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Australian Recession Coming? Arteries of Australia’s economy are in trouble; RBA Statement on Monetary Policy - May 2012: Reserve Bank cuts growth and inflation forecasts
Topic Started: 4 May 2012, 11:36 AM (3,292 Views)
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Australian Recession coming?

May 4, 2012

Two things happened yesterday that suggest to me that the Australian economy could be headed for recession. The first was the collapse of the First Fleet trucking company and the second was the release of the Australian Industry Group’s Performance of Service Index (PSI) which slumped 7.4 points. Houses and Holes covered it well in his piece here yesterday which he title “Something just snapped in the economy”.

But I want to focus on the 1st Fleet collapse in this post and what it means to me.

When I was a young fella my dad was a concreter but as he got a bit older his body packed up a bit and dad had to find a different path. He tried a few things and ended up a few years later buying 3 old Bedford Trucks, cannibalising them into two working trucks and set up his transport company out of the back of my Grandparents house in Auburn.

Mum and Dad did fairly well building up that business and had a decent transport company running by the late 1980′s. When I started working in financial markets in 1988 and particularly when I started trading in 1990 I noticed that I was making money from my conversations with dad. His business was tapped into the arteries and the plumbing of the economy, at least in Sydney, and I made money trading as the recession we had back then hit and bit and then I made more money as it lifted I was able to short interest rates and make money on the way out of recession.

It was my shorthand way of knowing what was really going on the economy.

I remember when 1st Fleet started and the trucks started popping up around Sydney and one of the drivers lived in our street. It’s a company that’s been going for at least 20 years and seems to have had a good business.

So, when I see that it has collapsed it reminds me of all the collapses that happened back 20 years or so ago. It reminds me of the trouble mum and dad had collecting their debts as their clients either stopped paying, went belly up or just extended payment times materially and I am genuinely worried about the health of the economy.

Gregory McKenna

Read more: http://lighthousesecurities.wordpress.com/2012/05/04/australian-recession-coming/
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raveswei
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companies usually do not collapse on the news that recession is coming

this company already collapsed so we could already be in a recession
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

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RBA cuts growth, inflation forecasts

May 4, 2012 - 11:39AM

The Reserve Bank cut its growth and inflation forecasts as weak labour and housing markets keep price gains in check, underscoring its decision this week to cut interest rates by the most in three years.

“Labor market conditions have continued to be on the soft side to date, with large increases in employment in mining and some service industries roughly offset by declines in the manufacturing, hospitality and retail sectors,” the central bank said today in its quarterly monetary policy statement. “A recovery in housing construction is unlikely in the near term.”

The RBA sees average growth of 3 per cent in 2012, down from its February estimate of 3.5 per cent. Consumer prices will rise 2.5 per cent in the year to December, from a previous prediction of 3 per cent; underlying inflation is predicted at 2.25 per cent from a previous 2.75 per cent, the central bank said.

The estimates are based on the overnight cash rate target remaining at 3.75 per cent, it said.

The revisions reflect RBA Governor Glenn Stevens's decision three days ago to slash the benchmark rate by half a percentage point to a two-year low, even as most economists polled forecast a quarter-point reduction.

The RBA is trying to buttress a housing market in which prices have fallen for five straight quarters, bolster employment as a high currency hurts non- resource industries and boost confidence that has weakened among consumers who are saving more.

'Subdued growth'

“The assumed high level of the exchange rate and a weak short-term outlook for building construction are expected to result in subdued growth outside of the mining sector in the near term,” the RBA said. “Growth in household spending moderated at the end of 2011 and partial indicators suggest that it remained soft in early 2012.”

Australia's four biggest banks are trying to guard margins against further erosion from elevated wholesale funding costs, by passing through less of the central bank's rate cuts to mortgage holders. The RBA lowered rates twice late last year by 25 basis points.

Read more: http://www.smh.com.au/business/rba-cuts-growth-inflation-forecasts-20120504-1y2zt.html#ixzz1trUBaq65
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Statement on Monetary Policy - May 2012 (PDF)
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miw
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raveswei
4 May 2012, 12:11 PM
companies usually do not collapse on the news that recession is coming

this company already collapsed so we could already be in a recession
Or close to it. Transport is a leading indicator. Dow theory states that if the Dow transport index is off, then Dow industrials will aalmost always follow. The weekly rail car loadings is a closely-followed statistic among traders.

You'd have to look into the reasons for collapse, but this is not a good sign.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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peter fraser
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miw
4 May 2012, 02:41 PM
raveswei
4 May 2012, 12:11 PM
companies usually do not collapse on the news that recession is coming

this company already collapsed so we could already be in a recession
Or close to it. Transport is a leading indicator. Dow theory states that if the Dow transport index is off, then Dow industrials will aalmost always follow. The weekly rail car loadings is a closely-followed statistic among traders.

You'd have to look into the reasons for collapse, but this is not a good sign.
In any economy, trucking is a difficult industry.

Greg is right though, it is a great indicator of how the economy is performing.

So is 1st Fleet indicative of the whole economy, or is it indicative of the management ability of that company only. Look for the profit announcements from TNT and Toll Industries - that might be a better indicator.

Edited by peter fraser, 4 May 2012, 03:02 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Bobby
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Debt levels in Australia are totally unsustainable. The Banks focus 90% on residential housing loans. Our nation has been brainwashed in respect to home ownership as an asset that forms the cornerstone to prosperity, Why? because our lazy finance community values property as its number one security item for loans.

The younger bankers are well versed in the art of perfecting security over homes, just ask them how they would finance foreign trade and they wouldn’t have a clue which department to refer you to! I can’t help but feel that the pay and bonus structures for the senior personnel drives short term focus on the easy revenue driver. Shoveling money into an asset bubble leads to quick bucks and big bonuses. Where is the skill in this practice, why should Banks pay the CEOs millions for this simple profit driver?

Reward the bank CEO who can actually deliver businesses a finance package that will allow them to employ people beyond the home construction industry. Of course this requires real banking skills that have now been lost to the art of home loan lending. Sadly this art requires the banks to find the next mug who is going to mortgage his life to the 'only asset is property' theory. This asset class is not as liquid as it seems and when these idiot bankers start to panic they will stop lending to developers, will seek lower loan value ratios and bobs your uncle, these actions alone will destroy their number one security asset and with it a lot of perceived household wealth. That's when the real Australian recession begins. The next recession we have to have.
'Chess is war over the board. The object is to crush the opponent's mind' - Bobby Fischer

Beware the Real Estate Astroturfers, for they are among you!
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peter fraser
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Bobby
4 May 2012, 05:06 PM
Debt levels in Australia are totally unsustainable. The Banks focus 90% on residential housing loans. Our nation has been brainwashed in respect to home ownership as an asset that forms the cornerstone to prosperity, Why? because our lazy finance community values property as its number one security item for loans.

The younger bankers are well versed in the art of perfecting security over homes, just ask them how they would finance foreign trade and they wouldn’t have a clue which department to refer you to! I can’t help but feel that the pay and bonus structures for the senior personnel drives short term focus on the easy revenue driver. Shoveling money into an asset bubble leads to quick bucks and big bonuses. Where is the skill in this practice, why should Banks pay the CEOs millions for this simple profit driver?

Reward the bank CEO who can actually deliver businesses a finance package that will allow them to employ people beyond the home construction industry. Of course this requires real banking skills that have now been lost to the art of home loan lending. Sadly this art requires the banks to find the next mug who is going to mortgage his life to the 'only asset is property' theory. This asset class is not as liquid as it seems and when these idiot bankers start to panic they will stop lending to developers, will seek lower loan value ratios and bobs your uncle, these actions alone will destroy their number one security asset and with it a lot of perceived household wealth. That's when the real Australian recession begins. The next recession we have to have.
Oh come on now Bobby, it's not 90% is it?

I stopped reading at that point.

Any expressed market opinion is my own and is not to be taken as financial advice
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skid row
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peter fraser
4 May 2012, 05:11 PM
Oh come on now Bobby, it's not 90% is it?

I stopped reading at that point.
I think the big four banks account for over 90% of residential mortgages. Maybe that's where the confusion arises. They benefitted massively from Government support and guarantees to the detriment of other Financial Institutions.
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peter fraser
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skid row
5 May 2012, 12:00 AM
peter fraser
4 May 2012, 05:11 PM
Oh come on now Bobby, it's not 90% is it?

I stopped reading at that point.
I think the big four banks account for over 90% of residential mortgages. Maybe that's where the confusion arises. They benefitted massively from Government support and guarantees to the detriment of other Financial Institutions.
OK then, lets look at the lending figures for Feb 2012;

Housing $13.7B
Personal $7.2B
Commercial $30.5B
Leasing $0.5B

Link

As I recall lending to commercial has increased over recent times in comparison to housing, but you can see that housing is nowhere near 90% of the total lending program.



Any expressed market opinion is my own and is not to be taken as financial advice
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