Get set for an August interest rate cut

Tue, 26 Jul 2016  |  

This article first appeared on the Yahoo7 Finance website at this address: 


Get set for an August interest rate cut

Get set for a further interest rate cut on 2 August, which is the date of the next meeting of the Board of the Reserve Bank of Australia. With the economy expanding at a moderate pace, at best, with the unemployment rate appearing to edge up and global economic conditions only fair, the case for a 25 basis point rate cut, to a fresh record low of 1.5 per cent, is solid. It will, nonetheless, be the inflation data next Wednesday that will help to lock in the case for lower rates.

Based on available information, inflation is set to rise by 0.8 per cent in the June quarter, which will leave annual inflation at 1.4 per cent. During the June quarter, there was a sharp lift in petrol prices driven by the jump in global oil prices. This alone will account for around 0.25 percentage points of the 0.8 per cent inflation rate.

The high inflation rate for the quarter (0.8 per cent equals annualised inflation around 3.25 per cent) would seem high enough to prevent the RBA from cutting. After all, the RBA acts with its interest rate settings to keep inflation between 2 and 3 per cent and a 0.8 per cent quarterly rise might be considered the start of a worrying uptick in price pressures.

Fortunately for the economy and jobs, the RBA uses its estimate of underlying inflation and not just headline inflation to determine inflation pressures and based on that, what the appropriate level for official interest rates should be. If petrol prices are stripped out of the June quarter headline inflation rate, quarterly underlying inflation will be close to 0.6 per cent and in annual terms, just 1.7 per cent which is below the bottom of the RBA target range.

With oil and therefore petrol prices flat in the last month or so, it is unlikely that there will be a similarly high inflation reading in the next quarter based on trends in petrol. Add to that benign inflation outlook is an economic growth performance that in recent months has seen retail sales growth stall, new dwelling approvals top out and the business investment climate remain weak and the case for a big more of a policy heart-starter for the economy seems compelling.

A further interest rate cut will see official interest rates at a never before seen 1.5 per cent.

Variable mortgage interest rates, which are already below 4 per cent in some instances, will be cut further which will free up cash flows for those with existing debt and lower borrowing costs for those looking to enter the market.

Before the global financial crisis, it was just about impossible to contemplate Australian interest rates falling to 1.5 per cent or less, as some forecasters are now speculating. But so too were ideas of negative interest rates which are now dominating much of the industrialised world.

Weak growth, disinflation and high unemployment remain ugly aspects of any economy. Since the GFC unleashed these problems, policy makers have been trying to reverse these problems. The success has been markedly better the policy response in the 1930s Great Depression even though economic conditions are generally sluggish.

The RBA is part of the super stimulatory policy framework and another rate cut would net week would be a further step in that direction.

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Wed, 29 Jul 2020



Covid19 has opened a door for Australians to positively accept significant changes that will lead to a shared good. This rare opportunity enables us to achieve sustainable economic and social goals that create a new ‘normal’ as our way of life.

These Ten Steps are presented as non-partisan recommendations to the Australian Parliament in the firm belief that, if they embrace them, the Australian economy and society will be greatly enhanced after the Covid19 pandemic has passed.

*A job for you if you want one.
A significant increase in part time and casual employment can be created that will enable you to enjoy a more creative and peaceful lifestyle and to live longer and better. The traditional age at which you would have been expected to retire will become obsolete as a result. An access age for pension and superannuation will become your choice. This will enable you to remain in paid work for as long as you want to, on a basis that you choose, while boosting the productivity and growth of Australia.

*You will get wage increases that will be greater than your cost of living.
A demand for enhanced innovative skills at all levels of employment will be created as the economy grows in strength, thereby enhancing your stature in the workforce and enabling executive salaries and bonuses to drop to levels that are accepted as justifiable by employees, shareholders and customers.

The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link:   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced.