Drop Rates Like They’re Hot
Inflation is at its lowest level since 1999, leaving the door open for the Reserve Bank to cut rates! Inflation has come in at just 1%. But you know this because wages haven’t moved up much in the last 3 years, have they?
What will interest rates do next Tuesday? After all the RBA have a hard target of inflation – it must not be greater than 3% but now it is 1%!! Surely they will lower rates? But our RBA has a record of doing too little too late. It should of done this as we called for it – 12 months ago. There is a fair chance according to most economists that this coming Tuesday it will lower rates by 0.25%.
It’s not their style to drop rates at the right time. Why!? Because our banking monopoly or oligopoly as APRA call it, will simply thumb their nose at the Reserve Bank and continue on with their giant profit grab now fully approved by APRA. What will our politicians do about this?? Absolutely nothing!
My Rate Prediction
With our dollar rising costing jobs, with falling real incomes, with banks NOT passing on reductions, with low inflation – They SHOULD cut and share the wealth with hard working Australians. They SHOULD drop 0.25% to 1.5%
If there isn’t a drop next week, it will be done before Novembers meeting. Which is of course – too little too late…
Commsec chief economist Craig James said he was surprised some market watchers softened their predictions of a rate cut, which he had already pencilled in.
“I think if the Reserve Bank didn’t cut interest rates next week people would be scratching their heads and asking ‘why?’,” Mr James said.
“There’s actually nothing in today’s figures to suggest that the rate of inflation would be returning to the Reserve Bank’s target of 2 to 3 per cent anytime soon.
“In this sort of environment the Reserve Bank seemingly has to cut interest rates.”
Check out AUS VS Canada!
The Governor of the Bank of England Mark Carney, used to be the Reserve Bank of Canada. He was so good that he was headhunted by the Bank of England! Our Governor also applied for the job but unfortunately for us – he didn’t make the cut. You can see that Canada drove its rates down to compete with the rest of the world.
Glenn Stevens hates lowering rates and did not keep up with other countries, leaving Australia behind. Against our advice he started raising rates! Back in 2009 we stood out the front of the Reserve Bank of Australia holding signs calling for a 2.25% interest rate. Back then, unemployment was just 4.3%.
Interest rates went up to 4.75%! We continued to call out Steven’s errors. No one else in the media did. The Australian dollar climbed making our exports dearer and unemployment went up and up. It is still sitting up around 50% higher than it was when Stevens went out of step with the rest of the world.
From 2011 he started to realise the error of his ways, with no apology to the 200,000 people that were unemployed. As you can see now we have had a lot of instability thanks to Stevens. Canada thanks to their Governor have had stability and have a rate far lower than ours still. Why are we always one step behind! There is still a big incentive for money to flood into the country because of our higher rates. High rates that ultimately you are paying!
Unlike Canada we had two huge lead weights in our saddle bags. One was Stevens and the other was Rudd. They were both incapably aided by our treasurer Swan. Each year they promised us a surplus and couldn’t see the huge deficits sinking the ship.
Are we catching up to Canada?
I am very positive that Australia is not going to make the same mistakes. I believe they now have learnt their lesson that high rates don’t work in lowering inflation. Low rates work!
High rates lead to a high Australian dollar and high rates unemployment. Low rates lead to a lower Australian dollar and higher employment. Thus, I think we are in for a purple patch!