RBA Lowe: still have scope to lower rates if needed

Just goes to show, no one takes much notice of the useless RBA these days! AUD is rising yet again.

That type of statement can only have an effect the first time it's made. After that it's already priced in, no matter how many times he repeats it. AUD long seems logical to me...

I've been embarrassingly wrong when posting my opinion last time on the AUD, and I do agree that AUD long might be the direction of least resistance but long term, the Australian economy after the mining boom bust, a economic cycle of 25 years, property bubble, a Grexit 50/50 possibility, an overvalued AUD dollar, a number of other threats, I really don't see the AUD staying high for too long. The Australian economy is in for a hard landing and the AUD doesn't reflect this. Most banks are saying that fair value of the AUD is 70c or less.

this is not going to happen

Don't expect Aussie to rally this week.

It is senseless buying an instrument which value will soon "decline" consequent to possible "Central Bank Rate Cut".

I really couldn't care less what most banks say. If that's the case then let them initiate sell orders but they probably want us to do that so they can buy.

Most banks are saying that fair value of the AUD is 70c or less.[/quote]

I said this a few weeks back. By the end of this year will be close to .70. I live in Australia and know how bad the economy actually is. The housing has reached its cycle and is just waiting to fall. Gov department, hospitals etc. have no money and alot more jobs will be going between now and 2017.

I said this a few weeks back. By the end of this year will be close to .70. I live in Australia and know how bad the economy actually is. The housing has reached its cycle and is just waiting to fall. Gov department, hospitals etc. have no money and alot more jobs will be going between now and 2017.[/quote]

I also live here mate and see what is really happening like you say the bust cycle is coming perhaps interest rates back to 17% love the boom bust cycle

Don't forget the AUD/USD pair has USD in it The 70 cents scenario may happen, but that assumes the US economy will be blossoming this year... somehow I'm not buying that...

allways looking for a great entry

I too live here and I don't see any of this. I see economic growth, albeit slower than before. I live in Victoria though, things may be different elsewhere in AU.

hi mate live on the sunshine coast in qld booming jobs outside the mining area but wheres thiers a boom is the bust cycle like nsw

Krassen, I also live in Australia as a few of the posters on here, the economy here is not good at all and seems to be getting worse as time goes by. The aussie is too high and it could go higher unless the USD gets stronger but Yellen isn't interested in Australia and rightly so she shouldn't be, but until the US economy gets better then we will have to expect the high AUD. We desperately need the aussie down under 75c but I cannot see it happening soon. Maybe next year.

Aussi, I live on the Gold Coast and the economy is BAD! shops and restaurants closing, staff being laid off or hours cut down. Shopping centres very quiet, ask my wife, she goes there and lets me know,

can agree with your wife , Nambour and Maroochydore shopping centre shops are closing it is the boom bust cycle like I said

sentiment bad yet property prices in 2 largest cities, that produce nothing, booming ?!!?

something not right here.

The logic behind that is (usually) that people can't find jobs where they live. Therefore they move to large cities, to try there. That creates accommodation shortages, and bust rent and property prices.

The problem may be due to the massive boom we had which put cash in people's pockets and Aussies traditionally love property. This is exacerbated by many foreigners, usually Chinese, doing the same thing with Aussie property - just buying it up. All this is further exacerbated by the very low interest rates on AUD.

Personally I'm not sure what I want anymore. I like the high AUD for my selfish reasons of going overseas and possibly investing in property in the UK, but I also have property here in AU and it's just going through the roof.

The Gold Coast and Sunshine Coast mentioned in previous posts are tourist areas so they have a different dynamic to say, where I am in the south of AU.

Lower interest rates do nothing more than increase the appetite for riskier assets. The problem is that now everyone needs to get into the game. Credit bubbles are growing whilst savings are being destroyed both by the lower rates of savings due to poor returns and by the destruction of purchasing power by misleading inflation figures. Real inflation, not the bullshit the government spins is well off the charts. That bag of groceries that cost you $80 a week last year and now costs you $100 hasn't gone up by 1% or 2%, any idiot with a calculator could tell you that. Private health cover up over 6%, property and land has grown well above inflation so at the end of the day what do you do. Leave the money in the bank and watch it erode, or put it into something that might give you better than 2%.

Government debt is spiraling and the answers are to build more roads, build more schools, build more hospitals and lower interest rates, relax lending practise SO THAT MORE PEOPLE CAN GET INTO DEBT. Like America, Australia allowed itself to become a net consumer, selling its raw assets for cheap, letting multinationals cheat out on taxes by playing the 'we pay higher wages to morons who don't know how to do something productive with it' whilst becoming a consumer. All the trade arrangements allow for us to buy, especially during the Aussie boom, consumerist crap from overseas for slightly cheaper than here at home KILLING OFF the Australia producers. If it wasn't for China's absolute need for Iron Ore and its willingness to pay through the nose for it, the boom would have ended a long time ago but the sustained period on which it went for meant the morphin drip stayed in longer.

Aussi mentioned 17% interest rates. It would take a mere 1 or 2 full points with the extra % that the bank throw on to bankrupt the majority of young homebuyers today. I know a ton of people (I run a small recruitment firm that deals with the mining industry) who are past the eyeballs in debt. They've either borrowed well past 85% LVR and paid the lenders insurance (funnily enough it gets rolled back into the mortgage - WTF), or if they have an existing loan they have been suckered into refinancing to invest the equity..... It's madness and NOTHING has been learnt from the GFC. 17% and you can say goodbye to everything. Those with enough foresite to increase their savings and/or lower their debt with have the opportunities to prosper. The flow on effect will be like dominos. Australia, lets face it, post mining boom we are done and the hold out for China to reignite itself and be our saving grace is a fallacy.

We will not re-establish production in Australia, not in the true sense where we balance our trade debt without a massive remodel of labour rates, massive cuts to government size (because it is encumbered anyway) and a massive incentive for businesses to come back. Until then we can sit on the porch and watch the slow decline.

Good article Razor, I think you have pretty well covered it. I was enjoying the read up until the part where you made the comment "much like myself" it made you sound like a egotistical, boasting git! Remember, if you want to look good or sound good, let someone else say it, by saying it yourself has the opposite effect.

Thanks,

I agree so I went back and reworded it. My fortune in life has not been without sacrifice, something that I have tried to instill on others. My advantage has been helped by the fact that I run a recruitment firm that, up until 18 months ago, prospered from the mining boom. My company still makes a good turnover but nothing like that which was on offer during the boom. I have seen first hand the wages paid to people, some of who's only life skills are to pull a lever, put their foot on the gas and move dirt. These people would regularly earn in excess of $150,000 a year for nothing more than a few weeks doing a training course. The level of waste was nauseating and made worse by the fact that most were still unhappy, wanting to be paid more and more. On the other side of the coin, the Mining industry under the steady increase of OH&S became an encumbered entity by regulations that stifled productivity and provided the perfect scape goat for the lowest common denominators that had infiltrated the systems like a virus, making the industry more and more expensive to run.

Even up until 6 months ago the belief that all that was needed, and all that is still needed, is a lower AUD to allow for China and Co to get a better bang for their buck. If anyone looked overseas they would see massive cities that are EMPTY. Billions and Billions have been made in China on this boom and that money has and is leaving town, including thanks to the relaxed Foreign Investment limits, into property and agricultural land in Australia. People we still employ today still don't get it. I have 1 particular employee who has in 10 years cleared over a million dollars, that is AFTER taxes they have made more than a million. They recently bought a house for $750,000 AND THEY BORROWED THE MAX. They have no other assets and they BEG for work because they are past their heads in this new mortgage.

It has been this lifestyle that has allowed me to enjoy eating beans on toast while others bask in the sun dining on $80 steak and wine. Some may say its ego but I can assure you, my life has been the complete opposite. While people drive flash cars, I catch public transport, while people go to the pub and spend $200 on alcohol I buy 2 cartons and entertain friends at home and while the world goes on consuming I have respected my time, a commodity far more valuable than money to devote time to learn how to build a sustainable life in the garden.

I can handle the stigma that is given to people who don't follow the herd, those who 'keep up with the Joneses'. I can handle living modestly while those around me go further into debt. The absolutely irony is that with interest rates this low, smart people would be paying down their debts, getting a better bang on the principle aspect of the loan and therefore reducing the future impact on interest. BUT, when a government spends recklessly, when massive multinations are in billions of dollars in debt is it any wonder why most don't give a shit.

I don't mean to offend, and my views of the world are my own. They don't sit well with most because most are too invested in the mind numbing objects that fill their lives and god forbid anyone take away that 4th TV in the background blaring another piece of shit drama show designed to remove us from reality. No the world cannot live without their objects and so the debt will continue to spiral upwards and upwards and upwards...... Oh well, most in power will be dead in 10 to 15 and therefore why should they change. It will be the next generation and the generation after who bear the weight. Take a look outside, there's a reason why teenagers today walk around aimlessly with their headphones in, unable to communicate with a world that is selling them short. The headphones act as a distraction so they don't have to open their eyes and face the tidal wave of debt that is going to crush them before they even get a chance.

Just a tired brain in a young body.... tired of the systems and tired of the corruption that is so blatant today.

Apologies if I upset anyone, just move along and ignore the rant.

Well I enjoyed the rant and I totally agree with you. I live just south of Cairns and this area has been in a decline since 2008.......

Best post here. Many others understand what is happening in Australia (I live in Melbourne) but seem to ignore that US economy dwarfs Australia so in an exchange rate dominates what happens to the pair. Since mid April USD has been in decline as FOMC meetings tell us that rate rise is being delayed. Consequently A/U has been on the rise during that time in spite of an interest rate cut and some other bad data. Last couple of days USD has bounced off a lower low on the daily and A/U has fallen. It's what I call a high probability buying opportunity. Even if there were a reversal in the trend there would probably be a retest of A/U high to close out some positions in the process.

Honorable mention (re Krassen getting my vote for best post) goes to Razor Trader as I agree many live beyond their means in good times and it will come back to bite them in bad times.

Great post(s) Razor Trader. Appreciate all your effort putting into words what all us Australians are thinking. I believe that cash is king now as I can see a housing bubble happening as buyers will not be able to keep making payments. We could easily go into recession and there is nothing that the Gov. and RBA can do.

They could likely embark on a version of QE - ZIRP much like the rest of the world has but it will be futile. Dab, I agree to some notion that the tie in the countries through the currency 'should' mean that when 1 goes up, the other goes down. In stable market conditions this balancing act will usually occur. In unstable markets though as we saw in the GFC, Tech bust and other crisis is that when the system breaks down all correlations mean zero and as credit exits the system then generally all currencies fall. With the US being central to everything, a massive slide in confidence over there will have the same effect here, but at the moment things in the US are deteriorating and I agree, the AUD will likely appreciate on the basis until the cataclysm occurs at which all markets are brought to their knees.

All central banks have done a great job of destroying savings through interest policy. IF you look at the world wide private debt, it was estimated to be somewhere in the 1/4 a Quadrillion dollar range and that was in 2013. China's debt has gone from 7 Trillion in 2007 to over 20 Trillion today, US government debt is over 18 Trillion.... These a numbers that to 99% of people are impossible to comprehend. It was only a decade ago that if you were a millionaire you were wealthy, not just rich but wealthy. Today the bench mark seems to be a billion - WTF do you spend a billion dollars on and really is there any need for it. As for the term Quadrillion..... well lets just say its a big number.

To put the term billion into persective - If you were to say to someone 'how long would it take you to count to a billion'. Some might rattle off 10 years, because you know I can count to 10 in like 2 secs, others might say 50-100 years because they know that saying 'one hundred and ten million six hundred and ninety nine thousand four hundred and 8 takes about 5 secs to say. Stringing them together without stumbling - good luck.

The actual time varies depending on how a person defines it but if we where to look at the averages of counting 1 to 100 being about 1 sec, 1000 - 1100 being 2 secs and so on, we may come to the conclusion that the average time per number is 5-6 seconds without factoring counting errors. That is 6 billion secs which equates roughly to 190 years! That number that today seems so common language is so difficult to comprehend. Now what about 1 trillion... Well even my brain hurts but I might give it a go tonight and time myself and work out the average just for shits and giggles. The point is that no matter what happens, when the arse falls out of this financial cycle then very very few people are going to be left unaffected.

As for cash is king. The problem with cash in the general sense ie Australian dollars, US dollars etc is that they could become completely irrelevant as a government falls into decline. Just look at the German Mark during its hyperinflation, or the zimbabwe Trillion dollar note. The real wealth is in productive assets. Is it any wonder that Forrest and Gina have brought cattle and agricultural land? Is it any wonder they Twiggy is doing his best to put all the blame on Rio and BHP to help rescues a debt ridden Fortescue. He owns a billion shares and I am sure he would love to stretch the price a little higher, find a sucker company that will buy him out so that he has the realised money in his pocket to purchase other assets.

Look into Whiting Petroleum aquisition of Kodiak Oil as it tried to position itself as a major playing in the Bakken Shale fields, an investment that will NEVER be paid off. Even if Oil was over $120 a barrel, the reserve it has and the profit margins render the debt unpayable. I am sure Fortescue is no different, just like a pile of other multinationals that grew out of proportions from credit on the belief that the world would keep spinning, the those reserves would keep coming out of the ground for less and less because 'technology' has helped it. I think not. The game of chess with debt is reaching its end game and pieces in play against it are nothing but pawns.... but then again, aren't we all just pawns.

Before anyone looks in and says 'you're just negative, a cynic, a pessimists', i'd disagree. I am actually more an optimist and those who I guess can think outside of the box, and no not that box called a television that portrays a widely distorted view of the world because 'everything is just fine', will see that there is a bigger world, one in which we don't really see because the veil has been so cleverly put in place with the inventions of fancy gadgets and ideals of flying cars and robots that will do everything for us, a fallacy that has been regurgitated since we entered the age of consumption not long after the 60's.

The fact that most people fear losing everything is somewhat laughable. For 2000 years man thrived, albeit with a little more effort and a little less access to the world, but we lived sustainably. We grew our own stock and could attend markets to sell the excess, we built houses out of renewable resources ie Trees and lived amongst the wildlife that we today push to the outskirts, we laboured and built our own goods. The key differences were that we actually had a little more time to ourselves in comparison to today, where we work 60 hours just to get by or to fend off starvation.... Sound familiar. The fact that there are parts of the developed world that, in the short space of 50 years, has completely lost the ability to do things for ourselves is unbelievable. But it again comes back to the stigma of being successful in society means you must own the latest and keep up with the that Jones family next door, who are trying to keep up with their Jones family next door and so on and so on.

That's about all I have time for. Really, I didn't want to come back and lay my ideals on others. People need to find their truth in their own way. I am not a 'doomsdayer', I just think cutting back on the credit munching that we do in society, putting some stock away for that rainy day so that one is not left hungry or without the resources to make ends meet.

Take care

RT

I for one don't see you as a doomsayer. Living within our means is a very valid truth that hopefully many can stop and think about. Keep up the good work RT!

Can't agree with the bit about all currencies falling in unstable market. Looking at one of your own examples the GFC and USD index went from 70.8 to above 88 on back of GFC. What you stated may be true of all other currencies but as long as USD is reserve currency it will behave differently. In times of uncertainty it will rise, with the exception if default risk becomes likely.

if you didnt know this fall is coming then PLS withdraw money from your account and use it for better purpose other than trading.

I don't think many realize that property in Sydney and Melbourne is up only because massive stimulus.

Australian banks loan chinese in a big way to buy in these 2 cities ONLY.

be afraid when music stops. Nothing else is going on.

I lived some time in Ausi and I agree with this