Interest Rates

The Reserve Bank has decided the economy is ticking along for the moment, and airline passengers lists confirm that many Australians have had a bit of cash to spare. On the day the central bank left official interest rates untouched, the Bureau of Statistics revealed millions of Australians have been in a position to take advantage of the dollar’s golden powers abroad.

Last year, short-term departures by Australians reached a new record of 7.8 million overseas visits, up from 7.1 million in 2010. Back in 2001 there were just 3.4 million visits.

Some 57 per cent of those who left the country for a short time last year did so for a vacation and a further 22 per cent said it was to catch up with relatives. That amounts to a lot of people with the dough to put to travel, a relative luxury.

Continue reading "The sun is shining but storms lie ahead for the surplus" »

Stop all the cheering, cut off the champagne. Prevent the pollies from barking and silence the drums. The piddling interest rate cut didn’t even happen.

Today’s widely expected drop of 25 basis points was the catalyst for plenty of chest beating. Treasurer Wayne Swan tried to unleash righteous fury, the banks tried to cry poor, the unions said the banks are squeezing ordinary Australians, and not in a good way. Nothing happened. The Reserve Bank of Australia decided to keep the cash rate steady.

But was all the hullabaloo justified in the first place?

Continue reading "Interest rate barney barely even rates as interesting" »

It’s the first Tuesday of the month, so if you’ve got a mortgage, you know what that means: you’re going to be hearing about interest rates today.

Economists are saying that it’s likely the RBA will cut rates. But those same economists, and punters, don’t seem to think it’s particularly likely the banks will pass on any cuts.

What’s interesting YOUR rates today? What’s on your mind?

Wayne Swan has made a mockery of his Finance Minister of the Year award in his dithering, spineless effort at pressuring the banks to do the decent thing on interest rates.

Swan went into half-arsed PR mode yesterday, using the media to spruik the line that the Big Four banks should drop interest rates 0.25 per cent in line with the RBA’s 0.25 per cent cut in the official cash rate.

He could have, and should have, done more. His role is not to lamely express dismay on our behalf. He is the Federal Treasurer. He has contacts. At moments like this, he should personally contact the Big Four bank chiefs and threaten all manner of medieval punishments if they fail to pass on the rate cut, the whole rate cut and nothing but the whole rate cut.

Continue reading "Wayne, shut your jawbone and show some backbone" »

An audible sigh went up around The Punch office yesterday as interest rates dropped a quarter of a per cent, as the bookies predicted.

The PM said there would be no reason for the banks not to pass on the rate cut in fall, but as The Punch was signing off late yesterday that was yet to have happened. Are interest rates falling a good thing for you? Or do you have something a little more interesting to say that might get a rise out of us?

It’s Wednesday, what’s on your mind folks?

Yesterday’s 0.25 per cent cut in interest rates has been framed in today’s press as great news for people with existing mortgages and those seeking to enter the property market.

Fair enough. On the face of it, it is good news. Repayments on the average 25 year home $300,000 loan will be $50 less this month, thanks to the jolly fellows in red and white fleecy suits at the RBA. But it’s even better news for wealthy property owners and real estate agents, who are both set to reap the rewards of an impending buying frenzy.

No issue in Australian life is framed in a more upside-down, nonsensical way than the issue of property prices. The more the market heats up, the more we sing and dance and rejoice. That, despite “housing affordability” continuing to be the greatest misnomer in Australian life since the show Australia’s Got Talent.

Continue reading "Why the rate cut will just create a deeper rut" »

Wayne Swan is aggrieved. The hard-working treasurer is disappointed at the way his long-heralded bank reform package has gone over. But should he be surprised really?

Let’s face it, bank packages, especially over-hyped ones, always underwhelm. Knowing this, it is curious that the Government has again managed expectations so ham-fistedly, taking weeks to reveal an unremarkable hand. Perhaps, like many things, it depends on where you stand.

After toiling away behind the scenes, the Government feels it has offered up serious reform. This may or may not turn out to be true if things like genuine portability of account numbers come to pass. Ditto with allowing banks to tap into the one trillion dollar national superannuation nest-egg, which may help storm-proof the finance sector against future global credit crunches. But neither of these reforms, nor many other aspects of the package, will do much for home-owners right now.

Continue reading "There’s not really a lot Wayne Swan can do about banks" »

Treasurer Wayne Swan, as Acting Prime Minister, began his press conference today by acknowledging Australians who have been hit by savage, widespread flooding.

Then he started talking about how he was going to help ordinary Australians by shaking up bits of the financial system, and it was at that precise point that Wayne Swan lost about 99 per cent of banking customers.

Floods they could understand, even if they were high and dry; covered bonds and RMBS funding were outside their usual ATM transactions.

Continue reading "That’s all great Wayne, but what about interest rates?" »

$6.4 billion in profit: Westpac Bank. $5.7 billion in profit: Commonwealth Bank. $4.2 billion in profit: the NAB. And $4.5 billion dollars in profit: the ANZ bank.

That is $21 billion in profit made by the big four banks on the back of the worst global recession the world has seen since the Great Depression. $21 billion in profit made while the government continues to provide some guarantees to the banks first provided during the global financial crisis.

The Greens believe enough is enough.

Continue reading "The major parties haven’t done enough on banks" »

Julia Gillard will be squeezing this sitting week in between international engagements but it’s likely to be wholly domestic matters that dominate Question Time today. Join us here from 2pm for live coverage.

Prime Minister Gillard is reportedly angry over the latest bank interest rate rise but people expect action rather than emotion from their government.

Wayne Swan has been angry with the banks on more than 30 occasions over the past three years but that hasn’t stopped them from raising interest rates by more than the Reserve Bank. This almost never happened under John Howard and Peter Costello and is a sign that the current government isn’t taken seriously as an economic manager.

Seven interest rate rises in the past year have added more than $500 a month to the repayments on an average mortgage.

Continue reading "Julia and Wayne are very angry, but what will they do?" »

Wayne Swan has a problem.

The banks think he’s a pushover. Several hundred thousand home-owners agree.

Now that the ANZ has joined the Commbank in defying public opinion and overshooting the Reserve Bank’s official interest rate increase, the federal treasurer finds himself in familiar territory. He’s really, really angry.

Continue reading "Interest rates: what now Wayne?" »

Ralph Norris and the Commonwealth Bank have had a tough week.

Following the decision to raise lending rates by almost double the Reserve Bank’s own rate hike there has been stinging criticism from pretty much every sector of the economy and a bit of personal abuse thrown in for good measure. 

Representatives from across the political spectrum have anointed “bank bashing” as Australia’s new national sport and the CBA and Ralph himself are a daily headline for every journalistic medium.

Continue reading "Ralph… what we have here is a failure to communicate" »

As the four big banks continue to act as a law unto themselves it’s time for Wayne Swan to match the tough talk with tough action, especially in relation to our competition laws.

We have some of the weakest competition laws in the world and that’s why we’re now in this mess with the four big banks.

The simple reality is that Wayne Swan and the ACCC have allowed the four major banks to get as big as they. The ACCC and, ultimately Swan failed to stop Westpac from taking over St George and that was after years of failing to stop the four big banks from taking over the smaller banks.

Continue reading "How Swan can actually make the banks pay" »

Imagine the same people who ran Australia’s big four banks ran your local Italian restaurant. It’s the little things you would notice first – the asterisk at the bottom of the bill alerting you, in six point type, to the $2 cutlery retrieval fee imposed the moment the waiter brought you a knife and fork.

Looking at the specials board would also incur a $2 charge. So would asking for a high chair.

If on one unfortunate night you had a soggy carbonara and they forgot the garlic bread, you would have to return to the restaurant to organise a meeting with the owner, explain that it was nothing personal but things weren’t really up to scratch, fill in an exit form and pay them $1000 before you’d be able to transfer your custom to the trendy new bistro which had just opened up the road.

Continue reading "Gratuitous PR advice for our friends in banking" »

Although his line of business was never clearly identified, it has been suggested by some scholars that Ebenezer Scrooge, the miserly grouch in Charles Dickens’ A Christmas Carol, was probably a banker or money lender.

Many current bank customers and mortgage holders would more than likely agree with this assessment in the wake of the wave of anger in the past week over interest rate rises and bank profits.

Bashing banks has long been a favourite Australian sport, especially when loan repayment pressures bite customers and the “Big Four” institutions reveal the billions they have made.

Continue reading "Public wants intervention on interest rate hikes" »

Loathe as I am to use a dirty four letter word a nice family-minded website, here goes ...

Bank.

To many observers our major banks appear to be engaged in a kind of cruel sport. The rules are obscure but it seems to involve repeated, heavy crash tackles on ordinary people – people with savings accounts, credit cards, home loans, that type of thing. Also kids, debts, bills and other worries. They’re commonly known as bank customers.

Continue reading "It’s official: we really, really, really hate the banks" »

Two weeks ago I decided to take a public stand on behalf of ordinary Australians. Home buyers, consumers and small business are sick and tired of being taken for a ride by the banks, who time and time again increase their interest rates above and beyond the official movements of the Reserve Bank.

I’ve had my critics - but if that means I’m standing up to a guy who earns $50,000 a day, while the customers who underwrite his business earn $50,000 a year – then I’ll cop it.

A strong banking sector is vital, but at the same time banks have an obligation to give something back to the community.

Continue reading "Hey Wayne, are you still laughing about bank reform?" »

There’s an old joke about what the difference is between a dead kangaroo on the road and a dead banker. There are skid marks in front of the kangaroo.

This week I am starting to wonder or not this is really a joke or the results from an experiment actually conducted.

If the last few days have brought any good news at all, they have at least confirmed Australians’ long-held suspicion that bankers are an evil clan of blood-sucking parasites with the social conscience of Genghis Khan.

Continue reading "It’s time for Julia to get medieval on the banks’ asses" »

This time yesterday Australians were merrily preparing for the Race that Stops the Nation, confident in the economists’ predictions the RBA would avoid the un-sportsmanlike act of hiking interest rates on Cup Day.

Just 24-hours later all hell has broken loose.

The RBA might have turned on the rates tap with its 25 basis points rise in official interest rates announced at 2.30 yesterday afternoon, but the Commonwealth Bank forced open the flood gates with an immediate move to put its own rates up 45 basis points.

Commbank boss Ralph Norris is not talking this morning, instead letting the Australian Bankers Association make the running.

Association chief executive Stephen Munchenberg said: “What the Commonwealth Bank is saying is that that marginal effect has built up 2 basis points or 0.2 per cent each month, and that’s now built up over nearly a year since the banks last moved interest rates, so there’s a cumulative effect there.”

Westpac just announced its profits have risen 84 per cent in the last 12 months. Yes, that wasn’t a typo - 84 per cent. In the 12 months to September 30 the Gail Kelly-steered Westpac made a net profit of $6.346 billion.

Apparently Kelly is due to make an announcement later today. Wonder what on earth that could be.

Continue reading "What a bunch of bankers" »

Our major banks are not like other businesses.

If a boat builder in Taren Point, or a plastics manufacturer in Chipping Norton or a motel owner on the Central Coast of NSW gets into trouble, there will be no taxpayer bail out. There will be no funding guarantee to support their continued access to credit. There will be no Reserve Bank to act as their own on-call lender of last resort to see them through their troubles.

The GFC proved that our four big banks are too important to fail. They know it and the taxpayers know it. The banks may be a legitimately protected species, but that does not give them a license to be precious, striking out at anyone who would dare raise questions about how they do business.

Continue reading "Banks can complain all they want but Hockey’s right" »

Attempting to make political capital out of interest rates is a risky business. It’s so tempting for both governments and oppositions to have a go at it, but invariably it ends up like some kind of disastrous military quagmire from which you must make a humiliating retreat.

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Joe Hockey’s demands that the Government step in to stop banks raising interest rates above the levels set by the Reserve Bank is a big and risky play. He could ask his former Prime Minister John Howard about its dangers. Howard’s famous statement that “interest rates would always be lower under a Coalition Government” came back to bite him in 2007 when rates rose right in the middle of an election campaign. 

Hockey has been immediately embarrassed by the reaction of one Liberal MP to the prospect. Liberal MP Don Randall was asked about idea this morning, and not knowing it came from Hockey said this:

Continue reading "Hockey’s big dangerous play on interest rates" »

With official interest rates set to rise and the costly festive season looming large on the horizon there’s no doubt Australian’s budgeting skills will be put to the test over the next few months.

Financial skills are incredibly valuable but it’s often not until you get older that you begin to appreciate the small lessons about saving and spending your parents may have taught you when you were a kid.

Growing up on a farm meant my Mum and Dad generally made the most of having me and my two siblings around during school holidays to do the jobs that needed to be done. Often we were given the opportunity to make some cash carting hay or working in the wool sheds.

Continue reading "Giving kids an early start in learning to make ends meet" »

The likelihood of interest rates rising is back on the agenda, following explicit warnings from the Reserve Bank that it is considering the need for tighter monetary policy.

The Coalition has consistently warned that the Labor Government’s heavy borrowing and build up of debt will put upward pressure on interest rates.

These warnings have been rejected by the government and by a few select commentators in the media.

Continue reading "Big spending equals big rates - no buts about it" »

With the Commonwealth Bank announcing a record profit last week you have to wonder if the big banks are laughing all the way to bank at consumer’s expense. What are struggling Aussie families with mortgages to make of the ever growing profits by the big banks and warnings from bank CEOs to expect more interest rate rises?

Well, consumers and Aussie families need to be really upset at the failure of the Federal Treasurer Wayne Swan and the ACCC to protect competition in the banking sector. Wayne Swan and the ACCC just stood by and let the major banks take out vigorous competitors.

This failure has allowed the four major banks to increase their stranglehold of the banking sector to such dangerous levels that the major banks can now just increase interest rates and fees at will.

Continue reading "Big banks laughing all the way to the… bank" »

To own your own home is the dream of many.  I never noticed it as much until I arrived to Australia almost 7 years ago.

People younger than myself had already purchased their first homes; some even had additional investment properties. I was shocked; I couldn’t understand how they managed to achieve it.

In Ireland then, no one I knew in my age bracket owned their own home, instead we all rented and spent most of our disposable income on entertaining and holidays in Europe.

Continue reading "The Australian dream is fine for those who can afford it" »

Now I have vacated the job of helping edit news.com.au, let me reveal my dreadful desire to write an almost unthinkable headline: “Rates hike means more gain for savers”.

It’s pretty well inconceivable that any major media outlet would lead with this sentiment for fear of alienating all the hard-pressed homeowners, the millions of working families and Aussie battlers feeling the pinch in the ever-tightening mortgage belt.

This holds true from the most rabid reactionary radio shock jock, through the marching minions of Murdochdom (I am yet to hand back the company-issued electric shock collar), to the fairy floss fops of Fairfax and even unto the ABC commissars of collectivist cant.

Continue reading "Come on RBA, get those rates up you good thing" »

Update 3pm: The RBA surprised everyone and left interest rates on hold today.

In recent years a horrendous new phrase has appeared to describe people struggling to make ends meet. They’re suffering from “mortgage stress.”

This week it was reported almost half of the young people who availed of the Rudd Government’s increased help for first-home buyers were suffering from this terrible condition. If true life will get a whole lot more stressful for them over the coming months as interest rates return to normal, starting most likely with a Reserve Bank announcement this afternoon.

Where did this “mortgage stress” phrase come from, anyway? It sounds like some kind of psychological disease that should be covered by Medicare. As far as I can tell what it actually means is you have borrowed too much money.

Continue reading "Are your stress levels going up with interest rates?" »

At first blush today’s employment figures are an early Christmas present for the federal government. Some 30,000 jobs were created in November and the unemployment rate, against expectations, crept downwards by the tiniest of notches.

But there won’t be any champagne popping in the Cabinet room. There’s a worrying trend beneath the figures: the mining states, which you’d assume are leading Australia’s unexpected economic performance, are actually shedding jobs. It’s the states in the southeast - previously the laggards - where the jobs are being created.

So [the run-up] to Christmas Eve will be a nervous one for Kevin Rudd. Santa could be preparing a big sack of trouble to chuck down his chimney in the form of the national accounts which come out on December 24 16 and should give a clearer indication of any weak spots in the economy.

Continue reading "The one Christmas present Kevin Rudd doesn’t need" »

As a child, my parents read to me the classic childhood tale of the boy who cried wolf, a tale that cautions against repeatedly claiming danger when there is none.

Last year, businesses throughout the world experienced danger associated with the global financial crisis.  The risk of a catastrophic collapse of confidence was very real and to the credit of the Australian Government, and other governments around the world, there was quick action to restore investor confidence.  The stimulus package might not have been perfect, nor was it always directed in the best way possible, but it did its job.

But if you have been listening to the banks of late, you might get the sense the crisis has not passed, that profitability is under grave threat and that interest rate margins are too low. I dispute this.

Continue reading "OK banks, you’ve had your fun with interest rates" »

So banking is like bananas.  And facing a storm like the tragic one in Queensland a few years back that hit banana growers hard.  Or so says the following Westpac video.

Some people think it was silly.  Condescending, even.  Maybe they think a disaster caused by banks isn’t the same as one caused by nature.
Me, I don’t think it’s silly. Like Forrest Gump said, life is like a box of chocolates.  Except now it’s like a banana smoothie.

Continue reading "Westpac: Yes, we have no bananas" »

Over the past few years Westpac CEO Gail Kelly has been the lucky beneficiary of some of the mushiest anti-journalism in the land.

Going back through the clipping files is, to use a cliché, a veritable orgy of cliché. Kelly has been hailed as the supermum, the platinum-haired beauty, a woman of steely resolve, who is always immaculately turned-out, a passionate advocate of work-life balance, someone who is quietly reinventing the way business is done with a more compassionate, family-minded approach to corporate conduct.

When she was appointed as CEO in August 2007, one female journalist shouted excitedly at the press conference: “There’s hope for us yet!”. There is hope you yet, girls, if your idea of equality is seeing female chief executives demonstrate that they can be every bit as foolish and as flint-hearted as their overwhelmingly male equivalents.

Continue reading "So much for Gail Kelly’s innate feminine compassion" »

It’s time for a hard conversation about money. Some Australians, it seems, have literally bet their houses on interest rates staying at the current record lows.

There’s a stock-standard way of reporting the outcome of a Reserve Bank meeting in which the board decides to leave the target cash rate unchanged. You’ll have heard it on radio: “Homeowners can breathe a sigh of relief after the RBA left interest rates on hold”.

But with interest rates as low as they are, any homeowner who is really holding their breath waiting for the RBA decision these days is, quite simply, living beyond their means.

Continue reading "If rate rises are hurting now, you need a smaller house" »

There were lots of memorable lines in Tony Abbott’s first press conference as Liberal leader yesterday but there was one you can expect to hear repeatedly ahead of the next election, whenever that might be.

``Each and every interest rate rise over the next 12 months is due to the irresponsible spending spree of the Rudd government,’’ he said.

There you have it. Kevin Rudd is going to be made to own each and every 25 basis point rise in interest rates between now and the next election - including the latest one yesterday.

Continue reading "Here comes Tony" »

Evidence is now mounting that last week’s Newspoll poll showing a seven point drop in Labor support was a rogue result, with Essential Research’s weekly tracking showing no movement in the two-party preferred vote.

The Essential Report, that has Labor comfortably ahead 59-41, follows on the heels of Monday’s Herald/Nielson poll that was also steady.

Beneath the headline figures there are some intriguing sub-plots, with the public going close to welcoming the increase in interest rates, while continuing to rate the Prime Minister down on his handling of the asylum seeker issue.

Continue reading "It’s a blip – Rudd maintains lead with interest" »

UPDATE: As of 5pm all four banks have already passed on the interest rate increase.

For the second time in as many years, the Reserve Bank has helped cement the banking community’s reputation as a cuddly bunch of warm-hearted funsters by using Melbourne Cup Day to stick it to home-owners.

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While you were munching on some prawns the RBA increased rates from 3.25 per cent to 3.5 per cent, resisting the temptation to go for a much more dramatic and painful 0.5 per cent rise, but still sticking by its warning that there would be more more pain to come.

Many people with mortgages will shrug this one off – we’re still about $700 a month better off in terms of repayments than we were when the GFC hit.

Continue reading "Kevin Rudd does not want to own these rate increases" »

Whatever the reason, Kevin Rudd can take no comfort from today’s Newspoll showing a seven-point turnaround in the standing of Labor and the Coalition in the past fortnight. The poll comes as political strategist and Punch regular Peter Lewis writes today that a majority of Australians thinks Rudd is weak on border protection, according to the latest Essential Media findings.

The PM’s nightmare scenario is that there are three factors at play - disapproval at his “tough but fair” line on asylum seekers, disquiet over his economic management ahead of today’s dead-cert interest rate hike, and a sign that some voters are growing tired of the hitherto unassailable Teflon Kevin.

Unless the Newspoll is a blip, Labor is facing the almost unbelievable prospect of a nail-biter election with a two-party preferred lead of 52 to 48 over the Coalition. We’ll throw the commentary to you - what’s your take on it?

Wayne Swan went on the front foot this afternoon in response to the 0.25 per centage point interest rate rise the RBA has just announced.

Before Joe Hockey could race to the back of the NSW Parliament to accuse the Government of being responsible for the rise, Mr Swan predicted he and Malcolm Turnbull would try to pin it on him and the Prime Minister.

“Never forget that if the Liberal Party has their way Australia would be in recession right now,’’ Mr Swan said. ``For the Liberal Party to claim now that interest rates can stay at record lows is simply laughable and demonstrates their lack of any economic credibility whatsoever.”

Continue reading "Interest rates: who’s to blame?" »

Update 2.35pm: The RBA has just announced it has raised the official cash rate by 0.25 a per centage point to 3.25 per cent.

The Rudd Government is yet to make a hard decision. But this won’t stop them leaving the heavy lifting to someone else - namely Glenn Stevens at the Reserve Bank.

Whether the RBA decides to lift interest rates today or on Melbourne Cup day, this will be a hard decision. It will mean increased pressure on family budgets and small business.

For the more than 200,000 Australians who have bought their first home recently, it will their first Rudd rate rise, with more to follow.

Continue reading "We don’t want to join the high interest rates club" »

Last Friday I continued a tradition of my predecessor in Cook, Bruce Baird, by catching up with one of our more prominent Shire constituents at Tatterstalls Club in Sydney.

The occasion was a public hearing of the House of Representatives Standing Committee on Economics, which Bruce used to chair. The constituent was none other than Reserve Bank Governor Glenn Stevens. The Shire conspiracy over economic management in Australia continues!

As usual, reports of the proceedings narrowed in on the key question of where rates are headed. Sadly, the answer is up,  by as much as 2%. This was not a major revelation as the Governor had already flagged this view in the Bank’s August monetary policy statement.

Continue reading "When rates go up again, who will Rudd blame then?" »

No pay rise and no relief on the mortgage. It hasn’t been a banner day for Kevin Rudd’s working families. But that’s the price of prudence.

The Reserve Bank’s decision to leave interest rates unchanged at 3 per cent was no real surprise. Not much has changed since the nine board members’ last met in June, certainly nothing to convince them that the time was right for a little extra economic stimulation.

The Fair Pay Commission’s decision to deny Australia’s 1.3 million battlers a pay rise was a little more unexpected. The ACTU argued strongly for another $21-a-week hike to the minimum wage.

Continue reading "No payrise, no rates cut, no joy for working families" »

If you’re searching for your first home you’d better find one this week, and you’d better have a healthy deposit, and you’d better hope your job’s secure, and you’d better pick the right suburb and don’t think about relying on the economic downturn to help you out.

No pressure but the Commonwealth Bank and BIS Shrapnel have in the past couple of days butted into the dreams of thousands of Australians and promptly turned them into a nightmare.

Contrary to all dining table predictions BIS Shrapnel today said house prices will go up 20 per cent over the next three years. This as CBA raised its fixed rate, after last week being the first to break ranks and lift its variable rate. Expect the rest of the banks to follow at a respectable distance, as soon as Wayne Swan stops holding press conferences to talk about team work and heavy lifting.

So prices are going up, rates are going up – and you can’t even get the friendly guy from the bank to take your call. And guess what, it’s your fault.

Continue reading "First home dream turns into a nightmare" »