The dust still hasn't settled from the election, calling what is right and what is wrong at this stage is, IMO impossible.
No doubt there are a lot of fiscal and international constraints that the coalition wasn't aware of prior to attaining office.
I feel it is a bit like you going for a promotion, to a position that they sacked someone from, as it is in chaos.
Then four weeks later, you are questioned as to why you are implementing change.
I'm prepared to give them 6 to 12 months and then judge their performance, to start making judgement after 4 weeks is immature. Just my opinion.
I will jump in when I have seen some runs on the board, at the moment it appears to be people passing wind.
By the way I wasn't being sarcastic, Labor needs young people who do have a selfless approach.
It's worth a look. Professor Warwick McKibbin was a member of the Reserve Bank Board for ten years, including during the GFC. During that time he made clear his poor opinion of the Labor government. As a result, Wayne Swan did not offer him a further term. He is a plainly spoken, rational person whose comments about Mr Swan and the then government on 7.30 this evening are enlightening indeed.
Read more: http://www.smh.com.au/federal-polit...up-rba-fund-20131025-2w7d8.html#ixzz2imOzyCAQWayne Swan considered bolstering the Reserve Bank's reserve fund earlier this year, but was formally instructed by the Treasury Department that shoring up its capital holdings could be counter-productive, Fairfax Media has discovered.
Despite Treasurer Joe Hockey's decision to bolster the RBA to the tune of $8.8 billion this week, an official minute to Mr Swan in April advised the then treasurer not to transfer money from the government to the bank on the grounds there was no legal basis for the request.
The minute advised that the impression created by doing so could undermine confidence in the central bank's stability and compromise its independence from the government.
The advice contradicts any suggestion by the new government that Mr Swan had been negligent in allowing the bank's capital buffer to run down, and had acted against the advice of the RBA itself.
It's possible(arguable) the recent debt crisis with the American government has fuelled concerns about economic risks in Australia. It might be a good idea now to increase the capital base of the RBA
Well the commodity price bubble has burst, if you hadn't noticed.
The rest of what you said seems to indicate interest rates should be lower, to increase peoples borrowing ability?
I see interest rates being low as a massive trap, that when sprung, will redistribute wealth from the poor to the wealthy.
The boom has peaked, but it was hardly a bubble... and it certainly was not "far bigger than the US housing bubble that led to the financial crisis"..
No... well it would, but in the circumstances people were (and still are) not rushing out to borrow... the main effect would be to firstly increase disposable household income, which slows the foreclosure rate, and for the rest helps improve their liquidity, esp by reducing debt and increasing savings. .
That would be the case if you forecast sharp rise in inflation. BUT what I'm saying and the smarter forecasters say and will continue to be proven right... is the commodity boom was always going to cycle back off it's boom to a more modest levels and the risk of recession is greater than inflation.
Lower interest rates would have helped make the AUD/USD yo yo less extreme. Cutting interest rates sooner and harder would have helped flatten out the extremes of the AUD/USD, which in turn would ease pressure on the RBA cash rate (note their mention of the high exchange rate) and it would be lower atm, thus not being so damaging to business and consumer confidence.
I emphasise confidence rather than temporary gains from cheap imports, because it's confidence that causes people to make long term capital decisions whether in housing, business or mining. It's the lack of confidence about their terms of trade that is halting capital expenditure in a hurry.
The RBA main measure they react to is the CPI. Fuel is a major influence from the rising AUD/USD. Keep the AUD/USD lower and fuel and consequently the CPI would not spike up and there would be no excuse to not lower rates more.
The other concern often raised but never eventuating is over stimulating property prices. In all the circumstances it NEVER was going to happen, despite extra stimulus like the QLD government $10,000 building boost grant scheme... it hardly raised a ripple.
The other factor often mentioned in their reasoning for not lowering more was the AUD/USD... concerns about the US ending QE. But, look what happens when they didn't cut... the $ went higher... and keeping all the reasons they should have cut more in play.
They will have to cut interest rates more to stimulate the economy which has never shown signs of real inflation... ie not induced by other than the exchange rate.
I won't go in to all of the above, but I can tell you I sleep better knowing that Abbott/Hockey are running our finances than Gillard/Swan or Rudd/Bowen.
Adults running a household budget.
It ain't brain science.
And no more brainfarts on the expenditure side.
gg
I won't go in to all of the above, but I can tell you I sleep better knowing that Abbott/Hockey are running our finances than Gillard/Swan or Rudd/Bowen.
Adults running a household budget.
It ain't brain science.
And no more brainfarts on the expenditure side.
gg
Well said gg, consumer confidence is rising, that is because we are not seeing "days of our lives" government on tv every day.
The general public likes government to govern not be a bloody soap opera.
Yes, as though that helps, house prices are at all time highs 'again'.
So therefore if you are correct and people aren't rushing out to borrow, it must be investors and overseas purchasers pushing up the prices. Hows does that help Joe average Australian, other than those who own property.lol
I guess you own, or are purchasing a house or houses.
Who said it was bigger than the US housing bubble?
If it wasn't a bubble why are companies like Atlas Iron, Panoramic rescources, Mincor at the lowest levels they have been since the gfc?
Yes, as though that helps, house prices are at all time highs 'again'. So therefore if you are correct and people aren't rushing out to borrow, it must be investors and overseas purchasers pushing up the prices.
Hows does that help Joe average Australian, other than those who own property.lol
I guess you own, or are purchasing a house or houses.
Your hyperventilating, as the Aus $ falls the price of fuel rises, it doesn't fall as you suggest. My bolds
Our fuel price is linked to the Singapore fuel price.
http://www.aip.com.au/pricing/facts/Facts_about_Petrol_Prices_and_the_Australian_Fuel_Market.htm
The RBA, or at least McKibbin. This is the piece referred to, again:
In 2011 he warned of a commodity price bubble far bigger than the US housing bubble that led to the financial crisis. In the middle of last year he said the Australian economy was about to boom and that the RBA needed to lift interest rates.The RBA over estimated 'a commodity price bubble' and well and truly over estimated the fear of inflation.
But was it really over estimated, or just overstated for their political bias objective!
It was a premature slowing of mining investment caused by a fall in confidence from concerns about revenue, capital raising and profitability, mainly driven by the $ exchange rate. Other factors like the carbon and mining tax impacted confidence but their impact is mainly felt when making 'super' profit's, with far less impact on development and 'normal' operations.
I would add that part of the reason why the mining tax produced so little revenue in it's first year is because it's likely some development costs were expedited to offset against the 'super' profits... thus making profits more modest and appear that the boom was bust, prematurely.
On the contrary, it has set up many companies for more profitable returns when the tax is abolished.
House prises are not at all time highs everywhere. Where they are back to, or a little above GFC prices, is largely the effect of increased immigration settling around a few capital cities. There is also some tempered organic growth in certain areas due to area specific development, but generally housing prices are far from breaking new highs with any strength Australia wide.
There is an element of overseas investors, as been discussed maybe on another thread. They have been encouraged into 'Land Banking'. For the most part they can afford to take a long term position which has resulted in arguably more land, and future housing being tied up undeveloped or sitting on the market at higher reserves, including foreign owned housing, than the market is prepared to pay, hence the patchy increases in certain areas where the asking price is less.
From what I said:
A more aggressive RBA rate cut would still increase disposable household income, which slows the foreclosure rate, and for the rest helps improve their liquidity, esp by reducing debt and increasing savings.
A significant reason for firmly high rents and low vacancy rates is a slower rate of new housing construction, including investment housing because of above. Add in a bit higher than normal mortgage defaults and you have more upward pressure on rental demand coupled with decreasing rental vacancies, keeping rents higher.
If the RBA had cut even .5% more when they started cutting we would be in a lot healthier position, with that modest inflation rate more from organic growth than international influences.
Certainly intending to be more active as the cycle looks closer to bottoming.
True fuel is linked to Singapore, BUT the bowser price here is affected by the import cost, the exchange rate.
Think about the number of times you have heard the Singapore (or world price) has fallen but the oil companies have not passed the saving on at the bowser.
If the RBA cash rate was .5% lower from the start, that would temper (slow or lessen) the flow of funds in and there for out again, causing the AUD to yo yo less severely and not denting investment confidence so badly. Surely you've herd it often complained that some businesses will jump prices at the smell of a reasonable excuse, but never lower prices if the event never eventuates or reverses. The scrapping of the mining tax is a case in point, where Brisbane City Council is failing to guarantee a reduction in rates equivalent to that attributed to the carbon tax.
The high AUD has heavily slowed our economy down via exchange rate exposed industries such as tourism, manufacturing and education. These are the every day bread and butter industries that support and stabilise our economy. They deserved more support from the RBA than the 'super' profits of our banking industry.
Before anyone jumps on that, think about how little the banks passed on from early cuts and the key RBA players, appointed by the Howard government, Glen Stevens (replaced Ian Macfarlane) and Roger Corbett... two very conservative, even Big L Liberal in philosophy... as in more obsessed with a balanced budget, low or no debt and protecting corporate profits.
If you take a wider look, the RBA (as evidenced by reports) has taken a more conservative bias in it's judgement calls, more favouring the big end of town than the average aussie.
While certainly not endorsing Labors policy on a number of issues, nor a fan of Swan as treasurer, you cannot escape the reality of RBA decisions based on Big L Liberal philosophy contributing to making the economic situation 'appear' worse that it actually is as a smoke screen to avoid passing on better rate cuts for the betterment of the average aussie.
Well Whiskers, if you are right and interest rates drop further, pushing house prices higher. You have to feel for the underclass that will be created.
You make referance to the fact house prices are only booming in major population areas, that has always been the case.
You also make reference to RBA rate cuts increasing disposable income, that is only for those with a home loan.
You also make reference to RBA rate cuts reducing foreclosures and giving them more liquidity. It would appear to me those people are in financial stress and have no liquidity anyway.
If in some way your reasoning is supposed to indicate we are in a great financial state, I'm missing it.
All your assumptions seem to be based on a bouyant housing market, which by your own admission is being proped up by overseas investors.
Housing is non productive debt, once it is built it does nothing for the economy, to make it a lucrative investment vehicle is a recipe for disaster.IMO
You're missing it.
I'll post up some more charts tomorrow, but for now... house price rises (in some areas) is driven by demand for housing from population growth, as evidenced by high rents and low vacancy rates... rather than low interest rates..
You are only seeing strong price increases in established inner city areas, which supports the arguement that it is investment drivenIf low interest rates was stimulating housing you would see stronger construction as well as other things..
Hence my argument that interest rate should have been much lower to (among other things) stimulate the building and first home owner sector. .
Tomorrows lesson will be on how the RBA is colluding with the top end of town and Big L Libs to squeeze the average aussie for max corporate profits... the 'stuck' (on purpose, as in people reluctant to pay higher prices and rent, or build new homes, tending to stay at home in extensions to existing family homes as Syd mentioned) situation our economy is in atm largely because of the RBA monetary policy.
I'll give you a clue. Think about the Asian Financial Crisis around 1997/8 caused by artificially high interest rates.
Higher rents can only be driven by higher wages
Wages certainly is not the only thing!
So why is wages growth still quite strong at over 3% but rents, rental yields and property prices generally slower to flat?
The thing that drives prices higher is higher demand, like increasing population (for the product or service), over the available supply... slower rate of building approvals as indicated in chart.
You may also have seen reports that in many areas it has been more economical to rent than buy a property for some time, because of the prevailing economic circumstances, resulting in a lower vacancy rate, but not substantially higher prices.
That says something about the demand side of the equation and monetary policy.
If what you are saying is you are expecting wages growth to improve affordability, I think you will be disappointed by this government.
Tomorrows lesson will be on how the RBA is colluding with the top end of town and Big L Libs to squeeze the average aussie for max corporate profits... the 'stuck' (on purpose, as in people reluctant to pay higher prices and rent, or build new homes, tending to stay at home in extensions to existing family homes as Syd mentioned) situation our economy is in atm largely because of the RBA monetary policy.
I'll give you a clue. Think about the Asian Financial Crisis around 1997/8 caused by artificially high interest rates.
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