# Interest rates - where are they heading?



## BradK (14 October 2008)

So, where are interest rates heading? 

A new stimulus package - have we forgotten about inflation? A $1000 bonus for me for the little one - BUT, I would prefer for them to keep that money and put it towards the pensioners. WHY I am getting a thousand bucks for the little one?? 

Oh well, dont kick a gift horse in the mouth. 

So, where are interest rates heading? I want LOW interest rates so that I can pay off my house quicker. I was hoping that in the wash out of this 'credit crisis' we, as Australians, would stop regarding housing as a commodity.

In his stimulus package, Bush said that he wanted to 'return to vigorous growth' - have we learned nothing? I was bracing to get hit by the BIG ONE. But, looks like we have learned absolutely nothing from this and the bull is back. 

Paying off my house, growing a vege patch and getting some chickens. 

Brad


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## xoa (14 October 2008)

Yep, heading towards lower interest rates. Got to keep people borrowing and spending, the pyramid scheme will collapse otherwise.


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## stocks4beginners (14 October 2008)

Brad, let me quote from a story I read online.

 "Leaders of euro zone countries held an emergency meeting on Sunday to decide pan-European measures aimed at propping up the battered financial sector.Governments remain committed to support the financial system and therefore to avoid the failure of relevant financial institutions, through appropriate means including recapitalization. In doing so, we will be watchful regarding the interest of taxpayers and ensure that existing shareholders and management bear the due consequences of the intervention. Emergency recapitalization of a given institution shall be followed by an appropriate restructuring plan.Ensuring sufficient flexibility in the implementation of accounting rules given current exceptional market circumstances."  

I am sure most of them are really trying you know because it politically this is not good for them either. Let us hope they would some how find a solution to this.


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## BradK (17 October 2008)

ANZ just cut rates by 0.25% on variables. 

I thought 6% (for the consumer) was a bit nuts even last week - but, I reckon we could head to that BY THE END OF THE YEAR. 

Brad


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## nunthewiser (17 October 2008)

what would you say if i said intrest rates to hit 13% and over within 4 years ?


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## skyQuake (17 October 2008)

Futures pricing in 3.75% by March 09
4.25% by Nov 09


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## chops_a_must (17 October 2008)

nunthewiser said:


> what would you say if i said intrest rates to hit 13% and over within 4 years ?



Well... the target rate in the US is almost zero, and yet the mortgage rates have gone from about 6.5% to about 7.25% in about 4 days.

So, it's kind of irrelevant isn't it?


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## robots (17 October 2008)

hello,

and Zimbabweeee has inflation of 10000% so therefore we are going to get inflation of 10000% ? 

thankyou
robots


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## Smurf1976 (17 October 2008)

My best guess is the big tick. We go down to the bottom then up far higher than where we started. Draw it and it looks like a tick. 

All just in my opinion of course. But I arranged my own finances (12 months ago) in the expectation that interest rates would fall somewhat then rise significantly. The only thing that's changed is I now think the fall will be a lot bigger and may last a bit longer than I was expecting 12 months ago.


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## BradK (18 October 2008)

nunthewiser said:


> what would you say if i said intrest rates to hit 13% and over within 4 years ?




I'd say, 'lucky I locked in for five years at 6% when I do later this year or early next year!' 

Brad


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## chops_a_must (18 October 2008)

robots said:


> hello,
> 
> and Zimbabweeee has inflation of 10000% so therefore we are going to get inflation of 10000% ?
> 
> ...




Lol, you are a deluded tool.

Banks don't source funding from Zimbabwe.


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## robots (18 October 2008)

hello,

another professor with all the knowledge after reading a few blogs

thankyou
robots


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## BradK (18 October 2008)

chops_a_must said:


> Lol, you are a deluded tool.




Mods???????????????????


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## Garpal Gumnut (18 October 2008)

It depends as usual.

I can see 2% by this time next year if all goes to s**t.

It certainly wont go up.

gg


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## stocksontheblock (9 September 2009)

*Interest Rates Going Up???*

It never ceases to amaze me the rubbish some of these analysts keep coming out with.

I have read this afternoon that JP Morgan are saying interest rates will go up 25bp next month.

Where do these hacks get this sort of rubbish from? Come on, you have got to be kidding me. Like all these funny-money outfits ramping something in the hope it might come true might just work in their favour, yet IR’s up next month?

Yeah right!!! 

Anyone else think this is going to happen? Me, I have been saying it for about 2 months now, we won’t see another one before Jan 2010, with the faintest of chances Dec this yr, yet not banking on that one.


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## gfresh (9 September 2009)

One at least before the end of the year to take the heat out of the speculators and the melb & syd property markets. 

So I don't disagree with them


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## drsmith (9 September 2009)

If our economy follows a nice, friendly recovery path then it's reasonable to expect the RBA cash target to double from present levels over the next few years.


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## joeyr46 (9 September 2009)

drsmith said:


> If our economy follows a nice, friendly recovery path then it's reasonable to expect the RBA cash target to double from present levels over the next few years.




37 years of bull market and you expect a recovery after 18 mths of correction I think your taking too much notice of the media. Interest rates could go up a little as there is still demand in the system but when the next wave down takes hold they might well plummett to near zero like US (currently) or Japan several yaers ago


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## Nyden (9 September 2009)

joeyr46 said:


> 37 years of bull market and you expect a recovery after 18 mths of correction I think your taking too much notice of the media. Interest rates could go up a little as there is still demand in the system but when the next wave down takes hold they might well plummett to near zero like US (currently) or Japan several yaers ago




37 years of bull market? What in gods name are you talking about? Sorry, but that's just stupid. Not one comment you've made there is valid.


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## trainspotter (9 September 2009)

*UP !* When the Reserve Bank boss Glenn Stevens comes out and supports the existing Guvmnt stimulus policy and states "The current rate level was an emergency setting and that the RBA will tighten once the emergency has passed" you know that the only way interetst rates are heading is going to be up. Notice how he used the term "was" (as in the past tense) and not "is" (as in the present tense) Very Freudian IMO.


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## drsmith (10 September 2009)

Did I say if ?

I did.


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## OzWaveGuy (10 September 2009)

I still don't have a solid idea based on people's input on this thread: UP/DOWN/HOLD?

Based on historic data what does the evidence suggest will happen to interest rates should the markets head north or if they head south? There must be some data points that provide some form of clarity based on these 2 scenarios?

I would have thought that if the markets continue to head south, and people significantly decrease their borrowing, the lenders will want to drive revenue somehow - raising of the interest rates is certainly an easy way to partially achieve that goal.


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## prawn_86 (10 September 2009)

OzWaveGuy said:


> I would have thought that if the markets continue to head south,




What markets have you being watching for the past 8 months?  :


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## stocksontheblock (10 September 2009)

OzWaveGuy said:


> I still don't have a solid idea based on people's input on this thread: UP/DOWN/HOLD?
> 
> Based on historic data what does the evidence suggest will happen to interest rates should the markets head north or if they head south? There must be some data points that provide some form of clarity based on these 2 scenarios?
> 
> I would have thought that if the markets continue to head south, and people significantly decrease their borrowing, the lenders will want to drive revenue somehow - raising of the interest rates is certainly an easy way to partially achieve that goal.




You are talking about bank interest rates, not the RBA rate - they are very different.

One is the means by which you (the borrower) get bent over and asked how hard you would like - guess which one of the 2 that is?

The other is supposed to be a form of monetary policy which has much more broader consequences than those of the banks.

The only reason why many people see the RBA rate and the Bank rate as being one in the same is that the Banks are always on the nose, and by shifting rates up its a wonderful political football. Esp. when independent of the RBA upping their rate.


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## stocksontheblock (10 September 2009)

joeyr46 said:


> 37 years of bull market and you expect a recovery after 18 mths of correction I think your taking too much notice of the media. Interest rates could go up a little as there is still demand in the system but when the next wave down takes hold they might well plummett to near zero like US (currently) or Japan several yaers ago




I wont even bother with what’s wrong with this statement, other than to say, I will place a $1 million bet on the table right now to say hell will freeze over if you think we will have RBA rates at or near 0%, in fact, I would almost go so far to say short of hell freezing over, I would put the same bet on that interests will go no lower!

Like to take the offer up joey?


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## Uncle Festivus (10 September 2009)

stocksontheblock said:


> I wont even bother with what’s wrong with this statement, other than to say, I will place a $1 million bet on the table right now to say hell will freeze over if you think we will have RBA rates at or near 0%, in fact, I would almost go so far to say short of hell freezing over, I would put the same bet on that interests will go no lower!
> 
> Like to take the offer up joey?




Depends if you are talking Target Rate, Effective rate or Real rate? Real rate is already 1.5%?


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## stocksontheblock (10 September 2009)

Uncle Festivus said:


> Depends if you are talking Target Rate, Effective rate or Real rate? Real rate is already 1.5%?




The current RBA (Reserve Bank of Australia - sorry, not being a smartarse just making sure) REAL RATE is 1.5%?

Do I have this right?


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## OzWaveGuy (10 September 2009)

Err, I don't want people to start betting on what the rate hits (or arguing). My fundamental question is below and is straightforward:



OzWaveGuy said:


> Based on historic data what does *the evidence *suggest will happen to interest rates should the markets head north or if they head south? There must be some data points that provide some form of clarity based on these 2 scenarios?




If you have any data that suggests what rates will do over the longer term (eg trends), this can relate to: variable interest rates, Official cash rates, 90 Day, 180 day rates - I really don't mind, just curious on what the longer term trend could look like.


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## stocksontheblock (10 September 2009)

*Re: Interest Rates Going Up???*



OzWaveGuy said:


> Err, I don't want people to start betting on what the rate hits (or arguing). My fundamental question is below and is straightforward:
> 
> 
> 
> If you have any data that suggests what rates will do over the longer term (eg trends), this can relate to: variable interest rates, Official cash rates, 90 Day, 180 day rates - I really don't mind, just curious on what the longer term trend could look like.




As you can see I have also asked a question which was shifted into this thread as it existed before my question. So I guess thats why there appears to be 2 threads within the one. Might explain why it looks like your question is not matching the answer.



stocksontheblock said:


> It never ceases to amaze me the rubbish some of these analysts keep coming out with.
> 
> I have read this afternoon that JP Morgan are saying interest rates will go up 25bp next month.
> 
> ...


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## OzWaveGuy (10 September 2009)

I've pulled the variable interest rate data from the RBA site which goes back to 1959.

Some observations:

In most cases where there is a bear market (eg 12months or more) the interest rate trend was mostly up during the bear market. Even in the current bear market - the first 7 months of the decline saw higher interest rates.

This divergence can be seen on the red lines between the XAO and the variable interest rate line.

Not all bear markets show divergence - initially. In the 1987 market crash, the interest rate initially came down, but quickly powered to new highs: Some of you will remember the 17% interest rates in the late 80's.

Where the market has climbed, interest rates have generally been mixed, except after the 1987 crash and the bear market that lasted until 92'. Since the 1990's, the interest rates have continued to fall, presumably because of the easy to access credit that saw more of the population take advantage of the credit boom and put a higher % of their household earnings towards borrowings.

Based on the evidence, there is a high probability that the variable interest rate will need to move higher (perhaps significantly) should the bear market wear on.


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## Julia (10 September 2009)

OzWaveGuy said:


> Err, I don't want people to start betting on what the rate hits (or arguing). My fundamental question is below and is straightforward:
> 
> 
> 
> If you have any data that suggests what rates will do over the longer term (eg trends), this can relate to: variable interest rates, Official cash rates, 90 Day, 180 day rates - I really don't mind, just curious on what the longer term trend could look like.



Interest rates, particularly the RBA cash rate, are not directly  determined by what the market is doing.


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## joeyr46 (12 September 2009)

stocksontheblock said:


> I wont even bother with what’s wrong with this statement, other than to say, I will place a $1 million bet on the table right now to say hell will freeze over if you think we will have RBA rates at or near 0%, in fact, I would almost go so far to say short of hell freezing over, I would put the same bet on that interests will go no lower!
> 
> Like to take the offer up joey?




I'll say no I have a 5% risk factor and that would mean I need 20m to take that bet? Its's obvious you went to uni because you cant be bothered to educate anyone else! Obviously I don't know what is wrong with that statement or I would not have made it. I am only 80% certain interest rates will go to near zero  in the future (say 3- 4 years) not overnight. Of course with global warming here(in paradise) Hell might just freeze over. (RBA Rates just to clarify)


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## Soft Dough (17 September 2009)

Julia said:


> Interest rates, particularly the RBA cash rate, are not directly  determined by what the market is doing.




Nope it seems that they are more likely linked to election timing and ego profiles of the incumbent prime minister

Interest rates need to rise, just a small amount so that people get it into their thick skulls that they NEED to stop borrowing and spending.


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## Stormin_Norman (22 September 2009)

depends on the bond market.

http://www.youtube.com/watch?v=DvyRQlXoMA0


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## Early Bird (22 September 2009)

surely as the stimulus effect wears out the last thing the government will want to do is raise interest rates, as this will dampen growth in the economy further? better to let it find its feet again post stimulus and then once sustainable growth takes hold start to raise interest rates. the only reason they woudl raise interest rates now woudl be if inflation was seen as an impending threat, and i havent seen any evidence to suggest this????


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## Stormin_Norman (22 September 2009)

Early Bird said:


> surely as the stimulus effect wears out the last thing the government will want to do is raise interest rates, as this will dampen growth in the economy further? better to let it find its feet again post stimulus and then once sustainable growth takes hold start to raise interest rates. the only reason they woudl raise interest rates now woudl be if inflation was seen as an impending threat, and i havent seen any evidence to suggest this????




government cant control interest rates. apart from spending and its effect on bond prices.

bond prices determine interest rates.


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## OzWaveGuy (9 October 2009)

Ultimately the RBA is a market follower when setting interest rates. There's no magic undertaken by an individual or anyone at the rba when it comes to interest rates...you or I could just as easily set the rates....as EWI points out...

At Elliott Wave International, we've said for years that central banks don't control interest rates any more than they control the weather. If conventional economists would simply plot central banks’ decisions on a chart of bond yields, they would likewise discover that bankers simply react to what the bond market dictates.

Here is a chart of the 3-month Australian Treasury Bills that our Asian-Pacific Financial Forecast subscribers saw in the April 2009 issue, with the note from the editor Mark Galasiewski:​
More charts and full article is here: http://www.elliottwave.com/freeupda...Control-Central-Banks-and-Interest-Rates.aspx


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## Aussiejeff (11 October 2009)

OzWaveGuy said:


> Ultimately the RBA is a market follower when setting interest rates............




Today's scuttlebutt would tend to reinforce that claim....

"BANKS have confirmed homeowners' worst fears: *they will increase mortgage rates by more than the official Reserve Bank rises in the coming months*. 

The Big Four banks claim they will be forced to lift interest rates beyond the official RBA cash rate increases because they are facing higher costs of raising money in the wholesale markets, The Sunday Telegraph reports." http://www.news.com.au/business/money/story/0,28323,26194165-5013952,00.html

No surprise at all, huh? 

Given that even Blind Freddie could have foreseen this train of events, any FH buyer that has been crowing about how great the future for housing looks and who now starts whingeing about being squeezed by rising rates gets NIL POI from me....


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## joeyr46 (11 October 2009)

OzWaveGuy said:


> I've pulled the variable interest rate data from the RBA site which goes back to 1959.
> 
> Some observations:
> 
> ...




Your observations are correct but I have a different take on the reason interest rates initially went up during bear markets, the market points the way to the future ahead of time and when it tops the real underlying economy is still strong so driving rates up until the real economy starts to slow.
Your chart of interest rates against the market shows a clearly defined 3rd wave up to 87  (in the market)and then a 5th wave from 91 to 2007/8 with interest rates going nowhere near as high as in the 3rd wave so giving confirmation that there was nowhere near the demand for money in the 5th wave.As we'dexpect
Now (IMO) we are near the end of wave B and so interest rates should rise and continue to rise for a short while after the end of the B wave (How close to the end I'm not sure but I suspect within a couple of weeks (could be very wrong here) 
and then rates will dive as wave C gathers pace IMO as a)there is less supply to lend but also there are less people who qualify or want to borrow 
Just a different perpective


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## DB008 (11 October 2009)

I personally think that there should be some legislation to govern the lenders a little bit more on interest rates that they are allowed to charge on home loans, in particular the following points;

When the RBA raises rates, loan providers are not allowed to raise their rates within a 10-14 day period following the rate decision. (The big 4 have already raised rates since the decision last week)

When the RBA lowers rates, the loan providers must lower rates within a 10-14 day period.

Interest rates on fixed (upto 5 year fixed) or variable home loan rates must be within 200 bases points of the RBA Offical cash rate.

Break fees - well, haven't we been taken for a ride here. I recently had to pay over 8k to get out of a 180k loan? JOKE!!! Should be capped at a MAX of 1% of the loan. And l've heard more horror stories than this. Come on, break fees, admin fees, they hit you with everything bar the fence post!



Now, this is just my 2 cents worth, so please don't cut me down. I feel that we are getting taken for a ride sometimes here in Oz. 

Next to go also should be ATM fees. In the UK, you can use any of the big 5 banks without fees....but that's another topic and not really about interest rates, oh well, got to dream.


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## Soft Dough (11 October 2009)

DB008 said:


> Now, this is just my 2 cents worth, so please don't cut me down. I feel that we are getting taken for a ride sometimes here in Oz.




Well you are wrong, the margins here are comparable or less to other developed nations, it is just that people do not investigate this as they want to believe they are being ripped off by the big greedy bank which is allowing them to borrow the money to become rich.

The true losers of this political pressure on interest rates is business.

The stupid Krudd government pressures banks to keep interest rates for residential property artificially low at the expense of business rates.

Any competent, forward thinking politician would actually do the opposite and pressure banks to reduce rates of business loans and charge unproductive loans ( eg housing ) more, as this would :

1. Decrease speculative waste on residential realestate, and hence address the waste of money in this area, which actually causes outflow of money from the country, and hence contributes to deficits.

2. Improve business investment, which would strengthen employment, improve trade balance and provide protection against predatory offshore interests who are using this timeframe to purchase strategic businesses in this country at low prices - something we will regret in the future.

But then again, How would Wayne Swann and other politicians know what to do with money and how to generate more, as they are too interested in winning votes.


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## DB008 (11 October 2009)

Hmm...maybe your right.
But, if a bank can offer a loan like this, why can't an aussie bank borrow money from these guys, lock in the fx rate and then onsell it as a mortgage here in Oz...oh wait, they DO. 
And, they can onsell it as a fixed or variable loan, eg 6.5%, 3 year fixed and still make 4% with limited risk.


http://www.shinseibank.com/english/housing/index.html

http://www.shinseibank.com/english/housing/loan_kinri.pdf


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## Soft Dough (11 October 2009)

DB008 said:


> Hmm...maybe your right.
> But, if a bank can offer a loan like this, why can't an aussie bank borrow money from these guys, lock in the fx rate and then onsell it as a mortgage here in Oz...oh wait, they DO.
> And, they can onsell it as a fixed or variable loan, eg 6.5%, 3 year fixed and still make 4% with limited risk.
> 
> ...




Which bank in australia is a Japanese citizen?


Australian banks do not borrow that cheap.


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## persistentone (19 October 2009)

Can someone recommend high quality income securities that are adjusted quarterly against the Australian central bank rates, or some other index that is proportional to the central bank rate?


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## boofhead (19 October 2009)

It depends on the returns you're after. A number of hybrid securities use BBSW + margin. BBSW happens to be a little higher than RBA official rate at the moment.


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## OzWaveGuy (29 October 2009)

Since the RBA will be meeting soon, I thought I'd help the process along.

In a previous post, EWI's research shows that the RBA Cash Rate Target simply follows the 90 Day Bill rate.

So looking at the data below (data source: www.rba.gov.au), where do you think the rate will head next?

My opinion is: Cash rate target will move to 3.5%

With a possibility that to could move as high as 3.75%


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## Timmy (29 October 2009)

OzWaveGuy said:


> Since the RBA will be meeting soon, I thought I'd help the process along.
> 
> In a previous post, EWI's research shows that the RBA Cash Rate Target simply follows the 90 Day Bill rate.
> 
> ...




OWG, if the RBA 'simply' follows the 90 Day Bill Rate, as you say, and your chart is correct, why do you think it goes to 3.5 with only a 'possibility' of 3.75?  Based on what you have said then 3.75 is definite, right?


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## drsmith (29 October 2009)

It's more of a case of the 90-day bill rate trying to anticipate the future cash rate.

Look at the graph on the top RHS on the first page.

http://www.rba.gov.au/ChartPack/interest_rates_australia.pdf

In anticipation of rising cash rates to cool the Australian economy 90-bill rates overshot the RBA's cash target in 2008 prior to the full onset of the GFC and the subsequent rapid RBA easings in late 2008. 

Note also that the 90-day bill rate did not lead the way down anywhere near as much during the latter rapid easings.


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## OzWaveGuy (29 October 2009)

Timmy said:


> OWG, if the RBA 'simply' follows the 90 Day Bill Rate, as you say, and your chart is correct




The data in the chart says it.



> why do you think it goes to 3.5 with only a 'possibility' of 3.75?  Based on what you have said then 3.75 is definite, right?




Not sure I follow your logic Tim or your assumption of a target of 3.75%. The RBA rate lags the market.

As a side note: A 0.5% increase to 3.75% is a large step in a tough economy and could be politically damaging - If I were the RBA, I would simply raise rates in .25% increments, following the 90 day rate. Unless of course the 90 day rate jumps ahead too far - then 0.5% change would be warranted


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## Timmy (29 October 2009)

OzWaveGuy said:


> Not sure I follow your logic Tim or your assumption of a target of 3.75%. The RBA rate lags the market.




I have made no assumptions.
You said the RBA 'simply' follows the futures market, but there is much more to the setting of official interest rates than that, your model is oversimplified and misleading.  As you say in your subsequent post, there are other considerations too.

Thanks DrSmith, makes sense.


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## MRC & Co (29 October 2009)

drsmith said:


> In anticipation of rising cash rates to cool the Australian economy 90-bill rates overshot the RBA's cash target




Overshot, doesn't sound like the markets I know 

No meet Jan remember, could affect Nov-Dec decisions.


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## drsmith (29 October 2009)

MRC & Co said:


> No meet Jan remember, could affect Nov-Dec decisions.



The 1% cut by the RBA in October 2008 is the most interesting in that the 90-day bill market did not anticipate it at all.


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## MRC & Co (29 October 2009)

drsmith said:


> The 1% cut by the RBA in October 2008 is the most interesting in that the 90-day bill market did not anticipate it at all.




Yes, I remember it clearly.

Probably the easiest money in history ever made on that day.  Milllions being handed out in bags!


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## jonojpsg (30 October 2009)

MRC & Co said:


> Yes, I remember it clearly.
> 
> Probably the easiest money in history ever made on that day.  Milllions being handed out in bags!




Don't spose you've got one of those bags spare have you MRC


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## OzWaveGuy (27 November 2009)

It's almost that time again. I wonder what verbs the RBA and the mainstream media will be using on the interest rate meeting?

Or one can simply look at the 90day bill rate and see that it's changed from 3.88 at Oct end to 3.98 as of yesterday - That's a whole 0.1 difference month to month.

I doubt the RBA will move the cash rate target to 3.75% from 3.5% based on such a small move of the 90day rate. My bet is to hold the rate at 3.5%, or a very outside chance to 3.75% if the RBA wants to narrow lag of the cash rate target.


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## boofhead (28 November 2009)

Recently the 90 day rate has hit above 4.00% a few times. Thankfully it was 4.005% when AQNHA new coupon rate was calculated. The 30 day rate has been steadily climbing too.


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## Bill M (30 November 2009)

I read today somewhere that the RBA has never raised rates 3 Months in a row. They have lowered 3 Months in a row but never raised. So either history repeats itself or we see something happen that has never happened before. I'll go the history, no change for December.


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## IFocus (1 December 2009)

RBA up the rate...........they keep saying that the rate was set at emergency lows and inferring current conditions do not meet an emergency


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## BigWillieStyles (2 December 2009)

The RBA will continue to raise rates as long as house prices increase or atleast slow greatly.


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## persistentone (3 December 2009)

MRC & Co said:


> Yes, I remember it clearly.
> 
> Probably the easiest money in history ever made on that day.  Milllions being handed out in bags!




What specific investments did you make in response to that rate decrease?


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## skyQuake (3 December 2009)

persistentone said:


> What specific investments did you make in response to that rate decrease?




Buy SPI


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## persistentone (3 December 2009)

skyQuake said:


> Buy SPI




You invested in Spitfire Resources, a maganese exploration company, as a way to exploit a move in the 90 day RBA rate?    What?


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## OzWaveGuy (3 December 2009)

Looking at the daily 90 day rate data for the last 3 years, the RBA's cash rate target has lagged the 90 day rate by an average of 0.18%. 

As of the 1st of Dec with the interest rate target at 3.75%, that lag is 0.27% which is still higher v's the average lag - implying the RBA could raise rates again should the 90 bill rate climb only a little higher into the next RBA meeting.

And for those that are wondering - Yes, I do have better things to do :


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## skyQuake (3 December 2009)

persistentone said:


> You invested in Spitfire Resources, a maganese exploration company, as a way to exploit a move in the 90 day RBA rate?    What?




lol as in the index futures - SPI 200

It shot up like crazy, but you had a few seconds to get on!
Pity we probably wont see stuff like that for a long time


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## trainspotter (6 April 2010)

RBA in all their wisdom have raised interest rates by another .25%. Strangle , Choke, Gurgle, Smother, Drown, Suffocate the Aussie Battler.


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## coffee_snob (6 April 2010)

Good if you have got money invested in term deposits 

BAD if you have a home loan!


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## drsmith (6 April 2010)

The final paragraph in the RBA's media release would suggest there's more to come.



> Interest rates to most borrowers nonetheless have been somewhat lower than average. The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today’s decision is a further step in that process.




http://www.rba.gov.au/media-releases/2010/mr-10-06.html


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## newbie trader (6 April 2010)

Do you think it is interesting that the Commonwealth raised their IR 30minutes after the announcement? Or is this not unusual? Apparently they dont think our economy will double dip and will stay strong now and that this raise is a show of 'strength' / 'stability'.


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## Trembling Hand (6 April 2010)

newbie trader said:


> Do you think it is interesting that the Commonwealth raised their IR 30minutes after the announcement? Or is this not unusual?




?

Its not like they wait until an announcement and then think about what they should do.


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## dutchie (6 April 2010)

newbie trader said:


> Do you think it is interesting that the Commonwealth raised their IR 30minutes after the announcement? Or is this not unusual? Apparently they dont think our economy will double dip and will stay strong now and that this raise is a show of 'strength' / 'stability'.




They (CBA) don't lower them as quick!!

That's what you get when you have a monopoly.


----------



## newbie trader (6 April 2010)

Trembling Hand said:


> ?
> 
> Its not like they wait until an announcement and then think about what they should do.




Well then why dont they all just raise them right after?


----------



## Trembling Hand (6 April 2010)

newbie trader said:


> Well then why dont they all just raise them right after?




Because its a big conspiracy. What they do is decide before each announcement who will go first but thats only after they consult the pope and pay the Freemasons their keep as well. They do this in a secret meeting place in a tunnel deep underground just outside Davos Switz. Thats also where they decide the world cup, the price of oil & who gets to sell arms to Africa.


----------



## satanoperca (6 April 2010)

Trembling Hand said:


> Because its a big conspiracy. What they do is decide before each announcement who will go first but thats only after they consult the pope and pay the Freemasons their keep as well. They do this in a secret meeting place in a tunnel deep underground just outside Davos Switz. Thats also where they decide the world cup, the price of oil & who gets to sell arms to Africa.




Finally it all makes sense, always thought there was something fishy about the four pillars and the RBA.


----------



## trainspotter (6 April 2010)

Banks with interest rates are like panties on a woman. Quick to pull up but slow to come down.


----------



## Largesse (6 April 2010)

give this man a medal, and a beer


----------



## drsmith (6 April 2010)

The banks probably decided beforehand to move interest rates in line with the RBA so the decision this time was easy to make.


----------



## Smurf1976 (6 April 2010)

trainspotter said:


> RBA in all their wisdom have raised interest rates by another .25%. Strangle , Choke, Gurgle, Smother, Drown, Suffocate the Aussie Battler.



Ouch with the cartoon!

Just got two mice yesterday in a nice fancy cage. Now I just have to work out how to get them to be a bit more brave - they hide in their little mouse house as soon as anyone comes near at the moment.


----------



## Julia (6 April 2010)

trainspotter said:


> RBA in all their wisdom have raised interest rates by another .25%. Strangle , Choke, Gurgle, Smother, Drown, Suffocate the Aussie Battler.



That's pretty silly, trainspotter.  Rates have been extraordinarily low for some time.  You can't reasonably expect them to stay there.
It might restore some sense of proportion if you consider that I and many others were a couple of decades ago paying 22% on mortgage on an IP.

Every time there's a change in interest rates, it's only ever reported from the standpoint of the borrowers.  Might be nice to occasionally focus on those who have actually made the effort to save.


----------



## cutz (6 April 2010)

trainspotter said:


> RBA in all their wisdom have raised interest rates by another .25%. Strangle , Choke, Gurgle, Smother, Drown, Suffocate the Aussie Battler.




I'm curious,

Which battler are you talking about, the one geared to the max with a string of IPs or the one with cash in the bank getting SFA in a term deposit, paying tax on it to rub salt into the wound.


----------



## SmellyTerror (7 April 2010)

But... my entire investment strategy and financial future is dependent on another massive and unsustainable property bubble! What will I do now??? :shake:


----------



## satanoperca (7 April 2010)

SmellyTerror said:


> But... my entire investment strategy and financial future is dependent on another massive and unsustainable property bubble! What will I do now??? :shake:




Leverage up again and buy more. Cannot loose.

The world has at least one more global stimulus package before debt saturation is reached.

Easy sailing.

Cheers


----------



## trainspotter (7 April 2010)

Julia said:


> That's pretty silly, trainspotter.  Rates have been extraordinarily low for some time.  You can't reasonably expect them to stay there.
> It might restore some sense of proportion if you consider that I and many others were a couple of decades ago paying 22% on mortgage on an IP.
> 
> Every time there's a change in interest rates, it's only ever reported from the standpoint of the borrowers.  Might be nice to occasionally focus on those who have actually made the effort to save.




Dunno about extraordinarily low? Compared to what Australian history dictates then yes. Compared to the rest of the world then no. I too purchased my first IP when interest rates were at 17% (on the slide) but their were reasons for this to be occuring. Paul Keating was the Treasurer and he had his hands firmly on the levers of the Reserve Bank. Up went interest rates and OUT goes Bob Hawke. Brilliant tactics. Don't forget that Keating also deregulated the banks about the same time etc ... I could go on and on but I do not wish to bore the other ASFers. In other words there were OUTSIDE pressures on the reason as to why interest rates were at this pinnacle. Absolutely NO reason for them to be going up now IMO. 

Japan at ... wait for it ... 0.1% YEPPERS ... POINT ONE OF A PERCENT and expected to stay at this rate. US Federal Reserve's 16 March meeting where they kept the fed funds rate unchanged at 0-0.25 per cent. YEPPERS .... POINT TWO FIVE OF A PERCENT. 

And the RBA Governor comes out and basically says "The official cash rate will have a five in front of it before 2010 ends." YET .. the figures he is using to quantify this is the retail figures over the CHRISTMAS PERIOD. Oh dear, talk about navel gazing in reverse. Alice through the looking glass kinda stuff.

Interest rates going up is great for the ones who have cash and are not "borrowed" on the never never plan. It also means that a lot of people are out there doing it TOUGH and likely to sink slowly into the mire of debt burden. It also means that inflation is rising which means house prices are rising as well as the cost of living which has the knock on affect of Unions demanding more in wage rises blah blah blah.

I am all for interest rates rising in a TIMELY manner and not this knee jerk reactionary stuff we see happening right now. Talk about strangling the goose that laid the golden egg syndrome.

Rant over ....... normal transmission to resume.


----------



## trainspotter (7 April 2010)

cutz said:


> I'm curious,
> 
> Which battler are you talking about, the one geared to the max with a string of IPs or the one with cash in the bank getting SFA in a term deposit, paying tax on it to rub salt into the wound.




The battler I refer to is the FHB who has embarked on his and her journey to financial freedom of buying their own home. The ones where he is a mechanic pulling about 38k a year and his partner being a hairdresser on about 28k a year. Wherby nearly 50% of their nett income is going on a mortgage to live the great Aussie dream of owning their own home. They are the battlers. They need interest rates going up like a hole in the head.


----------



## Julia (7 April 2010)

TS, interest rates such as you quote for the US and Japan are because the economies of both those countries are in dire straits.
No such situation here.  On the contrary.

The 'battler' (jeez, I hate that expression:  it's like "the workers" as though only people in blue collar jobs actually work) should have considered and allowed for interest rate rises if they bought via the FHB grant and at the time interest rates were at what the RB then described as emergency lows.

And btw the 22% I referred to was in NZ at the time, but yes it was a time of high inflation.  Amazing capital gains on property in very short time.


----------



## trainspotter (7 April 2010)

Is it possible that this inflationary pressure is due to the Federal Government borrowing more money from overseas to fund the "stimulus" packages that they handed around like a drunken sailor on shore leave? If Australia’s productive capacity is fully stretched, any new government infrastructure investment financed out of borrowings will, if other policies remain unchanged, add to inflationary and interest rate pressures IMO. 

The "battler" used to be me BTW. I started with nothing other than $500 in my bank account, a job and turned it into a house. The bank I borrowed the money from (Keystart - State Govt money) QUALIFIED me that I was eligible for this kind of loan. Inflationary pressures turned this simple little home into a tidy profit of 67k over 5 years. I was pretty happy with this RoR and used this money to go again. It is up the financial institutes to ensure that the DSR, UCI's and projected interest rates are withing their target range allowing them to loan the money to the "battler".


----------



## drsmith (7 April 2010)

trainspotter said:


> And the RBA Governor comes out and basically says "The official cash rate will have a five in front of it before 2010 ends."



Where has he said this ?


----------



## trainspotter (7 April 2010)

In his statement, Stevens enumerated all that was good in the Australian economy. The labour market is good. "The rate of unemployment appears to have peaked at a much lower level than earlier expected." The business sector is good. "The process of business sector de-leveraging is moderating, with the pace of the decline in business credit lessening and indications that lenders are starting to become more willing to lend to some borrowers." Housing is good. "… the market for established dwellings is still characterised by considerable buoyancy." 

The terms of trade are excellent. "Australia's terms of trade are rising, adding to incomes and fostering a build-up in investment in the resources sector. Under these conditions, output growth over the year ahead is likely to exceed that seen last year, even though the effects of earlier expansionary policy measures will be diminishing."

You got that? Output growth next year is likely to exceed last year's despite the diminishing effects of earlier expansionary measures.

Hence, *"The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today's decision is a further step in that process."*  4.25% current .... 5 % by years end ... wait and see !


----------



## cutz (7 April 2010)

Why don't they just get it over and done with by jacking up rates 50 points at a time, it's quite obvious we're in the middle of a housing bubble if to quote Trainspotter "a mechanic pulling about 38k a year and his partner being a hairdresser on about 28k a year" are in way over their heads out in the outer burbs.


----------



## MR. (7 April 2010)

cutz said:


> Why don't they just get it over and done with by jacking up rates 50 points at a time, it's quite obvious we're in the middle of a housing bubble if to quote Trainspotter "a mechanic pulling about 38k a year and his partner being a hairdresser on about 28k a year" are in way over there heads out in the outer burbs.




Exactly, 4% decrease in rates and they have only recovered 1.25% to date. Should have increased by 50 points. Their slow return is making the bubble worse.


----------



## drsmith (7 April 2010)

trainspotter said:


> Hence, *"The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today's decision is a further step in that process."*  4.25% current .... 5 % by years end ... wait and see !



So 5% is your forecast.

If conditions are sufficiently bouyant then that may be the case. I suspect 4.5% year end  is still a possibility based on statements from a RBA board member in December last year (neutral is lower than it has been in the past as banks have lifted their margin on home loans). Household debt also remains at hisorically very high levels so small rises have a big impact. The RBA is well aware of this. 



trainspotter said:


> The battler I refer to is the FHB who has embarked on his and her journey to financial freedom of buying their own home. The ones where he is a mechanic pulling about 38k a year and his partner being a hairdresser on about 28k a year. Wherby nearly 50% of their nett income is going on a mortgage to live the great Aussie dream of owning their own home. They are the battlers. They need interest rates going up like a hole in the head.




Politically the prospect of a federal election later this year may also result in them being a little more cautious than they otherwise would have been. What happens afterwards though will be interesting. Battlers lured in with the increased FHB grant like the above could be in for a very hard time.


----------



## MRC & Co (7 April 2010)

Read the statement that accompanied the rise yday.  If that's not hawkish, I don't know what is!


----------



## trainspotter (7 April 2010)

MRC & Co said:


> Read the statement that accompanied the rise yday.  If that's not hawkish, I don't know what is!




Spot on MRC & Co. Just spot on !


----------



## satanoperca (7 April 2010)

Posted this in the property thread but here is also applicable.



> Mortgage borrowers can absorb much higher interest rates, says Moody's






> Moody's argues borrowers on a $300,000 mortgage would still be saving $415 a month compared to March 2008 when rates were at 7.25 per cent.




So no complaining, mortgagees have got it easy, they are actually saving money even with increases in IR's

http://www.theaustralian.com.au/business/city-beat/mortgage-borrowers-can-absorb-much-higher-interest-rates-says-moodys/story-fn4xq4v1-1225850875159

Cheers


----------



## GumbyLearner (7 April 2010)

Julia said:


> Every time there's a change in interest rates, it's only ever reported from the standpoint of the borrowers.  Might be nice to occasionally focus on those who have actually made the effort to save.




Good call Julia. Couldn't have come at a better time for savers. I look forward to more rate rises.


----------



## Calliope (11 April 2010)

> MORTGAGE rates are predicted to hit a horror 10 per cent within the next two years as the Reserve Bank hikes rates to prevent runaway inflation.




There is little doubt that first home buyers who were motivated by first home buyers' grant and low interest rates will be defaulting on their payments in droves. They should come out OK providing they can unload their homes while the market is still strong. If the banks have to sell their homes they are in trouble. If house prices collapse we could see a repeat of The Lehman Bros. collapse.




> "The makings are there for a repeat of the commodities boom that we saw between 2003 and 2008, and rates will likely hit, or exceed, previous highs in this cycle."
> 
> The news will strike terror in many homes, especially owners who stretched to afford a property when rates were at record lows last year.
> 
> ...



. 

http://www.news.com.au/money/interest-rates-heading-for10-per-cent/story-e6frfmci-1225852259386


----------



## georgey (11 April 2010)

In NZ in 1988 my x and I bought a house on 21.5% rate and we just
managed to find one we could afford even with 2 incomes.
On hindsight, it's a safe way to get into debt because you are
restricted a lot, also, in those days a mortgage was based on only 
one income, much safer than recently. Good luck to those now with a 
huge mortgage based on 2 incomes and one loses their job while rates
rise. 
I think bank deposits were about 15% at the time.


----------



## SmellyTerror (12 April 2010)

Calliope said:


> There is little doubt that first home buyers who were motivated by first home buyers' grant and low interest rates will be defaulting on their payments in droves. They should come out OK providing they can unload their homes while the market is still strong. If the banks have to sell their homes they are in trouble. If house prices collapse we could see a repeat of The Lehman Bros. collapse.




Good scare story!

1. Given that  horror story of Lehmans and mass defaults, you'd think the RBA would be smarter than to bring about the downfall of Australian civilisation with massive interest rates.

2. "...owners who stretched to afford a property when rates were at record lows" are idiots. They're doomed. They are dead already and don't know it. They are too stupid to live, and no realistic RBA action will save them. They are economic food.

The fact that this government (and the last one) held their hand and led them to the cliff doesn't change the fact that they jumped off themselves.


----------



## Dowdy (12 April 2010)

trainspotter said:


> I am all for interest rates rising in a TIMELY manner and not this knee jerk reactionary stuff we see happening right now. Talk about strangling the goose that laid the golden egg syndrome.
> 
> Rant over ....... normal transmission to resume.





Don't recall you saying anything when they dropped rates dramatically.

Raising rates .25 is not dramatic. What was dramatic was dropping them from 7 to 3%


----------



## trainspotter (12 April 2010)

Ummmmmmmm I wasn't a member of ASF when the rates dropped so a bit hard to make a judgement call on this one Dowdy. I never mentioned the word dramatic? I questioned the RBA call to raise rates 4 times in 5 meetings with rates likely to go higher in the very near future. 5% by the end of 2010 I believe I called? I am not seeing this wonderful economic recovery that the media is portraying and the sunshine and lollipops.


----------



## trainspotter (12 April 2010)

Demand for home loans continued to wane in February, even before the two latest interest rate increases, data released on Monday shows.

Just 50,287 mortgages were granted to owner-occupiers in February, down by a seasonally-adjusted 1.8 per cent compared to January, the fifth consecutive month of decline, Australian Bureau of Statistics data shows.

Economists' forecasts had centred on 1.0 per cent fall in February home loan commitments.

Last year's three interest rate rises and an end to the federal government's more generous first homebuyer grant at the end of 2009 were blamed for the steady drop-off in mortgage demand.

Hmmmmmmmm ........ sunshine and lollipops my gluteus maximus.


----------



## kincella (12 April 2010)

either these people are not borrowing from aussie banks, or they are borrowing from overseas banks at low 1% rates, or not borrowers at all...
look at this one, paid $225,000 above the quote...for an adjoining one bedder, knock the walls out and join the two flats together...

deep pockets is an under statement

appears outrageous to me....but also funny....in a way...
higher rates are not showing up as lower house prices....
so is there another explanation for this subject ?

https://www.aussiestockforums.com/forums/newreply.php?do=newreply&noquote=1&p=546745


----------



## trainspotter (12 April 2010)

Did I not ask this question several days ago? "What's the rush?" 

http://www.thebull.com.au/articles_detail.php?id=10713 It appears it is because they follow "trend rates"? WTF ??


----------



## Trembling Hand (12 April 2010)

kincella said:


> either these people are not borrowing from Aussie banks, or they are borrowing from overseas banks at low 1% rates, or not borrowers at all...




The stats don't add up 

Home loans fall for the fifth straight month,
Increase supply,
High clearance rates,

Clearly two things are going on if in 60 days loans haven't caught up with sale figures.

1/ Cashed up investors & owners with "money on the sidelines" are coming in post GFT liquidation. probably stock money.

Or

2/ Rudds panic and loosening the restrictions on foreign ownership has opened the food gates. Removing property from its primary use, shelter for Aussie citizens, and has become the place for cashed up new millionaires from the north to invest in.

Another Rudd inquiry and rushed decision coming in 6 months?


----------



## drsmith (12 April 2010)

Trembling Hand said:


> 2/ Rudds panic and loosening the restrictions on foreign ownership has opened the food gates.



How much have the flood gates been opened on foreign ownership ?

http://www.businessspectator.com.au...prices-pd20100330-425E7?OpenDocument&src=srch


----------



## Trembling Hand (12 April 2010)

drsmith said:


> How much have the flood gates been opened on foreign ownership ?
> 
> http://www.businessspectator.com.au...prices-pd20100330-425E7?OpenDocument&src=srch




Good article. It would be nice to see the up to date figures though. Somewhere the stats don't add up - yet. Something up to recently has gone a bit off side?


----------



## sageintraining (13 April 2010)

Up. My view is up based largely on 3 factors;

1. House prices. We have laxed laws and now as previously mentioned we have foreigners buying up and consequently driving up prices. Compounding this problem is the drop in the demand for home loans, which has a flow on effect on the construction of new homes which consequently adds further pressure to the housing shortage we have. The shortage will further push up house prices. Can someone tell me if the first home buyers grant applied to newly built homes? ...i recall reading somewhere it didnt but i'm not sure. IF it didn't, it was bloody stupid policy by Kevin.

2. Commodity Prices. In the short term-medium term I suspect commodity prices to rise however it'll be steady and slowly.. China's meant to be incrementally revaluating its currency hence the higher future rates. Theres also the disheartening talk of a bubble; some say its real.. We'll see.. I need to look at some raw data before i can offer any real judgement+ ask more people in the know (lucky for me there are a couple of economics lecturers who specialise in China).

3. Labour Market+ Trend growth; Target growth should be around 3% which is the norm for aussieland and we have a rather robust labour market. So it'll mean our rates will be ATLEAST be in sync with the normal times.. which i think is arouund 4.75%.


----------



## algis (17 April 2010)

*Re: Interest rates - business vs property*

Hi,

Any views on the effect of changes to interest rates and business investment compared to the property mortgage market?

I would be assuming that the more sensitive of the two to interest rate change is business investment as it usually involves more risk?

Only trouble is, more recently the risk associated with property has increased with the high leveraging I'm hearing.

Cheers,
Algis


----------



## Julia (17 April 2010)

Algis, Radio National's "The National Interest" programme had a segment on this yesterday which you might find interesting.

http://www.abc.net.au/rn/nationalinterest/stories/2010/2875221.htm

On deposit rates, when I checked about a week ago, term deposit rates have largely fallen in the wake of the Reserve's increase in the cash rate!


----------



## algis (18 April 2010)

Thanks Julia.

I wasn't aware that banks were abiding by this Basel II agreement, which sets out banking capital adequacy according to risk.  And business investment apparently is 5 times more expensive for banks to fund, hence their interest in the mortgage market.

I am reminded by the high interest rates during and after the boom of the late eighties.  There were a lot of poor businesses that got eliminated (probably a good thing) after being hammered by the rates and Oct87 and reducing tariffs.  Housing dropped off as well.  I'm not sure who got worse off?


----------



## KateMelb (19 April 2010)

sageintraining said:


> Can someone tell me if the first home buyers grant applied to newly built homes?




Until last year, an extra $7,000 was on offer for first home buyers who bought a brand new house, although the house-and-land package companies quickly swallowed this up through inflated prices.


**********************
I DIY manage with Rentwise.


----------



## Joe Blow (19 April 2010)

KateMelb said:


> I DIY manage with Rentwise.




If this is something you wish to have at the bottom of each of your posts can you please add it to your signature, rather than including it in each post where it will end up being quoted by others.

Thank you.


----------



## Smurf1976 (19 April 2010)

sageintraining said:


> IF it didn't, it was bloody stupid policy by Kevin.



The grant was introduced by a Liberal government lead by John Howard, not the present Rudd Labor government.

The grant was intended to offset the impact of GST on house prices. However, given the rapid rise in house prices over the past decade the grant is now inadequate to offset the GST impact on housing.

Personally, I'd gladly see the end of it along with the various other bubble-creating mechanisms.


----------



## drsmith (19 April 2010)

Smurf1976 said:


> Personally, I'd gladly see the end of it along with the various other bubble-creating mechanisms.



Get rid if it along with property transaction taxes such as stamp duty.

Cap negative gearing and take CGT back to CPI indexation (perhaps capped at the corporate rate).


----------



## satanoperca (20 April 2010)

Rate rises no over yet.
Go RBA

http://www.theaustralian.com.au/business/markets/reserve-bank-forecasts-boost-to-incomes-amid-higher-prices-for-exports/story-e6frg926-1225855907542



> Reserve Bank forecasts boost to incomes amid higher prices for exports




Can hear the violins playing already.

Cheers


----------



## trainspotter (4 May 2010)

Official cash rate 4.5% - anyone want to suggest who is going to be the first of the Majors to raise their rates?? Variable rate approx 7.45% residential lending.

My money is on ANZ


----------



## Tink (4 May 2010)

I was going to say the NAB, but looks like we were both wrong



> The Commonwealth Bank was first to follow the Reserve Bank, lifting its standard variable rate rate from 7.11 per cent to 7.37 per cent.
> 
> Economists had been tipping the rate rise, with the market pricing in a 69 per cent chance that the Reserve Bank board would hike its cash rate by 25 basis points.
> 
> Rates now back at "average levels"


----------



## trainspotter (4 May 2010)

CRIKEY ! CBA gone already !! Nothing like thinking about it ?? Notice they snipped .26% as well ! Took them all of 29 minutes to get it out in the market place too !


----------



## drsmith (4 May 2010)

Unless something unexpected happens, this will be the last RBA rate change for a while I suspect.

Post election though may be a whole new ball game.


----------



## Julia (4 May 2010)

trainspotter said:


> CRIKEY ! CBA gone already !! Nothing like thinking about it ?? Notice they snipped .26% as well ! Took them all of 29 minutes to get it out in the market place too !



Let's see if it gets passed on to term deposit rates.  The last two rises haven't in most cases, and the longer term deposit rates are actually lower than they were a couple of months ago.

What sort of rates do the banks pay if they borrow on the international market?


----------



## CanOz (4 May 2010)

Julia said:


> Let's see if it gets passed on to term deposit rates.  The last two rises haven't in most cases, and the longer term deposit rates are actually lower than they were a couple of months ago.
> 
> What sort of rates do the banks pay if they borrow on the international market?




Well i think that would be LIBOR.

Current and recent.

CanOz


----------



## trainspotter (4 May 2010)

Julia said:


> Let's see if it gets passed on to term deposit rates.  The last two rises haven't in most cases, and the longer term deposit rates are actually lower than they were a couple of months ago.
> 
> What sort of rates do the banks pay if they borrow on the international market?




Click on the link for the info Julia.

World Interest Rates Table
Major Central Banks Overview 
Central Bank   Next Meeting Last Change Current Interest Rate 
Bank of England May 10 2010 Mar 05 2009 0.5% 

Bank of Japan May 21 2010 Dec 19 2008 0.1% 

European Central Bank May 06 2010 May 07 2009 1% 

Federal Reserve Jun 23 2010 Dec 16 2008 0.25% 

Swiss National Bank Jun 17 2010 Mar 12 2009 0.25% 

Bank of Canada n/a Apr 21 2009 0.25% 

*The Reserve Bank of Australia n/a May 04 2010 4.5% *

http://www.fxstreet.com/fundamental/interest-rates-table/

Borrow money from a country with a LOW interest rate and pump it into the cartel of banks we have in Austrayaa and VIOLA 3% ON YOUR MONEY FROM PRIMARY LENDER ( Let's go for bank of Canada) then give it to the Aussie home owner at 7.5% and suddenly we have over a 7%+  RoR ... Ooopsies !


----------



## trainspotter (5 May 2010)

Is it just me or does anyone see the irony in this Government spending on stimulus packages and blowing billions of dollars on handouts and feel good propoganda whilst the RBA is doing it's best to slow down an overheated economy?? WTF ??? No seriously .... WTF???

2 speed economy I hear you blabber .... soon to be a one speed with no chance of ever recovering.


----------



## Julia (5 May 2010)

trainspotter said:


> Click on the link for the info Julia.
> 
> World Interest Rates Table
> Major Central Banks Overview
> ...




With apologies for my ignorance about inter-bank practices, would e.g. our local banks actually be borrowing from any or all of the above banks at those rates?  Is money freely available now?

If so, then no wonder deposit rates haven't moved in line with the Reserve's changes in the cash rates.
A week ago ANZ were offering 7% on a 3 year term deposit.  It's now down to 6%.


----------



## trainspotter (5 May 2010)

Julia said:


> With apologies for my ignorance about inter-bank practices, would e.g. our local banks actually be borrowing from any or all of the above banks at those rates?  Is money freely available now?
> 
> If so, then no wonder deposit rates haven't moved in line with the Reserve's changes in the cash rates.
> A week ago ANZ were offering 7% on a 3 year term deposit.  It's now down to 6%.




Pretty accurate info there Julia (give or take a few checks and balances on the way through) GFC was all about banks lending money to each other through an open exchange format. "A" bank had a book of mortgages/loans/lines of credit etc.  worth "x" dollars ....... they sold it to bank "B" for "y" dollars who was expected to make a profit from it. We all know the rest.

So how it works is if we pick on the bank of Canada for example at .0.25% and we go through a regulatory body who adds on their percentage (world bank for eg.) at 3.5% and underwrites the script to give to another bank who then offloads to you at MARGIN RATE of 7.09% (todays rate at NAB) then someone is making a sheeetload of moola.


----------



## trainspotter (6 May 2010)

If the Greek financial instability echoes into Europe and Wall Street gets the shudders we may well see a global tightening of credit between banks. Second wave GFC so to speak. Australia will not be immune this time to the constriction of funds.


----------



## Julia (6 May 2010)

This item from "The World Today" offers a comprehensive (if frightening) summary of the potential fall out from the Greece problems.

http://www.abc.net.au/worldtoday/content/2010/s2891994.htm

One of the economists in particular describes the reasons why this is potentially way worse than the GFC.


----------



## Julia (6 May 2010)

Before I start trawling through interest rates, does anyone have suggestions for (preferably online) at call rate?
(I've sold 99% of my p/f and the 1% remaining will go as soon as they reverse today's upward movement.)


----------



## drsmith (6 May 2010)

Julia said:


> (I've sold 99% of my p/f and the 1% remaining will go as soon as they reverse today's upward movement.)



Are you worried you will sleep too well tonight if you sell the lot ?

For savings I generally use this site for a broad look around.

http://www.infochoice.com.au/banking/savings-account/list.aspx

Note: You may need to uncheck sponsered listings.


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## Julia (6 May 2010)

drsmith said:


> Are you worried you will sleep too well tonight if you sell the lot ?



Heavens, dr, I will worry whatever I do!  Having sold almost everything, there will quite possibly be some good news and I'll wish I'd not had such a focus on capital/profit preservation!

There's just too much global bad news and pessimism for me right now.



> For savings I generally use this site for a broad look around.
> 
> http://www.infochoice.com.au/banking/savings-account/list.aspx
> 
> Note: You may need to uncheck sponsered listings.



Thanks.  I only quite recently realised that these "we will find the best rate for you" sites only feature those organisations from whom they are paid a commission.  Or at least that's how it works with medical insurance.


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## drsmith (6 May 2010)

Julia said:


> Thanks.  I only quite recently realised that these "we will find the best rate for you" sites only feature those organisations from whom they are paid a commission.  Or at least that's how it works with medical insurance.



I suppose they have to make their money somehow.

I have cash at ANZ at a 1.55% bonus rate to their online saver rate. That was not listed on the above comparison site at the time I found it. I'm not absolutely sure but I don't think it was around for very long.

Some provider's websites have proceed from the infochoice page so I assume these would be the ones (if any) that would trigger a commission if an account was ultimately opened from there.


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## basilio (7 May 2010)

> Before I start trawling through interest rates, does anyone have suggestions for (preferably online) at call rate?
> (I've sold 99% of my p/f and the 1% remaining will go as soon as they reverse today's upward movement.)




Perhaps gold sovereigns Julia? I can certainly see why you have decided to preserve your capital out of the stock market.

I'm just not sure how "safe" any institution will be if default starts to get out of hand. 

My idea of security ? A paid for roof over your head, an energy supply that keeps the house running, a garden that keeps one fed and some good friends for company and support.

Cheers


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## Julia (7 May 2010)

basilio said:


> Perhaps gold sovereigns Julia? I can certainly see why you have decided to preserve your capital out of the stock market.
> 
> I'm just not sure how "safe" any institution will be if default starts to get out of hand.
> 
> ...



I like your idea of security, basilio.
Re safety, in Australia the government guarantee on bank deposits is OK for a while (even if our banks weren't amongst the safest in the world), but you're right:  it's the fear that governments will start defaulting that is setting the panic levels at present.

Oh, and drsmith, I did sleep pretty well last night!


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## trainspotter (7 May 2010)

I have found Esanda to offer excellent service and rates Julia. (This is not advice and the people responding to this should do their own research)

Unfortunatley they are not online and prefer the old fashioned approach of a phone call and paperwork.


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## robots (9 May 2010)

hello,

http://www.theage.com.au/business/report-forecasts-more-rate-rises-20100509-ulh3.html

oh yeah, this guy got the score on the board or is it for Trash on the Mac?

thankyou
robots


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## trainspotter (9 May 2010)

1) Rates to rise due to inflationary pressures brought about the government borrowing heavily overseas to buy votes. 
2) Booming (ALLEGEDLY) commodities sector was the major factor in the last rate rise and RBA is predicting a possible 2 year rise in this faction. 
3) House prices have jumped upwards of 15% in some areas in the CITIES.
4) Fuel costs have risen 4.2% and pharmaceuticals up 13% due to consumers no longer being eligible for the government assitance in paying for drugs.
5) Electricity, Water and other household consumables increased by over 10% in some states.
6) Vegetable prices also increased over 10% in supermarkets due to hail storms and inclement weather.
7) RBA is still telling us that interest rates are not at "normal" levels.

These are but a few of the indicators that I believe that interest rates still have a way to go in the upward trend of this cylcle.


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## drsmith (11 May 2010)

Is the budget forecast for inflation of 2.5% a polite request from the government to the RBA not to raise interest rates any further prior to the election ?

On what basis does the government expect inflation to fall ? 
Their forecast is below current and the RBA's most recent forecast.



> Recent data on inflation confirm that it has declined from its peak in 2008, helped by a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand.* In both underlying and CPI terms, inflation over the most recent 12 months was around 3 per cent.* Nonetheless, the extent of decline from here may not be quite as much as earlier forecast and *inflation now appears likely to be in the upper half of the target zone over the coming year*.



http://www.rba.gov.au/media-releases/2010/mr-10-07.html

The minutes from the RBA's May board meeting will make for interesting reading when available. 

http://www.rba.gov.au/publications/rba-board-minutes/index.html

June will be even more facinating.


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## drsmith (11 May 2010)

More on the government's inflation forecast.



> Underlying inflation is expected to stabilise at around 2 ½ per cent through 2010‑11 and 2011‑12. Headline inflation is expected to be 3 ¼ per cent through the year to the June quarter 2010 and 2 ½ per cent through the year to the June quarter of both 2011 and 2012.




http://www.budget.gov.au/2010-11/content/bp1/html/bp1_bst2-01.htm


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## joea (5 June 2011)

In moving interest rates to control inflation a number of statistics are taken into account.
inflation, gross domestic product - GDP, level of $A,  international interest rates i.e. (USA), unemployment, housing starts, car registrations, retail sales, wages, fiscal policy and taxes and competition policy. 
These are listed in a trading book by ASX.

Years ago the rates were raised or lowered to control interest rates.

Why is this simple decision now expected to control inflation in a two speed economy?

We have the government eguating "full time jobs" to "part time jobs", taxes and levy's by the government out of control.
And fear about rate rises are push by media every month.
No wonder the public are angry and unsure about investing.

I think the RBA need to wake up and get off their "fat arses" and compile a new equation, to give the Australian's some hope, that their control of the economy is at least an intellectual decision and not just a bl***y guess.

Better still I would be extremely happy if Peter Costello was at the RBA , instead of some "seat warmer" waiting for retirement.

When labor was first in power the rates were lifted. Nobody can convince me that was a sole decision by the RBA. It was a push by the Labor Government. Following that rate rise, there were a number of decreases as we went into recession.

So somebody was not looking out the window.

There has to be a better way. And that is not a simple rate, rise or fall.

Cheers.


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## ginar (5 June 2011)

This is my window into the future re interest rates , at this present moment a rate rise by years end is very high probability with august currently a 50% chance of this occuring  .......... fwiw the term deposit rates are heavily influenced by 3 year bond yields , for those in cash the ability to monitor these bonds is very useful in obtaining the best returns


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## joea (5 June 2011)

ginar said:


> This is my window into the future re interest rates , at this present moment a rate rise by years end is very high probability with august currently a 50% chance of this occuring  .......... fwiw the term deposit rates are heavily influenced by 3 year bond yields , for those in cash the ability to monitor these bonds is very useful in obtaining the best returns




ginar
Actually I cannot open that attachment for some reson.
I cannot see your reason for a rate rise by end of year. I think that is a part of the "fear campaign" by the media. (although i accept that may happen)

Actually the media now talks about gold because of the fear of a "double dip recession".

I expect the decision on June the 7th  to be passed on to July.
I also cannot see why a month would make that much difference. They must be sure, because Gillard has eveybody hurting now already.

Swan was talking up our economy, in the next breath  he is defending the bad figures.
I just do not think our economy is that good. No doubt it is better than other countrise as Swan keeps telling us. But that is like comparing "bad " to "terrible". 

The RBA should not "jump at shadows", or move rates for political reasons such as the decision in 2007. I would not like to see a rate rise, then oil move to $120/barrel.

Cheers


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## noirua (7 December 2020)

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