Reserve Bank of Australia to cut rates

[RSLudlum]

So the gig is on and the propping up of the dollar is on? First China, and now Australia, with continued Russian pressure to uphold their Uranium trade agreement, is using it's Reserve bank to prop the dollar thereby solidifying it's siding with US (and the dollar)...Could this be a proper assessment for the current situation? What is Australia's exposure to the finance debacle here in the US?

Below is the article on the RBA rate cut, and here is an article on the Russian-Australian Uranium agreement: http://www.skynews.com.au/news/article.aspx?id=263769

Rate cut highly likely today
Updated: 05:28, Tuesday September 2, 2008

source

The Reserve Bank is widely expected to cut interest rates today for the first time in almost seven years.

The only question remaining is by how much?

All 17 economists surveyed by AAP believe the easing cycle will begin today, most likely by 0.25 percent, in a bid to loosen tight credit markets and stem a deterioration in business conditions.

The Reserve in the past has cut rates by 0.50 percent at the start of a downward cycle.

The RBA has over the past month - through its official releases and speeches from central bank officials - strongly hinted that the official cash rate was set to come down from a 12-year high of 7.25 per cent.

AMP Capital Investors chief economist Shane Oliver said the economy has 'well and truly come off the boil' and is forcing the RBA to shift monetary policy.

Dr Oliver said the central bank could repeat September's move in October, February and March to ward off a recession.

'The risk of recession is quite significant, up around 40 per cent,' Dr Oliver said.

'The down move in the economy will ... take pressure off inflation and the Reserve Bank will increasingly recognise that.'

Meanwhile, borrowers will be looking to their own banks to pass on any RBA rate cut this week.

ANZ Banking Group has said it will pass on any RBA decision in full.

National Australia Bank has committed to move in line with a 25 basis point cut.

Westpac Banking Corporation and the Commonwealth Bank of Australia have declined to guarantee they will follow any RBA decision in full.

But CBA chief executive Ralph Norris said last month the bank would 'do our best to pass on as much as we can to our customers'.

Market observers do expect most banks will follow the RBA, given the competitive pressures in the lending market.

Wizard Home Loans on the weekend pre-empted the likely RBA decision but lowering its variable rate to 9.29 per cent, from 9.54 per cent.

Teachers Credit Union (TCU) on Monday became the first major credit union to promise its customers would receive the full benefit of any cut in official interest rates, but lowering its standard variable home loan rate to nine per cent.

'We are keen to take this opportunity to ease any pressure on them,' TCU chief executive Steve James said in a statement.

Federal Treasurer Wayne Swan has repeatedly challenged Australia's commercial banks to follow any RBA rate cut.

 

[Zippyjuan]

Apparently the Australian economy has been struggling and losing jobs so while they are also concerned about inflation, are looking to cut rates to give them a boost. They seem to be more concerned about slow investment than the potential for inflation. An interesting thing they are also doing to try to fight inflation is to cut spending. Maybe we should try that- instead of pumping up spending and borrowing.
From April of this year:
http://www.abc.net.au/news/stories/2008/04/14/2216678.htm

Australia's economy faces an uncertain future: economist
By business reporter Michael Janda

Posted Mon Apr 14, 2008 5:47pm AEST
Updated Mon Apr 14, 2008 7:16pm AEST


Peter Kriesler says Australia's expanding resource sector is a potential weaknesses in the economy. (Inside Business)
Australia's economy currently appears to be weathering the global financial storms, but a respected economist sees clouds brewing on our horizons.

Peter Kriesler, Associate Professor of Economics at the University of New South Wales, thinks Australia is poorly placed to withstand any further international economic deterioration.

"The huge foreign debt and the huge private sector debt means that we're much more susceptible to recession, interest rates et cetera, coming from abroad," he says.

Professor Kriesler thinks some of the apparent strengths keeping our growth higher than OECD counterparts may become weaknesses in the future.

He says one of these potential weaknesses is Australia's expanding resource sector.

"If you look at the Australian economy, the manufacturing sector, the industrial base, has been shrinking quite rapidly; we're becoming more and more reliant on a number of key resource exports," Professor Kriesler said.

"The problem with that is that anybody who invests knows that the best and safest way to invest is to have a broad portfolio, but we're putting all our chickens in one basket, all our eggs in one basket.

"Right now we're so reliant on what's happening abroad, particularly China and India... there's a possibility that the growth rate there [in China] will slow down, which means that the resource boom that's been carrying us forward will collapse."


Mining drain

Furthermore, Professor Kriesler believes that while the mining sector is largely responsible for keeping our economic growth higher than other Western nations, it is also soaking up a vast amount of labour and investment resources in the process, depriving other economic sectors of affordable, skilled workers and capital for expansion.

These shortages are driving inflation higher, and Professor Kriesler thinks the measures currently being adopted by the Reserve Bank to fight inflation are doing more damage than good to the economy.

"When we put on the brakes, the first thing that falls is investment, and what Australia desperately needs, and what we've been desperately short of, is investment in infrastructure, manufacturing, education, all of these things," he said.

However, it is not only the Reserve Bank seeking to check inflation, with Treasurer Wayne Swan and Finance Minister Lindsay Tanner insisting that the Federal Budget will cut spending significantly.

Professor Kriesler believes that attempts to reduce inflation are disproportionately directed at wage and salary earners and the poor, while those who own assets outright can profit from higher interest payments on their savings.

"The explosion of the domestic financial sector has led to low income earners having a lot more debt than they previously had, and they're the ones who are really going to suffer with high interest rates," he said.

Unlike some other economists and business groups, Professor Kriesler believes the abolition of WorkChoices should help to minimise the negative effects of economic turmoil on most Australians, by placing some restrictions on the ability of employers to cut wages and sack workers during a recession.

"The situation would have been a lot worse if we still maintained the full WorkChoices," he said.

"WorkChoices would have really pushed, I think, any cost of a recession onto particularly poor paid, less skilled workers."

For better or worse, it seems there are more turbulent times ahead for Australia's economy.

 

[JRuc33]

So after raising rates for SEVEN STRAIGHT YEARS the Reserve Bank of Australia can't lower from upwards of 7%? Its not some stupid conspiracy guys.

 

[Conza88]

So after raising rates for SEVEN STRAIGHT YEARS the Reserve Bank of Australia can't lower from upwards of 7%? Its not some stupid conspiracy guys.

It's just fucken retarded Keynesian economics, where the elite (those in power i.e the politicians and the fucktards that are in the treasury department + the 12 UNELECTED, largely unknown members of the Reserve Bank of Australia, go into a closed room & decide the economic fate of a nation.

Noooooo... they don't have any self-interest, they're angels looking out for every man and his dog. They care so much, they're practically Gandhi reincarnated, with a bit of Mother Teresa thrown in.

The mere fact that they go behind closed doors, not open to the public, with no transcripts and that the members making the decisions can influence the lives and economic welfare of everyone in the nation = pretty much by defintion: makes it a conspiracy against the people.

 

[RSLudlum]

So after raising rates for SEVEN STRAIGHT YEARS the Reserve Bank of Australia can't lower from upwards of 7%? Its not some stupid conspiracy guys.

I wasn't trying to imply some sort of conspiracy. I was asking if the events I laid out seemed to have anything to do with each other because I'm not aware of Australia's current state of economic affair hence the questions I asked. And if it is a conspiracy, it's the same crap we're going through here in the US with our 'Federal Reserve', men who believe they can control a 'free market' system better than the supposedly free citizens of America.

 

[Zippyjuan]

And hence my answer saying that yes, indeed, it does appear as though the Australian central bank is raising rates to try to help their slowing economy. I do not think it is to support the value of the US dollar.

 

[theoakman]

there's not a conspiracy to hold up the dollar. If there was, then all your modern economists you see on CNBC and Fox Business news wouldn't have been screaming "the dollar can't collapse, foreigners will prop it up". It's been common assumption that foreigners would try to hold the dollar up and they have done that. It's because of them that our dollar index isn't at 40 right now. Unfortunately, they don't have enough bullets in their clip. If they did, the dollar would have never slid in the first place. They can destroy their own currencies trying to hold it up, but eventually, they'll wake up and realize they are suffering trying to keep this jig of the "Strong American Consumer" going. A lot of people on this forum are waiting for the floor to drop out over the course of a week. It's not going to happen. With this bailout mindset running throughout the world, it's going to be a slow but sure disaster. We would have seen the fall out had we let Bear Stearns, Fannie, and Freddie Collapse. But they didn't. They aren't going to let anyone fail. Even when they do, they are bailing people out with FDIC funny money. The pain will only be realized years later when we wonder why it costs us 150 bucks to fill up at the pump. Rest assured, everyone is getting bailed out right now. Everyone except people with savings accounts. Those people are getting robbed.

 

[jon_perez]

I wasn't trying to imply some sort of conspiracy. I was asking if the events I laid out seemed to have anything to do with each other

Well, you sure make it sound like you do - "propping up the dollar"...

What is true is that if the US dollar weakens it puts pressure on other countries to also lower their currencies especially if the US ends up grabbing market share from their exports.

 

[Dr.3D]

Well, you sure make it sound like you do - "propping up the dollar"...

What is true is that if the US dollar weakens it puts pressure on other countries to also lower their currencies especially if the US ends up grabbing market share from their exports.

Any way you look at it, they are propping up the dollar. (conspiracy or not)

 

[theoakman]

Well, you sure make it sound like you do - "propping up the dollar"...

What is true is that if the US dollar weakens it puts pressure on other countries to also lower their currencies especially if the US ends up grabbing market share from their exports.

sooner or later, those countries will realize they would be better off keeping their products than shipping them over here.

 

[Dr.3D]

sooner or later, those countries will realize they would be better off keeping their products than shipping them over here.

But, but, look at all the worthless paper they can get for shipping them over here.

 

[JRuc33]

And hence my answer saying that yes, indeed, it does appear as though the Australian central bank is raising rates to try to help their slowing economy. I do not think it is to support the value of the US dollar.

I'm pretty sure raising interest rates would not help their slowing economy.

 

[Zippyjuan]

Thank you for catching my typo. As the original post says, the cut, not increased interest rates which can help to stimulate the economy by encouraging borrowing and spending.

 

[JRuc33]

Ok, it all makes sense now lol.