Inflation

[againsthegrain]

Banks will and cop the blame: clever move from Morrison ?

ohh the tyranny, current affair will love it

 

[mullokintyre]

Banks will and cop the blame: clever move from Morrison ?

Not sure if Scomo has anything to do with it.
He might think he does.
I mean after all, the RBA is an 'independent statuary Authority".
Mick

 

[mullokintyre]

Canada has become the next domino to fall.
In a statement from Bank of canada

The recent increase in CPI inflation was anticipated in July, but the main forces pushing up prices – higher energy prices and pandemic-related supply bottlenecks – now appear to be stronger and more persistent than expected. Core measures of inflation have also risen, but by less than the CPI. The Bank now expects CPI inflation to be elevated into next year, and ease back to around the 2 percent target by late 2022. The Bank is closely watching inflation expectations and labour costs to ensure that the temporary forces pushing up prices do not become embedded in ongoing inflation.

The Governing Council judges that in view of ongoing excess capacity, the economy continues to require considerable monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s projection, this happens sometime in the middle quarters of 2022. In light of the progress made in the economic recovery, the Governing Council has decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant.

The Canadian CB has acknowledged that inflation is rising , and the forces are stronger and more persistent, GDP growth is strong (and forecast to get stronger). hence their plan to end QE earlier. It still thinks that inflation will ease back around 2% in late 2022, though I will be betting that it will have act on inflation earlier than that. They have already brought forward the planned QE easing, so I expect the interest rates will also have to be adjusted earlier than they forecast.
Mick

 

[mullokintyre]

I just don't understand the thinking at the RBA.
As pointed out, they are adamant that they will not need to be raising interest rates until 2024.
The market has twice tested their resolve, and both times they have caved.
Last Friday they stepped in not once, but twice into the market to buy bonds to keep the yield around their target rate.
And yet on Wednesday and Yesterday again, when the market tested their resolve, they did not step into the market to support their yield curve, and it shot up 0.5 from their preferred 0.15.
So what has changed??
Have they run out of money (ha ha)?
Are they telegraphing a rate hike come Tuesday?
Did the Federal Government (Scomo) lean on them?
Did they just get cold feet?
Did the Murdoch Press ring the RBA and tell em to back off?
Or are they just as clueless as everyone else?
Mick

 

[over9k]

I just don't understand the thinking at the RBA.
As pointed out, they are adamant that they will not need to be raising interest rates until 2024.
The market has twice tested their resolve, and both times they have caved.
Last Friday they stepped in not once, but twice into the market to buy bonds to keep the yield around their target rate.
And yet on Wednesday and Yesterday again, when the market tested their resolve, they did not step into the market to support their yield curve, and it shot up 0.5 from their preferred 0.15.
So what has changed??
Have they run out of money (ha ha)?
Are they telegraphing a rate hike come Tuesday?
Did the Federal Government (Scomo) lean on them?
Did they just get cold feet?
Did the Murdoch Press ring the RBA and tell em to back off?
Or are they just as clueless as everyone else?
Mick

They're on the take from the liberal party, who are on the take from real estate developers and also own a mountain of investment properties themselves.

When interest rates are low, P/E is high. It's as simple as that.

 

[mullokintyre]

They're on the take from the liberal party, who are on the take from real estate developers and also own a mountain of investment properties themselves.

When interest rates are low, P/E is high. It's as simple as that.

Thanks for that such a useful an insightful response.
Mick

 

[over9k]

Thanks for that such a useful an insightful response.
Mick

I was being serious.

 

[mullokintyre]

How can we take someone seriously when their moniker says Forum jester??
Mick

 

[divs4ever]

I just don't understand the thinking at the RBA.
As pointed out, they are adamant that they will not need to be raising interest rates until 2024.
The market has twice tested their resolve, and both times they have caved.
Last Friday they stepped in not once, but twice into the market to buy bonds to keep the yield around their target rate.
And yet on Wednesday and Yesterday again, when the market tested their resolve, they did not step into the market to support their yield curve, and it shot up 0.5 from their preferred 0.15.
So what has changed??
Have they run out of money (ha ha)?
Are they telegraphing a rate hike come Tuesday?
Did the Federal Government (Scomo) lean on them?
Did they just get cold feet?
Did the Murdoch Press ring the RBA and tell em to back off?
Or are they just as clueless as everyone else?
Mick

first off both major parties are making noises like they are expecting a Federal Election , MAYBE even before Xmas ( NORMALLY the RBA avoids appearing to help any particular election campaign )

the second factor is Tuesday is Melbourne Cup Day when NORMALLY 2.30 pm is the time people care about is the RBA the least ( but it MIGHT be different this time )

now somebody like me would HIKE ( up 0.5% ) the rates on Tuesday to SHOCK the economy ( into retiring debt , and better deployment of cash reserves for those that have some ) , catch them completely off guard and then CONSIDER a 0.25% rise in February ,

but you have a better chance that Australia would go back to the gold standard , than 'somebody like me ' getting into the RBA building ever again

unless the faceless men suspect BOTH parties look toxic to voters , i suspect all you will see is a choreographed drama ( at least until after the next election )

so is it different , this time ??

 

[divs4ever]

How can we take someone seriously when their moniker says Forum jester??
Mick

' many a true word said in jest ' , my mum would say ... however i prefer puns

 

[Smurf1976]

Two of his mates were there, one a builder, the other an electrician.
All of them have the same problem, actually getting the raw materials to work with.
Supply train issues means that they no longer have one wholesaler, they basically have to ring around to find out who has got stock, then start talking about prices.

This is where inflation multiplies.

First the price of the item goes up by whatever amount.

Next problem however is physical availability runs short. Now instead of buying from a single supplier which is convenient to your business and getting a % discount from that supplier due to the volume of purchases you make, you're now buying a bit here and a bit there from lots of suppliers.

None of those are going to give you a discount for the small volume of one-off purchases you're making from them.

Having to physically go around lots of places, some of which may be 10 or even 50km away, chews up time and lots of it.

Then there's administration. Depending on the nature of the business, the idea of having an account with a single supplier no longer works and it's problematic to have an account literally everywhere. All of a sudden every work team, which may mean each individual worker if they're by themselves, is going to be buying things at retail price from any shop they can get it at. Now you've got a pile of administration overheads either with corporate credit cards or reimbursement of cash.

End result is your material costs have gone up, distance put on your company vehicles has increased, your workers' productivity has gone down and you're now spending considerable time administering it all.

End result is the price you need to charge customers increases by far more than just the cost of materials alone.

Then your staff politely remind you about all these price increases which you've surely noticed and say something about their wages.....

 

[over9k]

How can we take someone seriously when their moniker says Forum jester??
Mick

I think it was pretty bloody obvious to anyone with even half a brain.

 

[banco]

Banks etc. are still saying no rate rises until late 2022.

 

[qldfrog]

Banks etc. are still saying no rate rises until late 2022.

But how would they know anything a year ahead...seriously

 

[againsthegrain]

But how would they know anything a year ahead...seriously

it's standard banking procedure to say one thing but do the opposite I thought

 

[mullokintyre]

In todays (or maybe tomorrow's OZ, there is a similar theme to the sudden change in heart of the RBA to support the yield curve.
From the Australian

But AMP Capital chief economist Shane Oliver said investors were likely getting ahead of themselves, amid a chaotic few days of bond trading.

Dr Oliver said such a rapid move higher in rates would be a “shock” to the economy and drive houses price down at a time when the post-Delta recovery in previously locked-down states was still in its early stages.

With that in mind, Dr Lowe would make clear in Tuesday’s statement that a hike remained some distance away, Dr Oliver said.

Beyond Covid-related price increases in segments such as housing construction materials and imported goods such as cars and furniture, Dr Lowe has repeatedly said that a meaningful lift in wages growth – to at least 3 per cent – remained central to sustainably higher inflation over the medium term.

Aside from anecdotal evidence, there remains little hard data that labour shortages are feeding through to economy-wide pay gains.

The Australian Bureau of Statistics’ latest wage price index showed only 1.7 per cent increase over the year to September – barely half of the headline inflation rate, meaning workers’ “real” pay went backwards.

I doubt there would be any in the real world of actually running/owning a business would take any notice of the hopelessly outdated ABS labour statistics. They conduct interviews of a fixed number of participants, then massage the data to counteract seasonal variations, and produce stats that a lot of business people just laugh at. the Australian labour market is a highly variable beast that only varies greatly with time, but also with region and area. This is even greater now with the various border restrictions, both state and International.
despite what the ABS might suggest, talking to people who try to get labour is extremely difficult in this market, and it does not appear to be going away any time soon. Anecdotal evidence can be dangerous when trying to extrapolate, but if the anecdotal evidence is only going in one direction, it can provide a pretty good approximation of real world conditions.
Mick

 

[mullokintyre]

I think it was pretty bloody obvious to anyone with even half a brain.

Ok, will turn off half my brain when reading your contributions from now on.
Mick

 

[banco]

Suspect Government will flood the country with migrants to put downward pressure on wage inflation. You can already see NSW Premier etc. pushing the Feds to turn the spigot on.

 

[againsthegrain]

Suspect Government will flood the country with migrants to put downward pressure on wage inflation. You can already see NSW Premier etc. pushing the Feds to turn the spigot on.

There is already a mess (mass) of workers not wanting to work due to sitting on benefits for 1-2 years. More cheap labour, more lazy local workers... I guess if they all working for the dole they not officialy unemployed

 

[qldfrog]

https://finance.yahoo.com/news/why-...y-about-humanity-versus-nature-093605627.html
A different look i found interesting