Who’s on first? Then again who cares – so come in spinner and step right up.

Who’s on first? Then again who cares – so come in spinner and step right up.

Global economic machinations are well documented and not looking pretty despite plenty of spin. Many first home buyers will in time, face default and it will get ugly. It always does and this time around it is no different.

On December 5 2001 the Reserve Bank of Australia (RBA) applied a -0.25 cash rate reduction to take the official cash rate to 4.25 per cent. 2001 was the year when the RBA reduced the cash rate from 5.75 per cent to 4.25 per cent, the lowest recorded rate in decades. This ‘rate euphoria’ quickly turned to a rate of family attack. The RBA then applied (from May 2002 to March 2008) twelve 0.25 cash rate increases and in March 2008, the cash rate climbed to 7.25 per cent. In 2007/2008 South-West Sydney experienced the highest rate of mortgage defaults when property prices fell by as much as 45 per cent.

As the data now comes in, the Australian Bureau of Statistics (ABS) revealed this week that those on ‘first’ – being the first home buyers, made up 26.5 per cent of home loans approved in January 2009. The highest proportion since records started in 1991 – we all know that that in 1991 Australia entered Paul Keating’s “recession we had to have”.

The Rudd Government’s first home buyer’s grant which expires in June this year, will have dire consequences – our very own version of America’s subprime. Western Sydney property sales are in boom mode based on a cash rate of 3.25 per cent. Recorded sales for the three months to February soared by a staggering twenty per cent. One should also not rule out projections that unemployment rates will all but double over the next twelve months.

Yesterday, Australia’s unemployment rate soared to 5.2 per cent (the highest rate since 2005) and NSW leads the country’s unemployment queue – a clue for those on first. Who knows where petrol prices will go, and electricity prices will jump a staggering 21.5 per cent from July. For Lower and Upper North Shore residents you are now under notice that if you plan to stay at Royal North Shore hospital, bring your own cake of soap as Fort Crumble (NSW government) no longer offer this luxury due to budget constraints.

Businesses keep telling Kevin Rudd and Wayne Swan that if Payroll Tax was abolished the unemployment rate would settle not escalate. The reality is that if State governments tax businesses for employing people – less people result in less tax. Not sure what part of this Kevin Rudd and Wayne Swan fail to understand.

With the benefit of hindsight it is well documented that when interest rates are low, inflation skyrockets and when this happens the RBA bump up cash rates to curb spending. Figures released this week by BIS Shrapnel revealed that the number of townhouses and apartments abandoned/deferred in Sydney from January to July 2008 was 4,072. From August 2008 to January 2009 the abandoned/deferred numbers jumped to 5,326 where this total number now sits at 9,400. Such data suggests the ‘calm before the storm’. In the meantime the Rudd government keeps telling property punters to step right up – everyone’s a winner. Kevin is overlooking the fact that Australia is presently in tools-down mode with building companies closing down – an industry all but insolvent.

Just as interesting is that the first home buyers grant stimulus which is part of Kevin Rudd’s first stimulus package is unlikely to be extended – alarm bells ringing? A stimulus package that stimulates bankruptcy when one bears in mind that the RBA left the cash rate at 3.25 per cent this month despite reducing it by 4.00 per cent since December 2008.

This week’s announcement by the World Bank that the global economy is likely to reduce for the first time since World War II, would be reason for concern. There again Australia’s greatest ever Treasurer, Wayne Swan, remains nothing more than a blank canvas and the Rudd/Swan government has done absolutely nothing to address businesses – they actually employ people! The stimulus package is in favour with employees, but out of favour with employers.

Economic stimulus – not exactly. With tools down, Kevin Rudd hit the unemployed nail on the head. Kevin Rudd. “But had we waited and done nothing … these unemployment figures would have been much worse.”

Kevin – you actually did nothing and these unemployment figures will only get worse. The problem with government and treasury is that nobody is actually at the coal face. So what do they do? Throw money around as if it was confetti .

An economic saga in continuation – so abolish Pay Roll tax and see what happens. After all, a smart “cash splash” would be exactly what the Doctor ordered. Maybe then Kevin Rudd would be on first!

Cheers ^__^

For this week’s recorded Mosman real estate, Cremorne real estate, Neutral Bay real estate and Cammeray real estate sales http://www.rwm.com.au/news/

9 Responses to “Who’s on first? Then again who cares – so come in spinner and step right up.”

  • maybe we should all suggest that Robert is appointed chief of the reserve bank but knowing robert why take the job of being the captain of the titanic !!!! when we all know the sssssss is going to hit the fan well done again the Westen suburbs prime is just about on us !!!

  • james elliott says:

    Being the owner of a construction company i am comforted by the fact that at least in this recession i cant be retrenched.
    I am amazed how many seemingly intelligent people I know on the north shore who 1. dont mind Kevin and Wayne and 2. think Peter Costello is History

  • Chris Dale says:

    Rob, always read your news and always find something in it, however whilst I have no Politicial penchant either way, it was Costello who introduced Legisiation to induce people to invest in their Super Funds (and they are talking about replacing Turnbull with him) Super going down may not matter to younger ones however my Mother 89 has lost more than 40% of her money, regarding the Elect just use 20% less and try walking you save a bit of petrol that way. regards Chris Dale ps always a good time to invest in Real Estate

  • Nick says:


    You are dead on, if we are not careful the first home owners packages will be our sub-prime, if unemployment hits these young people and / or they are hit with higher interest rate as the economy receovers in X years.

  • steve mccarthy says:

    Its very easy Robert and can all be summed up in one word.

    Nothing changes only the faces, its the same every time.

    Unfortunately they will be in Canberra for a while to came, bunnies can’t resist free carrots.

  • Gordon Frend says:

    James Elliott is right, it’s still fashionable in some quarters hereabouts to be seen to be leaning left. Dunno how long it will last, the passion must be wearing thin.

    Then of course as we know ALP governments are very disciplined and always follow 3 rules, particularly the Krudd and NSW (No Sense Whatever) ones:

    1) Everything bad that happens (phew) is the fault of John Howard and the GFC (goddamn f…… capitalism);

    2) Everything good (we’re waiting. . .) is the result of superb financial management by little Kevvie, Wayney, Nathan and Eric (and all pigs are cleared for takeoff on runway 32);

    3) Everything else – see 1) and 2) above.

  • Simon Nelson says:

    While Robert is right about the first time buyers market, it really is small fry compared with what is going on. This is not about one small part of the Australian property market but about a Golbal Financial Crisis. And if anybody thinks that any other government, be it led by Costello, Turnbull, Howard or even god, could do any better, dream on. We are about to be swept up in this whole global thing whether we like it or not. The people who are currently taking advantage of the first time buyers grant might lose their homes if they lose their jobs, but if they stayed in the rental market, instead of not paying their mortgage, they wouldn’t pay their rent. So, the landlords would default. The net result is the same!

  • Gordon Frend says:

    Simon, you’re quite right about the presence of the GFC and I would think that everybody agrees with that. But I think you’re on shaky ground when you say that no other government could do better.

    Little Kevvie and co have gone for a cash splash which seems to have more to do with paying off their supporters and as a sweetener for the next (no doubt early) election than with effective economic management.

    A much bigger issue though is the twin burdens they have imposed on Australia’s recovery from the GFC. It is literally incredible that they are imposing the vast costs of their climate religion at the same time as they are reimposing the oppression of union control on employment prospects. And don’t start me on the NSW mob. . .

  • Some very interesting perspectives and the common theme being that in an economic crisis the governments of the day have to do more not less. The fact that they seem to be suffering from political alzheimer’s where Kevin Rudd keeps changing his economic beliefs to suit each change of events to better position himself in the eyes of the public.

    The fact that it so obvious where his economic platform for election was delivered as a financial conservative. Then in the first year every time they delivered bad news they blamed it on the previous government. Countries need leaders not feeders and Rudd appears to be the later.

    As they say some were born to lead and others to follow. The fact that he has to keep re-inventing his financial persuasion suggests he is confused – which is not the example a country needs in these difficult times. I must admit he is a brilliant builder of political grandstanding just look at the 20/20 summit and the “Apology” all now buried beneath the grandstand.

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