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Australia Faces Its Demons

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The RBA have rather delightfully (in their March bullettin) summed up the situation.

Firstly - Australian banks have aggressively replaced one expensive, volatile, short term source of funding...

graph-0312-5-01-small.gif

... with another...

graph-0312-5-02-small.gif

... with entirely predictable compression...

graph-0312-5-11-small.gif

... resulting from the need to offer spiralling incentives...

graph-0312-5-03-small.gif

... to essentially the same captive, dumb money.

Secondly - and amusingly enough - while spreads at the short end are more or less* at what I like to term "pre-public sector borrowing crisis" levels, it seems the market is somewhat more dubious about longer maturities...

graph-0312-5-05-small.gif

... with the obvious impact on long duration lending (like, say, residential mortgages, at the risk of taking this somewhere vaguely close to on-topic'd-ness)...

graph-0312-5-09-small.gif

Doubly amusing is that it's now cheaper for the average Aussie battler to borrow against "bricks n mortar" than to use the exact same collatoral to start a new business (a point not entirely lost on the RBA themselves, I might note)...

graph-0312-5-10-small.gif

And finally, at ~1.5% net interest margin (just going back to that chart again one more time)...

graph-0312-5-11-small.gif

... you have to wonder exactly how large a fraud it would take to turn the average Regional's hoard of gold directly into pyrite...

Echoes of Pyramid** brewing?

Anyway, if the SMH (or any of the other woeful AFP ^C^V'ers out there) want to know why the Aussie economy is shrinking like a nude skiier's*** scrotum... well... it's simple, innit.

Clearly the magic money tree needs watering again.

Maybe the RBA can wangle a Government Guarantee up for pension fund liabilities too?

That ought to just about buy us another year****.

(* although those extra few bips have gotta be really hurting if you're rolling short durations at high leverage - should be a good year for insolvency practitioners, if not necessarily OTHER SME's who geared up on assumptions that chinamania was some kind of magical endless plenty... hmm, so that's a mid to long term employment problem brewing then... and a funding problem for banks too... as well as the public sector... oh dear...)

(** yes really, I LOL'd at the time too)

(*** oh, you ARE awake down the back)

(**** or a new government, whichever comes first)

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The RBA have rather delightfully (in their March bullettin) summed up the situation.

Firstly - Australian banks have aggressively replaced one expensive, volatile, short term source of funding...

(** yes really, I LOL'd at the time too)

(*** oh, you ARE awake down the back)

(**** or a new government, whichever comes first)

GREAT post. Such a tragedy when Australia has so many wonderful inbuilt advantages for this decade that they have been pissed up against the wall by the government.

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Hello Australia, welcome to 2008!

The first Ponzi "bank" falls. Except it isn't a bank it's an, erm, dunno, something that looks like a bank.

http://smh.com.au/business/rural-savings-threatened-after-collapse-20121025-288cm.html

Australia is a bizarre place to be right now; retail and anything other than mining* and government-funded businesses are dying on their ar5es but the one is being masked by the other.

* and I'm not so sure mining is doing so well nowadays.

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Hello Australia, welcome to 2008!

The first Ponzi "bank" falls. Except it isn't a bank it's an, erm, dunno, something that looks like a bank.

http://smh.com.au/business/rural-savings-threatened-after-collapse-20121025-288cm.html

Australia is a bizarre place to be right now; retail and anything other than mining* and government-funded businesses are dying on their ar5es but the one is being masked by the other.

* and I'm not so sure mining is doing so well nowadays.

Ive just jumped out of the mining sector into a nice Gubbermint job albeit for a small pay cut. The slow down in the Pilbara was noticable with every construction project that could be, being shelved, slowed down or cancelled.

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Ive just jumped out of the mining sector into a nice Gubbermint job albeit for a small pay cut. The slow down in the Pilbara was noticable with every construction project that could be, being shelved, slowed down or cancelled.

Chimes with an anecdotal conversation with a mate up in BrisBogan last week; sitting tight in a finance job despite hating it because there's loads of lay-offs from the mining companies.

I thought the bringing forward of MYEFO to avoid having to factor the mining slowdown into the "forecast" was particularly mendacious, even for an Australian politician (and that's really saying something).

The Hugh Hendry interview on the Economist's website is particularly interesting with regards whether China really will be Australia's salvation.

Edited by Paddles

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Hello Australia, welcome to 2008!

The first Ponzi "bank" falls. Except it isn't a bank it's an, erm, dunno, something that looks like a bank.

http://smh.com.au/bu...1025-288cm.html

Australia is a bizarre place to be right now; retail and anything other than mining* and government-funded businesses are dying on their ar5es but the one is being masked by the other.

* and I'm not so sure mining is doing so well nowadays.

MMT in action.

You are doomed.

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Chimes with an anecdotal conversation with a mate up in BrisBogan last week; sitting tight in a finance job despite hating it because there's loads of lay-offs from the mining companies.

I thought the bringing forward of MYEFO to avoid having to factor the mining slowdown into the "forecast" was particularly mendacious, even for an Australian politician (and that's really saying something).

The Hugh Hendry interview on the Economist's website is particularly interesting with regards whether China really will be Australia's salvation.

One of my mates working for Macquarie Bank has told me his entire team are being outsourced to Manila over the next year. I guess the bus I used to catch from cremorne to Wynyard when I worked at Macquarie will be quieter. I'm glad I moved back to London the finance IT job market is much healthier than in Sydney.

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Chimes with an anecdotal conversation with a mate up in BrisBogan last week; sitting tight in a finance job despite hating it because there's loads of lay-offs from the mining companies.

I thought the bringing forward of MYEFO to avoid having to factor the mining slowdown into the "forecast" was particularly mendacious, even for an Australian politician (and that's really saying something).

The Hugh Hendry interview on the Economist's website is particularly interesting with regards whether China really will be Australia's salvation.

Interesting interview with HH, and extra kudos Paddles for getting your blog linked to by Mish, and for getting Bardon posting on it LOL

So if China is leveraged to the rest of the world on the downside, and Aus is leveraged to China - we could be in for a bumpy ride down here.

My AUD assets are long out of the country, and I'm somewhat underwater on that one as a result but its moving in the right direction again - 2013 could be very interesting.

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DANIEL BOSTOCK'S foray into the heady world of property investing ended in bankruptcy at the age of 22.

Now he is left wondering whether the cards were stacked against him from the start.

Mr Bostock was just 18 when he bought a $165,000 unit in Cairns sold to him by Jordan Myall, a family friend who owned one or two properties and was getting around in a Chrysler Crossfire. Mr Bostock, who lives in Brisbane, says he regarded Mr Myall as ''an older cousin that you wanted to be like''.

http://smh.com.au/national/buried-in-debt-after-property-promises-fail-20121029-28drp.html

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Great response to the "Australia in Asia" nonsense this weekend;

http://paulwallbank.com/2012/10/28/australian-hubris-in-the-asias-century/

"Sometime in the 1990s – possibly around the time of John Howard’s election – Australia turned inwards and insular. We had the opportunity  to position Australia as a credible mid-level power in the region but we chose instead to renovate our kitchens.

That opportunity has been lost and repeating the mantras of the 1980s with the words ‘China’ and ‘Chinese’ substituted for ‘Japan’ and ‘Japanese’ won’t cut it."

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Interesting interview with HH, and extra kudos Paddles for getting your blog linked to by Mish, and for getting Bardon posting on it LOL

Cheers mate. Yes, nice of Mish to point people my way, my ISP struggled to cope! Presumably he didn't read all the other stuff in there about mail-order brides, bogan car plates the parlous state of Australian male business attire.

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With all the hoo-hah surrounding Australia's commodity boom, I was somewhat startled to discover that they have in fact being running a trade deficit much of the time since the 70s and only seem to have run surpluses briefly in the 90s, then at the turn of the millenium and then during 2010 and 2011.

http://www.tradingeconomics.com/australia/balance-of-trade

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This thread was at risk of disappearing, and I thought I'd give someone the chance to post a link between AFL drug cheats and house price cheats...

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This thread was at risk of disappearing, and I thought I'd give someone the chance to post a link between AFL drug cheats and house price cheats...

Business setiment quite pessimistic here in Perth, home of the resource boom. Definitely far fewer jobs on Seek etc.

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This doesn't sounds like good news :blink:

"Prime Minister Julia Gillard has confirmed the budget will take a $12 billion hit on a fall in tax revenues to levels that mark a "return to normality" as the mining boom ends."

http://www.businessspectator.com.au/news/2013/4/29/federal-budget/gillard-confirms-12bn-budget-hit

Edited by GeordieAndy

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This doesn't sounds like good news :blink:

"Prime Minister Julia Gillard has confirmed the budget will take a $12 billion hit on a fall in tax revenues to levels that mark a "return to normality" as the mining boom ends."

http://www.businessspectator.com.au/news/2013/4/29/federal-budget/gillard-confirms-12bn-budget-hit

But interestingly the media is pushing a meme of the housing market gaining strength......and the chinese are coming!

all very depressing...

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Australia's central bank cut interest rates to a record low 2.75 percent Tuesday as investment in the Asia-driven mining sector hits its peak and the persistently high dollar squeezes local industry. The Reserve Bank of Australia's shock decision to slash 25 basis points takes the official cash rate to never-before-seen lows, and is aimed at priming those areas struggling as the economy transforms away from mining. "With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years," said RBA governor Glenn Stevens.

"(The bank) judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target." Link

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Australia's central bank cut interest rates to a record low 2.75 percent Tuesday as investment in the Asia-driven mining sector hits its peak and the persistently high dollar squeezes local industry. The Reserve Bank of Australia's shock decision to slash 25 basis points takes the official cash rate to never-before-seen lows, and is aimed at priming those areas struggling as the economy transforms away from mining. "With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years," said RBA governor Glenn Stevens.

"(The bank) judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target." Link

So based on what we have seen in the UK, US, and elsewhere, I predict 10 years of declining interest rates down to near zero in an effort to keep the house market inflated. It was starting to crumble (and indeed had in parts of Victoria and NSW), this will give a fillup.

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I have some friends in Perth who are reporting 'austerity' measures being the norm in companies (no paid evertime, expenses limited) and reports of a 9-day fortnight becoming the norm. It sounds like the mining is really declining and hitting things hard. My friends in Melbourne have had a 9-day fortnight for the past 6months.

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I have some friends in Perth who are reporting 'austerity' measures being the norm in companies (no paid evertime, expenses limited) and reports of a 9-day fortnight becoming the norm. It sounds like the mining is really declining and hitting things hard. My friends in Melbourne have had a 9-day fortnight for the past 6months.

Yep, it's coming off the boil here in Brisbane, you can smell it, sales everywhere, in the shops....Chermside's shopping center has sale signs permanently locked to window space. Its only a mater of time before rates are knocked down to somewhere close to zero....Mining, its cooling, manufacturing is f**ked, the dollar has to weaken, alot....They are only starting to realise the dumb f**kers that everyone else is devaluing, and having a strong currency just don't help exports....But at least the sun is shining and it will be a gud'un......

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Yep, it's coming off the boil here in Brisbane, you can smell it, sales everywhere, in the shops....Chermside's shopping center has sale signs permanently locked to window space. Its only a mater of time before rates are knocked down to somewhere close to zero....Mining, its cooling, manufacturing is f**ked, the dollar has to weaken, alot....They are only starting to realise the dumb f**kers that everyone else is devaluing, and having a strong currency just don't help exports....But at least the sun is shining and it will be a gud'un......

Do you know what - based on the approaches I have seen used in the UK and US, I am very tempted now to buy a property in Oz on a mortgage. If, as seems likely, rates are smashed downwards, AND the AUD collapses, I could get a cheap deal even if house prices drop by 25%. I get paid in non AUD......

i could even rent it out cheap to some deserving section of society (medical/police etc).

go on, tell me I am wrong

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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