All Posts Tagged With: "rba"

The Members of European Parliament are in the limelight again, expected to solve their fellow politicians’ fiscal problems.

Once again, they are bouncing off walls – this time figuratively, as far as we know. Alongside them are central bankers, IMFers and gaggles of other geese ruffling each other’s feathers.

–That smooching sound you hear is the sound of Australian investors planting a big fat kiss on the bald head of RBA Governor, Glenn Stevens. Stevens has no plans to raise interest rates anytime soon in Australia. He said as much in remarks yesterday. Despite a hell-storm brewing in Europe, Aussie stocks have opened the day up almost two per cent.

–What did the money-price fixer have to say?

The plunder begins on Sunday when the Rudd government finally unveils the Henry Review of Taxation, which, by all accounts, is likely to include a new federal resource “rent” tax to go alongside the royalties miners must already pay the States. The government could not have chosen a more apt word than rent. The government is the ultimate rent seeker.

When the man who sets interest rates tells you that you’re rising, it would be wise to at least hear him out. Whether you take him at his word is up to you. But if you’re making financial plans – say, like you’re going to buy a house and are trying to figure out if you can stand a few extra points rise in the interest rate – the man has told you what is going to happen.

RBA assistant governor Philip Lowe said in a speech in Sydney yesterday that constraints on home building are restricting the supply of homes in Australia. The shortage is one factor keeping prices up. Nothing was said about the lending boom.

On that note, it is worth going off on a tangent for a moment. The idea that government formed institutions can bring about free markets and globalisation is a paradox.

The burden of today’s Daily Reckoning is to figure out what’s going to happen when Australia’s millions of baby boomers retire. From the looks of it, the stock market will crash, government finances will be stressed, and the economy is going to slow. None of that sounds very promising.

Banks have recapitalised, making up for some of their losses from 2008 and 2009. But you still have a financial system addicted to debt and leverage. Investors have bought into the recovery story, though, and taken a punt on shares at just the time they ought to be reducing their allocation to shares (in our estimate). Why?