mrd

Here’s something you don’t read every day in the finance section: Inflation has been running riot but the Reserve Bank isn’t lifting interest rates.

Luckily the RBA had given the markets plenty of warning that it would pretty much ignore today’s June quarter Consumer Price Index. Just as well – otherwise we could have had a bit of panic this morning as the CPI came in considerably worse than expected. And the market was expecting a bad number.

For the record, the headline CPI increase for the quarter was 1.5 per cent for the quarter, making 4.5 per cent for the financial year. Even the RBA’s preferred “trimmed mean” measure (which takes out the biggest swings) came in at 1.2 per cent for the quarter and 4.3 per cent for the year. Ouch. That’s a fair whack more than the RBA’s declared target band of 2 to 3 per cent.

They are the worst quarterly inflation figures since 1991, ignoring the one-off GST increase, but most of the better commentators are actually saying the next move in official interest rates will be down, albeit not until next year sometime.

Source: Michael Pascoe -Yahoo Money

Roy Morgan Consumer Confidence Rating has stopped falling – up 1.3 points to 92.0. Now 48% of Australians expect bad times for the economy in the next year
Article No. 776 – Latest Roy Morgan Consumer Confidence Rating: July 11, 2008

So, what are you expecting? I ask this because you will get out of life what you expect… not what you deserve!

Life and the economy move in cycles. Many people fall victim to these cycles. To avoid “victim status” and ensure an onwards & upwards journey (good times & bad) you must maintain a right attitude and right focus.

Katrina and I are very positive about the future. In recent months we engaged the services of Business Consultants who are assisting us to restructure our business to facilitate our growth plans moving forward.

My ‘mrd journey’ has taught me much to date and there are a few interesting parallels that I would like consider between building a traditional business and building an investment property business.

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The media tell us that the ANZ Bank has increased its interest rates forecast and is predicting that the Reserve Bank will lift rates twice before the end of the year.

Westpac say rates will stay on hold this year, while the Commonwealth Bank is tipping one 0.25 of a per cent rise.

TD Securities global chief strategist Stephen Koukoulas has forecast the Australian economy has now started to slow enough to prompt interest rate reductions over the next year. The investment bank has predicted 125 to 175 basis points; between five and seven rate cuts may be lopped from the official cash rate of 7.25% by the end of next year!

Somewhat supporting that view, the National Australia Bank’s chief economist, Alan Oster, said there was a 30% chance the Reserve Bank would begin cutting rates this year as economic growth deteriorated. An interest rate cut this year is a possibility, but there may not be enough of a slowdown,” he said. “But we think that by the late 2009 they will be down to about 6 per cent.”

With so much “background noise”, do you find yourself confused… and wonder who to listen to?

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