Problems at ‘home’ could see interest rates plunge

Westpac Chief Economist Bill Evans came out on Friday predicting that interest rates could fall 100 basis points over the next 12 months while unemployment could jump as high as 5.75 percent (up from 4.9 percent today) as a range of leading employment indicators were turning south. In an article about Mr Evans comments, The Australian reported :

Trevor Rowe, the executive chairman of investment bank Rothschild and one of Australia’s best-connected businessmen, predicted the world “lurching from one crisis to the next” and said Canberra was overly distracted by the carbon tax.

He said policymakers should be focusing instead not only on insulating the country from the international debt crises but also eyeing rising mortgage arrears that pointed to a housing market vulnerable to a steep correction.

Mr Rowe said the Prime Minister was “not being realistic” when she said this week that the underlying economy in Australia was strong.

We wonder what magnitude of mortgage arrears Westpac is current observing?

ยป Interest rates set to plunge, Westpac says – The Australian, 16th July 2011.


  1. I’ll try and read between the lines, or read the TrueSpeak to see if I get this right.

    Westpac Bollocktician Bill Evans (Ranked Nationally as Bollocktician No. 2, second to Ross Greenwood and a head of Shane Oliver of AMP) came out on Friday, as the data can no longer be weighted, massaged, nor fudged, and thus spoke:

    Interest Rates better come down at least 100 basis points, despite the Bank raising rates above the RBA rates in the past. Bill stated, Unemployment + Underemployment (Underemployment: Counting those that still either require a benefit, or average out one hour per week work) will jump from 14% to 23%, in a tactic that may scare Australians and force the RBA into a rate cut. In a question to Bill on why doesn’t Westpac take the initiative and reduce rates, Bill had nothing to say.

    “We wonder what magnitude of mortgage arrears Westpac is current observing?” I do, and especially the Conmanswealth. Its’ not just Mortgage arrears, its’ utility bills, Credit Card payments, and school fees all in arrears too. When the local Bottle-Shop owner complains about how much his sales have declined, makes you think how much purchasing ability (not power) people now have. That’s something you can’t blame the internet for, *BUT* I am seeing more drunk people around than ever.

  2. “We wonder what magnitude of mortgage arrears Westpac is current observing?” WCE that is a very good point. The PM is so busy and consuming all resources into this bulls$%t carbon tax that the underlying issues are moving up faster. I believe when all said and done she will go down as one of the worst PM’s. The problem is after speaking to majority of Australians and I hate to say this have really gotten so arrogant. Everyone thinks China will boom for ever and that Australia economy is doing great. Yet they all fall to realize the underlying issues like debt is causing some major major cracks and are getting worse.

  3. China….Boom forever…..That party’s in decline right now. Give it another 18 months and the Chinese government will have to put it’s resources in to fighting a revolution. The rioting is already starting in China…..Anyone who speaks of it is jailed. Only western reporters who are game enough to visit and return will confirm this though.

    And so, the most indebted generation of Australian’s continue to party.

  4. Even if there is a revolution China’s Factories still need to be fed with the worlds resources.

  5. AverageBloke, we know, we’ll all be paying the Carbon Tax for them to do so. They won’t.

  6. THE HEAT IS ON !!!!

  7. I smoke reality.

    Where are 99.9% of all the worlds cheap everyday use items made? Thats right China. Try and go out and buy an affordable piece of clothing, furniture or electronics that isn’t made in China. Do you honestly think that the factories will just shut down overnight?

    What are you smoking?

  8. Averagebloke is either a real estate agent or property speculator. Or bought and paid for.

  9. @AverageBloke

    For China to continue at its current rate of growth and consumption (of our raw materials) the local population needs to consume almost like an American to make up for the drop in US and European consumption. They aren’t even close (see below link).

    How can they keep this up and how much of it has been stock-piled. Note that china spent $586 billion USD on stimulus in the 2008/09/10. This has now come to an end. They have also accumulated $1.7 trillion in local government debt (what I call masked stimulus).

    Whilst they still have significant US dollar reserves even if the fully paid off all Gov debt; i’d say they will keep this for a rainy day.

    Please accept my sincere apologies for providing the above facts.

    AKA Glass Empty.

  10. G’Day AverageBloke, oddly enough I agree with some of what you say, and some I don’t. The odd part of what I do agree with you with, I believe will not result in what you say it will be. I agree with you, practically everything is made in China, and the factories will not be closing down tomorrow. But China is no workers paradise (Der! BotRot, OK sorry), and the way the Western World + Japan is going, I think will be on par with China. Yes dred the day factories start appearing here again.

    When we here in Australia were paying big(ger) bucks for Nike, Reebok, and Addidas shoes, many factory workers in South Korea, Taiwan, Central and South America earned a few cents in a day. OK South Korea and Taiwan took off, but Latin America?

    What I’m trying to say workers here may not be paid the salaries they once were. I think that’s a certainty of what this world has become. And all the resources China wants pulled out of the ground, will not translate into wealth for workers anywhere. Again I’ll say I think, it will be a world of debt slaves and a cashed, or more liquid, or a more wealthly class.

    China will not be a world saviour (neither for Australia). Factories don’t mean anything, resources paid for aren’t for us. And I don’t think economies are nationally based anymore (for a long while now), either you can make a good income for yourself, or your one a feed yourself salary, Globally. Tonnes of people (here) just don’t have money and are carrying large debt obligations. Then there are those that have dunny roles made of money. Not much will be left in the middle, which is how most of the world (China especially) lives. Us too now.

  11. Well guys when China’s growth falls off a cliff I will gladly come back and concede defeat. I will type “I concede defeat” on Chinese made keyboard via my Chinese made Computer via my Chinese made ADSL modem.

  12. AverageBloke, what will happen if credit issuance in Australia drops off a cliff despite a solid growth in China? Apart from holding on to the fraying Keyboard and Mouse.

    China’s growth need not fall off a cliff for Australians to fall off one. According to Bollocktician Bill Evens, Australians might just be doing that.

  13. BotRot,

    Thanks it too late for the banks. Did you read about the hedge fund managers and anlaysts around the globe are shorting Australian banks? Average bloke its not a competition but its just to hard to not ingnoring all the underlying issues of debt in Australia and China. No matter what anyone says it is not good. China is not going to be any different from anyone else as their debt load is going through the roof. They cant print much more money otherwise inflation is going to get even worse for them. I just dont buy the China story. I think they are cooking the books so bad that when it all finally comes out they will go down in history as the worst country to ever run an economy. Hey I could be wrong. All you have to do is look at all those Chinese companies that are being investigated around the world for cooking their books. Now investors are starting to realize that China isnt the envy of world economics.

  14. Yes LBS, I know and have known for a few years now China is not what Australians, and their media, and their financial commentators are making it out to be. Not from my own profundity, but what others have been saying about it. If China is in such a boom state, why does it need to borrow so much money? Why where Chinese officials worried about what China’s (very big) debt would incarnate into after a few years? This was in 2008. Between 60-70% of GDP in property? That’s fine if you have something to do after that. But there isn’t the huge internal consumer society Aussies claim China will develop, like tomorrow. I think at the very least China will have a big head ache after the party.

    As for Australian banks, when Rudd was boasting that our banking system is solid, and the best in the world. Jim Rogers and Marc Faber were calling Australian Banks toxic sludge pitts. Again I asked why? Well we are seeing now why. Doesn’t anyone mention the $3.5B NAB, $1B Westpac, and the $53B RBA took from the US Fed in emergency loans? Excpet maybe the hedge fund managers you make mention of. I remember reading an article in the UK Telegraph (like 18 months ago) how investors where looking at Australian banks ready to short them.

    I also reckon that in 2008 when the GFC hit, Australia went down with the World, and never came out of it. And this veneer of we got through it was painted on be massive credit and the (gigantic) debt people, and the Government took.

    AverageBloke or anyone, can you make the connection between China and Australia’s property prices? And do you think other factors (excluding or including China) can bring them down? Maybe I’m on the wrong track, and truth really is stranger than fiction. But I think Australia is about to grow itself a big underclass, a permenant one. So who can buy your house?

  15. The answer to that is Investors could buy my house if I could afford one. With all the carnage Long Term Investors who bought 10+ yrs ago still hold all the cards. A tight rental market and lots of Tax breaks that no government has the balls to change. Meanwhile the working mooks like me who have money in the bank, have to pay tax on the meagre interest we get from our savings. Win Win / Lose Lose.

    I understand the points about China that you are making botrot has they are the same points that are brought up about China for last few years but my point is that the underlying world demand for basic goods isn’t going away even if the whole world goes broke people still need basic items like shoes, clothes, cheap tv’s and mobile phones. Chinese growth could drop to half 9% to 4.5% but it’s still growth isnt it?

  16. Average Bloke,

    Unfortunately, if the whole world goes broke, people will first go for the basic necessities: food, shelter, energy and security. Particular order may vary based on individuals, but deman for new things that China offers will suffer greatly, in my opinion. New shoes and new clothes will still be needed, but volume will certainly come down. Cheap TVs and mobile phones are a luxury elevated to the status of “need”, and I would bet that demnd for those new found luxuries will drop off a cliff into abyss.

  17. @ AverageBloke,

    You are dreaming ! Now that the value of property has started its downward fall lending will continue to dry up because the banks will keep reducing the values they put on each property. Just in the same way that banks lend more as property values rise they restrict lending as values fall. And do you think that people that have investment propertys are stupid ? they will sell as soon as they can to get value out of the investment then let the market crash so they can jump back in years later this is why listings of propertys for sale are exploding . You act like people with investment propertys are fools well guess what they know how to make a buck and the way that is going to happen now is to sell sell sell. Tax breaks are no good if your investment keeps going backwards! investers are in it for the money not the love of it!

  18. China requires 6% annual growth to calm the masses. It growth falls below that, internal investment will dry up, effectively encouraging it’s own recession. After decades of reasonable growth, any stutter in China will be large. Human emotion demands it to be.

  19. 2bob all the really smart long term investors are geared so they can ‘hold’ the proerty until their retirement. That’s the point.

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