AUSSIE ECONOMY A BOX OFFICE CRASH!!

AUSSIE ECONOMY A BOX OFFICE CRASH!!

This week’s announcement by the ‘Governor of Moolah’ that he was increasing the cash rate by 25 basis points, to 5.75 per cent had all the mystery and intrigue of a sequel to The Da Vinci Code. Just like The Da Vinci Code where followers are transported on the journey through chapels in Great Britain, to the Louvre Museum in Paris as part of their quest for the grail, the Governor of Moolah this week took us to China, to the booming resources of Western Australia and Queensland. He even included escalating oil prices and the like. Previously he just went Oi, the Australian property market is too hot, so cop this! This week’s slap on the wrist was marinated in overseas ingredients – however Australians overall will find this international menu to be most unpalatable.

The following chapters will be uncovered next week and you can be assured of more “smoke and mirrors” from the Federal Government that went to the last election under the banner of superior economic management and lower interest rates (but that is another story). Travel back in time by taking a journey to The Reserve Bank of Australia website. The time is 23 January 1990, the ‘Governor of Moolah’ is BW Fraser, the Prime Minister is RJL Hawke (better known these days for practicing his putting on his recently installed roof-top putting green). The cash rate had just been dropped 50 basis points and the rate reduced from 17.50 per cent to 17.00 per cent. Unlike his golf handicap Hawke, whilst in office, enjoyed ten more reductions when on 6 November 1991 (the last rate reduction) he headed to the 19th hole and the cash rate stood at 8.50 per cent.

Enter PJ Keating Prime Minister and the ‘Governor of Moolah’ is BW Fraser. When Keating took up the throne in December 1991, the cash rate was 8.50 per cent and when he was de-throned in March 1996 it was 7.50 per cent. In his time he enjoyed four rate reductions and three increases. Also departing in September 1996 was BW Fraser who handed the head teller responsibilities to Mosman resident IJ Macfarlane.

JW Howard was sworn in as Prime Minister of Australia on 11 March 1996, becoming the 25th person to occupy the office of Prime Minister since Federation. The rate was then 7.00 per cent. In his time he has experienced eleven reductions and twelve increases and the lowest rate was 4.25 per cent in December 2001. With this week’s increase one can reasonably expect the Government to seriously ‘kick the tin’ in next week’s Federal Budget, to appease voters and prevent a backlash.

So the question is, how will this week’s rate increase affect the market given that the NSW economy is presently parked in Struggle Street? If you are renting, you can expect to become decidedly poorer because rents will continue heading north as investors continue to place the property market on ignore. Presently, the vacancy rate across Sydney is at 1.9 per cent and it will continue to decrease significantly at the expense of the low income earners. The Mosman housing market should not see any noticeable changes given that it has the highest average taxable income on the North Shore (Source: Australian Taxation Office 2003/04 income year). Overall the house market has flattened which is attributable more to the longevity of the market, than economic climates. It will be challenging through the Winter months and we can’t expect to see any significant reductions in the number of days on the market. More particularly, if we have another increase in Spring, we could see certain markets implode under the mounting pressures.

No longer on our property menu 13/11 Watson Street Neutral Bay (owner/occupier), 3/56 Harbour Street Mosman (investor), 44 Spofforth Street Cremorne and 19 Muston Street Mosman. Another good week for subscribers. We managed our 242nd sale to a value of $460,631,600. As for how much one reads into the market the Northern and Eastern suburbs should be business as usual with the Western and Southern suburbs now sporting an asterisk.

As for the “Interest Rate Code” we can easily crack that, as since September 5, 2001 all rate increases have been at the minimum +0.25 per cent. The last +0.50 per cent increase was February 2, 2000 and the last +1.00 per cent increase was December 14 1994.

What is increasingly difficult to decipher is how America, Britain, Canada, Thailand, Malaysia, Japan and Singapore are bathing in lower rates than the “lucky” country. It appears that the “Governor of Moolah” may have diagnosed our economy as suffering from a runny nose. Let’s hope that it does not become a chest infection. Cheers ^__^

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