Every day, I enjoy this guy’s commentary and views. He is to the point with his communication and will share with you this – it is relevant to all of you, especially if you have a house, unit, mortgage or you have a dollar to your name.
As you may know, we were pleased to announce Greg Adams joining our Forex and Futures team, bringing a wealth of experience to the table. Greg is from an engineering background and as such is straight to the point and more importantly gets it done. Amongst other things, his expertise is bringing some very strong processes into the trade selection and risk management.
Greg Adams: Thoughts from my desk 8th Oct 2014
Australian interest rates – currency war non-participation by RBA, playing the long game.
4Q 2015 is when Australia will put up its interest rates. Australia has not participated in the global currency war, to our disadvantage, losing manufacturing jobs overseas as a result, however I think the RBA will play an end game, which is to wait till US puts up its interest rates mid 2015, then wait 6 months more before we put up ours, this 6 months window is our ‘advantage’ and the same effect of having played the war without having to have played it. It’s called playing the long game.
If you want to gain exposure to our strategies for trading this view, click here and Greg will speak with you personally.
Lower average rates the new normal.
As you know, there are currently standard variable home loan interest rates just under 5%. What does the future hold?
Australians are familiar with average standard variable home loan interest rates of around 7.2%.
(7.19% from Aug 02 to Jul 07, 7.26% from 2000 – 2010, 8.54% from 1990 to 2010, 9.95% 1990-1999)*
I say the new average will be 1% lower for the next 10 years.
That will put the average standard variable home loan interest rates of around 6% and here’s why.
Every time we get a shakeup in the job market (think dot com bubble, GFC), 10% of the workforce leave and don’t re-engage, after some time they just drop off the statistics. Canada recently noted that to maintain the average yearly GDP growth of 2-3% with this job loss effect from each shakeup, their new central bank average interest rate will need to be about 1% lower than it has been in the past.
I see this will flow on to variable home loan interest rates. Countries like Australia will immigrate their way forward to a point but not enough, to negate the job loss effect completely. The job loss effect is not a bad thing, think of it as a job efficiency effect of the capital system.
Looking at the data provided by the bankers association, it supports this view rather well. Food for thought and certainly a trading opportunity. Click here to make a time to speak to Greg directly.