Over the past year or 2, we've been steadily raising them by a quater of a % at time

Any Aussie knows, this 1% slash is a pretty significant cut... very expected in a time of extreme urgency.





www.news.com.au...


[edit on 6-10-2008 by Agit8dChop]

Thank goodness for 1% rate cut. Long overdue!

I am also glad that Glenn Stevens seems to be seeing sense - especially after his remark a few months ago about how banking sector's lack of rate cuts was part of "... life in this environment". Does anyone know if the banks will be passing the cuts down to the ordinary people????

[edit on 7-10-2008 by 04326]

Its a totally hypocritical move by the Reserve Bank. They have stated time and time again that they would not lower interest rates until inflation gets back around 3%. We're on track to have around 4.5% inflation for this quarter - a long way from their "concrete" goal.

Fear is driving the decision, not sound economic policy, and the Reserve Bank just blinked.

from what i have heard the banks are under no obligation to also cut interest rates and have ben indicating that they wont... however their black hearts may change ...

though i wouldnt wanna bank on it.

True, inflation is still rising, and this wont help.
The aussie dollar was around 77c to the US$ last night, thats pretty bloodly low considering a matter of months ago we were close to an even $

now, its going to drop.

as for the banks?

I reacon they'll pass on 40% of the rate cut.

Banks, and petrol companies make me want to go postal.

Only they can present a multi billion dollar yearly profit, yet still say they HAVE to raise fee's and costs.

Something worth noting,

a 1% slash in interest rate cutes stinks of desperation.

While im glad the markets are in the green today, ( after being in the red all morning )I fear they will quickly follow suit and post another loss tommorow, after the US continues its dive!



[edit on 7-10-2008 by Agit8dChop]

Westpac have announce that they'll drop by .8% . Rather suprising, but still a little cheap of them not to pass on the whole cut.

The significance of this drop is very important, Rudd the Dud has been saying that Australia should be reasonable insular from the Us fallout. The stupidity of this is apparent when drastic measures like dropping 100 base points on the official interest rate are made....is this to increase inflation ? kill the Aussie dollar ? ( someone knew it was going to go down massively because the Aussie dollar is trading @ 74 US cents and falling ) ?.

I personally think this whole world ( western ) is about to crack wide open and massive currency failures are on the horizon. The writing is on the wall with currently Germany, UK, US, Finland and France having its banking institutions fail and need nationalizing and I feel Australia is about to experience some real pain real soon.

I'm tipping Macquarie to come under some scrutiny over the coming weeks seeing its Australia's largest Investment Bank and its well known shady dealings with over valued Funds and Investment schemes.

Stay tuned to the house of cards as it all comes tumbling down.

I think the 1 % cut was not completely desperation, and I dont think it was an educated decision either, likeagit8d chop said, they have been increasing it a quarter at a tiume, then all of a sudden, WHAM!, 1 % cut.

I think the reserve bank is gambling, I reckon they have taken a big risk that will be a 50/50 go either way type of decision. it may make it heaps worse for us or heaps better.

Think of this, yeah the aussie dollar has gone down, but that will make Australian manufactured and resourced goods far more attractive for export, would it not? This will increase manufacturing and work in australia, insulating us that little bit more from the global impact of this mess.

other countries will want to buy aussie goods more, spending what little currency they have to either pay of their debts, bail out their own banking institutions, and the rest on aussie goods.

It makes sense, it was a gamble aimed at redcuing the value of the aussie dollar, and it may have just payed off, but time will tell.

1% drop, will keep many who are about to loose their homes going for that little bit longer, while it may spur on first home buyer into the hosing market, more economic benefit.

I understand everyone is cautious to such a drastic measure given the situation of the world markets, but lets just give it a couple of days and see how it ges before we start bagging them.

MM I see your logic, how ever I must point out that Australia is not a Manufacture based Economy its predominantly mining now as the highest gross sector.

The fact we went 1 full percentage points down is scary we needed to go up to curb hyper inflation which sadly what is about to happen with our day to day goods with most food now imported into Australia.

Not to get stuck on the semantics but why would a government want to actually deflate our dollar ( by the Fed lowering 100 base points ) other than to benefit the mining sector ?????? it certainly doesn't benefit anyone else my dear friend.

In summary...it makes inflation worse, imported goods go up, labour market more competitive, benefit exports and perhaps some our manufacturing gain if they keep their money offshore and purchase from there.

I see your reasoning Melbourne_Militia, and while I think you're right about exports, there's nothing we export of any value that is paid for in Aussie dollars so it won't have an effect. The vast majority of our commodity exports are priced and paid for in US dollars, so the price to the end user has not really changed too much. This could change soon though, because when the rest of the world finally starts calling in their debts with the US, its going to tank too.

Australia, like the US, owes too much money overseas. The reason we have had such inflation over the past 10 years is because our dollar isn't worth much.

Sure, the rate cut will help some homeowners and perhaps encourage some poor gullible fools to get into the market, but I believe our real estate market is due to tank soon, so this will only worsen the problem. Prices are way too high. Normal people can't afford a $400,000+ mortgage, and this is what you're expected to pay for entry level properties in most cities. It can't go on, and I don't think it will go on. Look at what has happened in Japan (albeit 15 years ago), the US and the UK. New Zealand prices are starting to dive, and our real estate prices are going to go too.

ComBank Securities had a guy on TV a couple of weeks back saying they normally make about 10 margin calls a week to people that have borrowed money to buy shares - the week they interviewed him he said they had to make 1000's of calls. All those smart people that listened to even smarter people and borrowed money to buy shares are going to either have to sell them or cover their loans, or come up with the cash some other way. For some that will mean forfeiting their loan portfolio, or trying to sell a leveraged investment property. Its hard to get a loan now and prices are expensive, so if lots of properties start coming on the market with "motivated sellers", you watch the prices start to tumble.

There needs to be a correction, and I think its knocking on the door. Then again, I could be wrong

[edit on 7-10-2008 by Snappahead]

yeah, thanks for that guys. I understand Australia is not a manufacturing economy, but there still are many people who rely on the manufacturing sector to make a living.

yes, to curb inflation you need to raise rates, but by doing that your making it so much harder for homeowners to pay off their mortgages, or even just to keep afloat.

Heres a hypothetical that Id like to try and tackle with the help of you blokes-

Say the reserve bank went the other way? say they surpised everyone and raised the interest rate 1 % instead of down, basing their reasons on spiralling inflation rates.

you would curb inflation, but how many people would be forfiting their home loans en-masse? this would cause an even worse rental housing crisis than there is at the moment, rental rates would skyrocket and many people would be on the street with no where to go.

desperate times would cause people to take desperate measures to survive and provide for their family.

anybody else have a different take on this?

Spot on mate, sadly though I don't think the Res. dropped because of us peons mate owning homes. Me thinks they are trying to deflate our dollar because stupidly they think they may be able to stimulate the economy through increased borrowing ???? because the interest rate is lower ? one thing is certain mate.....the Reserve has lost control of our economy.