Hello,
I have been reading lots and note that many believe that we are soon (maybe 6 months – maybe 2yrs but soon) to experience a period of high inflation and thus higher interest rates.
Anyone got any comment / food for thought for me.
Here's my prediction – one economist will say we are in for higher interesta rates and inflation.
Another economist will predict we are in for a recession, high unemployment and lower interest rates.
Economists predictions are varied, I wouldn't concern yourself with them too much. I personally love Ronald Reagans advise, that there should be an economist's version of Trivial Pursuit, with 100 questions and 3000 answers.
yer ha ha… I feel like I'm the dice
I have been googling away trying to learn 'the factors that drive inflation growth' so that I can make my own prediction. It must be too simple or too complex a question cause I cant seem the answer (in simple form)
Inflation. Generally two types. Cost push and demand pull. Cost push means that production costs rise eg. wages, raw materials and the retailers have to put up prices to cover costs. Demand pull means that everyone wants a particular item and there are not enough to go around. So people pay more to get the little that's there. I found this site http://www.hsc.csu.edu.au/economics/issues/inflation/Topic3Tutorial2Inflati1.html
Hope this is of use
Andrew
itsandrew
Go as far as you can see and you will see further.
I follow this website for daily info on expectations for the next move from the RBA for their cash rate.
http://www.asx.com.au/sfe/targetratetracker.htm
Rate expectations several years out can be seen and are as good a predictor as any in my opinion, of course the future is not set in stone and big surprises do happen! We all like to think we are better than average drivers and better than average speculators and have an advantage over the markets in terms of predicting the future
Nothing is set in stone. I would budget for 200 basis points.
"Within 24 hours of being appointed by HSBC as chief economist for Australia and New Zealand, former senior Reserve Bank economist Paul Bloxham has dropped a bombshell, predicting the RBA will raise official interest rates by 125 basis points by the end of next year"
If you look at the RBA Bank Income Profitability http://www.rba.gov.au/chart-pack/bank-income-profitability.pdf
You can see recent changes in their return on equity This is based on past events. Also their non-interest income is falling putting pressure on the banks to pass on falling future returns.
The Aussie banks obtain about 26 per cent of their funding from overseas, mainly to boost housing credit supply, That means that about 26% of their loans are financed through offshore bonds.
This is exactly the danger for the Australian economy. What happens if foreign investors start to worry about their investments? If they start to pull out of Australia, what happens to the currency and the banking sector?
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