http://www.nicholsoncartoons.com.au/flash/flash.php?id=381
Have a look through Nicholson's cartoons to see some of the criticism of the political response to fuel prices over the last year or so...
http://www.nicholsoncartoons.com.au/cartoon_6071.html
Thursday, March 12, 2009
Begin your inquiry: What issues petrol prices?
Here the ACCC provides information regarding the 'price cycles' of fuel in major cities. This gives both suppliers and consumers more information about pricing - does this fact contribute to more competitive markets? There is other information which is very useful regarding the 'determinants of price in this market:
http://www.accc.gov.au/content/index.phtml/itemId/280309
Fuelwatch was an initiative in Western Australia to reduce producer sovereignty and potential for pricing strategies which were unfair for consumers. You can learn a great deal through this little resource:
http://www.fuelwatch.wa.gov.au/info/dsp_petrol_prices.cfm
Our economy may be slowing, but there is still inflationary pressure. This article discusses some recent figures and the affect of an increasing fuel price:
http://www.abc.net.au/news/stories/2009/03/02/2504819.htm
OPEC will continue to play with Supply to affect the price of oil and ofcourse petrol, notice the expectations of a reduction in supply in response to lower prices in Singapore:
http://www.theaustralian.news.com.au/story/0,25197,25166480-12377,00.html
Here's an interesting discussion about good politics and bad economics relating to fuel prices: http://www.theaustralian.news.com.au/story/0,25197,23765241-5013868,00.html
http://www.accc.gov.au/content/index.phtml/itemId/280309
Fuelwatch was an initiative in Western Australia to reduce producer sovereignty and potential for pricing strategies which were unfair for consumers. You can learn a great deal through this little resource:
http://www.fuelwatch.wa.gov.au/info/dsp_petrol_prices.cfm
Our economy may be slowing, but there is still inflationary pressure. This article discusses some recent figures and the affect of an increasing fuel price:
http://www.abc.net.au/news/stories/2009/03/02/2504819.htm
OPEC will continue to play with Supply to affect the price of oil and ofcourse petrol, notice the expectations of a reduction in supply in response to lower prices in Singapore:
http://www.theaustralian.news.com.au/story/0,25197,25166480-12377,00.html
Here's an interesting discussion about good politics and bad economics relating to fuel prices: http://www.theaustralian.news.com.au/story/0,25197,23765241-5013868,00.html
Wednesday, March 11, 2009
Fiscal stimulus - changing who holds the debt and when it is repayed?
In this article Ross Gittens of SMH anticipates that Australians will save most of the upcoming Fiscal Stimulus to pay off oversized debts:
http://business.smh.com.au/business/its-a-hangover-take-the-medicine-20090310-8u58.html
Is the Government anticipating this, or that our propensity to consume is high enough to keep the economy growing and keep up spending? Gittens title suggests that, whatever we do with the initial hand out, it is still the medicine which will ultimately contribute to lessening the 'hangover.' But, continuing the metaphor, what if many Australian's didn't 'get drunk' - having borrowed cautiously, saved prudently and spent wisely through this last boom anticpating a down turn in the market. These people don't need medicine - which itself will have side effects: http://www.theaustralian.news.com.au/story/0,25197,25175184-601,00.html
Here Peter Costello is reported to have warned the Australian public that Government spending now is financed by debt and itself will require repayment and interst payments later on - suggesting it may not be the most prudent policy decision.
http://business.smh.com.au/business/its-a-hangover-take-the-medicine-20090310-8u58.html
Is the Government anticipating this, or that our propensity to consume is high enough to keep the economy growing and keep up spending? Gittens title suggests that, whatever we do with the initial hand out, it is still the medicine which will ultimately contribute to lessening the 'hangover.' But, continuing the metaphor, what if many Australian's didn't 'get drunk' - having borrowed cautiously, saved prudently and spent wisely through this last boom anticpating a down turn in the market. These people don't need medicine - which itself will have side effects: http://www.theaustralian.news.com.au/story/0,25197,25175184-601,00.html
Here Peter Costello is reported to have warned the Australian public that Government spending now is financed by debt and itself will require repayment and interst payments later on - suggesting it may not be the most prudent policy decision.
Thursday, March 5, 2009
Credit crisis forcing a reflection on dominant market ideology?
End of Chicago free-market ideals?
By Sarah Brown in Chicago
Does the recent financial crisis signal the end of free-market economics? [Reuters]
Nestled within the leafy campus of the University of Chicago, stands a brownstone building known currently as the Chicago Theological Seminary Building.
But the building's new occupants have more worldly pursuits than the study of God.
It is now the planned site for what will be the Milton Friedman Institute for Research in Economics.
The new $200m establishment will be dedicated to the Nobel prize-winning economist viewed as the pioneer of neo-liberal economic thought and founder of the so-called "Chicago School" of economists, whose policies have shaped world markets for decades.
However, those who commissioned the establishment could not have picked a more inauspicious time for its launch – as Friedman's policies, which influenced so many within US politics, are widely being blamed for the current global financial turmoil.
At a time when the world is beginning to view tighter regulation and oversight of markets as the only way out of the crisis, many people are questioning whether the 'Chicago school' of ideology itself has any future.
Dominating ideology
The Chicago School of Economics is less of an actual department than a school of thought – shaped by Friedman and his colleagues working across the economics department and the nearby law and business schools in the 1950s.
The 'Chicago School' influencedgovernments around the worldFriedman and his allies rejected Keynesianism – the popular economic theory of the time which espoused belief in the state's role in stimulating economic growth and stability in the private sector through interest rates, taxes and public works – in favour of "laissez faire" capitalism and deregulation.
"In the 1950s and 1960s there was only a small isolated minority who believed in methological individualism – the preference of individuals - as opposed to institutions,' says Gerald Friedman (who is not related to the late Milton), the professor of economics at the University of Massachusetts at Amherst.
"But time passed until, by the 1980s, the Chicago School came to dominate US economic thought."
But, although feted by many, critics argued that much of the Chicago School's ideas were best implemented by undemocratic states – pointing in particular to the infamous "Chicago Boys" of 25 Chilean economists trained by Friedman at the school who then returned to Chile to impose free-market policies under General Augusto Pinochet's rule - a period marked by his brutal repression and atrocities against human rights.
And just last month, as the US financial markets crumbled and protesters marched down New York's Wall Street, even Alan Greenspan, the former chairman of the US Federal Reserve, made the extraordinary admission to a US house committee on the crisis that he had "found a flaw ... in the model that I perceived is the critical functioning structure that defines how the world works" - the very basis of the free-market school of thought itself.
'Scapegoats'?
But Robert E Lucas, a professor of economics at Chicago University and a member of the original Chicago School, rejects claims that the ideology is responsible for the current financial turmoil, saying that the late Friedman and his colleagues have been made into "scapegoats".
In depth
"We have a free-markets tradition, but I personally don't believe [that the school is responsible]," he says.
"It doesn't mean anything – why don't you ask these guys [critics] what should be done specifically and what should be done now?
"People like [Josef] Stiglitz [the US economist and critic of free markets] use name-calling instead of just diagnosing the problem and saying what should be done.
"Should there have been regulation to prevent this? Well sure, but what sort of regulation? Let them spell out what regulation we should have in place."
But Gerald Friedman says that many people within the financial community feel it is the flawed methodology of the Chicago school which has facilitated the crisis.
"There is a lot of anger towards the Chicago school and the people on Wall Street feel betrayed,” he says.
"Deregulation has been a complete disaster for them."
"I think [the Chicago School] changed the direction of economics, but it’s over now and completely discredited."
Campaign issue
The question of the economy proved central in recent weeks on the US presidential election campaign trail.
In focus
Democrat Barack Obama, the victor and new president of the US, has Austan Goolsbee, a professor of economics at the Chicago Business school and Cass Sunstein, a legal scholar who taught at the Chicago University’s Law school for decades.
His defeated rival, Republican John McCain, had Jack Kemp, a fellow Republican and proponent of the Chicago school ideology.
McCain had been swift to seize on Obama's economic plans as "evidence" of what he called "socialism" during the race.
He's accused Obama of wanting to "spread the wealth" and of aiming for the role of "redistributor-in-chief" while Sarah Palin, his vice-presidential running mate, told a rally in Ohio that "now is not the time to experiment with socialism".
Obama, who was favoured by voters as being the best choice to deal with the economic crisis, assured voters he "loves the markets", causing some left-wing commentators to refer disparagingly to the Illinois senator's own advisers as "Chicago Boys".
But Gerald Friedman says that Sunstein, seen as a relative progressive, is viewed as the man who will shape president Obama's policies and he will be much more "aggressive" in finding a solution to the crisis.
"McCain's guys had the very conventional old-school aspects of [economics] which were 20 years out of date," he says.
"[With Obama] it's not New Deal, big government but, on the other hand, it's certainly – for first time since the 1970s - that we ... have a government that's a significant step [away] from the Chicago School."
Still believers?
However, if the Chicago School's philosophy is perceived by some to be finished, this is not a message that has so far trickled down to everyone.
On the university campus, students at the Chicago School of Business's sleek, glass-panelled school are still scurrying to classes - albeit in smart suits more befitting of a bank boardroom meeting than economics 101 classes - and meeting friends for coffee in the building’s cavernous hall.
They are the next generation of business leaders and the influence of the Chicago School of Economics looms large.
Many of them told Al Jazeera they had applied to study at the university purely for the prestige of attending classes still taught by the founding fathers of the free-market movement.
Nikolai, a young MBA (Masters of Business Administration) student from Germany who did not want to give his last name, said many of his friends had thought of switching their degrees from finance because of concerns over market conditions and fears of not being able to get jobs once they graduate.
But he still retains confidence in the school's tenets.
"Maybe it's just for the time being, this downturn," he ventures.
"Right now there are some arguments against it - but I’m still a believer in free markets."
In economics we understand down turns not as the end of capitalism, or free markets, but as part of cyclical activity. Proponents of other ideologies and systems see this as an opportunity to highlight failures in the system, and a failure of the system itself. Obama has promoted himself as being able to find solutions - what is he hoping to find? what is he hoping to do? Discuss whether the system itself is actually correcting - without any need for Government intervention, solution finding or adjustments.
By Sarah Brown in Chicago
Does the recent financial crisis signal the end of free-market economics? [Reuters]
Nestled within the leafy campus of the University of Chicago, stands a brownstone building known currently as the Chicago Theological Seminary Building.
But the building's new occupants have more worldly pursuits than the study of God.
It is now the planned site for what will be the Milton Friedman Institute for Research in Economics.
The new $200m establishment will be dedicated to the Nobel prize-winning economist viewed as the pioneer of neo-liberal economic thought and founder of the so-called "Chicago School" of economists, whose policies have shaped world markets for decades.
However, those who commissioned the establishment could not have picked a more inauspicious time for its launch – as Friedman's policies, which influenced so many within US politics, are widely being blamed for the current global financial turmoil.
At a time when the world is beginning to view tighter regulation and oversight of markets as the only way out of the crisis, many people are questioning whether the 'Chicago school' of ideology itself has any future.
Dominating ideology
The Chicago School of Economics is less of an actual department than a school of thought – shaped by Friedman and his colleagues working across the economics department and the nearby law and business schools in the 1950s.
The 'Chicago School' influencedgovernments around the worldFriedman and his allies rejected Keynesianism – the popular economic theory of the time which espoused belief in the state's role in stimulating economic growth and stability in the private sector through interest rates, taxes and public works – in favour of "laissez faire" capitalism and deregulation.
"In the 1950s and 1960s there was only a small isolated minority who believed in methological individualism – the preference of individuals - as opposed to institutions,' says Gerald Friedman (who is not related to the late Milton), the professor of economics at the University of Massachusetts at Amherst.
"But time passed until, by the 1980s, the Chicago School came to dominate US economic thought."
But, although feted by many, critics argued that much of the Chicago School's ideas were best implemented by undemocratic states – pointing in particular to the infamous "Chicago Boys" of 25 Chilean economists trained by Friedman at the school who then returned to Chile to impose free-market policies under General Augusto Pinochet's rule - a period marked by his brutal repression and atrocities against human rights.
And just last month, as the US financial markets crumbled and protesters marched down New York's Wall Street, even Alan Greenspan, the former chairman of the US Federal Reserve, made the extraordinary admission to a US house committee on the crisis that he had "found a flaw ... in the model that I perceived is the critical functioning structure that defines how the world works" - the very basis of the free-market school of thought itself.
'Scapegoats'?
But Robert E Lucas, a professor of economics at Chicago University and a member of the original Chicago School, rejects claims that the ideology is responsible for the current financial turmoil, saying that the late Friedman and his colleagues have been made into "scapegoats".
In depth
"We have a free-markets tradition, but I personally don't believe [that the school is responsible]," he says.
"It doesn't mean anything – why don't you ask these guys [critics] what should be done specifically and what should be done now?
"People like [Josef] Stiglitz [the US economist and critic of free markets] use name-calling instead of just diagnosing the problem and saying what should be done.
"Should there have been regulation to prevent this? Well sure, but what sort of regulation? Let them spell out what regulation we should have in place."
But Gerald Friedman says that many people within the financial community feel it is the flawed methodology of the Chicago school which has facilitated the crisis.
"There is a lot of anger towards the Chicago school and the people on Wall Street feel betrayed,” he says.
"Deregulation has been a complete disaster for them."
"I think [the Chicago School] changed the direction of economics, but it’s over now and completely discredited."
Campaign issue
The question of the economy proved central in recent weeks on the US presidential election campaign trail.
In focus
Democrat Barack Obama, the victor and new president of the US, has Austan Goolsbee, a professor of economics at the Chicago Business school and Cass Sunstein, a legal scholar who taught at the Chicago University’s Law school for decades.
His defeated rival, Republican John McCain, had Jack Kemp, a fellow Republican and proponent of the Chicago school ideology.
McCain had been swift to seize on Obama's economic plans as "evidence" of what he called "socialism" during the race.
He's accused Obama of wanting to "spread the wealth" and of aiming for the role of "redistributor-in-chief" while Sarah Palin, his vice-presidential running mate, told a rally in Ohio that "now is not the time to experiment with socialism".
Obama, who was favoured by voters as being the best choice to deal with the economic crisis, assured voters he "loves the markets", causing some left-wing commentators to refer disparagingly to the Illinois senator's own advisers as "Chicago Boys".
But Gerald Friedman says that Sunstein, seen as a relative progressive, is viewed as the man who will shape president Obama's policies and he will be much more "aggressive" in finding a solution to the crisis.
"McCain's guys had the very conventional old-school aspects of [economics] which were 20 years out of date," he says.
"[With Obama] it's not New Deal, big government but, on the other hand, it's certainly – for first time since the 1970s - that we ... have a government that's a significant step [away] from the Chicago School."
Still believers?
However, if the Chicago School's philosophy is perceived by some to be finished, this is not a message that has so far trickled down to everyone.
On the university campus, students at the Chicago School of Business's sleek, glass-panelled school are still scurrying to classes - albeit in smart suits more befitting of a bank boardroom meeting than economics 101 classes - and meeting friends for coffee in the building’s cavernous hall.
They are the next generation of business leaders and the influence of the Chicago School of Economics looms large.
Many of them told Al Jazeera they had applied to study at the university purely for the prestige of attending classes still taught by the founding fathers of the free-market movement.
Nikolai, a young MBA (Masters of Business Administration) student from Germany who did not want to give his last name, said many of his friends had thought of switching their degrees from finance because of concerns over market conditions and fears of not being able to get jobs once they graduate.
But he still retains confidence in the school's tenets.
"Maybe it's just for the time being, this downturn," he ventures.
"Right now there are some arguments against it - but I’m still a believer in free markets."
In economics we understand down turns not as the end of capitalism, or free markets, but as part of cyclical activity. Proponents of other ideologies and systems see this as an opportunity to highlight failures in the system, and a failure of the system itself. Obama has promoted himself as being able to find solutions - what is he hoping to find? what is he hoping to do? Discuss whether the system itself is actually correcting - without any need for Government intervention, solution finding or adjustments.
Sunday, February 22, 2009
Prudent Credit Policy or Rejecting some from gaining Credit?
CBA tightens mortgages amid new deposit rules
Richard Gluyas February 23, 2009 The Australian
THE Commonwealth Bank will tighten borrowing rules for first-home buyers to insist they contribute at least 3 per cent of the purchase price in their own money, in addition to any available government grants.
The move is in response to growing industry concerns about the quality of loans to the fast-growing, first-home buyer market and is in anticipation of interest-rate hikes in coming years, due to the expected inflationary impact of the large, recent increase in household income.
Currently, government grants of up to $14,000 for an existing home and $21,000 for a new home mean some first-home buyers can purchase dwellings with a 5-10 per cent deposit and no cash contribution of their own.
"Customers who have skin in the game in terms of their own funds are more committed to continue their repayments," CBA group executive retail banking services, Ross McEwan, told The Australian.
"So in the next couple of weeks, we're implementing a policy to require borrowers to contribute a minimum of 3 per cent (of the purchase price) on top of any government grant."
The move by Australia's biggest home lender follows recent cuts to the amount that ANZ and National Australia Bank will lend to borrowers as a proportion of property value.
NAB last month cut its maximum loan-to-valuation ratio from 100 to 95 per cent, while ANZ in November reduced the proportion it would lend to mortgagees from 95 to 90 per cent.
"In response to the softening in the economic environment, we have been tightening lending standards in recent months because as a responsible lender, we do not want customers in a situation where they are over-extended," an ANZ spokesman said.
But the CBA is already looking beyond the downturn.
As standard variable rates plunge to their lowest level in almost four decades, following a 400 basis-point easing in monetary policy since last September, the CBA is preparing for an inevitable turn in the cycle.
Mr McEwan said the bank's mortgage serviceability buffer had been tightened to ensure that customers could still meet their repayment obligations if interest rates rose by 2.25 percentage points. This was higher than the previous buffer of 1.5 percentage points.
"Home owners in Australia have a very good track record of keeping up their repayments under various scenarios," Mr McEwan said.
"What we want to avoid is a US-type situation, where people with low-interest loans got caught out when interest rates started to rise."
The move will be interpreted by some as credit rationing, in an environment where the cost and availability of wholesale funding remain under pressure.
But Mr McEwan said this was not the case, pointing to the bank's proven ability to raise funds, as well as its appetite for residential lending that was demonstrated by a rising market share over the past 21 months.
Home lending, he said, had remained strong over Christmas and last month, with market share picking up by 26 basis points in December.
The CBA chief said the real motivation for the measure was prudent credit policy in an environment where interest rates would eventually rise.
"The buffer needs to be extended for a situation when inflation starts to pick up and interest rates rise," he said.
Meanwhile, the CBA will roll back its fees for customers using other banks' ATMs, dubbed "foreign ATMs".
I have been concerned about banks willingness to lend such large amounts over the last decade, so this news is long overdue from my perspective. Managing debt is a responsibility and I think it good that banks play a bigger role ensuring they lend to people able to cover that responsibility in the medium term as rates rise. The question people rarely ask is 'can I handle this debt for many years to come, and if times get tougher?' instead many have been permitted to borrow on the condition they have the ability to handle the debt in the immediate term whilst conditions remain constant - but nothing is constant! Do any of you disagree with me? Should banks be free to lend more, take bigger risks, giving people more freedom to chose?
Richard Gluyas February 23, 2009 The Australian
THE Commonwealth Bank will tighten borrowing rules for first-home buyers to insist they contribute at least 3 per cent of the purchase price in their own money, in addition to any available government grants.
The move is in response to growing industry concerns about the quality of loans to the fast-growing, first-home buyer market and is in anticipation of interest-rate hikes in coming years, due to the expected inflationary impact of the large, recent increase in household income.
Currently, government grants of up to $14,000 for an existing home and $21,000 for a new home mean some first-home buyers can purchase dwellings with a 5-10 per cent deposit and no cash contribution of their own.
"Customers who have skin in the game in terms of their own funds are more committed to continue their repayments," CBA group executive retail banking services, Ross McEwan, told The Australian.
"So in the next couple of weeks, we're implementing a policy to require borrowers to contribute a minimum of 3 per cent (of the purchase price) on top of any government grant."
The move by Australia's biggest home lender follows recent cuts to the amount that ANZ and National Australia Bank will lend to borrowers as a proportion of property value.
NAB last month cut its maximum loan-to-valuation ratio from 100 to 95 per cent, while ANZ in November reduced the proportion it would lend to mortgagees from 95 to 90 per cent.
"In response to the softening in the economic environment, we have been tightening lending standards in recent months because as a responsible lender, we do not want customers in a situation where they are over-extended," an ANZ spokesman said.
But the CBA is already looking beyond the downturn.
As standard variable rates plunge to their lowest level in almost four decades, following a 400 basis-point easing in monetary policy since last September, the CBA is preparing for an inevitable turn in the cycle.
Mr McEwan said the bank's mortgage serviceability buffer had been tightened to ensure that customers could still meet their repayment obligations if interest rates rose by 2.25 percentage points. This was higher than the previous buffer of 1.5 percentage points.
"Home owners in Australia have a very good track record of keeping up their repayments under various scenarios," Mr McEwan said.
"What we want to avoid is a US-type situation, where people with low-interest loans got caught out when interest rates started to rise."
The move will be interpreted by some as credit rationing, in an environment where the cost and availability of wholesale funding remain under pressure.
But Mr McEwan said this was not the case, pointing to the bank's proven ability to raise funds, as well as its appetite for residential lending that was demonstrated by a rising market share over the past 21 months.
Home lending, he said, had remained strong over Christmas and last month, with market share picking up by 26 basis points in December.
The CBA chief said the real motivation for the measure was prudent credit policy in an environment where interest rates would eventually rise.
"The buffer needs to be extended for a situation when inflation starts to pick up and interest rates rise," he said.
Meanwhile, the CBA will roll back its fees for customers using other banks' ATMs, dubbed "foreign ATMs".
I have been concerned about banks willingness to lend such large amounts over the last decade, so this news is long overdue from my perspective. Managing debt is a responsibility and I think it good that banks play a bigger role ensuring they lend to people able to cover that responsibility in the medium term as rates rise. The question people rarely ask is 'can I handle this debt for many years to come, and if times get tougher?' instead many have been permitted to borrow on the condition they have the ability to handle the debt in the immediate term whilst conditions remain constant - but nothing is constant! Do any of you disagree with me? Should banks be free to lend more, take bigger risks, giving people more freedom to chose?
Tuesday, February 17, 2009
Australian growth: Monetary policy and export demand
RBA's Malcolm Edey confident in China, India growth
Allison Jackson February 18, 2009 The Australian
CHINA and India would continue to grow at a fast pace for a "long time", boosting demand for Australian raw materials.Reserve Bank assistant governor of economics Malcolm Edey said today China and India had “long way to go” before they caught up to industrialised countries. “China and India … until the recent crisis were growing at extremely high rates. They have got plenty of scope to do that for a long time,” Mr Edey told a business forum in Sydney. Mr Edey said demand for Australian resources would continue to grow “which is going to be very good for Australian incomes”, and would help offset the impact of an aging population on economic growth. “China and India and other parts of the developing world have a long way to go to catch up and as they catch up they are becoming a bigger and bigger part of the world and that’s a very powerful influence in increasing global growth prospects,” he said. “I think that force will continue to operate in the long run, but we are seeing very severe short-term effects from the global financial crisis working against that at the moment.” China ranks as Australia’s biggest trading partner, while India’s importance has grown in recent years. India is now Australia’s 11th biggest trading partner, according to the Department of Foreign Affairs and Trade website. Mr Edey reiterated the Reserve Bank’s view that Australia would continue to outperform other industrialised nations “in the difficult period that lies ahead” due to the strength of the domestic financial system. Mr Edey provided no clues on the RBA’s attitude towards interest rates since its last board meeting on February 3. At the meeting, the RBA board cut interest rates by another 100 basis points, taking rates to a 45-year low, and signalled it was near the end of the easing cycle. But since then the economic situation has deteriorated even further, with Japan, Australia’s biggest export market, experiencing the worst economic conditions since World War II and Australia’s unemployment rate at the highest level since June 2006 while business and consumer confidence are in the doldrums. Market participants are hoping RBA governor Glenn Stevens will provide some clarification on the central bank’s strategy when he testifies before federal parliament on Friday.
It offers some Australians a little hope when we hear continued talk about increasing demand for Australian exports underpining better economic conditions than other parts of the globe, however, which sectors will most benefit from this continued demand?
On a slightly different tangent: is it reasonable to expect the RBA to continue adjusting rates, or should they be a little cautious and 'wait and see' the effects on the recent and significant movements?
Allison Jackson February 18, 2009 The Australian
CHINA and India would continue to grow at a fast pace for a "long time", boosting demand for Australian raw materials.Reserve Bank assistant governor of economics Malcolm Edey said today China and India had “long way to go” before they caught up to industrialised countries. “China and India … until the recent crisis were growing at extremely high rates. They have got plenty of scope to do that for a long time,” Mr Edey told a business forum in Sydney. Mr Edey said demand for Australian resources would continue to grow “which is going to be very good for Australian incomes”, and would help offset the impact of an aging population on economic growth. “China and India and other parts of the developing world have a long way to go to catch up and as they catch up they are becoming a bigger and bigger part of the world and that’s a very powerful influence in increasing global growth prospects,” he said. “I think that force will continue to operate in the long run, but we are seeing very severe short-term effects from the global financial crisis working against that at the moment.” China ranks as Australia’s biggest trading partner, while India’s importance has grown in recent years. India is now Australia’s 11th biggest trading partner, according to the Department of Foreign Affairs and Trade website. Mr Edey reiterated the Reserve Bank’s view that Australia would continue to outperform other industrialised nations “in the difficult period that lies ahead” due to the strength of the domestic financial system. Mr Edey provided no clues on the RBA’s attitude towards interest rates since its last board meeting on February 3. At the meeting, the RBA board cut interest rates by another 100 basis points, taking rates to a 45-year low, and signalled it was near the end of the easing cycle. But since then the economic situation has deteriorated even further, with Japan, Australia’s biggest export market, experiencing the worst economic conditions since World War II and Australia’s unemployment rate at the highest level since June 2006 while business and consumer confidence are in the doldrums. Market participants are hoping RBA governor Glenn Stevens will provide some clarification on the central bank’s strategy when he testifies before federal parliament on Friday.
It offers some Australians a little hope when we hear continued talk about increasing demand for Australian exports underpining better economic conditions than other parts of the globe, however, which sectors will most benefit from this continued demand?
On a slightly different tangent: is it reasonable to expect the RBA to continue adjusting rates, or should they be a little cautious and 'wait and see' the effects on the recent and significant movements?
Jobs not secure in Australia...?
General Motors to slash 47,000 jobs
Jacob Saulwick,February 18, 2009 - 2:37PM Sydney Morning Herald
The parent company of Australian car maker General Motors Holden will slash 47,000 jobs worldwide in the coming year, but it remains unclear how many local positions are under threat.
General Motors will lay off 26,000 workers outside the US as part of a plan to remake the company in exchange for massive financial aid, according to a document lodged this morning with the US Treasury.
But the carmaker says it expects Holden to remain viable, in part because of assistance extended by the Australian Government.
Holden's plans for a new, more fuel-efficient car, financed with government help, should ensure that Holden remains a profitable arm of GM worldwide, the company said.
Holden is not ruling out cutting local staff.
"We are scrutinising all aspects of the business and will be making some decisions - some of them tough decisions - in the coming weeks in terms of our structure and operations,'' a spokesman said.
"All of this contributes to the ultimate goal of being a viable, sustainable local operation,'' the spokesman said.
The survival of the global carmaker is far from certain.
GM has lodged restructuring plans with the US Treasury as a condition of a temporary multi-billion dollar survival loan.
With sales plummetting, GM could need a $US30 billion crutch from the US Government by 2011, the Treasury filing asserted.
The company is also asking for help from the governments of Canada, Germany, the UK, Sweden and Thailand.
Some worrying news for workers in Australia's automotive production industry, although there seems some hope as our Government continues to support Holden in its efforts to produce. Are you aware of other instances through our recent economic history where the Australian Government has stepped in to 'prop up' car companies producing in Australia?
Jacob Saulwick,February 18, 2009 - 2:37PM Sydney Morning Herald
The parent company of Australian car maker General Motors Holden will slash 47,000 jobs worldwide in the coming year, but it remains unclear how many local positions are under threat.
General Motors will lay off 26,000 workers outside the US as part of a plan to remake the company in exchange for massive financial aid, according to a document lodged this morning with the US Treasury.
But the carmaker says it expects Holden to remain viable, in part because of assistance extended by the Australian Government.
Holden's plans for a new, more fuel-efficient car, financed with government help, should ensure that Holden remains a profitable arm of GM worldwide, the company said.
Holden is not ruling out cutting local staff.
"We are scrutinising all aspects of the business and will be making some decisions - some of them tough decisions - in the coming weeks in terms of our structure and operations,'' a spokesman said.
"All of this contributes to the ultimate goal of being a viable, sustainable local operation,'' the spokesman said.
The survival of the global carmaker is far from certain.
GM has lodged restructuring plans with the US Treasury as a condition of a temporary multi-billion dollar survival loan.
With sales plummetting, GM could need a $US30 billion crutch from the US Government by 2011, the Treasury filing asserted.
The company is also asking for help from the governments of Canada, Germany, the UK, Sweden and Thailand.
Some worrying news for workers in Australia's automotive production industry, although there seems some hope as our Government continues to support Holden in its efforts to produce. Are you aware of other instances through our recent economic history where the Australian Government has stepped in to 'prop up' car companies producing in Australia?
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