Posted 2008-08-09 17:36:38
 lannarebirth, on 2008-08-09 12:17:52, said:
A bad trend indeed; it seems to me that many do not see yet the worsening situation in Australia...
I wrote an email to a friend in Australia on April 1 (almost 5 1/2 months ago) with the question if it was that bad indeed with the following article:
Australia.
Debtland
Reporter: Stephen Long
Broadcast: 31/03/2008 ABC TV. "Four Corners Programme."
Mortgages doled out to people on disability support pensions; loans to refugees with no English and no jobs that leave their families with next to nothing to live on; home loans so large they push borrowers below the poverty line…
This isn’t America’s sub-prime meltdown – it’s Australia’s debt debacle, the legacy of a credit binge that’s sent household debt through the roof and lending standards through the floor. Now the hangover is kicking in.
As many as 300,000 Australian households may be at risk of losing their homes. It mightn’t take much – another rate rise or two, a family illness or maybe just the car breaking down – to send people under. And for thousands more who are better off but feeling the pressure, this credit crisis is getting too close to home.
Dianne and her family are frontline casualties. Their home is being repossessed after constant refinancing landed them with two mortgages, one at 10 per cent and another – on terms they didn’t understand - at 20 per cent.
Four Corners meets them as they despairingly pack their belongings and give up the keys. Why did they take out loan after loan? "Because they keep giving them to us," is Dianne’s blunt reply.
It’s not just fringe lenders but also big banks which have pushed unaffordable credit. "We lent to whoever we could and as much money as they wanted," admits a former bank credit salesman.
Four Corners reveals how one major bank dished out unsustainable loans to numerous refugee families in one area. Some had no English and no job. In one such transaction a nine-year-old girl acted as interpreter. Elsewhere a disabled pensioner tells how her welfare cheque and small part time wage were enough for another bank to lend her $200,000. She is now in penury.
These cases exemplify how lending standards have slackened. Not long ago the rule of thumb was that mortgage payments should not exceed 30 per cent of gross household income. Now lenders leave borrowers teetering on the poverty line.
Mortgage stress is compounded by plastic debt. "The banks are just handing out money on credit cards like there’s no tomorrow… It’s quite terrifying to think that the average household… now has three months of their disposable income on a credit card balance," says one analyst.
All the rage now are store-branded cards offering in-house credit with zero to pay for several years – then, typically, punishing interest takes effect. More than 10,000 stores offer these cards and many shoppers have several of them - but behind nearly all of them is one global financial colossus.
Many Australians have gone deep into the red to fund a newfound love affair with the stock market. The amount they have borrowed to buy shares now equals the total they have racked up in credit card debt. And as Four Corners discovers, when the market plunges and a margin call comes, some people are just reaching for the plastic…
Reporter Stephen Long surveys the human wreckage of the household debt crunch and looks at the key players and tactics behind recent aggressive lending. Long’s disturbing report also throws doubt over the data that banks rely on to make crucial lending decisions
On top of the above it seems that Australia is 'receiving' some 300.000 new immigrants this year (but I didn't check that) which puts more pressure to the fragile situation.
All-in-all, it's not just the USA and Europe who are in increasing trouble.
LaoPo
Edited by LaoPo, 2008-08-09 17:37:43.
Posted 2008-08-09 20:25:59
we will see lao pao. I'm not sure the assesment is so bad though. Commodity prices, while off their historical highs, are still strong. The RBA has been running a fairly responsible monetary possible, with interest rates at 7.5% or there abouts. In otherwords, it has room to move, unlike the US and the EU where interest rates are low already. Commodity prices have been high for this year, meaning that the federal budget will likely hit another near record surplus for 2008-09. This will give the government lots of options. If inflation is running high, instead of tax cuts it will inject the money into peoples super funds, providing liquidity there. Or if the economy looks fragile, the government will run a traditional Labor budget and do some good ole pump priming.
The AUD weekening is good too. It makes Australian exports cheaper - and given our reliance on exports, that is a good thing
Migrants are coming cause there is a massive skills shortage. Not all of the 300K you are talking about will be PR's...it will be roughly half of that as PR's, another 25K who are NZ citizens, and thus are not counted and another 100K odd who will be on bog standard 407 visa work permits, and will be given 30 days to leave the country if they lose their jobs. Migration - in the Australian context - has been found to be a net positive given that it is a skilled based system, rather than a family renunion system that you see in most other places.
Posted 2008-08-09 23:01:29
samran, on 2008-08-09 15:25:59, said: we will see lao pao. I'm not sure the assesment is so bad though. Commodity prices, while off their historical highs, are still strong. The RBA has been running a fairly responsible monetary possible, with interest rates at 7.5% or there abouts. In otherwords, it has room to move, unlike the US and the EU where interest rates are low already. Commodity prices have been high for this year, meaning that the federal budget will likely hit another near record surplus for 2008-09. This will give the government lots of options. If inflation is running high, instead of tax cuts it will inject the money into peoples super funds, providing liquidity there. Or if the economy looks fragile, the government will run a traditional Labor budget and do some good ole pump priming.
The AUD weekening is good too. It makes Australian exports cheaper - and given our reliance on exports, that is a good thing
Migrants are coming cause there is a massive skills shortage. Not all of the 300K you are talking about will be PR's...it will be roughly half of that as PR's, another 25K who are NZ citizens, and thus are not counted and another 100K odd who will be on bog standard 407 visa work permits, and will be given 30 days to leave the country if they lose their jobs. Migration - in the Australian context - has been found to be a net positive given that it is a skilled based system, rather than a family renunion system that you see in most other places.  What's a PR in connection to migrants ?
Anyway, I read, earlier this year that Australians are such big consumers with their credit cards and that Oz had a total debt of AUD$ 42 Billion...that's 2,000 for every citizen.
Why is that so high and what about the mortgage problems for 100's of thousands ?
I am and always have been surprised by the enormous amount of users of Credit cards in the USA and other English speaking countries like Oz; In many EU countries we use systems that we pay with a bank card which withdraws the money immediately from your bank account, contrary to a CC (high interest rates).
I'm puzzled why such systems aren't in use; it would safe a lot of people a lot of money on a yearly basis.
You know better than me so I appreciate first hand comments 
LaoPo
Posted 2008-08-11 05:55:19
Australia's Deputy Prime Minister Pressures Banks to Cut Rates
By Laura Cochrane
Aug. 10 (Bloomberg) -- Australian Deputy Prime Minister Julia Gillard stepped up pressure on the nation's banks to pass on to borrowers any cut in official interest rates.
``If official interest rates were to fall, then we expect banks to pass that on to mortgage holders,'' Gillard told the ABC Television's Insiders program today.
Her comments echo those of Prime Minister Kevin Rudd, who said in Beijing on Aug. 8 that lenders ``have a responsibility'' to pass on central bank rate cuts to mortgage holders. Reserve Bank Governor Glenn Stevens signaled this week he may lower the overnight cash rate target from a 12-year high of 7.25 percent for the first time in seven years.
``It would be good for the banks to flow through any rate cuts,'' said Malcolm Watkins, Melbourne-based executive director Australian Finance Group Ltd., the nation's largest mortgage broker. ``But there is also the matter of the banks' higher costs of funds.
``We think the Reserve Bank needs to consider something in the line of a 50 basis point cut,'' Watkins said today in a telephone interview. ``Then we may expect 30 to 35 basis points of that to be passed through and 15 put back into the banks' margins.''
Australia's banks have faced government criticism for raising mortgage rates by more than the central bank increased its benchmark this year.
Loan Repayments
The nation's five largest banks have added an average 105 basis points to mortgage rates in 2008 as the global credit squeeze drove up funding costs. The central bank has added 50 basis points to its benchmark in that time. A basis point is 0.01 percentage point.
The increases have added A$250 ($224) to monthly payments on an average A$250,000 home loan, according to the Real Estate Institute. Households spent 38 percent of their incomes repaying mortgages in the March quarter, the most in the 22 years that the institute has measured affordability. 
Stevens said on Aug. 5 there is increasing ``scope to move towards a less restrictive stance,'' stoking speculation he will cut borrowing costs as soon as next month.
Consumer confidence slumped in July to the lowest level in 16 years and home-loan approvals tumbled in June to a four-year low. House prices fell in the second quarter for the first time in almost three years. The economy, in its 17th year of expansion, grew at the slowest pace in almost two years in the first quarter.
Currency Slumps
The benchmark interest rate will be reduced by at least 25 basis points to 7 percent when the central bank's board meets on Sept. 2, according to 18 of 25 economists surveyed by Bloomberg News on Aug. 8.
Currency traders are also betting on a cut. The Australian dollar fell below 90 U.S. cents on Aug. 8 for the first time since March. The currency dropped to 88.87 U.S. cents, down from a 25-year high of 98.49 cents on July 16.
Expectations of a reduction in the central bank's benchmark have caused a drop in the rate banks charge each other for loans. The Australian three-month bank bill swap rate fell to 7.32 percent on Aug. 8 from 7.59 percent before Steven's Aug. 5 comments, and 7.83 percent three weeks ago.
That prompted Australia & New Zealand Banking Group Ltd., the nation's fourth-largest bank, to cut its fixed-interest-rate loans by between 11 and 50 basis points on Aug. 8.
Westpac Banking Corp.'s Chief Executive Officer Gail Kelly said the same day she would ``love to pass through the full'' amount of any central bank cuts to the majority of borrowers, who hold variable-rate mortages. Almost 90 percent of Australian borrowers have variable-rate loans, which have historically moved with the Reserve Bank's benchmark.
Regulation Threat
The government may increase regulations on banks if they are ``not competitive enough,'' according to Treasurer Wayne Swan. ``We'll keep an eagle eye on banks as we go through the year,'' he said Aug. 7.
Assistant Treasurer Chris Bowen also added to pressure on banks today over interest rates. ``Any future cuts are a matter for the Reserve Bank, but we certainly would expect reductions to be passed on,'' he told the Ten TV Network's Meet the Press.
Bowen was backed by Chris Lamont, senior executive director of the Housing Industry Association, who said in a telephone interview today: ``You have got record profits from the Australia banks. Yes there has been an increase in the wholesale costs of funds, but surely some of a rate cut should be absorbed against profit forecasts.''
The Reserve Bank has raised its rates four times since August last year to cool inflation that hit 4.5 percent in the second quarter. The bank targets annual price increases of between 2 percent and 3 percent.
``There is a tightening of credit and an increase in the costs, and that is, of course, affecting Australia,'' Reserve Bank of Australia board member Roger Corbett said today on Sky Business TV.
``There is a very strong mineral base in Australia; we have a very strong, broad-based economy, strong banks and a great basis for confidence.''
---Bloomberg
LaoPo
Posted 2008-08-11 14:00:19
Laopo - you need to be very careful with the bloomberg report. Homeownership in Australia is quite high, and what happens in the financial markets affects people marginally. The rental market in Australia is very tight - a reflection of the tight demand/supply situation.
And, the federal government is banging on the banks cause it is good politics - but there is little they can do about it. The banks need to make money, after all, no?
Anyway....
From crikey.com
Glenn Dyer writes:
The Reserve Bank now sees slowing domestic economic growth and the slowing world economy as risks of the same weighting to our current high inflation rate.
As a result, Australia remains on track for a cut in official interest rates next month after the Reserve Bank issued its third Monetary Policy Statement of the year, signalling that it is now more concerned about the slump in economic growth and its impact on a slowing local economy.
For the first time this year, the central bank says it is now committed to "sustainable economic growth" as well as the medium term inflation target of 2%-3%. That was after warning in the two previous quarterly statements of the need to either tighten monetary policy, or maintain it to make sure inflation slows.
Sustainable economic growth and price stability are the two main policy objectives of the RBA, but since February controlling soaring inflation has been its main one via two interest rates to add to the two in November and August 2007. On top of that we had 0.50% or more in rate rises from the bank, plus higher oil prices, all of which have combined to trigger a rapid slowdown in domestic demand.
It is quite a significant signal to the market and is a clear sign the RBA sees the rapidity of the slowdown in domestic economic activity is doing its work and will slow inflation from next year onwards. That's even though it admits inflation will rise in the September and December quarters, where it could hit the 5% level.
CPI inflation is expected to be higher in the short run, at around 5 per cent in the December quarter, reflecting the effects of higher petrol prices and the recent correction to estimates of financial services inflation, before declining thereafter. Excluding financial services and the effect of the child care tax rebate, underlying inflation would peak at 4¼ per cent while CPI inflation would peak at 4¾ per cent.
An estimate of 5% inflation from the RBA would normally see markets pricing in another rate rise and pushing the Aussie dollar higher towards parity with the US currency. But not now. The sharp drop in private credit in recent months -- as well as retail sales, consumer confidence, home loans and building approvals -- is why the bank is signalling madly that a rate cut is coming. And I'd be punting on a drop of 0.50% or one of 0.25% next month and another in October because of something else the RBA said. The bank seems to be more worried about what a further downturn in the world economy would do to Australia, more worried than the impact of the higher inflation rate.
Any further deterioration in the outlook for global growth would represent a significant downside risk to the domestic activity profile, particularly if it led to a marked slowing in growth in China and India.
This could lead to a significant deterioration in the outlook for the Australian economy and commodity markets, which could lead to further moderation in inflation over time as growth of domestic incomes and spending eased and oil prices fell.
In addition, the ongoing turmoil in capital markets could exacerbate the slowing in domestic growth by further reducing the availability of credit to households and businesses.
That's the first time the central bank has been so explicit on the dangers from the very volatile world economy and credit markets and it appears to be setting up a pre-emptive rate cut or two (as Mr Stevens has suggested in the past it has done with rate rises) to give the economy room to handle any worsening in the global economy.
While many economists had expected big changes to its forecasts, there was very little. Like the May statement, the bank still thinks inflation will fall to 2.75% by the end of 2010 with economic growth running around the same rate, as well as non-farm growth.
The bank repeated the new mantra contained in last week's statement from Governor Glenn Stevens that: "On the assumption that the subdued demand conditions are likely to continue, scope to move to a less restrictive monetary policy stance in the period ahead is increasing." It continued:
While inflation is likely to remain high in the short term, the Board judged at its August meeting that demand was slowing to an extent that could be expected to bring about a significant reduction in inflation over time. On this basis the Board decided that the existing monetary policy setting was appropriate for the time being
The evidence to date is that a significant moderation in demand is now occurring, and it is looking more likely that demand will remain subdued, and economic growth will be fairly slow, in the period ahead.
The Board will continue to monitor developments and make adjustments as required in order to promote sustainable growth consistent with the medium-term inflation target of 2–3 per cent.
That last statement was added to the main statement in the document for the first time this year and sends a signal that the bank now is juggling "sustainable economic growth" as well as inflation in some time. This is what it said at the end of the May statement:
The Board will continue to monitor developments, and will make adjustments to policy as needed to ensure that inflation returns over time to the medium-term target. months.
In fact it's a complete switch in policy from May's concentration solely on inflation.
Posted 2008-08-13 03:10:56
samran, on 2008-08-11 09:00:19, said: Laopo - you need to be very careful with the bloomberg report. Homeownership in Australia is quite high, and what happens in the financial markets affects people marginally. The rental market in Australia is very tight - a reflection of the tight demand/supply situation.
And, the federal government is banging on the banks cause it is good politics - but there is little they can do about it. The banks need to make money, after all, no?
I'm not sure why you say so...?
With such high homeownership one can imagine it is very dificult for many to keep on paying their debts with such high mortgage interest rates in Oz.
And thus it would be a good thing for the RBA to lower the rates; hopefully the banks will follow and reward their clients with a lowered rate as well, especially for the existing mortgage rates.
Anyway:
"The Australian dollar, known as the Aussie, has lost 10.4 percent since reaching a 25-year high on July 16..."
http://www.bloomberg...6...&refer=home
LaoPo
Posted 2008-08-13 07:49:56
even though USD appreciation is presently at a standstill AUD and NZD are still falling like stones.
Posted 2008-09-07 14:49:43
LaoPo, on 2008-07-10 01:46:32, said: I have to admit I never heard of this chap; will have a read tomorrow. He reminds me of the Bhagwan..
Are you telling me you follow his advises ? 
LaoPo
Hi LaoPo, just curious, How does this chap remind you of the Bhagwan? Do you have some first-hand experience with "the Bhagwan"...cheers
Posted 2008-10-03 21:24:49
lannarebirth, on 2008-07-30 20:59:43, said: Those interested in $AUD may want to Google "Bearish Shooting Star Candlestick". That's what it looks like to me anyway:
 AUD.png
And so it was...
xadw.png 67.57K
16 downloads
Posted 2008-10-06 21:17:54
That carry trade unwind is mother%#@*&#. Been there, done that. My sympathies.
Posted 2008-10-06 21:32:42
I cannot compete with any of you either in a wealth, financial knowledge or economic trends knowledge basis but hasn't the aud just returned to the traditional long term value it has had of about 75% of the USD with the rate being artificially high for the last few years. What does worry me is that it is still putting strong reliance on coal and is steadfastly refusing to embrace any Nuclear Power despite saying it is going to force reductions in emissions. It also concentrates on selling raw materials rather than local processing such as not using the North West shelf gas and salt to locally support a petrochemical industry. That is why I worry about the long term future although I think Australia is fairly stable now.
Edited by harrry, 2008-10-06 21:34:24.
Posted 2008-10-06 21:41:39
harrry, on 2008-10-06 21:32:42, said: I cannot compete with any of you either in a wealth, financial knowledge or economic trends knowledge basis but hasn't the aud just returned to the traditional long term value it has had of about 75% of the USD with the rate being artificially high for the last few years. What does worry me is that it is still putting strong reliance on coal and is steadfastly refusing to embrace any Nuclear Power despite saying it is going to force reductions in emissions. It also concentrates on selling raw materials rather than local processing such as not using the North West shelf gas and salt to locally support a petrochemical industry. That is why I worry about the long term future although I think Australia is fairly stable now.
I think the thing people need to take away from this experience is that markets are frought with risk. Leverage enhances that risk, and if you're leveraged enough there's no amount of "Insurance" (derivatives) that will mitigate that risk(instead it can compound it further). The use of derivatives was widely sold as a risk reducing mechanism, but the idea that risks might be reduced only caused distortions in the market. The removal of that same "protection" will likely cause distortions as well, and no one knows how long it will take before markets (anymarket) will betrading on its fundamentals (if they ever did). Good Luck
Edited by lannarebirth, 2008-10-06 21:59:22.
Posted 2009-02-16 23:12:00
lannarebirth, on 2008-10-06 21:17:54, said: That carry trade unwind is mother%#@*&#. Been there, done that. My sympathies.
Old thread, same questions.
Some people must have gotten burned badly, thinking that the AUD/USD would reach parity and beyond...
I wonder how many TV posters from OZ/NZ we've lost.
Anyway, I keep staring at this .5 USD for 1 NZD mark - and I'm itching to pull the trigger (from THB, as we all know it's basically USD at this point). I'm at the Thai limit for foreign currency already, but I'm thinking I'll do it in somebody else's account.
My question is... do you think we've passed the carry trade unwind? It was FAST AND CRUEL... but now we're where we are... and at 50 cents the NZD is just baiting me (which probably means it will go to 10 cents because anything I do seems to be opposite day)...
But, ok - are there carry trade figures out there? Have all the japanese housewives repatriated their monies? I know NZ still has room to cut rates, but I just wonder how much unwinding has already occurred....
Lanna, how bout a Tits n Ass (TA) of the NZD/THB? Just for fun....
Posted 2009-02-17 00:27:59
jcon, on 2009-02-16 23:12:00, said: lannarebirth, on 2008-10-06 21:17:54, said: That carry trade unwind is mother%#@*&#. Been there, done that. My sympathies.
Old thread, same questions.
Some people must have gotten burned badly, thinking that the AUD/USD would reach parity and beyond...
I wonder how many TV posters from OZ/NZ we've lost.
Anyway, I keep staring at this .5 USD for 1 NZD mark - and I'm itching to pull the trigger (from THB, as we all know it's basically USD at this point). I'm at the Thai limit for foreign currency already, but I'm thinking I'll do it in somebody else's account.
My question is... do you think we've passed the carry trade unwind? It was FAST AND CRUEL... but now we're where we are... and at 50 cents the NZD is just baiting me (which probably means it will go to 10 cents because anything I do seems to be opposite day)...
But, ok - are there carry trade figures out there? Have all the japanese housewives repatriated their monies? I know NZ still has room to cut rates, but I just wonder how much unwinding has already occurred....
Lanna, how bout a Tits n Ass (TA) of the NZD/THB? Just for fun....
Hi jcon,
I don't have any data (save for Yahoo) on NZD:THB, and what data I have for USD:NZD is limited. As you can see it's in the same expanding triangle as GBP, AUD, EUR. It's a bearish pattern but you'll note it exhibited positive divergances at its recent lows under .50. FYI the $USD Index showed positive divergances for 2 years before its recent bottom in March of last year (which may not be THE bottom).
nzdw.png 58.42K
4 downloads
nzdthb.png 4.9K
1 downloads
Anyhow, if it's Thai baht you're exchanging, a VERY ROUGH guess is, the Kiwi is not done going down judging from the wave pattern. OCICBW
Posted 2009-02-17 00:47:57
Thanks lanna - your input is always appreciated. And yes, it would be THB I would be exchanging... maybe I'll dabble a bit and see what happens (I've been known to 'pull out' on more than a few occasions... ). I'll keep people updated on my losses!
Now if I can just get Crash999 to give me his own special brand of technical analysis, then I can see things from both sides... 
If you're right lanna about the Kiwi still having some downside to it vs. the THB..... then oh boy I feel for the Kiwis in Thailand...
Posted 2009-02-17 01:08:47
jcon, on 2009-02-17 00:47:57, said: Thanks lanna - your input is always appreciated. And yes, it would be THB I would be exchanging... maybe I'll dabble a bit and see what happens (I've been known to 'pull out' on more than a few occasions... ). I'll keep people updated on my losses!
Now if I can just get Crash999 to give me his own special brand of technical analysis, then I can see things from both sides...
If you're right lanna about the Kiwi still having some downside to it vs. the THB..... then oh boy I feel for the Kiwis in Thailand...
To be clear, I don't know. I'm guessing based on what is insufficient data.
Posted 2009-02-17 04:52:15
jcon, on 2009-02-16 23:12:00, said: I'm at the Thai limit for foreign currency already, but I'm thinking I'll do it in somebody else's account.
? ?
Posted 2009-02-17 14:04:16
Naam, on 2009-02-17 04:52:15, said: jcon, on 2009-02-16 23:12:00, said: I'm at the Thai limit for foreign currency already, but I'm thinking I'll do it in somebody else's account.
? ?
Thai nationals have a 100k USD (or equivalent) limit for holding foreign currency in a Thai bank, all bank accounts included and summed up (they can, do, and will check - scb manager showed me on his screen what I held and in what banks, with just my Thai I.D. card number).
I am a dual-national, so my Thai-side is "quota-ed."
My other nationality has tax implications that I don't even want to get into, so I avoid it like the plague. Someday they will get me, but for now, fcuk 'em.
I should have written, "I'm at the foreign currency limit for Thais" instead of "I'm at the Thai limit for foreign currency" for more clarity.
|
Sponsored by ...
|
