MSE News: Base rate held at 0.5%

Really2

chucky wrote: »

and don't they also have a potential housing bubble ready to potentially burst?

It's a good point and similar what the UK sleepwalked into.

The rate increases (and rate holding) we did to combat inflation because of the oil bubble were actually the wrong call. (because the economy was half down the pan and oil popped spectacularly)
Their can be no doubt it made our problems worse, could Oz sleepwalk in to a similar situation and pop it's housing bubble instead of slow deflation.

I don't know that much about OZ but I would think their banks could do without asset crashes an defaults at the moment, just like any other nation

Thrugelmir

Really2 wrote: »

Is that not because of their inflation?
http://news.smh.com.au/breaking-news-business/consumer-inflation-expectations-up-mi-20091210-kl0z.html

Are we not going to suffer inflation longer term?

Interest rates will determine capital flows. And the UK will need to borrow money.

Generali

Australia has seen big rises in house prices and there have been falls in expensive areas.

There are a few things that put Aussie banks in a better position than most:

- The First Home Owners Grant means that very few borrow 100%.
- Banks have larger reserves than in most countries
- Banks require (and required for much of the bubble) Mortgage Indemnity Insurance for anyone borrowing > 80% of the property value
- 'Negative gearing' means that BTLers in trouble are at least able to offset their losses against income tax

The bigger potential problem for Australia's banks is probably unsecured debt. There is a culture in Aus (quite recent I think) for sort of 'reverse saving', that is buying something with consumer debt and then paying it off as quickly as possible. Once you're back to $0 you go and buy the next thing. Aussies love their toys - almost everyone seems to have a hobby car (usually it seems to be a 1970s Monaro) or a boat or a jet ski - and they are quite prepared to borrow to buy them.

Significant and prolonged increases in unemployment would hurt a lot of people that way. Fortunately Australia seems to have dodged the bullets for a large part so far. Unemployment is 6.2% (I think) and falling. Government debt is low and steps are being and have been taken to cover the liabilities of future pensions and few new liabilities are being built up thanks to the 'super' pension system.

Jonbvn

PasturesNew wrote: »

"Base rate held at 0.5%"

OR

"Savers robbed for a further month, so people who over-stretched don't feel the burn of their ways ... and those that hadn't overstretched get to party some more with their free/unexpected money"

OR

The STR doesn't seem to be panning out as expected.

Cannon_Fodder

Watching 'This Week' last night, Andrew Neil threw out a stat;

To insure £10Mn of Germany's debt costs £25k.
To insure £10Mn of the UK's debt costs £85k.

"The widest margin ever". Surprised the pundits.

Does anyone know;

a) was he right
b) is it a problem now
c) is it going to lead to a problem soon
d) if it will be a factor in interest rate setting
e) what it means generally

Generali

Cannon_Fodder wrote: »

Watching 'This Week' last night, Andrew Neil threw out a stat;

To insure £10Mn of Germany's debt costs £25k.
To insure £10Mn of the UK's debt costs £85k.

"The widest margin ever". Surprised the pundits.

Does anyone know;

a) was he right
b) is it a problem now
c) is it going to lead to a problem soon
d) if it will be a factor in interest rate setting
e) what it means generally

a. No idea but it sounds right to me
b. no
c. Probably not
d. Not directly
e. They're probably using prices in a market for something called a Credit Default Swap (CDS). This is a sort of insurance policy you can buy against someone you lent money to 'defaulting' (basically that means not paying the money back although it gets a little more complex).

Some CDS markets are 'liquid' and have pretty open prices and mechanisms which mean they have some reference to the outside world. Sovereign debt (Government debt) CDS markets are little more than a bunch of gamblers throwing the dice.

They have little meaning but they are a simple shorthand for risk used by people that don't really understand risk like journalists.

HTH