Now two weeks later the financial experts are saying that the Reserve Bank of Australia is preparing the markets for cuts to interest rates? It apparently won't need to see the inflation figures due in November to make the move. Obviously there are things that the RBA board members didn't see as important then, that have now emerged.
Suddenly the RBA signalled its new bias towards an easing on October 2 in a statement released by its governor, Glenn Stevens, after yesterday's board meeting in Sydney
How things have changed since August.
It was just in August that optimism ruled the RBA's statements on the World Economy. In particular that China's growth appeared to have stopped slowing. yesterday's updated assessments of international conditions is now more subdued.
Australian Banks are lowering their mortgage rates independent of the Reserve Banks
Just weeks ago the Big Four banks were not passing on the RBA rate reductions.Now the CBA has about faced and lowered its fixed rates by up to .4%. What's that all about? First they say they can't afford it, then drop their pants weeks later?
When the big banks broke ranks with the RBA on interest rate reductions, they broke the pact with the RBA to support the Banks. That is a dangerous move and the banks seem to be thinking that through.
Europe's economy is still going backwards
Anyone that thinks that Europe has fixed its problems with Greece, Spain and Portugal isn't thinking straight. It will be 5 to 10 years before these problems have been ironed out.Growth in the US was ordinary
The US economy is still in a hole. Its climbing out of a creator left by Bush's scatter brained bunch. What if the Party that caused that hole gets back into power again in November. Another disaster looms large in my view.
Obama promised blue skies, and then discovered the economy was trashed by years of Republican actions.
Clearly Obama should have been straight with the people once he discovered the Gravity of the mess he found. He should have told the US that they had an eight year hole to fill. Then the Republicans blocked his efforts at job creation. And now people belief that the Republicans can fix things? We have the same problem in Australia. A hostile opposition party trying to hold Australia back.
The biggest problem I see for the US is property prices increasing and then mortgage rates increasing, and then the Republicans getting the population to work for less money. Either way, home prices in the US are down for years.
China had uncertainty about near-term growth
China has so many areas it can grow in, but right now they don't know which way to go, and even their Premier says the economy is disorganised. When it gets it's act together the growth will continue.
The RBA is very concerned the big falls in "some coal and iron ore prices of importance to Australia, are not being reflected in the Price of the Australian Dollar
This is the dilemma that we face. The Australian Dollar is overpriced at its current value, given these in massive falls resources prices. But when those prices fell, the Australian dollar held up. That need to change.
It seems that the Australian Dollar is too attractive in an uncertain World, and paying good interest rates compare to other Countries.
So if the RBA wants to shake this inertia, it might be thinking more than one reduction to get the momentum for a lower dollar in motion. An Australian Dollar at 90 Cents US would make our economy so much better.
Food Security a hot topic, but not on the RBA radar?
One thing the RBA has not mentioned is Australia's bumper wheat crop in a hungry World.Food security could be a factor just when Australian wheat growers are having a bumper crop, and major wheat producers like Russia, the US and Canada are having poor crop harvests.
So Australian Farmers are expecting a once in 20 year win on the grain prices, just at the very time that World Leaders are stating that Food Security is the future concern.
So Australia gets lucky again!
Miners pull back on projects
Lesser factors are the pull back of mining projects. Clearly, if all the projects talked about came on stream, there would be to many projects and no enough skilled people to handle them. And many Australians don't want to import workers for the purpose of bringing these projects forward.Fortescue Metals Group became the first big resources company to scale back an investment program [funny about that] until prices recovered. Whilst the RBA has to consider the announcement as factual, you have to wonder at their real motive in this.
As the Prime Minister has said
"This is a boom with three distinct phases: a prices boom, which is now passing, an investment boom - still to reach its peak - and a production boom for the years and decades ahead."
Will Australia's inflation stay low with the carbon tax?
Economists have said that Australia's inflation rate is unlikely to climb above 3 per cent for the next one to two years, even with the Carbon tax effect added.The RBA may well ignore the carbon tax inflationary effect, so that even a 3.5% inflation rate could be seen as within its comfort band.
The one thing that has not been looked at is the inflationary effect of a World wheat shortage on grocery prices. Wheat is just about everything that is in a packet these days.
Summary on Mortgage rates
The RBA seems to have gone from "no need" to reduce interest rates, to being concerned about the US, Chins, Europe, Asia and the sudden drop in commodity prices, whilst the dollar hangs too high. It clearly sees that the Dollar has to be forced to come down hard.At the same time the CBA has reduced deeply its fixed rates interest on many home loans. A give away that it sees mortgage rates heading lower, and that competition in the mortgage market is heating up on thin home loan sales.
Home loan views sourced by Mr Mortgage
