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Aussies economic future .... (Read 2313 times)
Sprintcyclist
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Aussies economic future ....
Oct 20th, 2008 at 11:16am
 
An article from a well respected banker, Hans Redeker, head of foreign exchange strategy at BNP Paribas, Europe's biggest investment bank.



"January 2008: he predicted the Aussie dollar was facing two years of decline, and expected to see it fall to 66 cents. He was right. He also predicted a rise in financial market volatility, higher inflation worldwide, higher interest rates in Asia, weakening demand for Australia's minerals exports from China, and a weaker sharemarket in China, all of which would drive down the Australian dollar. Since then, the Shanghai sharemarket has crashed 50 per cent from its peak.
October 2008: two weeks ago Redeker repeated his claim that abundant foreign money had been available to Australia and too much of it had been spent on real estate, creating a speculative bubble: "The easy money went straight into real estate c Australia will now have to generate 4 per cent of GDP to meet payments to foreign holders of its assets. This is twice as high as the burden faced by the US."
After the Australian Reserve Bank slashed key interest rates by 1 per cent, Redeker also told London's Telegraph that he was concerned about what the Australian Government may do: "Yes, Australia has a fiscal surplus, but that does not offer as much protection as people think. If the Government boosts spending further, the current account deficit will spiral out of control."
And what has the Rudd Government just done? Boost spending.
There was certainly no discussion of the current account deficit spinning out of control, or Australia's excessive debt, when the Prime Minister, Kevin Rudd, launched his $10 billion economic stimulus package last week, nor any from the Opposition Leader, Malcolm Turnbull, who offered in-principle bipartisan support.
It gets worse. Redeker continued: "There is a risk, however remote, that Australia could face some of the foreign funding difficulties we have seen in Iceland."
Iceland! Iceland was the most leveraged economy in the developed world when it became the first economy to be bankrupted by the credit crisis. You do not want to be mentioned in the same sentence as Iceland unless the discussion is fishing or blondes.
After quoting Redeker, the Telegraph's global business columnist, Ambrose Evans-Pritchard, weighed in with his own commentary: "The immediate problem for Australia's banks is that they gorged on offshore US dollar markets to fund expansion because the interest costs were lower. They were playing c on a huge scale with leverage c European banks face much the same problem as dollar liabilities come back to haunt, but Australian lenders have pushed their luck even further."
Gabriel Stein, of Lombard Street Research, weighed in with this, after noting that Australian household debt had reached 177 per cent of gross domestic product, almost a world record: "It is amazing that in the midst of the biggest commodity boom ever seen they have still been unable to get a current account surplus. They have been living beyond their means for 10 years. What worries me is that productivity growth has been very low: they have been coasting after their reforms in the 1990s."
The global financial world is watching the Australian dollar because it holds a key to the great unanswered question of this uncertain era: will the global market punish a currency for its declining interest yield? Or will it reward a currency because of the soundness of its economy? Central banks are acutely interested in the answer.
Evans-Pritchard thinks the early signs are hopeful that the answer is the good one, that nations will be rewarded for having sound economies. But he does not believe Australia can escape the consequences of excess: "Australia has allowed its net foreign liabilities to reach 60 per cent of GDP during a decade-long boom, twice the level of the US. The country will, in effect, have to pay 4 per cent of GDP in the form of rents to foreign asset-holders as the bill for such extravagance falls due."
The bill is falling due. Earlier in the year Australians travelling in Europe would have paid about $1.50 for every euro spent. Today they need $2.10. The Aussie dollar is weak again, despite all the luck of the China boom. This raises a number of awkward questions. Did the lucky country became the greedy country? Did it fail to sufficiently embark on a program of nation-building during the resources boom? Was most of the bonus redistributed as tax cuts, which were spent chasing bigger mortgages, bigger homes, new cars and general consumption, stimulating short-term economic growth but not enough on long-term productivity and higher savings?
During 17 years of unbroken economic expansion and a 10-year commodities boom, it took a lot of people, borrowing a lot of money, taking a lot of unproductive risk, to get to where we are today: a nation with excessive debt and excessive vulnerability to external circumstances barely within our control.

http://www.smh.com.au/news/opinion/paul-sheehan/greed-a-deadly-sin-for-the-economy/2008/10/19/1224351052160.html?page=2
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Re: Aussies economic future ....
Reply #1 - Oct 20th, 2008 at 11:28am
 
Well that seems like a pretty fair assessment to me Sprint.

I am not in favour of the bailout mentality, and I think Rudd has gone too far with this, "spend your way out of trouble" approach.

Fair blame to Howard as well, when the nation was crying out for infrastructure investment, he was giving baby bonuses, and pork barrelling himself from one election to the next.

Howard and Costello could have invested the windfall profits of the resources boom in making our economy less fragile than it is, the states became addicted to their tax revenue from the property boom, both Labor and the Libs shortchanged us, and our future, to maintain their respective political advantages.

I think this belongs in POLITICIANS SUCK.  BIG TIME.
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Re: Aussies economic future ....
Reply #2 - Oct 21st, 2008 at 2:53pm
 
hi,
you can blame our "multiculturalism" for most of our woes.
ask yourself the question: why don't western europeans settle here like they used to?
DR9.

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Re: Aussies economic future ....
Reply #3 - Oct 21st, 2008 at 2:58pm
 
Plenty do. You might as well blame aliens instead. It would make about as much sense.

The RBA is strongly opposed to Rudd's unlimited cap on guarantees for bank deposits. Big investors are moving all their money into accounts that are protected by the guarantee, which is skewing the money market and making it harder for businesses to get investment. They want the cap on the guarantee to be as low as possible.
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Re: Aussies economic future ....
Reply #4 - Oct 21st, 2008 at 3:10pm
 
freediver - yes, $50,000 would be enough.

Why would a media loving populist alarmist PM NOT follow the RBAs recommendations ?
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Re: Aussies economic future ....
Reply #5 - Oct 21st, 2008 at 3:19pm
 
I've heard claims that the current government relies very heavily on RBA advice, partly due to Swan's inexperience.
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Re: Aussies economic future ....
Reply #6 - Oct 21st, 2008 at 6:33pm
 
'Australia's economic future.' Personally, I'd like to see Australia re-establish its manufacturing industry.
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Re: Aussies economic future ....
Reply #7 - Oct 21st, 2008 at 6:52pm
 
ex-member DonaldTrump wrote on Oct 21st, 2008 at 6:33pm:
'Australia's economic future.' Personally, I'd like to see Australia re-establish its manufacturing industry.


I would like to see it too but some trades and skills are already lost here so it would involve importing tradesmen and specialists from overseas, which is political no-no in current crises.
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Re: Aussies economic future ....
Reply #8 - Oct 21st, 2008 at 7:00pm
 
tallowood wrote on Oct 21st, 2008 at 6:52pm:
ex-member DonaldTrump wrote on Oct 21st, 2008 at 6:33pm:
'Australia's economic future.' Personally, I'd like to see Australia re-establish its manufacturing industry.


I would like to see it too but some trades and skills are already lost here so it would involve importing tradesmen and specialists from overseas, which is political no-no in current crises.


Man, why does this always need to result in mass importation of third-world migrants? Why is that ALWAYS the answer? 

Can't we just do what the Japanese did back in the 19th century and go overseas and bring back 'knowledge' about the industries and skills required?

A few tariffs would fix the manufacturing industry, but as a sacrifice, I think the resource industry would reduce significantly as a result (I'm not sure why this happens, it just does).
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Re: Aussies economic future ....
Reply #9 - Oct 21st, 2008 at 7:10pm
 
Why do you automatically think 'third world' when you read 'trades and skills'?
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Re: Aussies economic future ....
Reply #10 - Oct 21st, 2008 at 7:18pm
 
ex-member DonaldTrump wrote on Oct 21st, 2008 at 7:00pm:
tallowood wrote on Oct 21st, 2008 at 6:52pm:
ex-member DonaldTrump wrote on Oct 21st, 2008 at 6:33pm:
'Australia's economic future.' Personally, I'd like to see Australia re-establish its manufacturing industry.


I would like to see it too but some trades and skills are already lost here so it would involve importing tradesmen and specialists from overseas, which is political no-no in current crises.


Man, why does this always need to result in mass importation of third-world migrants? Why is that ALWAYS the answer?

Can't we just do what the Japanese did back in the 19th century and go overseas and bring back 'knowledge' about the industries and skills required?

A few tariffs would fix the manufacturing industry, but as a sacrifice, I think the resource industry would reduce significantly as a result (I'm not sure why this happens, it just does).


If you mean mining as resource industry then I don't se a tragedy in slowing it down. I reckon there is nothing wrong with keeping vital recourse for our own future.

As for Japanese, some of them went out to learn technology but when they return they had brought with them more than that and that is why everything Japanese changed so dramatically in that time.

The Distance used to be the reason why we had to be self reliant and I hope it will be again when cheap energy will be no more.

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Re: Aussies economic future ....
Reply #11 - Oct 21st, 2008 at 7:20pm
 
freediver wrote on Oct 21st, 2008 at 7:10pm:
Why do you automatically think 'third world' when you read 'trades and skills'?


I'm not sure, I guess because lately the word 'skilled' has been carelessly and incorrectly placed alongside the word 'third world immigrant' by the media and Government. So naturally, when Tallo mentioned 'importing tradesman and specialists' from overseas, I assumed he was using the same terminology and propaganda the media and Government put forth.

You're correct though, FD. I'm sure Tallo didn't mean importing third worlders would help create a solid manufacturing industry in Australia. To suggest that would be downright nutty and I think Tallo is a little too smart to suggest something such as that.

PS. You just couldn't resist replying to me even though I specifically asked you not to, could you?
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Re: Aussies economic future ....
Reply #12 - Oct 21st, 2008 at 7:26pm
 
tallowood wrote on Oct 21st, 2008 at 7:18pm:
ex-member DonaldTrump wrote on Oct 21st, 2008 at 7:00pm:
tallowood wrote on Oct 21st, 2008 at 6:52pm:
ex-member DonaldTrump wrote on Oct 21st, 2008 at 6:33pm:
'Australia's economic future.' Personally, I'd like to see Australia re-establish its manufacturing industry.


I would like to see it too but some trades and skills are already lost here so it would involve importing tradesmen and specialists from overseas, which is political no-no in current crises.


Man, why does this always need to result in mass importation of third-world migrants? Why is that ALWAYS the answer?

Can't we just do what the Japanese did back in the 19th century and go overseas and bring back 'knowledge' about the industries and skills required?

A few tariffs would fix the manufacturing industry, but as a sacrifice, I think the resource industry would reduce significantly as a result (I'm not sure why this happens, it just does).


If you mean mining as resource industry then I don't se a tragedy in slowing it down. I reckon there is nothing wrong with keeping vital recourse for our own future.

As for Japanese, some of them went out to learn technology but when they return they had brought with them more than that and that is why everything Japanese changed so dramatically in that time.

The Distance used to be the reason why we had to be self reliant and I hope it will be again when cheap energy will be no more.



They say that there is so much metal and mining resources in WA that it will never run out, Tallo. Not sure how true it is, but if we have it, might as well use it to our advantage.

I think it's vital that Australia stays self-reliant. I don't think globalization is working that well at the minute and I think the political theory will change a bit when the sh1t hits the fan.

Personally, I think classical Liberalism was the ideal model for Global trade.
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Re: Aussies economic future ....
Reply #13 - Oct 21st, 2008 at 7:46pm
 
ex-member DonaldTrump wrote on Oct 21st, 2008 at 7:26pm:
...
They say that there is so much metal and mining resources in WA that it will never run out, Tallo. Not sure how true it is, but if we have it, might as well use it to our advantage.

I think it's vital that Australia stays self-reliant. I don't think globalization is working that well at the minute and I think the political theory will change a bit when the sh1t hits the fan.

Personally, I think classical Liberalism was the ideal model for Global trade.


Just as they say that Australia can take another 16 millions of people.
That's a salesman's talk mixing maximum possible with sustainable cruising. Our national advantage is the same as an advantage of any company and that is vertical integration, which involves processing raw materials and even making some goods out of it e.g. heavy and medium size machinery that we always will need to get the raw materials out and to plough our fields.
Surplus of the raw materials then can be served as trade buffer because They need it more then Us.



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Re: Aussies economic future ....
Reply #14 - Oct 21st, 2008 at 8:15pm
 
ex-member DonaldTrump wrote on Oct 21st, 2008 at 7:20pm:
freediver wrote on Oct 21st, 2008 at 7:10pm:
Why do you automatically think 'third world' when you read 'trades and skills'?


I'm not sure, I guess because lately the word 'skilled' has been carelessly and incorrectly placed alongside the word 'third world immigrant' by the media and Government. So naturally, when Tallo mentioned 'importing tradesman and specialists' from overseas, I assumed he was using the same terminology and propaganda the media and Government put forth.

You're correct though, FD. I'm sure Tallo didn't mean importing third worlders would help create a solid manufacturing industry in Australia. To suggest that would be downright nutty and I think Tallo is a little too smart to suggest something such as that.

PS. You just couldn't resist replying to me even though I specifically asked you not to, could you?


I thought I should humour you on your own board, but if you post something silly anywhere else I'm not going to hold back from pointing it out.
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