7:30 report tonite...

[incisor]

wow...

that was one hell of a bleak outlook on whats ahead..

hope the man was seriously way off kilter...

[Lotz-A-Landies]

wow...

that was one hell of a bleak outlook on whats ahead..

hope the man was seriously way off kilter...
Pleeze explain? (for those of us at work and not in front of the box!)

[cucinadio]

just watched as well ......mmm seems its been coming for a while :angel:.....l wonder ;)

cheers

[RobHay]

WHAT!

[weeds]

the rain.......

[carjunkieanon]

His best case scenario for the short to medium term is a recession similar to the 1990 (I wasn't aware of economics back then - still aren't now tho).

His worst case scenario - as bad as the great depression of the 1920-30s, lasting a decade.

His advice,

GET OUT OF DEBT.

If you have a secure job & a liquid, you should be OK.

House prices will fall, our mining bubble will bust.

Hope he's wrong, worried he's right.

[CowsGoMoo]

Nope, extra virgin olive oil. Some are imported ones blends of canola and waste products...
Buy Australian! It'll help our farmers in the deepening economic apocalypse that's coming - oh, that got a mention too..... :angel:

[carjunkieanon]

Nope, extra virgin olive oil. Some are imported ones blends of canola and waste products...
Buy Australian! It'll help our farmers in the deepening economic apocalypse that's coming - oh, that got a mention too..... :angel:

heh heh

I went and checked my olive oil as I'm trying a (new for me) brand for the first time - it wasn't any of the brands mentioned, but it does taste awful. Horrible fruity flavour that dominates everything.

[lnd130]

not a good outlook that our little mate put forward might have to rethink a few grand plans we may have had ,and stock up on canned food instead

[carjunkieanon]

so who? was he.....

I am not quite ready to worry yet. I can't help but feel much of it is a hype up by the press.....

Not press... economics professor from UWS.

Steven Keen talks to 7.30 Report
Associate Professor Steven Keen has come increasingly to prominence over the past couple of years specialising in the economics of Australia's spiralling household debt burden. He spoke to 7.30 Report tonight.

The 7.30 Report - ABC (http://www.abc.net.au/7.30/)

r

[Reads90]

Not press... economics professor from UWS.

Steven Keen talks to 7.30 Report
Associate Professor Steven Keen has come increasingly to prominence over the past couple of years specialising in the economics of Australia's spiralling household debt burden. He spoke to 7.30 Report tonight.

The 7.30 Report - ABC (http://www.abc.net.au/7.30/)

r

Oh right he is a professor so that makes it right and true, from a bloke that knows the theory but is a professor or eternal student and never lived in the real world like the rest of us

All this talk on TV about what might happen will make it happen as people talk and S**t themselves and cause a resection
Annoys me as the press should be talking up the Aussie ecomony and not dissing it every 5 mins , which lead to threads like this and makes matters a hell of alot worse

[cucinadio]

:D................:angel:.........................

[LOVEMYRANGIE]

Oh right he is a professor so that makes it right and true, from a bloke that knows the theory but is a professor or eternal student and never lived in the real world like the rest of us

All this talk on TV about what might happen will make it happen as people talk and S**t themselves and cause a resection
Annoys me as the press should be talking up the Aussie ecomony and not dissing it every 5 mins , which lead to threads like this and makes matters a hell of alot worse

Exactly. Spent all his life at school and most likely has a funding application in so needs some notoriety to stake his claim on how good he is... FFS!!
Never forget that the reason our younger generation dont have much of a clue anymore is coz they learned it from them teechas!!

I think Aunty is slowly going the way of the networks when it comes to its journalism talent!!

[carjunkieanon]

Oh right he is a professor so that makes it right and true, from a bloke that knows the theory but is a professor or eternal student and never lived in the real world like the rest of us

All this talk on TV about what might happen will make it happen as people talk and S**t themselves and cause a resection
Annoys me as the press should be talking up the Aussie ecomony and not dissing it every 5 mins , which lead to threads like this and makes matters a hell of alot worse

Him being a professor doesn't make it right & true, even he didn't claim that.

It does mean he's spent his professional life studying the topic (much as Blknight studies military vehicles). For example, he's aware of similarities between our current situation and recessions/depressions in the past, things that we probably aren't aware of. We don't know what will happen in the future, the best we can do is make predictions based on (hoped for consistency with) the past. If the factors that lead to the 1930's depression are appearing again, then it makes sense to be worried.

Also he is a real person in the world. He works at UWS as a Professor - probably barely earns enough to pay his own mortgage! It's not the highest paying job in the world, nor the most secure Uni to work for - (I was there for a while).

I agree about ppl causing a recession, I know bugger all about economics (I'll claim to know about thinking tho), but it seems to me that if everyone panics and sells, then prices will keep falling & everything will collapse. On the other hand, the Australian economy probably isn't going to stand on it's own strength- far too small compared to the world, if the world's going down, so will we. I'd rather hear the warnings & be able to prepare (as best I can), then only hear positive spin, think everything will be OK and really cop the s*** when it hits the fan.

If it turns out no where near as bad as predicted, I'll be delighted! Esp as I rent & have a completely unsecure job and no money!

[Captain_Rightfoot]

Oh right he is a professor so that makes it right and true, from a bloke that knows the theory but is a professor or eternal student and never lived in the real world like the rest of us

All this talk on TV about what might happen will make it happen as people talk and S**t themselves and cause a resection
Annoys me as the press should be talking up the Aussie ecomony and not dissing it every 5 mins , which lead to threads like this and makes matters a hell of alot worse

I know what you're saying .. but I've been following him. He's actually pretty cool. He seems switched on, and unlike most other people you see he doesn't have the vested interests festering that many people have. Particularly those involved in the real estate industry.

He could see this coming (debt bubble) and decided that he better warn people. I believe he's been warning people for a couple of years now. But Greed is in the room and no-one listens. In case you haven't noticed he is not alone in his summation.

It was only a couple of weeks back when I realised how big this all is. I think I'll remember the moment in the same way I remember where I was when 9/11 happened. I'll say to my kids I remember when I realised the Global Depression was coming. :eek::( 911 is going to look like a walk in the park compared to this.

You all think I'm a raving loony ... that's ok. If I got this wrong (we won't know for 6 months) you can all make fun of me (more than usual)!.

I told a property speculator (otherwise known as an investor) at work that there were dark clouds forming about a month back and he laughed at me. Property always goes up (implied at 20+% as it has recently). I noticed a particularly stern look about him today.

[Lotz-A-Landies]

So I gather it was not about weather and rain or imported and domestic olive oil.

The problems of the economics, is that it's hard to get out there and do it, unless of course you are the national treasurer. Not the place to acquire on the job work experience. So economics is probably one place where we need academics.

Who would want a global enterprise CEO to tell us what to do, aren't they the ones who lent trillions of dollars to people who had neither a job or any ability to repay the mortgage. And you wouldn't want any hedge funds managers, take Bear Stern's and Lehrman's. The last person you would want is an exec from AIG, got bailed out to the tune of 80 billion dollars and decided to have a $400,000 holiday on the money from the US Fed.

Diana

[Slunnie]

He's a Professor and clearly studies in that area.... he wouldn't know sweet jack all as he doesn't live in the real world.

I'm a brickie...and on a building site, and I read the paper. I'll tell you whats really going on out there.


:Rolling:


It'sthe recession that we had to have. (P Keating)

[Hymie]

My understanding of Basic Economics is thus.
It's all about confidence.
If people believe that a recession is going to happen, they will stop spending money, manufacturers will not have to manufacture, Primary producers will not have to produce materials for manufacturers and people all along the chain lose their jobs.
Look at it this way.
If you have money and spend it, you are keeping people in jobs and the wheels get greased.
The worst thing that can happen is for people to stop spending money and trying to save what they have, thereby driving up the cost of money.

How am I going so far?

Man my brain hurts!!!

[carjunkieanon]

My understanding of Basic Economics is thus.
It's all about confidence.
If people believe that a recession is going to happen, they will stop spending money, manufacturers will not have to manufacture, Primary producers will not have to produce materials for manufacturers and people all along the chain lose their jobs.
Look at it this way.
If you have money and spend it, you are keeping people in jobs and the wheels get greased.
The worst thing that can happen is for people to stop spending money and trying to save what they have, thereby driving up the cost of money.

How am I going so far?

Man my brain hurts!!!

That makes sense to me.

But I'm not planning to buy any shares at the moment (even tho it might be a good time since the prices are all low... weird logic).

But....I think part of the problem now is that all the people who expected to be getting money from the income streams 'guaranteed' by the banks (that don't exist any more) now don't get any money. AND, no banks have any money (ANZ for instance gets 60% of it's money, which it lends to you, from overseas), so small businesses (like my wife's) can't borrow money - so may not be able to buy stock, pay staff etc (this is happening in the US). So, net result is that more and more people are running out of money to buy things with, so the value of stuff goes down.

Which means you may be right, if you spend money it might keep things going (I think what the governments must be doing this when they inject money). Problem is you most likely need to spend BILLIONS to make a difference. You're few thousand won't affect anything, but will leave you broke - esp if you buy a house that drops in value or shares in a company that soon won't exists....

I'm making all this up as I go along tho...

r

[Lotz-A-Landies]

My understanding of Basic Economics is thus.
It's all about confidence....

...If you have money and spend it, you are keeping people in jobs and the wheels get greased.
The worst thing that can happen is for people to stop spending money and trying to save what they have, thereby driving up the cost of money.

How am I going so far?

Man my brain hurts!!!
Hymie

Sounds O.K to me, but I'm a nurse, so what would I know.

Spending at the moment is also probably O.K.

Borrowing money to do that spending is probably the wrong thing to do right now!

Diana

[DiscoStew]

Oh right he is a professor so that makes it right and true, from a bloke that knows the theory but is a professor or eternal student and never lived in the real world like the rest of us

I really hate that line of thought. If it wasn't for academics we wouldn't have many of the advances we have had. Many academics also work in the so-called real world. Don't perpetuate the crap that if you can't do it, you teach it. I have had the pleasure of working with academics on real-world projects and they bring an understanding that practitioners often do not have.

BTW he is not a professor, he is an associate professor. He needs one more promotion to be called Prof.

Having said that, there are also plenty of academics who do not have a clue and IMHO these are the one's most likely to be experts on TV. This guys bio at UWS includes "... pre-academic career included periods of journalism, in fields as diverse as economics commentator for the ABC's Indian-Pacific program and software editor for Australian Computing." Therefore I am a bit sceptical.




... and unlike most other people you see he doesn't have the vested interests festering that many people have.

I'm not saying he is wrong but he does have vested interests. He sells books. His promotion to Professor will be influenced in part by his national reputation and how many other publications refer to his work (under the Research Quality Framework funding model). Plus he may want to get more involved in public speaking and conferences. So a bit of publicity helps.



What I don't understand is: if I keep my job and can afford to service my debt now, and if interest rates do not go up, then why is this debt suddenly a problem?

[Captain_Rightfoot]

Apparently a number of euro countries have agreed on a co-ordinated rate cut. Might help a tiny bit :o

Anyone interested can read Steve Keen's Deathwatch (http://www.debtdeflation.com/blogs/).

[p38arover]

Is this the associate professor who was in the paper a couple of weeks ago - he was selling his house to get out of debt.

[Captain_Rightfoot]

What I don't understand is: if I keep my job and can afford to service my debt now, and if interest rates do not go up, then why is this debt suddenly a problem?

How much debt do you have? If you have more debt than equity you might be on the receiving end of a Margin Call (http://www.smh.com.au/business/money/tools/guides/investment/margincall.html). That is a US example.

Margin calls are normally associated with shares but they can also happen to property. Say you borrowed 100% to buy a 500k property late last year. Say the property market crashes and goes down 40% (probably worst case but plausable). You're making payments so all is good you think.

However a number of people loose their jobs and stop making payments. The banks take their houses but they don't get what they are owed. All of a sudden the bank needs money.

So, you're making payments and are a good customer. You owe 500k but your house is now only worth 300k. The bank thinks you're good for it. One day your bank manager rings and asks for you to provide some more capital as they are feeling a little exposed. They could ask for between 0 and 200k from you. You have to find the cash instantly or they will fore close and get what they can get. Remember that even if they only get 300k for they house they can still sue you for the other 200.

Thats not much fun at all, but it has happened in Australia before. It's already happening with shares and if things go bad it could happen again with houses. This is the closest it's been for some time. If a 40% drop in price could have your house being worth less than your loan than you could be at risk if things go bad bad.

[Captain_Rightfoot]

Is this the associate professor who was in the paper a couple of weeks ago - he was selling his house to get out of debt.

Yes.

[Lotz-A-Landies]

...
BTW he is not a professor, he is an associate professor. He needs one more promotion to be called Prof.
...
He may hold an associate professorship, however protocol determines that you address him as "Professor" or perhaps informally as "Doctor" but not anything less.

Just for your information.

Diana

[Captain_Rightfoot]

Apparently a number of euro countries have agreed on a co-ordinated rate cut. Might help a tiny bit :o

It doesn't look like it's helped.

FTSE momentarily went up but it's diving now - down 3.5%. Dax (Germany) down 4.77% Russia market suspended.

Anyone for a punt for the ASX tomorrow?

[DiscoStew]

He may hold an associate professorship, however protocol determines that you address him as "Professor" or perhaps informally as "Doctor" but not anything less.

Just for your information.

Diana

Maybe there are different protocols around OZ but that's not what we call them. We call them AssPro's (no kidding). I was politely corrected just after I started working at the University when I made that mistake. Anyway, not a big deal and I may be wrong, I just wanted to highlight that this guy is not yet a full professor. AssPros are still well qualified/regarded and I don't mean to suggest otherwise.

In the US it is quite different. I believe any teaching academic gets called Professor.




How much debt do you have? If you have more debt than equity you might be on the receiving end of a Margin Call (http://www.smh.com.au/business/money/tools/guides/investment/margincall.html). That is a US example.

Margin calls are normally associated with shares but they can also happen to property.

Thanks, that makes sense. From memory the market would need to crash by about 80% for my margin loan to be called. I have a line of credit against my house which could pay that anyway. Some quick sums say that the housing market would need to drop by 60% from prices as at a year ago before the house value dropped below the loan amount even after paying out the margin loan. So I am not feeling invincible but not nervous yet.

[nobbydoldrums]

My understanding of Basic Economics is thus.
It's all about confidence.
If people believe that a recession is going to happen, they will stop spending money, manufacturers will not have to manufacture, Primary producers will not have to produce materials for manufacturers and people all along the chain lose their jobs.
Look at it this way.
If you have money and spend it, you are keeping people in jobs and the wheels get greased.
The worst thing that can happen is for people to stop spending money and trying to save what they have, thereby driving up the cost of money.

How am I going so far?

Man my brain hurts!!!

That would make sense if the money is real and has real value. What seems to happen as a regular cycle, the real value of money/gdp/inflation and stock market diverge substantially over time and there is a correction at some stage - either the market takes a nose dive or there is rampant inflation. If you keep the money flowing, or simply print money, the dollar devalues.
Both have the effect of making most people poorer, but you could argue that rampant inflation is a lot harder to control than a depression.

[def90]

One of the dangers of the current times is technology and the internet. You can watch 24hours of the cylce, buy and sell with a couple of clicks, and share opinons with the push of a couple of buttons.

I watched the dollar drop 7c today and 4c in a matter of 20 mins.... The volatility is crazy...

Things are moving so fast and unpredictable...

I live in HK and have suffered the last 5 years from the strengthening A$ so in amongst the clouds, we are somehow better off...

A defender is now 40% cheaper for me....only if I had the cash!!

[B92 8NW]

That would make sense if the money is real and has real value. What seems to happen as a regular cycle, the real value of money/gdp/inflation and stock market diverge substantially over time and there is a correction at some stage - either the market takes a nose dive or there is rampant inflation. If you keep the money flowing, or simply print money, the dollar devalues.
Both have the effect of making most people poorer, but you could argue that rampant inflation is a lot harder to control than a depression.

Like what happened in Russia 1992:eek:

[Captain_Rightfoot]

Thanks, that makes sense. From memory the market would need to crash by about 80% for my margin loan to be called. I have a line of credit against my house which could pay that anyway. Some quick sums say that the housing market would need to drop by 60% from prices as at a year ago before the house value dropped below the loan amount even after paying out the margin loan. So I am not feeling invincible but not nervous yet.

Anyone who has a business should be doing a Capital stress test (http://www.businessspectator.com.au/bs.nsf/Article/Stress-test-your-capital-K6UAT?OpenDocument).

[Captain_Rightfoot]

Anyone want to take a stab at todays market performance?

Over night the score was...

UK -5.18 % down despite big gov intervention and euro rate cut.
Germany -5.88%
France -5+%
Russia CLOSED!
US -2% Good result but amazingly volatile.
Asia up to -10%!

I'm predicting a quieter day in Aus. Pobably only -3% :o It could go either way, but the dow closed on a down not and I think Asia will scare them down. Still that will be close to 10% in two days :o

EDIT: I could be wrong about the above but it probably doesn't matter now. The recession (at the very least) cometh :(

[waynep]

I saw that guy and admit was surprised at the negativity of his predictions : but given the last few weeks anything is possible.

Getting out of debt is a good policy but many people will find it immensly and increasingly difficult to do so.

I'm surprised when asking casually around friends and colleagues on how pervasive debt is in our community. Seems they borrow for everything including new cars, furniture, holidays.

I suspect getting out of debt will involve a reality check and more modest lifestyle choices for many. If not done by choice it may be forced upon them.

[mns488]

Anyone want to take a stab at todays market performance?



My guess (guess at best these days)

Start really badly (-4%) and then recover late afternoon ending about -1.5% down.

[mark2]

How much debt do you have? If you have more debt than equity you might be on the receiving end of a Margin Call (http://www.smh.com.au/business/money/tools/guides/investment/margincall.html). That is a US example.

Margin calls are normally associated with shares but they can also happen to property. Say you borrowed 100% to buy a 500k property late last year. Say the property market crashes and goes down 40% (probably worst case but plausable). You're making payments so all is good you think.

However a number of people loose their jobs and stop making payments. The banks take their houses but they don't get what they are owed. All of a sudden the bank needs money.

So, you're making payments and are a good customer. You owe 500k but your house is now only worth 300k. The bank thinks you're good for it. One day your bank manager rings and asks for you to provide some more capital as they are feeling a little exposed. They could ask for between 0 and 200k from you. You have to find the cash instantly or they will fore close and get what they can get. Remember that even if they only get 300k for they house they can still sue you for the other 200.

Thats not much fun at all, but it has happened in Australia before. It's already happening with shares and if things go bad it could happen again with houses. This is the closest it's been for some time. If a 40% drop in price could have your house being worth less than your loan than you could be at risk if things go bad bad.

I'm no finance expert but just did some research on margin calls. Its seems they only apply to margin loans which typically only apply to borrowing to buy share portfolios, and arent relevant to the average mortgage.

I'm not aware of anything in my home loan contract which would give the bank the right to sell under me or demand more capital, as long as my payments are up to date - I would expect they factor in market risk when they make a decision to issue the loan.

[weeds]

I'm no finance expert but just did some research on margin calls. Its seems they only apply to margin loans which typically only apply to borrowing to buy share portfolios, and arent relevant to the average mortgage.

I'm not aware of anything in my home loan contract which would give the bank the right to sell under me or demand more capital, as long as my payments are up to date - I would expect they factor in market risk when they make a decision to issue the loan.

i have or should i say had pretty healthy buffers with my portfolio but with the current markets it has narrowed......solution was to borrow more to increase the buffers so that a margin call won't be made which hopefully works out good for me as i have brought when the market is low

btw......don't know what everybody is talking about re: no money available to lend, i'm right in the middle of buying/upgrading to another house and borrow to invest in the markets:ono problems with my lender

[PhilipA]

Although its hard to remember that the task is to drain the swamp when you are up to your **** in alligators, we should remember that these things pass.

Already Bank Of Queensland has come out with a profit reduction of wait for it 2%.
I am convinced that the big four in Australia are still HIGHLY profitable (CBA pays 2.1 Billion for Bankwest) and will recover their price quickly when the panic subsides. They can get money no problem. For example I bought Westpac and ANZ in about march, thinking they would not go much lower. They are down a little from then but not much.

BHP will go up again, as the drop in the AUD mirrors the drop in commodity prices so profits stay up in AUD, although the rocket scientist analysts do not seem to have realised it yet.
When the market starts to recover it can go up 30% in a short time and it will recover.
I guess my biggest problem will be some companies I have which may not survive ( Eg Rubicon Japan Trust touted by Hot Profits), but the trick is to be diversified with< 10% in each company.
Look at the headlines
"Employment PLUNGES to 4.3%". This is the highest employment outside of the recent lows EVER. Miners are still crying out for staff.
"Housing loans off 4%". The banks have picked up share of 20% or so from the non banks. They are laughing.
IMHO, the recent reactions by the world central banks is setting the stage for the biggest boom with inflationary side effects ever.
The recent 1% drop by the RBA is really a draw back from their two incorrect rate rises at the start of the year, which most commentators said then were not necessary.
Don't panic the world is not ending( I hope)
BTW, I am almost certain that banks cannot place a margin call on housing. The bank risk is solidified by the LVR at the start of the loan and over 80% the bank is insured for any losses by the insurance that you the borrower pays up front. Do you really think the banks would like to foreclose on houses in a down market?
Regards Philip A

[ramblingboy42]

we should all go for a ride in a taxi, ask the driver what he thinks the answer to the economic problems are, stay in the cab long enough to listen to his suggestions, stop and buy a loaf of bread, a litre of milk , some fruit and veg and beer and the resultant cash bouyancy generated by everyone going for a taxi ride will be enough to stimulate the economy and avoid any recession. Who needs to be an economist?

[landy63]

Gut feel is that things will smooth out on US & other markets tonight and maybe even go up.

[adm333]

so who? was he.....

I am not quite ready to worry yet. I can't help but feel much of it is a hype up by the press.....

Chicken Little....

[waynep]

My guess (guess at best these days)

Start really badly (-4%) and then recover late afternoon ending about -1.5% down.

well Matt you were pretty much spot on - except for the last hour of trade ;):D

[CowsGoMoo]

I got this in an email today-



Monkey Business
Once upon a time in a remote town, a man appeared and announced to the people in the town that he would buy monkeys for $ 10. On seeing that there were many monkeys around, they went out to the forest and started catching them. The man bought thousands at $10 and as supply started to diminish, the people in the town stopped their effort.
He further announced that he would now buy at $20. This renewed the efforts of the people in the town and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms.
The offer rate increased to $25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it! The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the people in the town, “Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $ 35 and when the man returns from the city, you can sell it to him for $ 50.” The villagers squeezed up with all their savings and bought all the monkeys.
Then they never saw the man nor his assistant, only monkeys everywhere!! !
Welcome to the “Stock” Market!!!!!

[stuee]

[Start of Opinon/]

My uneducated speculation is that the our dollar is dependant on the commodity sector. ATM China has excess iron ore and has slowed down production rapidly meaning there is currently a big drop in the price of iron ore and consequently the value of BHP and the likes. There are a few small iron ore companies about to start their first shipments that are seriously facing going bankrupt now because demand is so low and unless China starts production up again soon the boom could end.

I believe Australia's shelter from the crisis is the commodities sector and if there's severely reduced demand for commodities our boom bubble could be popped and we're in just as much poop as everyone else. Mines would no longer be screaming out for employers and unemployment could skyrocket. But according to the press talks between rudd and wen, china has assured that they will continue their economic growth which means we should get through lightly in comparrison to other countries.

[/End of Opinion]

Question for people: why has the UK govts trillion dollar bailout gone so quietly through the press here in Aus?? So much talk about the US bailout but very little about the UK one.

On a positive note for those looking to buy a house in the future it might once again become a real possibility to buy a house in reasonable proximity to the city.

[Slunnie]

I was reading this from the Reserve Bank from the 7th...
RBA: Media Release-Expansion of Domestic Market Facilities (http://www.rba.gov.au/MediaReleases/2008/mr_08_21.html)


STATEMENT BY GLENN STEVENS, GOVERNOR
MONETARY pOLICY

At its meeting today, the Board decided to lower the cash rate by 100 basis points to 6.0 per cent, effective 8 October 2008.
Conditions in international financial markets took a significant turn for the worse in September. Large-scale financial failures in several major countries were accompanied by serious dislocation in interbank markets and heightened instability in other markets, including sharp falls in share prices. Official actions in a number of countries have been aimed at restoring stability, by adding to short-term liquidity and laying a foundation for longer-term recovery in the health of balance sheets. Nonetheless, financing is likely to be difficult around the world for some time ahead. This is also affecting Australia, albeit by less than in many other countries, given the relative strength of the local banking system.
Economic activity in the major countries is also weakening, and evidence is accumulating of a significant moderation in growth in Australia’s trading partners in Asia. The expansionary effects of the recent surge in Australia’s terms of trade are still coming through, but some decline in the terms of trade now looks likely over the coming year, with many commodity prices having declined from their peaks. This, combined with the likelihood of below-trend growth in the global economy, suggests that global inflation will moderate in 2009.
Thus far, the overall path of economic activity in Australia appears to have been close to what the Board had expected, with the needed moderation in demand occurring. The next CPI is likely to show an increase of around 5 per cent over the four quarters to September, but the Bank remains of the view that inflation will start to decline in 2009.
The recent deterioration in prospects for global growth, together with much more difficult market conditions even for creditworthy borrowers, now present the risk that demand and output could be significantly weaker than earlier expected. Should that occur, inflation would most likely fall faster than earlier forecast.
Given that background, the Board judged that a material change to the balance of risks surrounding the outlook had occurred, requiring a significantly less restrictive stance of monetary policy. The Board also took careful note of movements in funding costs in wholesale markets. Having weighed these considerations, the Board decided that, on this occasion, an unusually large movement in the cash rate was appropriate in order to bring about a significant reduction in costs to borrowers. The Board does not, however, regard that movement as establishing a pattern for future decisions.
The Board will continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2–3 per cent target over time.

For the Layman (like me), is this saying in a nutshell that they have dropped interest rates, but they will probably go up again when things settle to control inflation???

[mns488]

well Matt you were pretty much spot on - except for the last hour of trade ;):D

ha ha, the only thing i picked right today was a clean shirt out of my wardrobe.

[Captain_Rightfoot]

For those interested the median house price in Queensland fell 2% in July, and 4% in August. If August goes on for 10 months :o

[carjunkieanon]

ha ha, the only thing i picked right today was a clean shirt out of my wardrobe.

you know the rule...pics pics pics