Reserve Bank of Australia cuts Australian Mortgage Rates 1%

THE Reserve Bank of Australia has slashed interest rates by 100 basis points to 4.25 per cent.

Interest rates are now at a six and a half year low, and more cuts are on the way, economists say. CBA chief economist Michael Blythe said the RBA was likely to cut by a further 50 basis points in February. "It's a brave call to say there aren't any more rate cuts out there but you need more negative data to get large, rapid-fire rate cuts."

Last month the central bank cut interest rates by 75 basis points to 5.25 per cent. This followed on from a huge 100 basis point cut in October, and a 25 basis point reduction in September.

Most economists had tipped a 75 basis point cut today.

Minutes after the decision was announced, a spokesperson for Commonwealth Bank told news.com.au the bank would pass on the full rate cut, effective December 12. National Australian Bank followed suit, announcing it would pass on the full rate cut effective December 12, while Westpac said it would cut rates by 80 basis points. ANZ cut rates by 0.83 of a percentage point, effective December 12.

The central bank will be hoping today's rate cut encourages Australians to pull out their wallets, after data released this morning showed spending remained stagnant, despite recent figures showing that prices have started to fall.

RBA governor Glenn Stevens said although government and central bank stimulus packages had begun to take effect, global financial market sentiment remained "fragile".

"With confidence affected by the financial turbulence and a decline in the terms of trade now under way, more cautious behaviour by both households and businesses is likely to see private demand remain subdued in the near term," Mr Stevens said.

"With that outlook, and with capacity pressures now easing, it is likely that inflation in Australia will soon start to fall."

Macquarie Group interest rate strategist Rory Robertson said the RBA had, with its latest cut, reversed some six years of monetary policy tightening in just four board meetings.

Economists believe rates still have a way to fall, with some looking for a cash rate of 3.25 per cent next year. It is only the second 100 basis point rate cut since May 1992 - following a 100 basis point cut in October this year. The total 300 basis points worth of cuts since September is also the deepest set of rate cuts since early 1990, when the RBA eased monetary policy ahead of a recession.

Taking into account today's cuts, Australians will head into the Christmas season around $700 a month better off, according to experts.

Full story visit www.news.com.au

Pounds to Australian Dollars is currently 2.3255

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading

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iPod index reflects dive of Australian dollar

AUSTRALIA is the cheapest place in the world to buy an Apple iPod, according to a study to be released today, highlighting the dramatic fall in the Australian dollar in the past several months, The Australian reports.

CommSec will today release details of its "iPod index", which measures the price of an 8GB iPod nano in 62 countries to compare currencies.

CommSec chief economist Craig James said Australia had jumped to the cheapest spot after being placed 14th cheapest in July. An 8GB iPod costs $US131.95.

In July, a 4GB iPod (then considered the entry-level product) cost $US181.50.

"It's quite remarkable, we are the cheapest by a long way," Mr James said.

"Our currency has fallen dramatically."

It would be about 25 per cent cheaper for a British tourist to buy their iPod in Australia, rather than at home, Mr James said.

But while having an Australian dollar at US65c-67c was good news for manufacturers and other exporters as well as the tourism industry, Mr James said the iPod index shows the Australian dollar may have fallen too far too quickly.

Read more on this story at The Australian.

Pounds to Australian Dollars currently 2.3800

Australian Dollar fell out of favour today after yesterday’s brief rally

Hi All,

The Australian Dollar fell out of favour today after yesterday’s brief rally. It appears the world got ahead of itself and realised that the sky is still falling and there is now a rush to “safe” money mainly US Dollars, Euros, Pounds and Japanese Yen.

Being the loyal Australian I am, I am finding this very difficult to understand why the market keeps selling Australian Dollars at every point but sometimes things done make sense even though you want them to. If you are migrating to Australia this really doesn’t matter too much.

Look for the Pound to Australian Dollar exchange rate to say in the 2.48-2.58 range until something else happens.

Good news for those wanting to sell Australian Property – the new bailout package and first home buyers grant increases are working and 1st home buyers are re-entering the market and will hopefully push prices up, stimulate investment in Australia and boost the Australian building industry. (Good to see also 1st home buyers can get a Australian mortgage - unlike the UK.)

Pounds to Australian dollars exchange rate currently 2.5500

Regards

Damian

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Australian Dollar Exchange Rate fights back against the Pound but Outlook suggests further Falls

Hi All,

The Pound to Australian Dollar exchange rate yesterday saw one of the most surprising rally's I have ever seen as the Dollar exchange rate went from 2.2700 to 2.7200 almost a 20% jump. The question everyone is asking is;

Why did the Australian Dollar fall by so much?

Simple answer the global economy is in melt down and foreign exchange traders around the world are having to take off complex carry trades which are bets on interest rates and now heading to the safe haven of US Dollars, Swiss Francs and Japanese Yen.

(The Australian Dollar and the New Zealand Dollar for the matter has been used as a high yielding currency and traders have been borrowing from Japan by buying Japanese Yen which current interest rate is 0.5% and investing in the Australian and NZ market at 7%+. )

Before you rush to buy Australian dollars there is further risk these trades will drag the Australian Dollar to US Dollar back to the 2001 levels 0.4775 this will correlate to a Pound to Australian Dollar Buy Rate of around 2.900/3.000 a level that most people didn't expect to see this year or next for that matter.

Traders will watch technical levels on the Australian dollar today, said Westpac's Rennie. The currency closed below 67.15 U.S. cents yesterday, a 61.8 percent retracement from its April 2001 low to a July 2008 high, according to a series of numbers known as the Fibonacci sequence. The close below that level could "open up a deeper sell- off and a long-term target to the 2001 lows at 47.75,'' wrote London-based Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc. in a research note dated Oct. 8. source Bloomberg

So if you are migrating to Australia or just an expat sending money to Australia enjoy the bonus of a global meltdown/credit crisis - you are one of the very people that we benefit from the current market conditions.

Buy for now

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Commonwealth Bank of Australia buys BankWest

Commonwealth Bank of Australia has agreed to buy British bank HBOS's Australian unit BankWest for A$2.1 bln, to boost its market share in fast-growing Western Australia. CBA said it would raise A$2 billion of Tier 1 capital in an institutional placement of securities to help fund the BankWest deal.

Well good on the CBA buying what i always thought was one of Australia's best banks - seams the biggest loser out of the credit crunch is the customer as choice and competition is disappearing out of the market. All we need now is a Crude Oil crisis and Shell and BP can merge funded by the tax payer and they can return billion pound profits.

This is just one big mess

But on a positive note if you are migrating to Australia the pounds to Australian Dollar exchange rate has rallied yet again today and you can Buy Australian Dollars at 2.5500

Buy for now

IMS Foreign Exchange

Pounds to Australian Dollar now 2.4800

Hi All,

To everyone's surprise the Pounds to Australian Dollars exchange rate has rallied to the highest point this year. That GBPAUD Exchange rate is currently 2.4880 from 2.2800 a change of 9% change on the day, almost unheard of in the world of foreign exchange. I am at a loss to explain the massive change in the AUD exchange rate but the general sentiment is that it is outright panic and foreign exchange traders are running to the safe havens on the Swiss Franc and the Japanese Yen. ( Is the Australian Banking System really that bad shape that traders are scared about borrowing from Japan to invest in Australian government back bonds at 7% or 6.5% after the interest rate cut - it appears so)

Although the Reserve Bank of Australia is expected to cut Australian interest rates by 0.50% this response is ridiculous and I expect the the Australian Dollar to come back to the 2.3000 level shortly which is more realistic as the Bank of England. What has made matters worse is that there is Public Holiday in Oz that is leading to extremely thin trading conditions and exacerbated the move.

But for those of you in the UK thinking about emigrating to Australia or paying off an Australian Mortgage it is music to your ears as being in the UK makes sense again.

Dont be foolish - is you are buying Australian Dollars you have been given a gift horse here - Buy Australian Dollars while you can at these levels - when normality returns so will the Australian dollar strength.

Buy for now

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