The “Big Four” – and we are not just talking banks.

The “Big Four” – and we are not just talking banks.

Today we live in unprecedented times. Never before have we seen monetary policy attacked so aggressively where households (finally) come to the fore – not to be confused with four. I was speaking with a journalist this week about the state of the property markets and said. “They say you have to lose a Grand Final before you can win one. The same can be said with recessions where Generation X is much better positioned (based on previous bear markets) compared to Generation Y – who are experiencing market volatility for the first time and it is not improving – just yet.”

The Reserve Bank of Australia (RBA) has unveiled its financial chain saw in order to sculpt a new economy based on aggressive rate cuts. The RBA is today adopting an economic mindset never seen before and is now a very progressive institution with a current monetary policy that is all about protecting the innocent who have been dragged into this absurd Global Economic Crisis (GEC).

This is what I meant with the “Big Four” – September, October, November and December. The RBA meet next, on Tuesday February 3 2009 where we expect another rate decrease to set the tone for the New Year and beyond. As you can see from the graph below there is still plenty of play left in further interest rate reductions.

Rate cuts … the RBA has reversed around six years of monetary policy tightening in just four months /

Over to the other “Big Four”, nasty banking institutions that continue to milk consumers for all their worth – the ongoing attack where those who fixed interest rates now see Exit Fees expediently increase with each rate decrease. Credit Card interest rates are still charged at the early 1990’s rates (19 + per cent) yet the Cash Rate today sits at 4.25 per cent – work that one out! Fort Fumble (Rudd Government) would be better served by being instrumental in reducing these rates and exit fees. Instead it is gloating on cash rate reductions which were independently assessed and acted upon by the RBA. Fort Fumble had absolutely no input into this decision. Quite ironic and at the next Federal election we can expect to their slogan to be “in our term the Labor government delivered lower interest rates”.

The RBA started recording rates in January 1990 where the cash rate was reduced -0.50 per cent to 17.00 per cent. Only once before has the cash rate cash rate dropped to 4.25 per cent and that was back in 5 December 2001 – which was more a consequence of stabilising markets directly stemming from the September 11 terrorist attacks in America. Today we have the subprime fiasco as the accelerant for the present GEC.

Banks collectively made $18 billion in profit last financial year are better positioned today to lock and hold defaulting home owners instead of feeding them to the wolves as in the early nineties. This time around it makes better sense for them to hold properties rather than fold property markets. These assets should be quarantined until such time as the property markets recover. The debt can then be settled, without significant losses. Construction is down in NSW because the government of the day has lost the plot(s). Residential building approvals are now down 26 per cent YoY which will hold up property prices as we have a severe lack of supply. Banks need to manage, not massacre!

This leads me to Fort Fumble’s $15.2 billion increased funding for the states over the next five years. From Fort Fumble’s Bank Rudd to Fort Stumble (I need to review this name) historically the most incompetent government in NSW. Bankrupt of money and ideas – Fort Fumble should have argued that such an investment of (our capital) be managed by an appointed administrator given their previous incompetence to manage the NSW economy. With absolutely no idea of managing infrastructure, why would anyone give them more money to waste. If you need a hospital bed in NSW they now fly you to Queensland as NSW hospitals display a “No Vacancy” sign.

When petrol prices skyrocketed in the year to June 2008 – obviously cars were left at home which saw bus revenues increase 2.3 per cent and trains by 5.2 per cent. In an article by Linton Besser “Abandon ship: passengers avoid Sydney’s failing ferries” published on Ferry patronage was down 1.2 per cent so in his wisdom (?) the Premier has cancelled 36 Manly Jet Cat services per day from December 31. The fleet is being sold. More cars will now be on the road leading to increased Spit Bridge congestion which then reverberates through Mosman, Cremorne and Neutral Bay to the Harbour Bridge. No doubt the Congestion Tax will benefit from this decision. Back to ferries and let’s be honest, no congestion on the harbour! Yet from September to last week, 430 ferries failed to show up? This severely impacts on the workforce and results in lost productivity.

Australia’s population is now growing at the fastest rate in twenty years and at June 30 2008 our population was 21.374 million. Up 359,000 on the previous year. NSW delivers the largest departure lounge where population growth increased by only 1.1 per cent, second last after Tasmania at 1.0 per cent (so equal last).

Why? That would be Fort Stumble; no I will now call the NSW (government) Fort Crumble – yes that’s more appropriate.

If you live (or used to) in Sydney you are paying the highest Stamp Duty rates in Australia – hello exodus! Hello – GST reducing state taxes! Hello Fort Crumble – Phillip Hudson wrote on “NSW home buyers the hardest hit by stamp duty.” The Bank West residential Stamp Duty report shows the median stamp duty bill in Sydney is $19,385, the highest of all capital cities. Brisbane has the lowest, at $5688. Come in – departure lounge!

In Mosman the median charge was $107,865, second only to the Perth suburb of Peppermint Grove, where it was $192,249. Other Sydney council areas with the highest median stamp duty bills were Woollahra ($86,810), Waverly ($67,110), Hunters Hill ($68,485) and Manly ($62,270).

In Mosman, the median Stamp Duty bill was 94 per cent of the average home owner’s income of $114,244. For the record, Fort Crumble charge 3.5 per cent stamp duty on properties worth $80,000 to $300,000, then 4.5 per cent for $300,001 to $1 million, 5.5 per cent for $1 million to $3 million and 7 per cent over $3 million. Yet Fort Crumble remains broke, despite the billions collected over the last twelve years.

Fort Crumble equates to the greatest government financial collapse in Australia’s history. Wayne Swan keeps referring to the fact that Australia is in the strongest position to manage the GEC – I would suggest this is a result of our doings, not theirs. The challenge for Bank Rudd starts next year when it moves the (inherited) budget surplus into deficit. Backing Fort Crumble with additional financial injections will in all probability prove to be another financial disaster where too much of NSW revenues are bypassed via Sussex Street – the Union Bank. The Union Bank: that closed the “Dilemma – Account” on Macquarie Street Sydney because of insufficient funds after he lost the privatising sale of NSW electricity.

Next week we will preview our 2009 markets – our last edition for 2008. From an economy of scale perspective (given what is happening) “online” will be the major player in 2009. Print will very quickly have to run back to white boards. In 2009 vendors will not share print media companies. Rather they will make a choice, one or the other, being Fairfax Media V Cumberland Newspaper publications.

Times are changing in our property markets and so is consumer sentiment. What worked previously may struggle in 2009. Testing times ahead, but what remains to be seen, is who passes the test!

Cheers ^__^

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