Hi guys
Well here goes another RBA reduction. This time 25 bps.
As per last month let us see what the Banks do this time about the amount of reduction they pass on.
At its meeting today, the Board decided to lower the cash rate by 25 basis points to 3.50 per cent, effective 6 June 2012.
Growth in the world economy picked up in the early months of 2012, having slowed in the second half of 2011. But more recent indicators suggest further weakening in Europe and some further moderation in growth in China. Conditions in other parts of Asia have largely recovered from the effects of last year's natural disasters, but the ongoing trend is unclear and could be dampened by slower Chinese growth. The United States continues to grow at a moderate pace. Commodity prices have declined lately, though they are mostly still high. Australia's terms of trade similarly peaked about six months ago, though they remain historically high.
Financial market sentiment has deteriorated over the past month. The Board has noted previously that Europe would remain a potential source of adverse shocks. Europe's economic and financial prospects have again been clouded by weakening growth, heightened political uncertainty and concerns about fiscal sustainability and the strength of some banks. Capital markets remain open to corporations and well-rated banks, but spreads have increased. Long-term interest rates faced by highly rated sovereigns, including Australia, have fallen to exceptionally low levels. Share markets have declined.
In Australia, available indicators suggest modest growth continued in the first part of 2012, with significant variation across sectors. Overall labour market conditions firmed a little, notwithstanding job shedding in some industries, and the rate of unemployment remains low. Nonetheless, both households and businesses continue to exhibit a degree of precautionary behaviour, which may continue in the near term.
There have been no new data for inflation since the previous meeting. Over the coming one to two years, and abstracting from the effects of the carbon price, inflation is expected to be in the 2–3 per cent range. In the near term, it is likely to be in the lower part of that range, though maintaining low inflation over the longer term will require growth in domestic costs to slow as the effects of the earlier high exchange rate wane.
As a result of earlier changes to monetary policy, interest rates for borrowers have declined to be a little below their medium-term averages. Business credit has increased more strongly in recent months, though credit growth remains modest overall. Housing prices had shown some signs of stabilising around the turn of the year, but have recently declined again. Generally, the housing market remains subdued. The exchange rate has declined over recent weeks, reflecting lower commodity prices, heightened risk aversion and expectations of lower interest rates.
At today's meeting, the Board judged that, with modest domestic growth and a weaker and more uncertain international environment, the outlook for inflation afforded scope for a more accommodative stance of monetary policy.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hmmmm….this kind of smells like late 08/early 09 to me.
I wonder if sub 5% fixed rates will reappear at some point???
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Bank of Qld the first to make a move and they have dropped their rate by 20 bps.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Seems like Australia is heading downhill, I believe we did not escape the recession, merely just delayed it by a couple years.
Instead of falling down a couple years ago like the rest of the world, we survived by our high amount of resources, but that can only last so long.
The next couple years in the Australian economy will be very interesting, confidence appears to be very low at the moment.
They should be dropping the full 25. but anyway .05 doesn't mean much if your serious about investing.
It is good though as we should have a few more buyers running around.
This is how I look at all the negativity out there, ''I don't really care'' to be honest if you worry about other countries or even your own country, then you will never get anywhere as you will always be to scared.
Media said a couple of years ago we were gonna hit rock bottom, where is it?
Media said USA will take years to come back, There already on there way back up and were they realy as bad as the media Made out, mmm probably not.
Media said china will be the new USA, mmm not today.
Media are saying we mite go into rececsion again, mmm realy, I don't think so.
Media said property is stuffed for many years but I keep seeing some areas doing very well and people making money, so much for what the media says and also media are now slowly talking about hot spots, Maybe people got sick of buying negative papers so they need to make a few changes to make some more money.
No dealt media will make stories up about the latest price reduction, who cares I bet the guy that writes the story doesn't own a property and doesn't have a clue about property.
Tomorrow media will say property is booming again, is it realy or is it just some suburbs.Invest today for tomorrows market not the other way around
streamlineinvesting wrote:Seems like Australia is heading downhill, I believe we did not escape the recession, merely just delayed it by a couple years. Instead of falling down a couple years ago like the rest of the world, we survived by our high amount of resources, but that can only last so long. The next couple years in the Australian economy will be very interesting, confidence appears to be very low at the moment.Is peoples confidence realy down or it is just because you read some negative posts and what was in the paper and on the news?
Are you still working, buying property, living the same life you were living 10 years ago or living a better life or worse?
Everyone think about it like this, what realy went wrong in your life in the last two years, did the down turn realy effect you? or did it make you money? or has it just been the same as the last 10 years.
To be honest my life has not changed, it is still the same, I make money in good times or bad times, I have bad days and good days, Iife goes on.
Media is all ….Funny, radio is on while I am typing and they say, well there was another interest rate cut but not what everyone was hoping for, only a 0.25% cut. mmm mmm mmm
I'm certainly no property spruiker and I'm all for a balanced argument….but the way I see it, if the stock market is looking grim and rates are dropping…..this should make property an attractive asset in the current environment.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Backing up an earlier comment by Keiko about the media focus.
Yesterday we had a fall in the ASX of approx 1.8% (I am not a share investor so I don't know the exact figure) and we had major & large print headlines talking about $24b being wiped off the value of shares.
Fast forward almost 25 hours and the share market has recovered 1.5% (4.45pm on Tuesday) and barely a mention of the recovery in popular online media.
Methinks we would be a better place without such a negative focus by media channels.
Now back on topic.
Derek wrote:Backing up an earlier comment by Keiko about the media focus.Yesterday we had a fall in the ASX of approx 1.8% (I am not a share investor so I don't know the exact figure) and we had major & large print headlines talking about $24b being wiped off the value of shares.
Fast forward almost 25 hours and the share market has recovered 1.5% (4.45pm on Tuesday) and barely a mention of the recovery in popular online media.
Methinks we would be a better place without such a negative focus by media channels.
Now back on topic.
Hahaha that made me laugh, exactly what I'm talking about.
Jamie M wrote:I'm certainly no property spruiker and I'm all for a balanced argument….but the way I see it, if the stock market is looking grim and rates are dropping…..this should make property an attractive asset in the current environment.Cheers
Jamie
It will definitly help the property market, in the next few days I am sure the media will target that shares are no good and property is a safe investment.
I think 25bps is a good call. Leaves the RBA plenty of room to move on monetary policy. Don't forget we still have the highest cash rate (in the world?) or up there at least.
There is still a lot to do in the area of fiscal policy reform and a downturn may speed things up in this area, who knows? Not that we would wish it.
Company tax rates need to be overhauled and there are a lot of restrictions and barriers to entry in many businesses and industries. Look at groceries etc. We need less regulation, more competition with fewer rules but harsher penalties for those that do break rules.
We should not just look to monetary policy as the only brake and accelerator of our economy. It does not really work because the lead/lag times are to great. We need more competition to control prices and inflation and more spending on R&D to development world class technologies not just (relatively) short term infrastructure projects. We can only hope.
However, nothing gets the property market moving quicker than a new port, road or rail line.
Don. wrote:However, nothing gets the property market moving quicker than a new port, road or rail line.Good thing for Gold Coast as there is a new lite rail under way, also heavy rail proposed. Also plenty of new roads being built or upgraded. $68 billion of work planned or happening. Some suburbs are starting to get warm, good time to buy before the commonwealth games.
That's brilliant. If the banks pass on some, then property owners will get to save some more!
Oh they will pass some one but it wont be the full amount and i think thats the RBA was concerned about.
Had they gone 50 bps and the Banks passed on say half they start to lose amunition.
As it stands they can gauge it for another month and see what another reduction does for the market and retail sales in particular.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
keiko wrote:streamlineinvesting wrote:Seems like Australia is heading downhill, I believe we did not escape the recession, merely just delayed it by a couple years. Instead of falling down a couple years ago like the rest of the world, we survived by our high amount of resources, but that can only last so long. The next couple years in the Australian economy will be very interesting, confidence appears to be very low at the moment.Is peoples confidence realy down or it is just because you read some negative posts and what was in the paper and on the news?
Are you still working, buying property, living the same life you were living 10 years ago or living a better life or worse?
Everyone think about it like this, what realy went wrong in your life in the last two years, did the down turn realy effect you? or did it make you money? or has it just been the same as the last 10 years.
To be honest my life has not changed, it is still the same, I make money in good times or bad times, I have bad days and good days, Iife goes on.
Media is all ….Funny, radio is on while I am typing and they say, well there was another interest rate cut but not what everyone was hoping for, only a 0.25% cut. mmm mmm mmm
I see your point about how sometimes everything is portrayed in the media poorly and that people simply jump on the bandwagon. I agree that this happens too often and can have a negative impact on the perception of the economy.
My judgement this time is based on what I have seen first hand, firstly that my company (civil infrastructure engineering) has not been winning many jobs lately simply because there is not as much work as there was 2 years ago. This is not just my company, but all the competitors company’s are similar, there were no redundancies in my company 2 years ago, but there has been several over the past months.
Also I have seen in my dad’s business (foundry work) it has been getting a lot quieter across the nation, there are fewer foundries than there was 10 years ago, and yet they are still quieter than they were 10 years ago, saying there is simply less work out there.
Sorry I do not want to be pessimistic, and I know I probably sound it, I just am trying my best to be realistic and prepare myself as best as I can for the future.
Don. wrote:I think 25bps is a good call. Leaves the RBA plenty of room to move on monetary policy. Don't forget we still have the highest cash rate (in the world?) or up there at least.There is still a lot to do in the area of fiscal policy reform and a downturn may speed things up in this area, who knows? Not that we would wish it.
Company tax rates need to be overhauled and there are a lot of restrictions and barriers to entry in many businesses and industries. Look at groceries etc. We need less regulation, more competition with fewer rules but harsher penalties for those that do break rules.
We should not just look to monetary policy as the only brake and accelerator of our economy. It does not really work because the lead/lag times are to great. We need more competition to control prices and inflation and more spending on R&D to development world class technologies not just (relatively) short term infrastructure projects. We can only hope.
However, nothing gets the property market moving quicker than a new port, road or rail line.
Seems very logical, especially about developing smart industry. Terribly unbalanced economy we have here, still.. whether it’s dumb luck or just luck we are still.. lucky! Which always helps
streamlineinvesting wrote:keiko wrote:streamlineinvesting wrote:Seems like Australia is heading downhill, I believe we did not escape the recession, merely just delayed it by a couple years. Instead of falling down a couple years ago like the rest of the world, we survived by our high amount of resources, but that can only last so long. The next couple years in the Australian economy will be very interesting, confidence appears to be very low at the moment.Is peoples confidence realy down or it is just because you read some negative posts and what was in the paper and on the news?
Are you still working, buying property, living the same life you were living 10 years ago or living a better life or worse?
Everyone think about it like this, what realy went wrong in your life in the last two years, did the down turn realy effect you? or did it make you money? or has it just been the same as the last 10 years.
To be honest my life has not changed, it is still the same, I make money in good times or bad times, I have bad days and good days, Iife goes on.
Media is all ….Funny, radio is on while I am typing and they say, well there was another interest rate cut but not what everyone was hoping for, only a 0.25% cut. mmm mmm mmm
I see your point about how sometimes everything is portrayed in the media poorly and that people simply jump on the bandwagon. I agree that this happens too often and can have a negative impact on the perception of the economy. My judgement this time is based on what I have seen first hand, firstly that my company (civil infrastructure engineering) has not been winning many jobs lately simply because there is not as much work as there was 2 years ago. This is not just my company, but all the competitors company's are similar, there were no redundancies in my company 2 years ago, but there has been several over the past months. Also I have seen in my dad's business (foundry work) it has been getting a lot quieter across the nation, there are fewer foundries than there was 10 years ago, and yet they are still quieter than they were 10 years ago, saying there is simply less work out there. Sorry I do not want to be pessimistic, and I know I probably sound it, I just am trying my best to be realistic and prepare myself as best as I can for the future.
Fair enough. it will prob be a little slow over the next couple of years for your line of work depending on your location but things will eventually get better again.
I remember when I was running my company we were constantly busy doing earthworks etc and a guy I had sign writing my equipment said he didn't have much work and may close shop (I was thinking but where in a boom), once in a while his company would get busy but he said he needed more work which was not out there for him, when the recession hit things got a little slower for me but my sign writer got super busy and had more work than he could handle. while some are slow others are busy but eventually things will turn for most companies just like it does with property and shares etc, but give it time and it comes back good again.
I can see why my sign writer was slow in the boom times, not many people bothered adverting but in the slow times more people need to advertise.
Each business is slightly different and at different times there business booms and there business is slow.
It is the same for property, some areas boom and some areas are slow for all different reasons but things eventually turn.
I am currently making a load more money investing in Gold Coast property than I am in Melbourne, Brisbane and Sydney, reason for this, properties on the Gold Coast are so much cheaper than the other city's and there is a bunch of ways to make money from these properties and eventually Gold Coast will come back strong again and huge profits will be made over night, In some locations of Melbourne and Sydney there prices are to high and are slipping back. In Gold Coast prices are very cheap everywhere and will only go up.
So currently Gold Coast is the place to make some good money before things start getting expensive again.
Media is slowly tuning into gold coast market but there not in full production printing articles yet and the time they work it out, all the smart buyers would have already grabbed the bargains.
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