EYE-BALL Guru on – The Great Big Financial Swindle – Part III – GFC Bailout has only postponed the inevitable –
|Latest GURU Posts:
29th Dec – The Great Big Financial Swindle – Part II – The ‘Budget Surplus’ Backflip – Swan tells his own Porkies …
– 22nd Dec – The Great Big Financial Swindle – Part 1 – The ‘Budget Surplus’ Backflip – Swan serves up Senator Wong
– 14th Dec – The Walls are crumbling – Government admits High A$ policy is hurting –
– 4th Dec – Retailers and bureaucrats don’t understand – high A$ value responsible for off-shore purchases –
– 19th Nov – Government Expenditures Part I – Department of Prime Minister and Cabinet – DPMC – STAFFING –
– 3rd Nov – Shareholders – Holding back the world – scared money – scared boss’s –
– 31st Oct – Finally – RBA bubble head opens his mouth – He says – $A intervention not needed –
– 25th Oct – Foreign Minister Bob Carr & Wife – An Australian asset –
– 25th Oct – Communications Minister Stephen Conroy – one of Gillard’s Lap-dogs – untrained and unleashed –
– 24th Oct – Climate Change Minister Greg Combet – The Carbon Tax – emissions Trading scheme –
– 24th Oct – Treasurer Wayne Swan – Mini Budget Part 3 – The Clangers keep coming …
– 23rd Oct – Treasurer Wayne Swan – Mini Budget Part 2 – Mortgaging Australia’s Future to appease his ego
– 22nd Oct – Treasurer Wayne Swan – Mini Budget Part 1 – paints a false mirage to protect his legacy –
– 21st Oct – Penny Wong – On the mid-year accounts –
– 16th Oct – The First Home Owners Grant – the fallout and a reflection on a stupid stupid Government policy …
– 10th Oct – Tony Abbott Talks the Talk – but he is on empty when it comes to detail –
To see more GURU posts:
– The Great Big Financial Swindle –
– Part III –
– GFC Bailout has only postponed the inevitable –
| Author: EYE-BALL Guru | 2nd Jan 2013 |
|The most recent OECD report on Australia’s economic outlook was released on the 14th Dec 2012. The report represents some 140 pages of reproduced ABS and other domestic think-tank compiled data. It’s front page presents a summary of the collected data and highlights some interesting statistics.
[Click here to download the report as a PDF file …]
We all hear how Mr Swan loves to talk up the GDP growth numbers and boast his and the Government’s achievement in producing those numbers.
Under Labour GDP has grown to $1.487 trillion – see snapshot above – he often chides the Opposition over whether they have the ability to manage a $1.5 trillion dollar economy … meaning that he does and they don’t.
The GDP that gets the figure to $1.5 trillion is GNI – Gross National Income + Imports + exports. The GNI is $353.6 billion as at Sept 2012 – the national debt stood at $250.1 billion – source linked here – that represents a debt/GNI ratio of 71%.
I hear economists and other ALP supporters arguing that Australia’s financial position is so much better that the rest of the world. They based this calamitous comment on the fact that the Australian debt/GDP ration sits at around 26%, when most of our major trading partners is near 100% and above. Those same economists argue that this is reason to allow the Government to spend more money to save the economy from slipping into recession.
What absolute tripe … Australian commerce is coming to a screeching halt – not because of a lack of Government stimulus since the GFC – some $300 billion in new debt confirms this … but all because the rest of the world sees us as too expensive a Nation to deal with.
Our labour costs, our currency value, our trade imbalance, our reliance on others to produce the goods we want … Australia has never been more vulnerable to an economic Armageddon than is is right now … and yet the so-called elite of economic forecasters have no fear of what lies ahead.
The GFC impact was delayed here in Australia – that delay can no longer be held at bay – it is coming and the spending firstly by Rudd, and then the gluttonous irresponsible splurges by Gillard and her gang of bohemian snot-noses, has now place Australia smack in the middle of the ‘overflow’ equation. We have ventured too close to the cliff edge and gravity is working us closer – we will not nor cannot stop what is about to happen in this Nation.
The OECD report commentary is ‘dunny’ paper for the future … it’s based on past numbers and forward estimates provided by the Australian Treasury and ABS – the Treasury no longer has any creditability on economic forecasting given the so-called $160 billion in erroneous predictions of revenues the Government blame as the reason for the most recent budget surplus backflip.
The ABS use the Treasury numbers and modelling to form a great many of their numbers … it’s all tainted – and this OECD report is about as useful as a torch in a dark room with flat batteries.
Here is a fact – in the 2012-13 year the Government has forecast the interest cost in servicing the debt owed at $12 billion, up from $11.4 billion in 2011-12. That is assuming interest rates stay where they are or fall further.
A 1% rise in interest rates adds $2.5 billion to the current interest cost, 5% adds $12.5 billion and more than doubles the budget forecast.
To access the chances of future interest rate increases one has to be a realist – economic growth will not drive up interest rates – nor the threat of inflation indicator increases, but as Australia’s economic woes becomes more visible to the rest of the world, foreign capital inflows parked here because of the decade long resource ‘cash and carry’ trade will take their profits and move on the the next safe-haven.
This can be explained further when we revisit the reasons why the Government saw th need to guarantee the Banks during the height of the GFC crisis in early to mid 2009. During this period the A$ fell from near parity to below A$0.60c … in a matter of weeks – this was foreign investors withdrawing their investment funds in a panic move because they saw the ‘resource trade’ as finished. The Government had to issue the guarantee to stop ‘moms and dad’s’ also withdrawing their funds …
Bank security is a fickle thing – panic throws all logic out the window … yet that panic only comes when everyone realises they are at risk on being the last cab off the rank to act.
The only thing that will keep those off-shore funds on-shore is a rise in interest rates here at home – or a fear that where-ever they take their funds will increase their risk exposure.
When Mr Swan boasts about his ‘pipeline’ of future investments he proves his stupidity … Brazil, Mongolia, and Africa are months away from providing everything Australia provides in its mineral wealth and export volumes to the rest of the world – at a fraction of the cost to produce the same ore here in Australia.
If other Nations around the world stabilise as Australia begins its own economic meltdown, interest rates will rise very quickly in competition to try and keep those off-shore funds here.
None of the economic forecasters are expecting interest rate increases – but during the late 70’s and 80’s we had interest rate rises from single digits to in excess of 20%. This triggered the Keating ‘recession we had to have’ and that killed the ‘inflation’ fueled pressures and allowed interest rates to fall.
It took another five odd years to have commercial Bank interest rates safely back under 10% and since then it has been steady as she goes …
A hiccup here and there and the whole equation balance of global investment flows becomes a dogs breakfast fight for those funds.
With the ‘thick-tanks’, not ‘think-tanks’ at Treasury and the RBA, who by the way wear all the responsibility for the mis-management of the high A$ policy over the last 10 odd years, are all hoping for events to fall their way, as opposed to researching and advising policy that will assist insulating this Nation from the impending disaster.
THE TRADING ECONOMICS CHARTS:
Trading Economics is a global resource and provided free or paid-for economic data for Nations and their economic performances – use this link to view a summary page of all Australia’s economic indicators and a further reflection of the OECD data – again provided by the ABS and the Australian Treasury.
The chart and summaries below present some of the OECD data – [click all charts to enlarge in a new window]:
EuroZone Interest Rates: [Data series only goes back to 1998 – when €Euro commenced.] – note the small period post GFC when they lifted Official Interest Rates for a short few months to try and attract capital to the region …
The biggest issue associated with the interest rate differential game being played out is the RBA’s persistent concerns over inflation re-emerging.
This is 80’s and 90’s thinking and an overflow from old style economics. This highlights the archaic methodology of the RBA ‘think-tanks’ … they fail to understand that inflation is now a global infection – not so much about domestic policy but about global trade – and that trade being completely linked to labour costs and the domestic cost in currency terms to trade with one another.
There is no risk of inflation in Australia with the current value of the A$ – reducing interest rates on the back of this knowledge risk’s the off-shore investor funds exiting … given the value of the capital appreciation i.e. profits – in their A$ position they will jump at any reason to. The RBA had blundered badly and they continue to fail in their economic policy advice to the equally dumb Treasurer Wayne Swan.
If you are ‘long’ Australian property – your have reasons to be concerned – the best advice on offer would suggest to sell A$ assets and buy off-shore – i.e US property looks good and when the A$ crashed as it surely will – you’ll double your money when you consider the fall in Australian house prices, and the incumbent appreciation of your US$ house value.
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The EYE-BALL Guru …