation rate, your getting about what you disserve, your cash is safe from theft and somewhat protected from inflation.

I mean bond holders who's money is actually at risk ahead of depositors, and will lose 100% before a depositor loses a cent and are not government guaranteed, only earn a few percentage points more than the depositors as it is, and the various other loans and hybrids etc who will lose 100% before the bond holders lose only earn a few percentage points more than them.

The equity holders of the bank, who's capital is at risk, and who's position is junior to depositors, bondholders, and every other stake holder involved will lose 100%, before any of the others lose, they are the last to be attributed a profit and the first to generate a loss, their capital can fluctuate wildly, and at the moment they will earn about a 5%- 7% dividend.

So for a depositor to feel entitled to the same rate of return as what an equity holder expects seems silly to me.


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## DeepState (5 February 2015)

Something to consider.  The chart below shows the real yield on the 10 yr benchmark Australian Treasury 3% indexed bond.  This figure was 0.29%pa as at today's COB:




Market implied 10 year inflation expectations are pretty much 2% per annum.

Hence, for a 30% tax rate, you are expecting to destroy real wealth by around 0.4% per annum after tax for investing in this thing.  Remember, this is the best hedge against inflation surprise...which is enemy #1 for someone saving for a future life without personal exertion income as a main support - apart from not actually having enough savings. Nominal bonds are not the best hedge available. In other words, *you have got to have more money actually in the market today than you expect to spend in nominal terms in the future*.  

Saving is supposed to be rewarded by increased real consumption at some future date.  Today, it costs you to save.  In order for this to make sense you need to refer to explanations like:
- everything else I could hold is bloody expensive and this is the lesser stupidity; 
- there is a material risk of deflation despite the central expectation for inflation at about 2%pa; or
- I can't spend everything I own on restaurant dinners today because I simply can't eat that much. As a result, I have to invest in something to store my wealth for a future date even if I will be consuming less in real terms in future for the privilege of lending to the government.

Apparently, when you work it all out, we are also in full bore QE in real terms.  Possibly more so than Japanese or European sovereign bond holders.


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## Value Collector (6 February 2015)

DeepState said:


> Something to consider.  The chart below shows the real yield on the 10 yr benchmark Australian Treasury 3% indexed bond.  This figure was 0.29%pa as at today's COB:
> 
> View attachment 61461
> 
> ...




Cash is pretty much always a bad investment long term, and the longer the term the worse it is.

There are plenty of other assets that will produce higher cash flow, while also providing a natural hedge against inflation.


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## Julia (6 February 2015)

Value Collector said:


> I am fine with that, my point is just that if you hold your capital in a cash deposit, you have an extremely safe very senior position, where the bank has to lose 100% of it's capital before you lose, your also government guaranteed, so as long as your earning enough interest to cover the inflation rate, your getting about what you disserve, your cash is safe from theft and somewhat protected from inflation.
> 
> So for a depositor to feel entitled to the same rate of return as what an equity holder expects seems silly to me.



I don't think anyone has suggested that anyone feels* entitled* to anything in particular.
I understand the point you're making.
Nevertheless, deposit rates are probably more indicative of money supply and demand than any measure of safety.  eg  rates were very high back in the 70s/80s ( I recall paying 22% on IP mortgage) and, compared to today, they were high about five years ago when the credit squeeze was on and the banks were sorely in need of money and prepared to pay 8%.  I don't think that deposited money was any less safe at 8% than it is at 2.5% and still government guaranteed.


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## Value Collector (6 February 2015)

Julia said:


> I don't think anyone has suggested that anyone feels* entitled* to anything in particular.
> .




One of the forum members said they were offended because I suggested that depositors didn't really disserve to earn more than the approximate rate of inflation on cash deposit, I took that to mean he thought they were entitled to more.

.


> Nevertheless, deposit rates are probably more indicative of money supply and demand than any measure of safety.  eg  rates were very high back in the 70s/80s ( I recall paying 22% on IP mortgage) and, compared to today, they were high about five years ago when the credit squeeze was on and the banks were sorely in need of money and prepared to pay 8%.  I don't think that deposited money was any less safe at 8% than it is at 2.5%




Money was more at risk of inflation during the 70's/80's, when you were paying 22%, the depositor was at risk of having his money halve in value within three years if he didn't get a high interest rate to compound his holdings.



> and still government guaranteed




The government, and the banks capital protect your principle for loss on any given day, the interest rate protects it from being eroded by inflation. If inflation is 2%, a 2-3% coupon TD rate is fair.

If you don't think interest rates have anything to do with the safety of the deposit, try selling a 5% unsecured Bond, when an at call, government guaranteed, bank deposit account is paying 6% and it sits ahead of the bond in seniority. You won't beable to sell it, you will have to offer a higher rate to compensate the holder for the risk they are taking by accepting your bond.


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## sydboy007 (6 February 2015)

For anyone interested in what's currently available in the corporate bond world


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## sydboy007 (6 May 2015)

a good read for those who are finding it difficult to generate enough cash flow off cash and TDs.  Probablly wont get the strong capital growth of the last 2.5-3 years but should generate a a decent cashflow with some inflation protection built in.

https://www.fiig.com.au/news-and-research/news-and-research/details/2015/05/05/comparing-the-relative-value-of-indexed-annuity-bonds?utm_source=threeware_enews&utm_medium=email&utm_campaign=The%20Wire%20-%206%20May%202015%20-%20Issue%20347

With real yields of between 2% to 3% on offer, inflation indexed annuity bonds (IABs) continue to represent a compelling investment proposition given the strong underlying credit quality.

This article provides a comparison of the relative value of (IABs as well as a short summary of the underlying business and risk of each one.

IABs fully amortise over the life of the bond, with payments comprising both a principal and an interest component which are indexed to CPI. As such, IABs offer a relatively high cash flow for a product that offers inflation protection.

As listed in the table below, FIIG has a number of IABs available across a variety of maturities. Each of the IABs are currently rated investment grade and were originally issued as a source of financing for various infrastructure public-private partnership (PPPs). Generally speaking, these PPP projects receive availability-based service payments from their respective government counterparty, based on the availability of completed buildings and the provision of services.

The availability payments are contractually pre-agreed for the full project term and are generally sufficient to cover operating expenses, service debt and pay a return to equity holders. The availability revenues have a CPI-linked component which is directly matched to the CPI-linked outgoings of the project, which include servicing of the IABs. The bonds are senior secured, and as such a high level of recovery is expected in the unlikely event of default or project termination.

Despite the recent low reading for the CPI, we continue to see strong demand in the market for inflation protection. This was highlighted when the Australian government recently issued inflation linked bonds at negative real yields. Recent gains in crude oil prices and the depreciation in the Australian dollar underscore the importance of having a level of inflation protection incorporated into an overall investment portfolio. In an environment where Australian government inflation linked bonds are being issued at negative real yields, we believe the real yields of 2% to 3% on offer with these highly rated IABs continue to represent a compelling investment proposition. Each of the bonds listed below are available in initial investment parcels based on a $10,000 face value.




_Source: FIIG Securities 
Please note that bonds marked in red above are available to wholesale investors only. _

Wholesale investors can request the above table and chart with credit rating details from their FIIG representative.

Below we provide a brief outline of each of the projects and commentary on the relative value of the IABs related to each of them.

*Praeco* is a special purpose company that financed, designed, built and now maintains the Australian Defence Headquarters Joint Operations Command Facility under a PPP arrangement with the Commonwealth Government. Praeco is the only PPP project where the Commonwealth Government is the project counterparty, which is a relative advantage to the other IABs where the counterparty to the PPP is a state government. While the project’s credit is subject to refinancing risk, this relates to the nominal bullet bonds which have a call date one month prior to the maturity date on the IABs. We therefore expect the IABs will be fully repaid to maturity. We believe the Praeco IAB offers good relative value for investors seeking inflation protection with a shorter duration, noting the strength of the Australian Commonwealth government counterparty. 

*Wyuna Water* is a special purpose company which has entered into an agreement with the Sydney Water Corporation to design, build, and operate two water filtration plants in Illawarra and Woronora in Sydney for 25 years until 2021. The payment obligations from the Sydney Water Corporation are guaranteed by the NSW state government. We understand the contract is likely to be extended a further 15 years until 2036 which would be a credit positive. There could be a potential rating upgrade for Wyuna rating when the contract extension is finalised and if there is evidence of an improved financial profile for the remaining term of the extended PPP contract. With the potential for a credit rating upgrade, we consider the Wyuna Water 2021 as good relative value for a shorter duration IAB. 

*MPC* is the funding vehicle for the Melbourne Convention Centre PPP project. The IABs have a relatively high credit rating reflecting the benefit of a guarantee of scheduled principal and interest repayments on the bonds by insurer Assured Guaranty Municipal Corp. While the 2025 IAB looks fully priced, we see good relative value in the longer dated 2033 IAB given the relatively strong credit rating. 

*Plenary Justice SA* is the special purpose company which entered into a PPP arrangement with the South Australian government in respect of the redevelopment of five police stations and four court houses in six different locations across South Australia. Plenary Justice acquired the freehold rights to all of the six sites which enhances the recoverability on the bonds in an unlikely default scenario. Unlike other PPP projects, the operating phase obligations have been retained in-house by Plenary Justice rather than subcontracted out to third-party service providers, which means Plenary Justice has higher exposure to volatility in operating costs than other PPP assets. We consider the 2030 IAB to be fully priced given the higher operational risk and relatively weaker South Australian government counterparty. 

*Civic Nexus* is the financing vehicle for Civic Nexus Pty Ltd as trustee of the Civic Nexus Unit Trust (“Civic Nexus”), which entered into a PPP arrangement with the Southern Cross Station Authority to finance, design, build and maintain the Southern Cross Station (formerly known as Spencer Street Station), in Melbourne. Civic Nexus has the right to operate the Station for the balance of the project term, which expires in 2036. Major subcontractors are Honeywell Limited for facilities maintenance, Wilson Parking for security and parking, as well as other subcontractors including for cleaning. Unlike the other PPPs, Civic Nexus also earns a considerable portion of its revenue (around 30%) from commercial revenues including rental from retail properties, car parking, bus terminal rentals, locker hire, advertising and other sources. The Civic Nexus 2032 IAB appears fully priced at current levels. 

*Novacare* is the special purpose vehicle which entered into a PPP arrangement with the NSW state government to redevelop the Newcastle Mater Hospital. Construction was fully completed in mid-2009. Operating phase responsibilities have been subcontracted to Medirest (Australia) Pty Ltd and Honeywell Limited, for the entire project term through to 2033. Novacare is offering good relative value at current levels.

*RWH Finance* is the financing vehicle for RW Health Partnership, a special purpose entity established to design, construct, operate and maintain the new Royal Women’s Hospital in Melbourne under a PPP arrangement with the Victorian state government. The hospital was completed in 2008 and comprises a 5 level car park, 9 floor hospital facility, 60 bed private hospital and private consulting suites. While this is the highest yielding IAB on offer, we note the refinancing risk prevalent in the structure relating to the nominal bullet bonds issued by RWH Finance (see New Direct Bond – Royal Women’s Hospital for further information). For investors who would prefer not to have exposure to refinancing risk, there are other IABs such as MPC 2033 and JEM NSW Schools 2031 which are currently offering comparatively good value for taking a lower credit risk.

*JEM NSW Schools* is the financing vehicle for Axiom Education NSW No. 2 Pty Ltd (“Axiom NSW”), which maintains facilities at 11 schools across NSW under a PPP agreement with the NSW state government which expires in 2035. Axiom NSW has subcontracted the bulk of its services obligations to Spotless. Axiom NSW benefits however from the absence of refinance risk in its capital structure. FIIG has both a 2031 and 2035 IAB available, with both offering good relative value.

*JEM Southbank* is the financing vehicle for Axiom Education Queensland Pty Ltd (“Axiom Qld”), which maintains facilities at the Southbank Institute of Technology, Brisbane under a PPP agreement with the Queensland state government. Axiom Qld provides facilities management services, which are to be provided for the balance of the PPP term, expiring in 2039. It has subcontracted the majority of its operations phase obligations to Spotless, a highly experienced PPP subcontractor. The project is subject to refinancing risk, with the nominal bullet bonds which mature in June 2018 needing to be refinanced. However, unlike Praeco and RWH, Moody’s considers JEM Southbank’s refinancing risk more manageable and as such has kept its rating on a stable outlook.


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## pixel (7 July 2015)

> Media Release
> Number 	2015-11
> Date 	7 July 2015
> Embargo 	For Immediate Release
> ...



http://www.rba.gov.au/media-releases/2015/mr-15-11.html


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## sinner (7 July 2015)

Not many people are aware (thanks John Hussman!) that there is a strong relationship between short term government interest rates and total government debt.

Here is a scatterplot of RBA data, showing $b outstanding in Government securities vs the cash target rate. The data only goes back to mid 1990, so the relationship is not as clear as if you use US data from the Federal Reserve which goes back much further.




But, you get the drift! Government interest rates go with the Government balance sheet. This makes sense if you think about the accounting identity of Government + Household + Corporate sectors in a country.

So we can infer a move up to 4% rates would entail a 50% reduction in balance sheet. Rates above 6% have only been sighted when the Goverment balance sheet is barely in debt (generally implying the Household and Corporate sectors are doing well).

May be useful for those who are trying to figure out where rates will go. My 2c is that worries about rate hikes are overblown, since I think it is unlikely for Central Banks of the world to start trying to lighten their balance sheet without completely destroying the economy.


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## sydboy007 (8 July 2015)

sinner said:


> Not many people are aware (thanks John Hussman!) that there is a strong relationship between short term government interest rates and total government debt.
> 
> Here is a scatterplot of RBA data, showing $b outstanding in Government securities vs the cash target rate. The data only goes back to mid 1990, so the relationship is not as clear as if you use US data from the Federal Reserve which goes back much further.
> 
> ...




the worry is we're at close to ZIRP for Australia.

hate to think what will happen if bank CDS go back to GFC levels.  CBA is roughly the mid 60s at present but hit around 180 during the GFC and peaked around 210 in mid 2011.

The RBA had plenty of dry powder back then.  Any tightening in global credit markets will be instantly felt as the banks will pass on the cost increase to borrowers.  That might mean we start seeing a decent yield on TDs again, but doubt we'll get 5 year at 8% TDs like WBC offered.

prob best to get some corp bonds and accept that 5% is going to be a decent yield going forward in the new normal.


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## sptrawler (8 July 2015)

sydboy007 said:


> prob best to get some corp bonds and accept that 5% is going to be a decent yield going forward in the new normal.




I would think that is a fair call.IMO


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## sinner (9 July 2015)

sydboy007 said:


> the worry is we're at close to ZIRP for Australia.




There is still plenty of room to move downwards from 2%.


If you are familiar with the Japanese interest rate cycle, you will know that after the rate fell below 2% it never raised above it again, currently sitting at 0.5% I think. 

Meanwhile JGBs provided decent returns in the move from 2% to 0.5% (yields down, price up) while everyone thought that the "top is in" for JGBs for like 20 years now.


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## sydboy007 (9 July 2015)

sinner said:


> There is still plenty of room to move downwards from 2%.
> 
> 
> If you are familiar with the Japanese interest rate cycle, you will know that after the rate fell below 2% it never raised above it again, currently sitting at 0.5% I think.
> ...




Japan has historically run a current account surplus and has had the capability to support much of the Govt debt internally.

Australia has no such luxury.  I don't know what the lower bound will be here, but we definitely wont be able to get to 0% like the USA or Japan simply because we are not a safe haven currency like the USA nor a surplus capital country like Japan.

The RBA may be able to take the sting out of the some of the first 1% rise in overseas interest rates, but after that it's likely to be passed on in full to debt holders.

Don't forget how fast things moved when the GFC hit.  Interest rates the big 4 had to pay to get credit jumped by over 1.5% very rapidly.

How it all will pan out I'm not sure, but I'm enjoying the compression in bond yields with my SMSF bond portfolio providing roughly 14% annual returns over the last 3 financial years.  Not sure it can continue on like that, but I bought in for the income stream.  Capital growth has been a very welcome bonus.

Bank deposits wil unlikely give you much more than CPI, and to be honest for a guaranteed product I don't think it deserves much more than that.  Taking a bit of risk into some decent corporate bonds will get you at least twice CPI and in some cases close to triple that level.  Just wish there was some reasonably priced corporate bond funds in Australia.


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## sinner (9 July 2015)

sydboy007 said:


> Japan has historically run a current account surplus and has had the capability to support much of the Govt debt internally.




What does the ability to run a current account surplus actually mean? Most people don't understand it at all. Luckily Michael Pettis has written about it extensively to correct many misunderstandings and misconceptions.

http://blog.mpettis.com/2015/06/internal-and-external-balance/

here is just one small snippet of this long article which links to many other articles


> A country’s trade surplus (more accurately its current account surplus, which includes things like royalty payments, tourism, returns on investment abroad, and other things, but we will pretend they are the same) is exactly equal to its total savings minus its total investment, which is equal to the amount of savings it exports. This is why we refer to the balance of payments. The total money that ants receive from their trade (current account) surplus is perfectly balanced by the capital account deficit, which is simply the amount of savings they send abroad.
> 
> Why save more than you invest?
> 
> ...






> Australia has no such luxury.  I don't know what the lower bound will be here, but we definitely wont be able to get to 0% like the USA or Japan simply because we are not a safe haven currency like the USA nor a surplus capital country like Japan.




Demand for AU gov bonds has been high from Central Banks reweighting away from USD/EUR/JPY. High enough that while the AUDUSD was above 1, the RBA was actually selling bonds directly to other CBs off market to avoid their demand supporting the price. If those off market transactions were to come back on to the direct market, you can bet that the AUDUSD would be a lot higher than where it is today. 



> The RBA may be able to take the sting out of the some of the first 1% rise in overseas interest rates, but after that it's likely to be passed on in full to debt holders.
> 
> Don't forget how fast things moved when the GFC hit.  Interest rates the big 4 had to pay to get credit jumped by over 1.5% very rapidly.




I haven't forgotten. But you are conflating two things here. First, you have implicitly assumed that rates will rise any time soon, by an amount that would entail massive reductions in Central Bank balance sheets (i.e. unlikely). Second you are conflating this assumed rate hike with spiking corporate rates during a credit crunch where Government rates declined to all time lows.



> How it all will pan out I'm not sure, but I'm enjoying the compression in bond yields with my SMSF bond portfolio providing roughly 14% annual returns over the last 3 financial years.  Not sure it can continue on like that, but I bought in for the income stream.  Capital growth has been a very welcome bonus.




Nobody knows for sure, obviously, but the good thing about AAA Government bonds is that you can forecast their return under the assumption they are default free (i.e. may lose real but not nominal value). So we can forecast the benchmark rate for 10-30Y out from now, and compare it to the returns we might receive from other investments (adjusted by volatility if necessary) of the same duration to decide where to invest. i.e. maybe 2% p.a. doesn't sound like an awesome investment, but then again if your 10y annualised forecast for equities is <2%, after considering the volatility you may decide actually 2% bonds don't sound so bad.

(as an example)
http://hussmanfunds.com/wmc/wmc150608.htm


> We estimate that from current valuations, the S&P 500 will underperform Treasury bonds by more than 2% annually over the coming decade. We’ve never observed a similar level of stock vs. bond valuations without stocks actually underperforming bonds over the subsequent 10-year period. Next, look at bear market lows such as 2009, 2002, 1990, 1987, 1982, 1978, and 1974, and recognize that the completion of every market cycle in history has provided better investment opportunities, both in absolute terms, and relative to bonds, than are presently available.


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## sydboy007 (9 July 2015)

sinner said:


> What does the ability to run a current account surplus actually mean? Most people don't understand it at all. Luckily Michael Pettis has written about it extensively to correct many misunderstandings and misconceptions.
> 
> http://blog.mpettis.com/2015/06/internal-and-external-balance/
> 
> ...




Propping up Govt debt is much easier when you have a trade surplus.  Japan is still one of the worlds largest creditors.

Aus GBs are unlikely to be AAA for much longer.  30% gross debt appears to be the line in the sand.  The continued unwinding of the ToT will see resource profits continue to decline.  The budget forecasts are already wrong on CAPEX and I/O and coal prices.  I'd expect the AAA to be in danger before the next election.  That's my base belief.  If the car companies shut early or the housing building boom ends early due to falling pop growth then things will get ugly a lot sooner.

Mortgage and other private sector interest rates are set more by the cost of overseas bond markets than they are by the official cash rate.  I'm not predicting the RBA to raise rates, it's going to have to lower them, but depending on how grexit and the china hard landing goes the aussie banks may have to pay more for credit.  They're back to pre GFC levels of nearly 60% of funds from overseas.  Overseas funding is currently cheap(ish) but there's no guarantee that will continue, especially since the banks have started moving back to getting shorter terms.

2% Govt bonds sounds a raw prawn to me.  Why not get into some rated corporate bonds and get 4-5% for not much more risk?  Some ILBs are still offering cash flow of ~3.5%.  Not bad when you're income keeps pace with inflation.


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## sinner (9 July 2015)

I do acknowledge that a lot of the concerns you listed as risks to the AAA do also concern me more generally too.



sydboy007 said:


> 2% Govt bonds sounds a raw prawn to me.  Why not get into some rated corporate bonds and get 4-5% for not much more risk?  Some ILBs are still offering cash flow of ~3.5%.  Not bad when you're income keeps pace with inflation.




It was only an example number, not a real one (but for reference the current yield on Aus 10y is ~2.8% and 20y is ~3.4%). Investment choices like Gov vs Corp should only be made by individual investors after due diligence and personal risk evaluation, definitely not by blindly reaching for yield. 

I am not huge on gov bonds personally (I prefer gold as a long term savings vehicle), but I do hold some in both super and personal accounts to reduce overall portfolio correlation (which is not a feature corporate bonds provide) and I seem to assign a lower probability to interest rate hikes than most.


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## McLovin (9 July 2015)

sydboy007 said:


> 2% Govt bonds sounds a raw prawn to me.  Why not get into some rated corporate bonds and get 4-5% for not much more risk?  Some ILBs are still offering cash flow of ~3.5%.  Not bad when you're income keeps pace with inflation.




It's interesting that you can be so negative on pretty much everything relating to the Australian economy, but still think Australian corporate bonds at 4-5% represent good value.


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## qldfrog (10 July 2015)

McLovin said:


> It's interesting that you can be so negative on pretty much everything relating to the Australian economy, but still think Australian corporate bonds at 4-5% represent good value.



I share sydneyboy view: if i can get 3% above inflation: I sign today; 
I was actually wondering where i could get that!


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## McLovin (10 July 2015)

qldfrog said:


> I share sydneyboy view: if i can get 3% above inflation: I sign today;
> I was actually wondering where i could get that!




Here you go...

http://thewire.blob.core.windows.ne...e/fiig-rate-sheet/fiigratesheet.pdf?sfvrsn=26


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## sydboy007 (10 July 2015)

McLovin said:


> It's interesting that you can be so negative on pretty much everything relating to the Australian economy, but still think Australian corporate bonds at 4-5% represent good value.




Value in a sense is relative, not absolute.

Some corporate bonds still represent good value compared to Govt bonds or much of the share market.

What do you believe would be a realistic rate of return going forward?  5% with relatively low risk from a corporate bond issued by a company that has regulated assets seems a decent compromise in the current low rate low growth environment, especuially if there's further yield compression as I suspect there will be.

My pessimism is paying off so far.  Bonds are working well for me and moving funds out of AUD assets is also paying off.  I don't se much sunshine for the aussie economy over the next few years.  Lots of job losses coming from the resource CAPEX cliff and closing of the car industry.  I honestly don't know where the jobs to replace them will come from.  Tourism certainly wont fill the gap.


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## sydboy007 (10 July 2015)

McLovin said:


> Here you go...
> 
> http://thewire.blob.core.windows.ne...e/fiig-rate-sheet/fiigratesheet.pdf?sfvrsn=26




i use FIGG.  Thumbs up for making access to bonds easier.  Wish they'd launch a corp bond ETF.


----------



## Junior (10 July 2015)

sydboy007 said:


> i use FIGG.  Thumbs up for making access to bonds easier.  Wish they'd launch a corp bond ETF.




These guys launched a couple of months ago, individual exchange traded corporate bonds:  http://www.xtbs.com.au/available-xtbs


----------



## McLovin (10 July 2015)

sydboy007 said:


> Value in a sense is relative, not absolute.




When comparing a basket of bonds/shares/real esate you can get some idea on relative value, but you need to be adequately compensated for risk on an absolute basis. When I look down that list and see Mackay Sugar with ytm of 5.5% on an unrated, unsecured issue I have a hard time accepting risk is being compensated.



sydboy007 said:


> What do you believe would be a realistic rate of return going forward?  5% with relatively low risk from a corporate bond issued by a company that has regulated assets seems a decent compromise in the current low rate low growth environment, especuially if there's further yield compression as I suspect there will be.




For bonds? I have nfi. I assume you're talking about Sydney Airport? A BBB rated company. What does BBB mean?



> BBB: An obligor rated 'BBB' has adequate capacity to meet its financial commitments. *However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.*




(My bolding)

So how does that fit in with your assesment of where the economy is heading? If the scenarios that you post here actually come to fruition what are the chances that SYD cannot make its payments? I'd also point out that the next rating below BBB is junk status.


----------



## sinner (10 July 2015)

sydboy007 said:


> especuially if there's further yield compression as I suspect there will be.




Wait..

So you believe we are essentially at ZIRP, and you're skeptical of further declines in rates since we aren't a reserve currency or a capital account surplus, and you think our economy is screwed and you think we won't get to keep our AAA...

But you also suspect there will be further yield compression?



How does that work?


----------



## sydboy007 (10 July 2015)

sinner said:


> Wait..
> 
> So you believe we are essentially at ZIRP, and you're skeptical of further declines in rates since we aren't a reserve currency or a capital account surplus, and you think our economy is screwed and you think we won't get to keep our AAA...
> 
> ...




Can't current corporate bond yields compress further?

Can't new loans banks need to get to roll over expiring loans increase in costs as they did during the GFC.

The bond / credit markets are quite big.  Remember when the banks didn't pass on the full RBA rate cuts?  What happens when the cash rate is 1% and bank cds continue to increase?  How low can the cash rate go?  In a risk off environment what do you think that will do to Aussie Govt bonds?  Outside of Central banks who'd want to buy Aussie Govt bonds now with the reasonable expectation of further AUD falls.  is it worth the risk of loosing 10%+ on the currency for maybe an extra 2% yield?

Just for interest sake what's your views on where interest rates are going?  Do you think the AAA rating is safe?  How low will the market lets interest rates go in Australia?


----------



## sydboy007 (10 July 2015)

McLovin said:


> When comparing a basket of bonds/shares/real esate you can get some idea on relative value, but you need to be adequately compensated for risk on an absolute basis. When I look down that list and see Mackay Sugar with ytm of 5.5% on an unrated, unsecured issue I have a hard time accepting risk is being compensated.
> 
> 
> 
> ...




I'd not touch mackay sugar with a barge pole.  Others might

SYD AP - you'd have to decide on how likely they'd not be able to make an interest payment.  Considering there's no alternative to air travel in Australia there wont be too big a reduction in passenger numbers, and with the falling AUD we're seeing a decent uptick in inbound tourism.  International tourists spend up more, and retail is a big money spinner for the airport, along with parking.

cash converters could be a decent bond buy at 6.7%.  pawn brokers tend to do well in difficult times.  Plenary fixed with YTM of 6.24% would also be reasonable as they receive payment from the Govt.  Pickings are certainly slimmer than 6 months ago.

personally I don't think risk is being adequately compensated for in pretty much all asset classes.  Bank deposits barely compensate for inflation, a lot of bonds don't compensate enough, and shares in general are over valued, while property yielding a net 3% or less doesn't seem too hot either.

maybe buying some gold jewlergy is the safer way forward


----------



## craft (10 July 2015)

sydboy007 said:


> cash converters could be a decent bond buy at 6.7%.  pawn brokers tend to do well in difficult times.




Seriously?  There might be more demand in a recession but there will also be a lot more defaults.

At least 75% of earnings are from the most sub of sub prime lending. The balance sheet has nothing of substance except a bit of inventory which is second hand crap and the loan book. IF CCV's debt doesn't become priced as distressed in a recession I would be amazed. 6.7% is rose coloured ridiculous.


----------



## qldfrog (11 July 2015)

Thanks for the various inputs,  FIIG a resource I am happy to know now.


----------



## sydboy007 (11 July 2015)

craft said:


> Seriously?  There might be more demand in a recession but there will also be a lot more defaults.
> 
> At least 75% of earnings are from the most sub of sub prime lending. The balance sheet has nothing of substance except a bit of inventory which is second hand crap and the loan book. IF CCV's debt doesn't become priced as distressed in a recession I would be amazed. 6.7% is rose coloured ridiculous.




You could be right.  In the day of ebay and gumtree do we still need pawn brokers?  Still, they've been around with the rise of online competitors so there's some market demand for their services.


----------



## odds-on (12 July 2015)

I found the attached article a good read, so thought I would share with ASF.

http://aswathdamodaran.blogspot.co.uk/2015/04/dealing-with-low-interest-rates.html

Not really anything we can do about low interest rates other than accept "it is what it is" and make the appropriate modifications to any valuations. I think we will be in a low growth economic environment for many years...


----------



## craft (12 July 2015)

sydboy007 said:


> You could be right.  In the day of ebay and gumtree do we still need pawn brokers?  Still, they've been around with the rise of online competitors so there's some market demand for their services.





You still seem to be seeing CCV just as a pawn broker – That seems to me like describing a chemist by the retail business at the front of their shop and ignoring the prescription drug business. 



This seemingly unawareness of the true dynamics of the business and the risks involved is what makes me shudder at your line.


sydboy007 said:


> cash converters could be a decent bond buy at 6.7%.  pawn brokers tend to do well in difficult times.  :




It seems symptomatic to me of the chase for yield by people who in most cases have no idea of the extra risks they are taking to get that yield.  When risk gets under-priced things become more risky.  Financial suppression across the entire capital market line is pushing the risk adverse and uneducated in particular niches to inadvertently become the ultimate risk takers and that makes things risky for all of us.

I asume in making your call about CCV debt you would be able to at least answer these basic questions: 

What % of CCV profit comes from subprime lending?
What is the interest rate CCV charge on that lending? Is that under legislative risk? Are they pushing the intent of current rate caps with various fees?
What is the % of bad loans written off against those loans. What is CCV's earnings sensitivity to default rates
What is the history of default performance of these loans in a down turn?
Are the bonds secured? 
Does CCV have any other borrowings - do those other borrowings have a priority security.
What is the term of those other borrowings - Can CCV stay in business if those other borrowing are withdrawn or not renewed. How likely is renewal of those other facilities in a recession?
What fixed lease commitments do CCV have? Are the bond repayments superior to these claims?
How much in tangible assets does CCV have on the balance sheet. How much would the inventory be worth in a liquidation? How much of the PPE is lease improvements or assets without other uses?


----------



## sinner (13 July 2015)

sydboy007 said:


> Can't current corporate bond yields compress further?




Just to clarify, when you say "compression" I assume you are referring to yields going down.

The answer to which of course is: yes, no, anything is possible. But given your concerns about the economy it doesn't seem congruent to bet on corporate yields dropping.



> Can't new loans banks need to get to roll over expiring loans increase in costs as they did during the GFC.




This would be the opposite of yield compression...which is makes what you're saying kind of confusing.



> The bond / credit markets are quite big.  Remember when the banks didn't pass on the full RBA rate cuts?




You are once again conflating multiple things here. 

When you say "didn't pass on the full RBA rate cuts", I assume (since you don't specify at all) that you are referring to passing on rate cuts to mortgagees? Yes, I remember this, but it was temporary, and more importantly: so what? Not passing on rate cuts is the banks trying to protect margins. Rate cuts were also "not passed on" to savers, as the big 4 competed for deposits as a source of funding. Again, not sure what these questions have to do with anything...



> What happens when the cash rate is 1% and bank cds continue to increase?  How low can the cash rate go?




If this is some kind of rhetoric where you know the answer to this question, perhaps it would have been better if you had simply and clearly stated what you think is going to happen. I am not sure why you are asking me a hypothetical when you seem to believe the cash rate could never achieve 1% in the first place. 

How low can the cash rate go? In real terms it can go quite negative, and in nominal terms it can probably go quite close to zero, especially if the forecast for long term economic growth is low.



> In a risk off environment what do you think that will do to Aussie Govt bonds?




Anyone can go to the RBA website, download some data (e.g. construct yourself a Gov/BBB yield spread) and find out what happens to Aus Gov bonds during risk off environments. Hint: they generally do not go down. Perhaps you have never experienced a yield curve inversion where investors pile into long duration Govt debt.

Again, if this is some sort of hypothetical where you're assuming everyone knows the answer to this rhetoric, maybe better to just come out and say whatever it is you're thinking?



> Outside of Central banks who'd want to buy Aussie Govt bonds now with the reasonable expectation of further AUD falls.  is it worth the risk of loosing 10%+ on the currency for maybe an extra 2% yield?




Uh, you realise that for bonds to be issued, someone has to buy them, right? So outside of Central Banks, it's probably safe to assume everyone who was issued Aussie Govt bonds wanted to buy them...hundreds of millions/billions in AUM...

When did foreign exchange come into this? So now the thesis is that Aus Govs suck because of the AUDUSD?! I guess for experts at predicting where the interest rate will go, predicting foreign exchange movements are also a simple task.



> Just for interest sake what's your views on where interest rates are going?  Do you think the AAA rating is safe?  How low will the market lets interest rates go in Australia?




As I have already stated, I assign a relatively low probability of rate hikes within the next 12 months compared to most here, and I feel like there is plenty of room for yields to decline further. 

Do I think the AAA rating is safe? I don't know why my opinion counts, since I am no expert in analysing the balance sheets of countries. But the market yield (representing the aggregate marginal opinion of an entire market of experts) for Aus 10y is 2.93%, while the US 10y is 2.38%...so you can see that investors are not demanding a significant risk premium to fund AU vs US. Perhaps you are smarter than the market yield.


----------



## sinner (13 July 2015)

odds-on said:


> I found the attached article a good read, so thought I would share with ASF.
> 
> http://aswathdamodaran.blogspot.co.uk/2015/04/dealing-with-low-interest-rates.html
> 
> Not really anything we can do about low interest rates other than accept "it is what it is" and make the appropriate modifications to any valuations. I think we will be in a low growth economic environment for many years...




Excellent stuff here. I want to see the "interest rate room" too!



> Even if you take issue with my proxies for expected inflation (the actual inflation rate in the US each year, as measured by the CPI), real growth (the real growth rate in US GDP and the interest rate on a guaranteed investment, the graph sends a powerful message that risk free rates are driven by inflation and real growth expectations. If expected inflation is low and real growth is anemic, as has been the case since 2008, interest rates will be low as well and they would have been low, with or without central bank intervention.




This message is even more amplified when you consider that in a credit based monetary system, Gov bonds are essentially claims on the future productivity of the tax base of a given country, hence the expected return to be tightly coupled with forecasts on the productivity (e.g. inflation and growth) of that tax base.


----------



## McLovin (13 July 2015)

craft said:


> It seems symptomatic to me of the chase for yield by people who in most cases have no idea of the extra risks they are taking to get that yield.  When risk gets under-priced things become more risky.  Financial suppression across the entire capital market line is pushing the risk adverse and uneducated in particular niches to inadvertently become the ultimate risk takers and that makes things risky for all of us.




This here!

When people talk about "relative" value it should set off warning bells. Just because yields have fallen doesn't mean CCV have reinvented the sub-prime wheel. The first question should be am I being adequately compensated for the risk, not what are term deposits currently paying. SLV has a ytm of 7.4%. How does owning a few hundred million in catering equipment go when a recession hits and your borrowers are going out of business?

Even in regards to SYD (and I don't think they're going broke anytime soon!) EBIT of $600m and an interest bill of $500m. Half their revenue comes from retail/parking/property. Calling them a regulated asset is true but its not the full picture and they're not the same as a utility, there is a fair bit of discretionary spending. You only need to look at what happened to passenger numbers in Europe when the GFC hit.


----------



## Bill M (3 May 2016)

From The Australian
===
RBA slashes interest rates

Fear of a job-destroying deflationary spiral has compelled the Reserve Bank to cut interest rates to a new historic low of 1.75 per cent today, risking another politically charged spike in house prices and bounce in household debt.

http://www.theaustralian.com.au/bus...s/news-story/76e63b05d5c8d8a549ec2c6aa1ddeb83
===

Never ever seen it that low. Interesting times ahead.


----------



## CanOz (3 May 2016)

The Fin Review tipped it well last week after the inflation number came out...well done...

In thier statement it seems they're more worries about a strong AUD...


----------



## pixel (3 May 2016)

Bill M said:


> From The Australian
> ===
> RBA slashes interest rates
> 
> ...




Spend now, folks! No use saving for later - it won't be worth it.
Saving is a Mugs' game.

... as long as you don't plan to go an Overseas Holiday or buy imported goods. And pity the companies with debt denominated in USD. The tanking AUD will force them to pay back lots more. Of which our Banks will take their cut, of course. No wonder ANZ swung up from $22.78 Low to $25.11 High.


----------



## Wysiwyg (3 May 2016)

Harvey Norman and JB HiFi could benefit more from this.


----------



## qldfrog (11 May 2016)

interesting article
http://www.brisbanetimes.com.au/business/the-economy/miracle-needed-to-save-the-world-because-central-banks-cant-says-btims-gor-20160510-goqv3k.html
not sure where to put it, interest rate indeed but also markets, etc etc


----------



## sptrawler (11 May 2016)

qldfrog said:


> interesting article
> http://www.brisbanetimes.com.au/business/the-economy/miracle-needed-to-save-the-world-because-central-banks-cant-says-btims-gor-20160510-goqv3k.html
> not sure where to put it, interest rate indeed but also markets, etc etc




Yes frog, I was reading that article today, pretty well sums up the problem.
Not an easy fix, people need to buy junk, so China can sell junk, so they need to buy more of our stuff.

At the moment, everyone is up to their neck in debt, and want to spend any excess money on junk food. lol


----------



## greggles (1 November 2016)

Interest rates unchanged this month. Here's the full text of the announcement:



> Statement by Philip Lowe, Governor:
> 
> Monetary Policy Decision
> 
> ...


----------



## BarneyChambers (6 December 2016)

Westpac and NAB have just increased their interest rates, putting a lump of coal in the sock of many families this Christmas!


----------



## orr (6 December 2016)

BarneyChambers said:


> Westpac and NAB have just increased their interest rates, putting a lump of coal in the sock of many families this Christmas!




Many families...but some more than others; take a moments thought for real estate spivs, speculators and adjunct parasites. Make a change from bentleys, yachts, and the weekly coked up debauch...


----------



## greggles (5 June 2018)

Interest rates on hold at 1.5%... again.


> *The full statement by the Reserve Bank of Australia*
> 
> At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
> 
> ...


----------



## Junior (5 June 2018)

greggles said:


> Interest rates on hold at 1.5%... again.




I think they should have raised them around 18-24 months ago, maybe 0.5% - 1.0% and stopped property prices in their tracks at that point.  They won't raise now that prices are stagnating/falling in Sydney and Melbourne, and will have very little room to drop rates the next time stimulus/rate-cuts are required.  The likely scenario at this stage is that mortgage rates rise of their own accord, due to IR hikes overseas, and the RBA will have very little ammunition to offset that with any further cuts.

What are others thoughts on IR policy over the past few years?


----------



## luutzu (5 June 2018)

Junior said:


> I think they should have raised them around 18-24 months ago, maybe 0.5% - 1.0% and stopped property prices in their tracks at that point.  They won't raise now that prices are stagnating/falling in Sydney and Melbourne, and will have very little room to drop rates the next time stimulus/rate-cuts are required.  The likely scenario at this stage is that mortgage rates rise of their own accord, due to IR hikes overseas, and the RBA will have very little ammunition to offset that with any further cuts.
> 
> What are others thoughts on IR policy over the past few years?




The ABC citedt reports showing consumption in Aus. have been higher than wage increases. With increase property value, that mortgage line of credit, easy financing... massive amount of mortgage and personal debt, stagnant wages... Great policy.


----------



## Toyota Lexcen (5 June 2018)

they should be cutting, unemployment going up, inflation low, wage growth low, property prices down

in a corner now with no way out and will sit on the sidelines for probably 2-3years minimum


----------



## Toyota Lexcen (2 January 2019)

the chorus slowly building for an interest rate cut. It's an interesting situation.

The RBA cut to offset mining downturn, data released about inflation, wages, GDP indicates our economy average at best yet they wont cut because of debt levels.

i think the hint of QE by a RBA official was interesting.


----------



## sptrawler (3 January 2019)

I think they will wait to see, the outcome of the election, before moving either way.


----------



## greggles (1 May 2019)

Interest rates are expected to be cut this month for the first time since August 2016 as a result of inflation grinding to a halt in the March quarter with the consumer price index recording 0.0%, dragging the annualised rate down to 1.3%.

Those mortgaged to the hilt in an environment of declining real estate prices are probably breathing a sigh of relief. Those relying on interest rates to generate an income are probably groaning.

Is a rate of 1.25% a given this month or are there some who think the RBA will keep rates steady in spite of the inflation figures?


----------



## Smurf1976 (1 May 2019)

greggles said:


> Is a rate of 1.25% a given this month or are there some who think the RBA will keep rates steady in spite of the inflation figures?



Given they've made no change for almost 3 years I'm thinking they might wait until after the election to avoid any perception that it's a political statement of sorts?


----------



## willy1111 (1 May 2019)

There are a number of lenders offering 5 year fixed rates at 3.99% and 3 year below that again . . . thus I don't see much upward movement in rates over the next 5 years.


----------



## greggles (7 May 2019)

Interest rates on hold again. 

As Smurf suggested, the RBA probably didn't want to makes any changes so close to a Federal election.


----------



## Knobby22 (7 May 2019)

I don't think a rate cut would achieve much. Already below US interest rates and pensioners would do it tougher. Better to wait.


----------



## PZ99 (29 May 2019)

JP Morgan taking the mickey on rates going to 0.5% in a year IMV

But.. for what it's worth > https://www.afr.com/news/economy/mo...-0-5pc-in-12-months-jp-morgan-20190529-p51s7v (may need to open this with a private/incognito window)

"The official cash rate will touch 0.5 per cent midway through next year because the Reserve Bank will have to capitulate to a much more severe global economic downturn, according to JP Morgan economists.

With financial markets already pricing in a 0.25 percentage point rate cut on Tuesday and another two 0.25 percentage point rate cuts by the start of next year, JP Morgan suggests the RBA will have to go even harder."

I'm betting a fifty they stay on hold next Tuesday


----------



## jbocker (29 May 2019)

PZ99 said:


> JP Morgan taking the mickey on rates going to 0.5% in a year IMV
> 
> But.. for what it's worth > https://www.afr.com/news/economy/mo...-0-5pc-in-12-months-jp-morgan-20190529-p51s7v (may need to open this with a private/incognito window)
> 
> ...




What will it matter? The banks will slurp it all up anyway.


----------



## greggles (2 July 2019)

RBA cuts interest rates to an historic low of 1% in an effort to boost economic growth.

This is the first back-to-back interest rate cut since 2012.

https://www.abc.net.au/news/2019-07-02/rba-cuts-rates-to-a-new-low-of-1pc/11270464


----------



## PZ99 (2 July 2019)

The economy must be really down the toilet for the fed to not even wait for parliament to debate the tax cuts prior to lowering the rates. 

All the banks are down


----------



## SirRumpole (2 July 2019)

I imagine the government will stick stubbornly to its surplus goals instead of giving the economy an injection with infrastructure spending.

$1000 tax cut a year tax cut might help but in the view of rising gas and power prices it will get eaten up pretty quickly, and they haven't yet said where the cuts will be.


----------



## Smurf1976 (2 July 2019)

I think an issue here is that we're living in a world where a lot of people do have at least some very basic economics knowledge and know that whilst an interest rate cut might benefit them personally, the reasons for it are because things aren't going well.

It might help the housing and share markets given that cash deposits are rapidly approaching the point of paying zero interest or so close to it as to make the detail irrelevant, thus "forcing" those with funds into other assets, but I can't see it getting people back into the shops since too many are aware of the underlying reasons.


----------



## sptrawler (2 July 2019)

SirRumpole said:


> I imagine the government will stick stubbornly to its surplus goals instead of giving the economy an injection with infrastructure spending.
> 
> $1000 tax cut a year tax cut might help but in the view of rising gas and power prices it will get eaten up pretty quickly, and they haven't yet said where the cuts will be.



You never know Rumpy, schools might get another canteen.
Like you said the tax cuts have to be paid by cuts somewhere, also infrastructure capital and interest has to be paid from somewhere too, it is all a bit of a cleft stick situation ATM.


----------



## sptrawler (3 July 2019)

Smurf1976 said:


> It might help the housing and share markets given that cash deposits are rapidly approaching the point of paying zero interest or so close to it as to make the detail irrelevant, thus "forcing" those with funds into other assets, but I can't see it getting people back into the shops since too many are aware of the underlying reasons.



It is all becoming a really big problem IMO, as you say interest rates are at a point where savers may as well pull the money out, this then leaves the banks exposed as they have to source funding O/S.
Then the banks can't make money, it can all turn very nasty from here IMO, there isn't much wriggle room left. Hopefully a bit of confidence comes back, the papers start talking things up and planet Australia returns to normal. 
That would be nice


----------



## Smurf1976 (3 July 2019)

sptrawler said:


> It is all becoming a really big problem IMO, as you say interest rates are at a point where savers may as well pull the money out, this then leaves the banks exposed as they have to source funding O/S.



There's also the point that the RBA is just about out of bullets, the dam is just about dry or whatever other analogy you like to use.

If the cut to 1% doesn't achieve much then economically I think that'll be evidence that the proverbial can can't be kicked any further down the road. If business or consumers can't find a productive use for debt and/or banks aren't willing to lend at 1% well then that itself speaks volumes as to the broader circumstances. 

One thing of note is that the AUD is still around 70c so no movement of any significance there.


----------



## satanoperca (3 July 2019)

sptrawler said:


> interest rates are at a point where savers may as well pull the money out, this then leaves the banks exposed as they have to source funding O/S.




Had lunch with my retired parents and some of their friends yesterday, all of them are self funded retires at the moment, the main discussion was about how they could reduce/hid their assets so they could get a part pensions to cover medical expenses. How they we doing that was each week reducing their cash holdings in the banks.
It even surprised me when my conservative parents announced they had just purchased a holiday cabin to be build on the Murray river and the scheme they are using to pay for it with the builder, cash is still king.
When asked why, they replied "better to use the cash than leave it in the bank and get nothing for it".
The RBA where foulish and the govnuts more so for not addressing some of the fundamental issues facing the economy in the last 6 years, yes you dumb arse Libs, you have had six years to achieve something.


----------



## sptrawler (3 July 2019)

satanoperca said:


> The RBA where foulish and the govnuts more so for not addressing some of the fundamental issues facing the economy in the last 6 years, yes you dumb arse Libs, you have had six years to achieve something.



Well the first thing they have achieved is stopping Labor getting in, I bet your parents and the others were pleased with that, at least it has slowed the housing slide.


----------



## satanoperca (3 July 2019)

Actually no they weren't, as long term lib supports they wanted a change and while they didn't like the idea of loosing the franking credits, they strongly supported the removal of NG on existing properties.

As SP you seem to dislike labor so much, can you point out why in 6 years, we have the highest private and public debt per ca pita  this country has ever seen, a hollowed out economy, greatly reduced standard of living, some of the highest levels of suicide and mental health issues in any developed country and the Libs have achieved what exactly.

Sorry, I got it wrong, it is better to do nothing or the same as nothing and expect a change, than to embrace change without knowing what the outcome will be.


----------



## sptrawler (3 July 2019)

satanoperca said:


> Actually no they weren't, as long term lib supports they wanted a change and while they didn't like the idea of loosing the franking credits, they strongly supported the removal of NG on existing properties.
> 
> As SP you seem to dislike labor so much, can you point out why in 6 years, we have the highest private and public debt per ca pita  this country has ever seen, a hollowed out economy, greatly reduced standard of living, some of the highest levels of suicide and mental health issues in any developed country and the Libs have achieved what exactly.
> 
> Sorry, I got it wrong, it is better to do nothing or the same as nothing and expect a change, than to embrace change without knowing what the outcome will be.



Have you been living in a parallel universe, most of the last 6 years has been about struggling to get anything through the Senate, running a minority Government being led by an inept P.M.
The whole Country has been more concerned about left wing social agenda's than economic realities, and we are only just now getting the debate on to what it should be about, mainly due to the flogging the left wing got at the last Federal referendum.


----------



## satanoperca (3 July 2019)

Excuses, excuses, excuses.
Which PM are you talking about, it seems like a revolving door?


----------



## lusk (3 July 2019)

PZ99 said:


> The economy must be really down the toilet for the fed to not even wait for parliament to debate the tax cuts prior to lowering the rates.
> 
> All the banks are down




A quick browse of the ABS site will give you a good idea what the RBA is worried about.


----------



## Smurf1976 (2 October 2019)

PZ99 said:


> JP Morgan taking the mickey on rates going to 0.5% in a year



Well we're down to 0.75% and they seem pretty clear that there's more to come so here we are basically. One more step and we get the 0.5% and no guarantees that's the bottom.

Looking at all of this, I'm thinking that the markets are telling us that world economy is actually somewhat weaker than seems to be widely accepted.

RBA cuts rates from 1.5% to 0.75%, so halving them, and the AUD drops only slightly.

A couple of weeks after the blowing up of oil infrastructure in Saudi Arabia and the oil price is now lower than it was before that incident.

And so on. Doesn't make any sense unless the real message from the currency and oil markets is that the economy's actually pretty weak. Eg no point worrying about falling rates in Australia if the US is going to be forced into doing the same anyway. No point worrying about oil supply if demand's going to slump. And so on.

I do have a definite "uneasy" feeling about all this. Economics and politics globally looks rather stretched to put it mildly and yet the markets remain calm. At some point that's going to change I expect with the question being "what breaks?"


----------



## Knobby22 (2 October 2019)

The thing is , Smurf, the lower the rates the better the yield is for owning shares. So this will feed the bull market.

I don't agree with any further rate cuts. I think the theory behind it is flawed as can be seen in Europe. It destroys bank profitability  and reduces savings.


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## qldfrog (2 October 2019)

When money is free..as this is a 0 interest rate mean, it point to it being worthless, so as a very obvious consequence, if you want to preserve wealth, you should move it into real assets being shares, RE, interest giving bonds , PM or stockpile stuff oil, copper whatever if you have space to stockpile it


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## Knobby22 (2 October 2019)

Yes and in Australia property is king so we can expect a bubble.


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## SirRumpole (2 October 2019)

Smurf1976 said:


> Well we're down to 0.75% and they seem pretty clear that there's more to come so here we are basically. One more step and we get the 0.5% and no guarantees that's the bottom.
> 
> Looking at all of this, I'm thinking that the markets are telling us that world economy is actually somewhat weaker than seems to be widely accepted.
> 
> ...




I share your unease. There are signs around the world that something will "break" as you say. Thomas Cook being the latest indicator that people everywhere are reluctant to spend. Even negative interest rates in places like Japan haven't achieved much.

People don't spend if they don't have secure jobs and the confidence to know that they can continue to afford the luxuries they want. The rise of the gig economy and automation, and the resulting depressed wages have only provided pessimism about the future of work imo.

No Central Bank can do anything about this, it's up to the government to honestly recognise the problems and do something about it.


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## sptrawler (2 October 2019)

Knobby22 said:


> Yes and in Australia property is king so we can expect a bubble.



Property is only king in Sydney and Melbourne, in W.A it is on the nose, as there is no influx of immigrants therefore an oversupply.


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## sptrawler (2 October 2019)

My guess is the flow into ETF's and LIC's will continue, as picking individual stocks to weather a correction and supply an income, is a fine art not many are prepared to learn.


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## Junior (2 October 2019)

sptrawler said:


> My guess is the flow into ETF's and LIC's will continue, as picking individual stocks to weather a correction and supply an income, is a fine art not many are prepared to learn.




The consensus seems to be that stock-picking is dead, value investing is dead, and everyone should buy index funds as cost is all that matters.  I don't buy it, and it makes me think of this quote: "The more things change, the more they stay the same".


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## qldfrog (12 October 2019)

Hard to find the right place for this one
I really like the good in my opinion summary, and the implications for bank shares


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## Knobby22 (12 October 2019)

qldfrog said:


> Hard to find the right place for this one
> I really like the good in my opinion summary, and the implications for bank shares



Thanks for that Qldfrog.
I like the term "economic heroin." Good video.
He does explain quite well how the system presently is about making the rich richer and how they won't care if there is a major recession and may even want it.

The guy's  solutions, his faith in crypto currencies I don't share. I 100% agree with the implications for bank shares. I think it will be worse due to the effect of technology creating competition.

My prediction is that rather like what happened in England centuries ago, governments will need to tax property more.


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## qldfrog (12 October 2019)

And they will slam a death duty to effectively kill the middle class, and the class ladder, while adopting so called socialist or liberal policies which benefit the real super richs and nomenclature


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## Knobby22 (12 October 2019)

Well, I think it will depend on many things.
The future is not clear at this stage.


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## qldfrog (12 October 2019)

Knobby22 said:


> Well, I think it will depend on many things.
> The future is not clear at this stage.



Is it ever?
But we are indeed living in an instable world
On longuer trends
Ascending religious fanatism,
Western civilization downtrend,  China superpower, unrelenting population increase and planet destruction, mass propaganda and lower real education level,radicalisation as a results
And now i am trying to drive my investments for the next 40y 50y
Good luck qldfrog


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