RBA slashes rates

The Reserve Bank of Australia has concluded its February meeting with a ball-tearing riff that’s ruptured the speakers blaring “rate cut”:

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 2.25 per cent, effective4 February 2015.

Growth in the global economy continued at a moderate pace in 2014. China’s growth was in line with policymakers’ objectives. The US economy continued to strengthen, but the euro area and Japanese economies were both weaker than expected. Forecasts for global growth in 2015 envisage continued moderate growth.

Commodity prices have continued to decline, in some cases sharply. The price of oil in particular has fallen significantly over the past few months. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates.

Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns reaching new all-time lows over recent months. Some risk spreads have widened a little but overall financing costs for creditworthy borrowers remain remarkably low.

In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak. As a result, the unemployment rate has gradually moved higher over the past year. The fall in energy prices can be expected to offer significant support to consumer spending, but at the same time the decline in the terms of trade is reducing income growth. Overall, the Bank’s assessment is that output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected. The economy is likely to be operating with a degree of spare capacity for some time yet.

The CPI recorded the lowest increase for several years in 2014. This was affected by the sharp decline in oil prices at the end of the year and the removal of the price on carbon. Measures of underlying inflation also declined a little, to around 2¼ per cent over the year. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.

Credit growth picked up to moderate rates in 2014, with stronger growth in lending to investors in housing assets. Dwelling prices have continued to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months. The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market.

The Australian dollar has declined noticeably against a rising US dollar over recent months, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

For the past year and a half, the cash rate has been stable, as the Board has taken time to assess the effects of the substantial easing in policy that had already been put in place and monitored developments in Australia and abroad. At today’s meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate. This action is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target.

And the Aussie trapdoor opens:

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Comments

      • @Alby Comon trick for the instos to trick people into initiating longs for them to sell into and build massive short positions. Excellent short.

      • The Traveling Wilbur

        Thank you Mr Stevens.

        Though… what were you thinking? 0.25% – that’s not a cut… 1.00%, now that’s a cut! Apologies to Mr Hogan.

      • The RBA are doing exactly what’s required with the currency. The AUD should have been in the 70s a year ago, and it should be in 50s now.

      • @Lorax target aside, there is no way you can honestly interpret the swift slide in AUD as “stable”. If they want to go outside the charter, it should be changed by due process. I’m sick of their unaccountability for failing to meet their role!!

      • What?! You think with ore falling from almost $200/t to $60/t they should have kept the currency “stable” at $1.10?

        You housing crashniks really have detached from reality.

      • The Traveling Wilbur

        Only after he rolls around in all the cash he takes off them! More fool them. ; ) Anyway, it’s better he has their money than they do anyway.

      • Andy: the RBA did nothing much to stop it when it was unstable in the other direction; i.e. when it had a rocket under it.

        I don’t see why they’d do anything to stop it now, especially since, as Lorax points out, Australia’s TOT is plummeting.

        I believe that currently, no matter what they do, there’ll be pain ahead. Normally, a falling currency would result in substitution of imports with local products. But we all know what ‘making room’ for the mining boom did to our production of local products.

        That compound in Elizabeth with the plate steel fences and razor wire is looking ever more attainable with my USD stash.

    • …and around the country currency speculators long USD, debt peddlers and real estate agents cheer in unison.

      • Well that means you’re taking dirty money from the politico-housing complex! Do you feel unclean?

      • LOL good call. Well I don’t get anything out of them for my savings, so might as well get something out of them for my labour 🙂

      • The Traveling Wilbur

        Only after he rolls around in all the cash he takes off them! More fool them. ; ) Anyway, it’s better he has their money than they do anyway.

      • Update 1 hour on: The confidence fairy is really working her magic here at the bank (seriously!). Everyone has smiles and is diligently working away and collaborating much more than usual. Maybe I was wrong about this confidence thing?

      • Andy,

        Just imagine the smiles at Coca Cola if Joe Hockey announced that the Dept of Food was going to require all citizens to contribute to a fund that Coca Cola could use to cut the retail price of coke.

        That’s why the bank employees are looking jolly.

        The RBA have just cut the price of the stuff they sell and they know that helps get punters through the doors.

        Subject to the inevitable limits due to the CAD.

      • And an “independent” reserve bank that’s caved into pressure from vested interests.

        Yayyyyyyy.

    • Lorax,

      You should take the afternoon off and have nice long nap dreaming about the wealth effect elf and his side kick the confidence fairy dancing through the suburbs turning 50 year old 3 bedders into gold!.

      You don’t want to waste these good times!

  1. “…..Credit growth picked up to moderate rates in 2014, with stronger growth in lending to investors in housing assets. Dwelling prices have continued to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months… ‘

    That is what they call in finance circles ‘The Money Shot’.

    Fluffers may return to the tea room.

    ‘….The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market……”

    Some people getting it working a plough….. others from talking about it.

    • “Dwelling prices have continued to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months”

      Yeah Melbourne house prices only rose $17,000 in Jan…we can do better than that!

      • “Dwelling prices have continued to rise strongly in Sydney”,
        “Yeah Melbourne house prices only rose $17,000 in Jan”

        Go you good thing ! Go! Reach for the sky! Just thinking – what assets are we lining up to flog to pay for the profligacy? The RBA should publish their list.

      • A friend selling a flat in Melbourne is desperately relieved to have it under contract.

        He believes the whole Melbourne market is going to stall and get really ugly with over supply.

        Darwin on the other hand, has stopped dead in the unit market. Agents are casually knocking $100k of prices. Houses are still moving.

  2. “The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market.”

    BWHAHAHHAHAHHAHAHAHA

  3. ” the Bank’s assessment is that output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected. The economy is likely to be operating with a degree of spare capacity for some time yet.

    I am no RBA b

    • “The economy is likely to be operating with a degree of spare capacity for some time yet.”

      You gotta love the idea of ‘spare capacity’ in this economy. There are a few empty restaurants and shops? Capacity is this debt filled balloon that we have to keep making bigger and bigger using up teh world at a faster and faster rate. What the hell is the planned end game? Somebody please explain it to me.

  4. 3rd February 2015.
    Let’s see what happens from here; what value the overall Australia economy derives.
    Let’s see how much more debt floods in across your border; how many more assets are sold off…and let’s all watch how the A$ reacts to it over time.

    • migtronixMEMBER

      Who could have guessed you and marshy would be in heaven as the rent to then banks is cut. Thanks to champs like you, people like you but younger WILL NEVER be able to afford Hampton.

      *golf clasp Turnitup* Those kids you teach will be debt serfs FOR LIFE.

      Disgrace!

      • Come on dude, I’m an owner-occupier with a wife and a young daughter! Our house is small and modest. I work full time. I pay heaps of tax and don’t/can’t deduct a penny. Why do you hold such a grudge? Because you & I made different choices? You’re better than that, surely. So what is it?

  5. That was fun.

    6 standard deviations outside normal volality and someone or some algo leaked the cut about 20 seconds beforehand…

    SPI/ASX shot up like a rocket

    All the crosses soared, while poor Aud/Nzd knackered back to 1.06, but even NZDUSD fell almost a cent in sympathy.

    Back to May 2009 levels now.

  6. “output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected. The economy is likely to be operating with a degree of spare capacity for some time yet.”

    I am no RBA basher, but they have really overdone the weasel words this time.

    “probably … a little below trend …somewhat”

    “a little higher”

    “likely … a degree of spare capacity for some time”

    • Must have been a draft – I think what they really meant is…

      “output growth is stalling despite our best efforts to rebalance into our only remaining industry (housing) and will continue to push towards a depression, with the rate of unemployment peaking much higher over the next three years with the unwind of mining investment and closure of car manufacture and related activities. The economy will be operating with spare capacity for the duration of the upcoming lost decade as Australia finally realises its dream of becoming a Banana Republic and the poor white trash of Asia.”

  7. interested party

    “so as to foster sustainable growth and inflation outcomes consistent with the target.”

    Good bloody grief…!!!!!!!!
    Sustainable ??????growth ??????? WTF!!!

    Inflation outcome…..below target…….must…fight…deflation…monster…….Hahahahahhahahahhahahahahhahahha

    Fools.

    • “foster sustainable growth and inflation outcomes consistent with the target”

      The Target = The (majority foreign-owned) banks’ Net Interest Margin.

      Everything else is noise.

    • Hi IP.

      1.the idea is to bring the interest rate on government debt down….they are going to need it with all the printing in the future.
      2.the other reason is obviously to cause deflation so that they can say: we need to print more money.
      3. It keeps housing prices up so there is less chance of the banks being insolvent, because in October 2008 they were insolvent.

      As I’ve said before, check out RBA inflation calculator, see the years from 1973 to 1984…they have to reduce debt through the big inflation that will happen after the printing.

      • interested party

        Ath,

        I don’t know about your thoughts….

        1….the bond market dictates our national interest rates ifaik….

        2….deflation is not of their doing directly, it is a debt saturation event. Growth has been driven by debt and now that society is stuffed to the gills with debt the natural sequence of events is less growth; ie…deflation…..indirectly, yes it is of their doing as we all know. The printing of money is just the back door version of the bankers getting their cut…..they are still able to extract that cut at the moment through the usual means…so we don’t ‘print’ here in Aust yet…(yet!)

        3…yep.

      • ath – Inflation doesn’t reduce debt! That’s how we got to this debt saturated point – running negative RAT rates in the face of inflation.

      • IP
        The whole point of QE is to bring down interest rates for government debt:http://www.treasurydirect.gov/govt/rates/pd/avg/2007/2007_01.htm
        Then:http://www.treasurydirect.gov/govt/rates/pd/avg/2014/2014_12.htm
        Perhaps I should have said pathological deflation….where the velocity of money slows down.
        The interest on debt can be paid by the flow of the existing stock of money…..if there is no velocity, there is no flow.
        If there is no flow, then central banks have to increase the monetary base (print money).

        flawse
        Go to the ‘inflation calculator’ on the RBA site and see how a basket of goods and services valued at $100,000 in 1973 would in 1983 cost $294,583.33 [average annual inflation rate of 11.4% per year].
        By the same token a debt of $294,583.33 in 1973 would only really be worth $100,000 by 1983.
        That’s the only reason for central banks to purposely cause inflation.

  8. Cows_in_the_Cloud

    It is always fun to watch people celebrate interest rate cuts such as this one. As often said on MB, this should have been done ages ago with MP in place to manage the housing side-effects and spruce the Aussie economy.

    Now all it does it confirm that the economy is in the shit, and we can shut the barn door now that the horse has bolted.

    This is definitely not something to celebrate and the stupid run up in bank shares misses the whole interrelated world where our banks are funded from offshore accounts where their cost of borrowing in AUD terms has increased again.

    How long until S&P or Moody’s get tough on the Australian credit rating and lower it????

    EDIT: Good News for me though, I shifted a large portion of my liquid portfolio into Australian and US bonds in August 2014, now up 45% in AUD terms – silver lining?

    • migtronixMEMBER

      Bwaaahaaahaahaa! MP! No one really wants that… but cuts? Cures what ails you it does…

  9. Handy… looks like no matter what the gov or RBA do to prop up house prices, at this point they’re dropping like a rock when measured by non-AUD yardsticks.

    Bloody hell, I don’t even trade and I ‘made’ more money (at least in AUD) then I earned working today based on this movement.

    • anyone with more than ten or 20 grand in the ASX would have made more on today’s gains than 1/365th of their salary * …

      * except if you’re on a politicians/lawyers/real estate agents’ salary

  10. How is 0.25% a slash?

    You just wanted to use that cool pic.

    Yes, I realise .25% is 10% reduction. …

    • SoMPLSBoyMEMBER

      Cool Pik Indeed Esco!

      Welcome to the jungle it gets worse here every day
      Ya learn to live like an animal in the jungle where we play
      If you hunger for what you see you’ll take it eventually
      You can have everything you want but you better not take it from me

  11. Its lost above but comment of the day goes to The Lorax:

    The RBA are doing exactly what’s required with the currency. The AUD should have been in the 70s a year ago, and it should be in 50s now.

    That’s the crux of the matter -all this handwringing now by people complaining about rate cuts forgets that the RBA is about 2 years late with its easing cycle.

    Rock/hard place was reached awhile ago, RBA is just trying to squeeze through while the “adults” with the real levers sit around pointing fingers or taking a piss off the side of the other rock onto the people below….

      • Damn thing stole my comment but…..

        “RBA is about 2 years late with its easing cycle. ”

        Tripe! The RBA isNOT behind in lowering rates! The RBA is way behind, decades behind, in raising rates to a level where we have a sustainable and healthy economy. Lower rates have brought us to this point where we have sold off just about every damned thing built by our forefathers in this land. Instead of standing on their shoulders we are down grovelling in the s..t – all as a result of a negative RAT inteerst rate policy that has produced a self-indulgent nation that consumes too much and produces to little.
        Lower rates are not going to sprout factories across the land. If we want a lower dollar, and we certainly do, why don’t we go after policies that will give us that without any distortion of the economy. Why don’t we really have a look at what is really wrong? Why don’t we go back and read some of what was predicted at the time this mad free-for-all experiment was started. Where we are at was quite clearly predicted at the time. Of course those worrried about the welfare of the nation and its people were shouted down by the banks etc at the time all of whom wanted the outcome we now have.
        Why can’t we really have a look at policy instead of this stupid banal baying at the moon about lower interest rates? How long has this shambles produced by too low interst rates got to go on before someone’s brain begins to actually function and think?

        Why don’t some of the ‘learned’ writers here go back and read the predictions made when this free-for-all stupidity was introduced?

      • @flawse yep. The sooner we have end game, the better. Delay, delay, delay that’s all the powers that be are trying to do so the next shmuck can take the fall. The real shame is there’s no consequence for thse pricks – FFS glenny gets a million bucks to be Father Christmas and the nation’s hero!

        @mig hopefully CB is out shopping (spending yay!) on a new toy or with his family. I would be interested in his response.

      • Glen is underpaid compared to Gail et al! Makes me sick just thinking about it. They all get paid multi-fortunes every year to f..k the nation and its people.

      • @flawse yeah I suppose I’ve got higher standards for character in public office, shouldn’t forget about winners like GK who got paid millions to work wonders for St George.. oh wait :p

  12. It gets much tougher from here IMO

    On the surface of it, they did not need to cut today especially with oil prices where they are

    The only conclusion one can come to, is that they are more concerned about what is coming and are trying to head it off…I believe that is why they won’t employ macro prudential…

    You have to wonder how this will effect confidence in the economy as well…they are obviously communicating that things are sub par

  13. What difference will 2.25% make in investment decision? 2.25% vs. 0% not a big difference.

    USA was saved by Shale gas.

    What will save Australia?

  14. China’s growth was in line with policymakers’ objectives.

    While not untrue, there is some obvious spin here to prevent having to say China is slowing down.

    When a Central Bank has to tip-toe around like that it should be taken as a sign that things are not as well as they want you to believe.

    Jeez.

    P.S. I remember when Swan came out boldly saying that Oz only needed to start worrying if Chinese growth dropped to 8%…

  15. Meanwhile, asx hit a 7 year high

    These people really have lost the plot

    They’ve even seen where this ends in other countries

    What even goes through their minds?

    • Hockey was telling everyone how good it was for families, for businesses, for the economy – forgot one thing – the only vote that matters is the boomers – and they just got a rim shot.

  16. everyone just shut up and go buy a bigger house!! you know, the dream home that you have always wanted

  17. So much for pricing it into the exchange rate. Savers and the prudent get shafted again. The only consolation from all of this is the hope that we reach the crash sooner. F*ck this country.

  18. mine-otour in a china shop

    So much for “Forward guidance” from Central Banks – what a pile of crap. Expect the rest of the world to move lower than forecast and for the US to hike rates well before June. How long can markets continue to believe these “calming” guidance measures?

  19. We are not america we are not the EU. When our dollar collapses at such a rate so to will the investments that our country actually needs and wants.

    Who would push cash into australia to build anything if the exchange will wipe out a hefty profit with in a few months?

    Our dollar crashes 30% over a year or so and they cant find inflation? I’m amazed.

      • Lol wait for the inflation? Yeah when oil kicks higher and our dollar buckles a little lower its going to be right in rba’s face.

        High inflation and high unemployment what will the rba do? Ohhh nooooess

      • They will continue their self interest / popularity contest and slash. I would be genuinely shocked to the core if they did anything else.

      • Simplicity
        I’m an importer. We’ve had our first small rise (5 to 10%) as of feb 1. It will be followed by a series of price rises totalling between 25 and 40% over the next six months. So i am selling to retailers who will probably only raise most prices as the nold stock runs out (disastrous for small business) So the rise in prices resulting from teh lower dollar hasn’t really started yet and will take a year or so to flow through.
        I’m guessing many supply chains would look much the same.

        Note proice rises are not only from a falling A$ but also rising FOB prices ex China.

      • “They will continue their self interest / popularity contest and slash.”

        Yes. I think, from their viewpoint, that is the only option. It ends in very high inflation and disaster – economically and socially.

      • I agree flawse, companies bought many months ago and are selling based on prices 6 months ago.

        Essentially they “profited” from buying shipments valued in usd. The flow on effect is slow especially if inventories are high.

        Even companies who bought usd months ago might still be using the rate they bought the usd at and not the current rate when they decide margins.

        Anyway I can see oil kicking back up to $60/70 usd, Aud dropping to 0.7usd all around the same time that lower exchange inflation hits our shelves.

        So What will RBA do with higher inflation, declining purchasing power,higher unemployment?

        Lower interest rates more? Its a shit sandwich, rates should have gone up today to fire a warning shot to housing investors.

      • My current company is a big Australian manufacturer and post the exit of the car manufacturers, it will stand as one of the largest remaining, so we’re pretty happy right now provided we don’t see a massive drop in demand levels.

        My last two employers however were both large multi-nationals who imported almost everything, with sales in the hundreds of millions here in Oz alone. In both cases, our currency hedge was massive to say the least with a minimum of 6 months cover at any point in time…so when you ask where the inflation is, it’s still seeping slowly out of the FX hedge accounts of most other companies who play that game. Cost inflation will get here, but it will take a while before it arrives at a store near you.

        The other aspect is that I have seen many, many products for which I knew intimately what the FOB prices were at the time stay exactly where they were even as the dollar went from ~0.85 up to parity and above and now in the other direction. Someone has been making a fortune from the Australia tax (in these cases they were shared between that supplier and Bunnings!) and whilst they won’t want to give that up, they are pretty comfortable for now I’m guessing.

        Lastly, I’m interested to see the impact on foodstuffs/consumer staples. A reasonable portion of our domestic food industry is still intact in spite of what we’ve put them through, unlike the metal products industry which was simply wiped-out Blitzkrieg style to make way for the mining boom (try keeping a decent welder employed at $25-30/h when they were able to command $60-80+/h on mining projects.) So I wonder if we’ll start to see rampant inflation in consumer discretionary as the FX impact flows through or a softening of the rampant inflation hitting consumer staples over the past 5 years as their input costs stabilise. I’d actually expect those not impacted by inflation to start margin-grabbing to make up for the squeeze they’ve been through over this time anyway – that’s what I’d do…

        Consumer discretionary has a high fixed cost base at the retail end and, as is the case for most of these retailers, all of their profit is made or lost on the last 10-15% of their sales, so a slide in the dollar of this magnitude may well be the catalyst for an unravelling of our overly exposed retail industry.

      • Aaron

        Thank you for your post. i started writing a comment but I really don’t have time and it deserves a bit of time and consideration. Maybe tonight I can get at it. Note I wouldn’t argue with it but my main note would be around specification decline to achieve the pricing.

    • How long do we have to wait for?

      Hasn’t happened in Canada, who are a similar size and economy to ours.

      Their rates are 0.75%

      We’ve all been waiting for “inflation” for the last 6 years now – when will you give up?

      • migtronixMEMBER

        When the fools raise rates waaaayyy too late, the retirees start cashing in and draining the reserves, and all that “asset-backed” garbage finds it way onto the streets.

        Then we’ll give up, because that’s when the hyperflation comes. See Venezuela!

      • Coming
        I haven’t been predicting inflation for 6 years. I have been saying for a long time that long term inflation was coming our way/ I still say that. I’ll go further and say that very high inflation is heading our way. I’d also say that the time to defend against that is NOT after it arrives which seems to be your formula. You are obviously not in any business. You’re in some privileged position. So you don’t have to worry and you can continue to know everything.

        Don’t think! Don’t read! Don’t try to understand anything too complex! Don’t look ahead! Don’t try to look at the macro forces that have shapen our economic world and certainly don’t look at the macro forces that wil shape our world! Continue with the academic and intellectual fraud of MMT – I’m guessing your career depends on that snow-job.

      • Flawse – please don’t cast aspersions on my motivations or on my attitude.

        You don’t know the first thing about me

        Please explain to me why inflation hasn’t occurred yet
        Please tell me when it will occur
        Please tell me why it can’t easily be stopped dead in its tracks with interest rate rises and increased taxes if it ever does occur

        Please stop ranting and screaming, and explain your position logically, with some form of evidence/historical example if you can

        You are slowly turning into migtronix, with your incomprehensible ranting and persecutory delusions

      • migtronixMEMBER

        Ha ha incomprensible to those who can’t understand much maybe…

        We’ve also not had any global recovery, it’s getting worse.

        Explain that Coming?

      • migtronixMEMBER

        You and your aloofness are irksome but you don’t see me cry about it everyday. What do you do for a crust?

      • Flawse is right, just because dollar drops does not mean inflation spikes straight away. There is a lag and any first remnants of inflation were disguised behind lower oil prices.

        (Capt glen Stevens even shows this lack of knowledge because he doesn’t understand why jobs weren’t created because our dollar crashed 30% in 13 months. It takes time….

        Its a beautiful scenario that the RBA has not deciphered.

        Flawse in my opinion is correct there is a shocker coming in the form of a inflation read.

        I might add Inflation statistics in this country are shockingly weighted.

        The fact that fuel prices dropped 30% and we still have some inflation when fuel makes up 5-10% of the basket of goods (plus lowers transport cost for goods) it really tells you something…

        All the while true lower exchange hasn’t hit our shelves yet. Here comes a shocker!

      • Its none of your business; I am not involved in the FIRE sector. I have no investment properties.

        I know there has been no global recovery…that is exactly my point…

      • migtronixMEMBER

        “Its none of your business;”

        There’s that aloofness, don’t see enough of that everyday…

      • 4-8 months is my bet, odd guess but its calculating when time frame aussie first majorly dropped and guesstimating inventories of importers.

        Also factoring in a kick in oil prices back to 60/80 usd and where our dollar will be at that time guessing .68 – .70.

        And then finally when the read will actually show up on abs statistics (as dodgy as they are)

        Abs stats are weighted terribly I have to add again.

      • @Simplicity
        If and when this currency-derived inflation arises, what is to stop the RBA from arresting it by simply raising rates as Australia and other countries have done in the past?

        @migtronix I just don’t think it is necessary for me to share details of my personal life here. They are not relevant.

        One thing I can tell you is that I obviously don’t have as much skin in the game as most of you, many of whom are simply talking their own book (they have made very large short-AUD or short-housing bets).

        I am completely unleveraged, I own my family home, I have no investment properties, I have a very generic distribution of international and Australian shares.

      • migtronixMEMBER

        It’s not a the sharing, it’s the attitude.

        We all have faults, you bang on about mine endlessly!!

      • I think we would be friends in real life though, as I usually end up being friends with manic nonconformists

        I am sure your heart is in the right place, but your posting style is extremely irritating, and I resent your personal attacks when my approach to this is purely intellectual curiosity (with some element of social altruism)

      • Coming :

        @Simplicity
        If and when this currency-derived inflation arises, what is to stop the RBA from arresting it by simply raising rates as Australia and other countries have done in the past?

        They will be stuck as economy will be slowing, unemployment possibly rising whilst inflation is rising.

        There charter is to maintain interest rates between a certain band and not currency/job speculation so they will rise interest rates.

        But rising interest rates .25 wont stem inflation from currency devaluation as it is this devaluation that is causing our inflation. They would require 100bps minimum over the next year and they would be forced to try keep our dollar up to keep inflation down.

        But that wont work as it will send our economy into a tail spin, sending our dollar plummeting to new lows and bang your Venezuela

        Or they can continue lowering interest rates, sending dollar even lower and create huge inflation that sends economy into tail spin and bang your Venezuela again.

        Venezuela* with out a dictator or as much crime.

      • @simplicity would you raise interest rates now then?

        That would cause multiple bankruptcies, crush employment, and perhaps threaten the financial stability of the banking system

        I’m just curious as to what you think the difference would be.

        I personally think the only way out of this (or to at least ameliorate it) is for the RBA and the government to act in concert: the former to raise rates, while the latter embarks on very large “unfunded” deficit spending (eg money printing)

      • The big retailers (W and C) require suppliers (for some product categories) to price for the calender year for products that are ranged for a year – we used to buy from China from American companies with prices set in USD – to mitigate risk we used to buy forward cover in November for the following year. So for 2015 our prices were set for the year in Novbwr 2014.

      • inflation isn’t coming, how can it. No extra money has been allowed into the pockets of the man in the street.

      • Coming

        I hav ebeen explaining inflation here in this place for several years. I’ve explained why we haven’t had it. I’ve explained the underlying factors in terms of demographics and prosperity over and over again. I have done that logically and in detail over time. You CHOSE not to read! You CHOSE not to understand because it would call into question your false notions on MMT and your ideas of fairies at the bottom of the garden solutions. I don’t have time right now. It’s not my fault you have a closed mind.

        BTW you DON’T respond intelligently. You just return with your insistent MMT stupidity.

      • you are becoming more and more hysterical

        Let me know when inflation arrives, and I will bow to your prescience

  20. Our dollar is turning into junk and when inflation hits the only thing that can really rectify inflation in this country will be a higher exchange rate due to higher interest rates.

    But when your currency is starting to be thrown out by the world its going to become near impossible to achieve stable exchange unless you do something like russia did.

    We are destroying our own country to feed the mentality of investing in land that the country Already owns and houses constructed as cheap and as nasty as possible.

    Money is made by productivity and innovation I despise our share market in this country that offers neither.

    • Its indicative of how precarious the global situation is – it really is outta hand, when sentiments like ‘unheard-of’ – ‘record breaking’ – ‘historic’ – are used to describe goings-on almost on a daily basis.

      Another rate drop?

      The fear factor rises.

      I said I was going to send a ‘concerned citizens’ letter to the board of the RBA if they cut again.

      Will be drafting it tonight.

    • Buying 6 month puts on our major banks. This little rate cut today crossed the line literally…

  21. this is Stevens arse covering. This call is way way late and he should have gone 50 to 75 bp down and the same next month. He has ceded Australia’s competitiveness overseas with his comparatively high interest rate policy and now he is as usual playing catch up. Shame on you Glen, grow a pair…..

    For those interested my next call is USD/Yen to in excess of 200 in 12 months…….heard it here first….

  22. My story on how dodgy abs inflation stats are.

    Do you remember the major storm damage in queensland that wiped out every banana grower except for one lucky man whos plants got nice watered?

    Yep? Bananas went from $2 a kg to $22+ a kg in days, why is this important? Because a kilo of bananas is apart of the “basket of goods” used to measure inflation.

    The day bananas spiked i bought a massive AUD/USD long…. Weeks later RBA noted high inflation interest rates went up and AUD sky rocketed into 1.10. My best trade ever.

    ABS statistics are useless but the market thinks its god talking to them. Inflation is coming but I’m not going long AUD/USD this time, lol….

    • I disagree with you about a shock inflation print. It isn’t coming and even if it was due, it would be difficult to believe that it would be released. I agree that the metrics used to measure inflation are inadequate.

      The inflation is already here. We will see an increase in inflation in imports. The pressure and spectre has always been deflation. In the history of credit binges, it has always been the result.

  23. Central Banking is like an orgy.

    Yellen, Draghi, Kuroda and Carney are in the room totally starkers.
    Stevens shows up and starts sauntering around in a worn out old jock-strap with so many holes you can see everything, but from his perspective he thinks he’s putting on a strip-tease.