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Interest Rates, Local interest rate discussions
mullokintyre
post Posted: Mar 28 2019, 08:24 AM
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In Reply To: nipper's post @ Mar 27 2019, 05:55 PM

At some point in time, all these experts will finally wake up to the fact that interest rates are not the powerfull lever that some think it is. (Assuming it ever was a powerful lever).
Look at the experience in Japan , USA and Europe with low or below zero interest rates.
How will lowering interest rates (twice) improve things in OZ??
The two things keeping us going are Government spending (at all three levels), and immigration.
Interest rates don't seem to affect government spending much, and immigrants are not borrowing money when they first arrive.

Mick





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nipper
post Posted: Mar 27 2019, 05:55 PM
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What about Australian bond yields at a record low?
QUOTE
The plunge in Australian bond yields to a record low of 1.78% (below 2016’s low of 1.81%) reflects a combination of weak economic data locally causing the fixed interest market to price in RBA rate cuts and falling bond yields globally.

We remain of the view that Australian bonds will outperform global bonds (reflecting RBA easing at a time of the Fed holding) and that the Australian share market will continue to underperform global shares (as earnings growth locally lags that globally in response to weaker economic conditions in Australia).

We continue to see the RBA cutting rates twice this year....

and a bunch of pretty, but widely circulated graphs, from Shane Oliver
https://www.sharecafe.com.au/2019/03/27/glo...d-yield-curves/



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Mar 27 2019, 02:10 PM
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In Reply To: plastic's post @ Mar 27 2019, 02:07 PM

Perhaps if they offered better rates on long term deposits they might get some more capital.
So called investor rates from NAB at barely 0.5%.
Thievin bastards.

Mick



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plastic
post Posted: Mar 27 2019, 02:07 PM
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Some banks must be really feeling the pinch around about now. Like a cat on a hot tin roof wondering how are they gonna come up with the new capital requirements the Reserve Bank has told them they must meet.

https://www.nzherald.co.nz/business/news/ar...jectid=12216848

QUOTE
Good news in Reserve Bank gloom as mortgage rates fall and shares soar







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What did Uncle Mel do to us?
 
triage
post Posted: Feb 1 2019, 08:47 PM
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In Reply To: nipper's post @ Feb 1 2019, 06:43 PM

The dudes at macrobusiness have been calling for some time now that the next RBA move will be down (they may not be considered mainstream but it is fairly obvious that lots of insiders keep an eye on what they are saying). Likely what the RBA does will not be the whole story anyway as the banks are pushing their rates up independently of what the RBA is doing (something like 40% of their money is raised offshore and that is where the upward pressure is coming from apparently). The other factor is banks are knocking back heaps more mortage applications - a couple of years ago they were knocking back something like 5% of mortgage applications now the figure is more like 40%.

Also, I've seen numerous reports where banks were offering loans of say $1.2m 12 months ago but now are only willing to lend say $800k. So someone who could afford to pay say $1.5m for a property can now only buy something worth say $1.1m. I suspect the banks will get such a rogering from the Royal Commission report that they will remain risk averse for the forseeable future.




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"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

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nipper
post Posted: Feb 1 2019, 06:43 PM
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And now... (don't do it, fellas)
QUOTE
Shane Oliver from AMP Capital recently commented that:
- Australian home prices are likely to fall another 5-10% this year driven by a further 15% or so fall in Sydney & Melbourne. We have revised our expected top to bottom fall for Sydney and Melbourne property prices to 25% (from 20% previously).

The reason this is mentioned is what will the Reserve Bank do with the Official Interest Rate if Shane Oliver’s prediction is correct? The rate has been 1.5% since July 2016 and was 2% in April 2016. With tightening of credit having such a material effect on residential property values, we are likely to see the RBA rate drop during 2019. This was certainly not expected over the last few years as all commentary was how rates would increase!

what will they do!




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 


nipper
post Posted: Dec 14 2018, 09:00 AM
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QUOTE
The Reserve Bank says the next move in interest rates is up. Yet investors are starting to embrace the idea that policy makers will be forced to cut.

That leaves the Australian dollar vulnerable, with predictions it could fall as low as 65 US cents.

In the bond market, the yield curve for overnight index swaps -- a gauge of expectations for short-term rates -- has inverted, showing that traders expect the RBA's cash rate to be slightly lower than the current 1.5 per cent in a year's time.

Similarly, the cash-rate futures market is now suggesting about 10 per cent chance of a cut in the second half of next year, and less than 5 per cent for a hike....




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

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nipper
post Posted: Dec 6 2018, 08:16 PM
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QUOTE
In a major speech tonight that suggested the Reserve Bank was fretting about the potential fallout from an emerging slump in house prices, Deputy Governor Guy Debelle warned a lending slowdown could hurt the economy.

“There is a risk that a reduced appetite to lend will overly curtail borrowing with consequent effects for the Australian economy,” he said.

Noting the Reserve Bank had “repeatedly” said the next move in interest rates was more likely up than down, Dr Debelle said there was “still scope for further reductions in the policy rate“. “It is the level of interest rates that matters and they can still move lower,” he added, in remarks that could foreshadow a sharp reappraisal of the outlook by the Reserve Bank Board when it next meets in February, post summer break.
spinning on a pin



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Nov 6 2018, 01:32 PM
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no change --- 1.5%pa
QUOTE
The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the [RBA] Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
early birds
post Posted: Jul 4 2018, 10:08 AM
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In Reply To: nipper's post @ Jul 3 2018, 10:47 PM

No change from the Reserve Bank at its July meeting with the cash rate remaining on hold at 1.50% and likely to do so for the next year at least, if current economic trends continue, particularly weak wage growth.

Wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time,” Governor Phil Lowe said in his post meeting statement.

“Consistent with this, the rate of wages growth appears to have troughed and there are increasing reports of skills shortages in some areas.

"Inflation is low and is likely to remain so for some time, reflecting low growth in labour costs and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.”

"The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,“ Dr Low said.

So no need to lift interest rates, as some sections of the media and the economic commintariat have been urging.

The AMP’s chief economist, Dr Shane Oliver, who has been a ‘dove’ on monetary policy made the point that he saw “nothing in the RBA’s latest Statement to suggest an imminent change in monetary policy."

“While a brightening outlook for mining investment, strengthening non-mining investment, booming infrastructure spending and strong growth in export volumes argue against a rate cut, topping dwelling investment, uncertainty around the consumer, continuing weak wages growth and inflation, falling home prices in Sydney and Melbourne, tightening bank lending standards and the threat to global growth from a US driven trade war all argue against a hike.

"So it makes sense for the RBA to remain on hold.

"We remain of the view that an RBA rate hike is unlikely before 2020 at the earliest. And given the weakness in home prices and the negative wealth effect that will flow from that its premature to rule out the next move in official rates being a cut, he added.

He and some other analysts have noted that money market rates have risen, mainly due to the rise in US rates for our banks borrowing in US dollars. That is forcing some banks to lift some mortgage rates. Dr Oliver says that’s a concern.

“The RBA also appears to be a little more perplexed by the rise in money market rates seen in recent months seeing at as driven by “other factors” than just the US and unclear as to how long it will persist.

“The problem is that it is resulting in higher mortgage rates for some borrowers (with the big banks likely to move too) at a time when the property market is already weak and its harder to get a loan.

“If the rise in money market funding rates proves to be structural (due to say regulatory changes) then its another reason for the RBA to be cautious in raising interest rates and would point to the need for easier RBA policy over time than would otherwise be the case."
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i reckon if AUD keeps current rate and even drifting lower from here then inflation will be up-------if RBA not "cooking the states" of course.




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