Housing will lead economic upturn: RBA

David Uren, Economics correspondent   The Australian  February 21, 2009

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THE combined impact of rate cuts and the Rudd Government’s stimulus packages will create an economic recovery later this year, according to the Reserve Bank, starting with a revival in housing construction.

GOD FORBID OUR FIRST MARKET TO “REVIVE” WILL BE THE HOUSING MARKET, GLENN STEVENS!  LET THE LAND BUBBLE DEFLATE – OR ELSE!

The bank’s governor, Glenn Stevens, endorsed the Government’s economic strategy yesterday, saying its two economic stimulus packages would boost economic growth both this year and next.

BUT THIS WILL JUST DELAY THE NECESSARY CORRECTION, MR STEVENS. TRYING TO KEEP THE BUBBLE INFLATED WILL ENSURE A MORE-DAMAGING. BIGGER BURSTING WHEN IT DOES HAPPEN.  THE RBA MAY SUPPORT PEOPLE OR BANKS AT TIMES LIKE THESE – NOT BOTH.

He also said the Government’s actions to guarantee both bank deposits and wholesale funding had preserved confidence in the banking system.

YES INDEED! “CONFIDENCE” IN BANKS WHO WERE UNABLE TO MANAGE THEIR CREDIT EFFECTIVELY. THE PEOPLE WILL PAY FOR THIS ….. BIGTIME!

Appearing before the House of Representatives economics committee yesterday, Mr Stevens said the prompt actions of both the Reserve Bank and the Government would reduce the severity of the downturn.

“PROMPT ACTION” IN PRECISELY THE WRONG DIRECTION (WITH THE EXCEPTION OF THE $900 GIVEN TO PEOPLE.) PEOPLE MATTER MORE THAN BANKS RIGHT NOW.  NO?

“The path of the Australian economy is going to be considerably better than it would otherwise have been, and considerably better than a number of other countries around the world, whom we can see contracting at a very large pace,” Mr Stevens said.

HOW WRONG YOU’LL BE PROVEN, GOV!

He disagreed with new Opposition Treasury spokesman Joe Hockey that the Government should be saving some of its ammunition in case the downturn was protracted.

YES, THAT AND ABOLISHING TAXES ON LABOUR AND CAPITAL TO GET THE ECONOMY BACK INTO GEAR, JOE. THE TAX REGIME HAS BEEN FOSTERING PROPERTY RORTS AND FINING THE REAL ECONOMY! ISN’T THAT CRAZY?

“The longer you wait, the more ammunition you will end up having to use,” Mr Stevens said. “These things can get a sort of self-fulfilling momentum behind them.”

EXACTLY!  I PRESUME YOU’RE TALKING ABOUT THE PROPERTY BUBBLE THAT DELIVERED THIS GST?  OH, YOU’RE NOT!!

He raised the prospect that, having moved quickly to cut interest rates by 400 basis points since September to a 35-year low of 3.25 per cent, the Reserve Bank would stop cutting rates sooner than it had in other cycles.

UNLIKE MOST PEOPLE, I ACTUALLY AGREE WITH LOW INTEREST RATES AT ALL TIMES.  WE SHOULDN’T FALL FOR ‘LOW’ INTEREST RATES TO INVEIGLE US BACK INTO PROPERTY BUBBLES, THOUGH.

“That ought to be a good thing, because you hopefully will have got ahead of things,” Mr Stevens said.

WE WON’T GET “AHEAD OF THINGS” IF YOU DON’T LET THE LAND PRICE BUBBLE DEFLATE, BOYO!

He said the bank would be cutting rates further only to the extent that it received information that “tells us something genuinely new about the prospects for demand and prices over the medium term”.

WELL, THERE’S GOING TO BE PLENTY OF SUCH INFORMATION, GLENN!

Financial markets have cut their estimate of the board’s next rate cut from 75 to 50 basis points, however many private economists think it may pause for a month.

THE MARKETS DON’T HAVE MY OVERARCHING VIEWPOINT, GOVERNOR!

ANZ’s head of Australian economics Warren Hogan said: “The Reserve Bank feels they have got well ahead of the economic data and they can sit back and observe how things play out.”

INFORMED PEOPLE CAN SEE THEY WILL “PLAY OUT” VERY BADLY!

Mr Stevens said the fact that banks had passed on rate cuts to borrowers, albeit not in full, meant the Reserve Bank would not need to follow its peers in the US, Japan and England in cutting rates close to zero.

NOT YET!

He said the rate cuts and the stimulus packages would not prevent the world downturn causing weakness over coming months, but they would result in stronger growth towards the end of the year with a turn in housing construction.

HMMMM …. “GREAT EXPECTATIONS”?

The bank’s deputy governor, Ric Battelino, said Australia’s credit rating was in no danger, and the Government’s debt position was “among the very best in the world”.

YOU’VE LEARNT CREDIT RATINGS ARE UNFORTUNATELY RARELY IN DANGER IF YOU DO THE BIDDING OF BANKS INSTEAD OF THE PEOPLE, RIC?

Mr Stevens said the strength of the financial sector would help the recovery. The Government’s guarantee of bank wholesale funding had enabled Australia’s banks to tap world markets, coming second only to those of the US in raising funds since last November.

NO IT WAS THE MISGUIDED “STRENGTH” OF THE FIRE SECTOR GOT US INTO THE GFC, MR STEVENS! LEARN THIS: RAMPANT FIRE SECTOR BAD, REAL ECONOMY GOOD!

He also endorsed the Government’s strategy in offering unlimited guarantees to bank deposits.

BAD, BAD MOVE!  FALSE GENEROSITY TO BANKS! WHY NOT TO PRODUCTIVE SECTORS OF THE ECONOMY WITH TAX BREAKS?

“We had people starting to ring up talk radio and TV shows and querying whether they should take their money out of Australian banks,” Mr Stevens said. “You do not want to let that run. You will have to act, and the sooner you act to stop that, the better.”

WHY PROP BANKS UP AFTER THEY’VE FOULED THEIR OWN NESTS? WHAT OTHER PART OF THE BUSINESS COMMUNITY IS SO COSSETTED?

While China’s economy had weakened by more than expected, with industrial production falling for five months, he said there were tentative signs that the decline had been halted.

CHINA WILL SIMILARLY REAP THE WHIRLWIND OF ITS OWN REAL ESTATE EXCESSES.

I DON’T BELIEVE I AGREED WITH ONE STATEMENT IN THAT LOT?