Australia Faces Its Demons

[ParticleMan]

http://business.smh.com.au/business/wesfar...i5.html?page=-1

Thanks to the Government guarantee on wholesale funding, the big banks have been able to tap foreign wholesale markets. In fact, they have issued some $40 billion of bonds in the past five weeks alone, inundating the offshore markets with Aussie paper.

While it is all good and fine for the banks to meet their own funding objectives, which are predominantly mortgages, the upshot has been to undermine demand for Australian corporate issues. Indeed why would foreign buyers take on lower grade corporate paper when they have already loaded up on AAA-rated bank paper backed by the Commonwealth?

Not only does the weight of bank bonds diminish demand but it means the companies are forced to accept lower prices.

Moreover, the local banks are already fully exposed to local corporate borrowers. These big companies need to roll over some $35 billion this year, much of it for working capital and their banking syndicates almost invariably include foreign banks.

:

''If foreign banks do not roll over their share of these loans, it will be difficult for Australia's four major banks to fill the gap on their own,'' said PM Kevin Rudd in a speech in Adelaide earlier this week.

Citing Merrill Lynch figures he said offshore banks accounted for more than half of the $285 billion in syndicated loans that have been issued to Australian businesses since 2006.

''Of those outstanding loans, $75 billion is scheduled to fall due over the next two years.''

The wide brown land is now well on the way to currency devaluation; consumer and corporate defaults will stress the bank sector and the RBA will either increase issuance to fund the economy or increase issuance to rescue one of the "four pillars" (BankWest will prove to be CBA's "ABN Amro" moment in retrospect).

Either way demand for Government debt is half what it was ("local" demand for cash in the near-term will start the selloff, and the nosediving economy will finish it for good) - so yields will spike while the currency crashes.

Take care.

[StoppedClock]

Anyone who has a negative generalised opinion on any nationality is a tool.

and is probably english

[CrashBear]

Anyone who has a negative generalised opinion on any nationality is a tool.

and is probably english

Anyone who makes huge negative sweeping generalisations is a tool.

Edited January 21, 2009 by CrashBear

[Bardon]

One thing is for sure it is now becoming a buying time for canny investors looking for cash flow neutral or positive property this stuff hasn't been seen for a long time. With dropping prices, dropping IR's and increasing rents its that part of the cycle again and as I often say I dont see much downside on the entry level housing prices.

The first home buyer market is the strongest its been for a while.

Property has certainly held up very well in comparsion to shares.

Just finished a trip to Perth, Sydney and Adelaide and must say that I had the best food, wine and company that I could ever ask for maybe my targets are set far lower than the elitist posters on this thread.

I might give the +ve cash flow property investing a miss for the moment as I am heading down to Bangalow for the oz day weekend and will be window shopping for the retirement house and yes it will be -ve geared when I get one but that is good for me. 10 mins to Byron Bay 90 mins to Brissy and very interesting place.

[Lander]

Just finished a trip to Perth, Sydney and Adelaide and must say that I had the best food, wine and company that I could ever ask for maybe my targets are set far lower than the elitist posters on this thread.

You didn't happen to go in the Gazebo winebar did you?

[Bardon]

You didn't happen to go in the Gazebo winebar did you?

No I didn't I have heard that it is a good psot though. was working in Narabeen and eating and drinking in some restaurants in North Sydney.

[Te Mata]

Just finished a trip to Perth, Sydney and Adelaide and must say that I had the best food, wine and company that I could ever ask for maybe my targets are set far lower than the elitist posters on this thread.

The prosecution rests, m'lud.

[Lander]

No I didn't I have heard that it is a good psot though. was working in Narabeen and eating and drinking in some restaurants in North Sydney.

Oh, just wondered how it's doing because my sisters partner has half ownership in it and also runs it. Last time I saw him he told me he and his business partners were about to invest another couple of mil in buying and restoring some old industrial building to convert into a similar type of bar. Brave imo in this climate. Best of luck to him though.

[Bardon]

Oh, just wondered how it's doing because my sisters partner has half ownership in it and also runs it. Last time I saw him he told me he and his business partners were about to invest another couple of mil in buying and restoring some old industrial building to convert into a similar type of bar. Brave imo in this climate. Best of luck to him though.

Sydney is a funny one it hasn't had a lot of investment for the last few years and is well due for major infratsructure investment. Whether it happens is anyones guess we are tracking major projects in NSW but most projects are being delayed right now and I understand that they expect a State govt change which should help investment.

I would be staying well clear of commercial property right now anywhere in OZ as valuations and LVR's are way down as some are finding out when they refi or sell. Vacancies are also rising.

[Wires 74]

One thing is for sure it is now becoming a buying time for canny investors looking for cash flow neutral or positive property this stuff hasn't been seen for a long time. With dropping prices, dropping IR's and increasing rents its that part of the cycle again and as I often say I dont see much downside on the entry level housing prices.

The first home buyer market is the strongest its been for a while.

Property has certainly held up very well in comparsion to shares.

That`s interesting -looks like Oz is pretty exempt from the HPC - buy now looks to be the call.

[Wires 74]

DOUBLE POST.

Edited January 21, 2009 by Wires 74

[Te Mata]

That`s interesting -looks like Oz is pretty exempt from the HPC - buy now looks to be the call.

The low end of the market has been padded out by the gu'mint's first home buyer's bribe.... err I mean grant 0f $14,000 (IIRC). This has bumped up first owner type homes by approximately that amount.

Higher up the scale things are not so rosy. Also bear in mind that it has only been 4 months since the end of the China Olympics development bonanza, of which Oz was a major beneficiary. It could be argued on that basis that the Oz economy is 12 months behind in this cycle.

[ImA20SomethingGetMeOutOfHere]

That`s interesting -looks like Oz is pretty exempt from the HPC - buy now looks to be the call.

Doubt it.

I get the impression that much of the boom has been fueled by lending backed by foreign investment in Aussie banks - this has now left. Couple this with the fact that banks there are just as f***ed as anywhere else (UK and Iceland excepted) then I think that credit's going to get a lot tighter there for a while to come.

[ImA20SomethingGetMeOutOfHere]

The low end of the market has been padded out by the gu'mint's first home buyer's bribe.... err I mean grant 0f $14,000 (IIRC). This has bumped up first owner type homes by approximately that amount.

Higher up the scale things are not so rosy. Also bear in mind that it has only been 4 months since the end of the China Olympics development bonanza, of which Oz was a major beneficiary. It could be argued on that basis that the Oz economy is 12 months behind in this cycle.

I think that the first time buyer bribe has gone up to $17,000 now.

[South Lorne]

That`s interesting -looks like Oz is pretty exempt from the HPC - buy now looks to be the call.

....no way ...read it again ...this is pure VI.....

One thing is for sure it is now becoming a buying time for canny investors looking for cash flow neutral or positive property this stuff hasn't been seen for a long time. With dropping prices, dropping IR's and increasing rents its that part of the cycle again and as I often say I dont see much downside on the entry level housing prices.

The first home buyer market is the strongest its been for a while.

Property has certainly held up very well in comparsion to shares.

....real sick stuff !.....in the pure light of day......

[Leonard Hatred]

The low end of the market has been padded out by the gu'mint's first home buyer's bribe.... err I mean grant 0f $14,000 (IIRC). This has bumped up first owner type homes by approximately that amount.

Governments! When will they ever ****ing learn?

[drainman]

What does Australia actually make? What are their exports? Is it all just resource-based?

they make sheep, they export dead sheep and piss poor larger.... and fat birds.....thats the only ones i,ve met !

[laurejon]

they make sheep, they export dead sheep and piss poor larger.... and fat birds.....thats the only ones i,ve met !

Dont know if you are aware, but exporting natural resources is the best thing you can have. And Australia has plenty of them shared against a population the size of London.

Australia is a real oddity in my mind as wages are low, yet house prices are amazingly high.

In Sydney on the North Shore you will find few Aussies owning, all overseas people who mainly work in Finance. That said I know several people who are still buying up on the North Shore as its always a place you can rent, people are queing up and in most cases tenants enter a bidding war to secure a rental property.

Longer Term and Nationally I think Australia is going to face some very very tough times in the next decade.

[Si1]

Dont know if you are aware, but exporting natural resources is the best thing you can have. And Australia has plenty of them shared against a population the size of London.

Australia is a real oddity in my mind as wages are low, yet house prices are amazingly high.

In Sydney on the North Shore you will find few Aussies owning, all overseas people who mainly work in Finance. That said I know several people who are still buying up on the North Shore as its always a place you can rent, people are queing up and in most cases tenants enter a bidding war to secure a rental property.

Longer Term and Nationally I think Australia is going to face some very very tough times in the next decade.

i understand unemployment is quite low there, at least so far

if China decouples economically from the West, won't Aus follow, serving Chinese commodity requirements?

[Tiger Woods?]

Australia is a real oddity in my mind as wages are low, yet house prices are amazingly high.

Which means it is in for a very, very big and nasty fall.

[laurejon]

i understand unemployment is quite low there, at least so far

if China decouples economically from the West, won't Aus follow, serving Chinese commodity requirements?

I think that is already happening, Perth formerly the home of the miners earning fantastic wages is now suffering as mines go bust, and miners are laid off. A friend of mine has recently returned from Perth as there are very few jobs around.

Australia has a double whammy, as it set itself up to become a Global Centre for finance but didnt make it very far.

Food in Australia is very expensive now compared to the UK, and the Government charge for just about everything.

I hired a car when I was out there is November, and you cannot go anywhere without incurring Tolls and Tarriffs on the road, and worse, the Tarriffs are invisible, you have to register with the Government before you use car, providing your credit card to be debited. Sydney Harbour Bridge is now only Etag so if you have not registered and find yourself on that road, which is easily done, you will be fined.

[Patfig]

I think that is already happening, Perth formerly the home of the miners earning fantastic wages is now suffering as mines go bust, and miners are laid off. A friend of mine has recently returned from Perth as there are very few jobs around.

Australia has a double whammy, as it set itself up to become a Global Centre for finance but didnt make it very far.

Food in Australia is very expensive now compared to the UK, and the Government charge for just about everything.

I hired a car when I was out there is November, and you cannot go anywhere without incurring Tolls and Tarriffs on the road, and worse, the Tarriffs are invisible, you have to register with the Government before you use car, providing your credit card to be debited. Sydney Harbour Bridge is now only Etag so if you have not registered and find yourself on that road, which is easily done, you will be fined.

The tolls can be a bit confusing I have to say, however the toll on most toll roads is only in place until the road is actually paid for then it becomes toll free.

[laurejon]

The tolls can be a bit confusing I have to say, however the toll on most toll roads is only in place until the road is actually paid for then it becomes toll free.

If thats the case why is Sydney Harbour Bridge a Toll road, its been there for decades ?

The M2 is more than paid for, yet prices are going up and up. I was caught out on the road recently having picked up the hire car from Artarmon and then found myself on a one way sliproad down onto the toll road, leaving at Neutral Bay, but no Toll Booths, and then a huge debit on my credit card from the care hire company who payed the fine, then charged me double.

[mattyboy1973]

That`s interesting -looks like Oz is pretty exempt from the HPC - buy now looks to be the call.

It is going to be carnage down here.

20% off already unofficially in Sydney's better parts - Mosman, Eastern burbs, NOrhtern beaches - ask a real estate agent 'off the record'.

[Patfig]

If thats the case why is Sydney Harbour Bridge a Toll road, its been there for decades ?

The M2 is more than paid for, yet prices are going up and up. I was caught out on the road recently having picked up the hire car from Artarmon and then found myself on a one way sliproad down onto the toll road, leaving at Neutral Bay, but no Toll Booths, and then a huge debit on my credit card from the care hire company who payed the fine, then charged me double.

I did say "most" and the M2 is obviously not yet paid up. The harbour bridge will always be toll.