Rising Aussie Dollar and your job

[Mofra]

Mandatory 20% deposits on all home loans would promptly restore sense to the real estate market without the need to hike interest rates. It would fix the whole shonky mortgages issue that nearly brought down the financial system too.

Australian deposit requirements had absolutely zero effect in bringing about the GFC - it was US lending practices combined with their poor securitisation models.

 

[Smurf1976]

I'm still amazed that it took less than an hour, with no appointment, for me to walk into one of the Big 4 banks and walk out with a $185K mortgage. No proof of income, no proof of anything. I'm paying less than their standard variable rate and no mortgage insurance was required - and they quite happily went along with my suggestion that I didn't need to pay any set-up fees on the loan too. This was about 2 years ago.

Stop banks throwing money around like that and we won't have a problem with house prices. That said, if the RBA and other central banks keep printing then inflation will show up somewhere. If not house prices then it will be somewhere else - commodities, precious metals, stocks, bonds, food, utilities (that seems to be the big one at the moment) and so on.

 

[Smurf1976]

Australian deposit requirements had absolutely zero effect in bringing about the GFC - it was US lending practices combined with their poor securitisation models.

Not requiring a deposit is symptomatic of poor lending practices in the same way as bald tyres and a rusted out exhaust are symptomatic of a lack of car maintenance. Whether or not it directly contributes to problems, it's a pretty sure sign of overall neglect.

Based on what I've seen, Australian banks aren't much better than those in the US. We've had all sorts of loans for people who historically wouldn't have qualified - I can only assume that the risk associated with those has been passed onto someone else as it was in the US.

 

[Beej]

Not requiring a deposit is symptomatic of poor lending practices in the same way as bald tyres and a rusted out exhaust are symptomatic of a lack of car maintenance. Whether or not it directly contributes to problems, it's a pretty sure sign of overall neglect.

Based on what I've seen, Australian banks aren't much better than those in the US. We've had all sorts of loans for people who historically wouldn't have qualified - I can only assume that the risk associated with those has been passed onto someone else as it was in the US.

The minuscule mortgage default rate in Australia (especially when compared to the US or even the UK) would suggest your conclusions are not correct (see attached chart).

PS: Securitisation of mortgages was only ever a minor practice in AU. The big 4 banks hold the vast proportion of the mortgages issued on their books to this day (see www.apra.gov.au for actual stats). So there has been no great transference of the risk, small as that risk actually is as evidenced by the default rate data.

Cheers,

Beej

 

[condog]

The minuscule mortgage default rate in Australia (especially when compared to the US or even the UK) would suggest your conclusions are not correct (see attached chart).

Beej

Our rates are miniscule compared to US and UK...but

The banks are only yesterday saying for the first time they have suffered a very small decline in loan impairments.... and they cautiously think the worst may be over.....

This graph whilst accurate , is misleading as its time frame is prior to the last quarter where impairments peaked much higher then shown above....

If the govt increase Tier 1 capital requirements for the banks they will be requiring significantly more equity in loans ....... which is a great thing for stability, but a bad thing for growth....

I have heavy bank holdings and after closely monitoring thier performance and reports, I think they proved their strength , but alarmingly , I feel they where far closer to being in trouble then we where led to believe by the banks or the govt.....

Impairments where significantly higher then any asx announcments had indicated.... and had capital raisings been less successful a couple of them would be in severe trouble right now....

So yes.... we need to do something to tidy up our banks loan books, as if we do have a double dip.... i will be liquidating my bank shares for sure....

From a shareholders point of view , while still sound fundamental businesses they are severely less profitable in the short term due to ROE declines from cap raisings and loan impairments.....When one considers they have massively increased market share and domination ...... they should be powering, but they are not......

Thats a warning shot accross the bow, that we have a few problems to fix before the next big correction....

 

[Smurf1976]

The minuscule mortgage default rate in Australia (especially when compared to the US or even the UK) would suggest your conclusions are not correct (see attached chart).

My point is about house prices, not defaults.

If banks weren't giving huge loans to anyone with a pulse then do you really think house prices would be as expensive as they are today? I very much doubt it since there would be basically no demand for houses at that price without the loose lending of recent years.

 

[Soft Dough]

My point is about house prices, not defaults.

If banks weren't giving huge loans to anyone with a pulse then do you really think house prices would be as expensive as they are today? I very much doubt it since there would be basically no demand for houses at that price without the loose lending of recent years.

I think the problem is that people forget to realise that even though Australia has not had a recession in a long time, who knows when the next one will come.

Housing increasingly going past trend will only make the fall worse when it does come ( not if it does come ). I agree with other posters, I would not purchase property in Australia if I can get much better return in the UK or USA. Something has to give, either a fall, or stagnation for many years.


But back on topic,

How much longer to parity? Ima gonna hazard a guess that it will be parity by 30 june 2010.

 

[Ato]

The USD carry trade will unwind with gusto in the not too distant future and this will pop the Aussie 'commodity' dollar bubble.

Sorry, I dont really understand what this means. If you have the time, would you mind explicitly spelling it out for this newb please :run:

 

[GumbyLearner]

Ummm. You might just want to rethink those *statements of fact* after reading this? http://www.news.com.au/adelaidenow/story/0,22606,26332756-2682,00.html?from=public_rss

In REALITY, the OZ wine industry is facing -

(a) a significant decline in profitability.
(b) loss of jobs through numerous closures / mergers.
(c) significant reduction in global reputation with soaring OZ dollar making OZ wines too expensive in US.

IMO the OZ wine industry is in for "a world of pain" over the next 24 months or so at least, with an uncertain future after that for many of the growers who have survived to that point.

Have another one on me.....

I agree AJ.

I think also So Cynical is assuming that most Asian consumers of wine or luxury cars are quite discerning about purchases. The fact is that most people just want to impress others. Whether it be a fake bottle of plonk or a fake automobile? The days of plonk and automobiles especially fakes being outside the purchasing power of most urban Asians are long gone I'm afraid.
Open markets create opportunity, but they tend to encourage imitators rather than innovators from what I have observed around different parts of Asia.

Just my

 

[Dowdy]

A rising aussie dollar is great for my home based business since i import from China and Taiwan and they only trade in USD

 

[tehnoob]

Holden would look a lot weaker if the USA police car deal never happened.

It hasn't actually happened. If it does go ahead it wouldn't be until 2011 anyway.