Economists predict modest rate cuts

Economists doubt the Reserve Bank of Australia (RBA) has finished cutting the official cash rate just yet, but borrowers shouldn't rely on any more aggressive reductions.The RBA's minutes from its February board meeting - where it cut the cash rate by another 100 basis points - indicate the central bank remains concerned about the short-term prospects for the economy.It says its 400 basis points worth of rate cuts since September and the government's stimulus package will give a "significant" boost to the economy, but will take time to be effective."Given the speed at which the global contraction had occurred, short-term prospects were thus still for weakness in demand and output," the minutes said."Nonetheless, the substantial measures taken would help to cushion the economy from the contractionary forces coming from abroad and, over time, work to establish conditions conducive to stronger demand later in the year."Macquarie Securities economist Benjamin Dinte said the RBA would be hesitant to continue lowering rates at an aggressive pace."(But) we do believe that further softness in global economic conditions and domestic confidence is enough to justify another reduction in rates in March," he said.Federal Treasurer Wayne Swan conceded the government's latest $42 billion stimulus package, which passed the parliament last week, will take time to work through the economy."That's what the government has said about the package and why we moved so swiftly last October and again in recent weeks," Mr Swan told reporters.Economists are looking for the government's $10.4 billion stimulus package announced in October to help lift Wednesday's December quarter retail sales by 1.0 per cent after just 0.1 per cent growth in the previous three months.New opposition treasury spokesman Joe Hockey, unsurprisingly, doesn't believe the government has got the response to the global recession right."It's time to be prudent, it's time to be careful, it's not a time to panic," Mr Hockey told the Fairfax Radio Network."You have to show confidence, you have to believe things are going to get better, you have to have a plan to get things better. I don't think the government is doing any of that."But Mr Swan said it was the coalition that didn't understand the depth of the global recession and the type of response required."You've seen underscored today from the Reserve Bank minutes the need for a very substantial fiscal stimulus for our economy," he said.Still, despite the expected boost to consumer spending, the RBA expects the December quarter gross domestic product will be "broadly flat"."... a relatively good result in comparison with other developed economies," the minutes said.JP Morgan Australia chief economist Stephen Walters said it was the performance of those other economies that was likely to determine the need for further interest rate cuts.He said economic conditions among Australia's major trading partners had shown an "alarming deterioration" particularly in Japan - Australia's largest single destination for exports - where output had collapsed."Already, on current forecasts ... 62 per cent of Australia's export partners will be in recession in 2009, including eight of the top 10 destinations," he said."A pause (in rate cuts) next month is possible if economic conditions improve, but so too is a cut of more than 50 basis points, depending on how the data prints, particularly offshore."Financial markets have fully priced in a 50 basis points cut by the RBA next month.

$42b stimulus package for Australia

The Rudd Government will pour an extra $42 billion into the economy over the next four years in its latest bid to defy the economic gravity that is dragging down economies around the world.
The extra spending was contained in a package of measures announced today by Prime Minister Kevin Rudd and Treasurer Wayne Swan, as the Government battles to adjust its policies and forecasts fast enough to cope with the rapidly deteriorating global economy. It brings the total stimulus efforts by the Government to $88.7 billion.The Government also halved its 2008/09 growth forecast for the economy to 1% from a November forecast of 2%. Today's spending package includes $28.8 billion for infrastructure, schools and housing, as well as $12.7 billion cash payments for low and mid-income earners, to be paid in March, 2009.''The Government will move heaven and earth to reduce the impact of the global recession on Australia,'' Mr Rudd said .
Opposition Leader Malcolm Turnbull, speaking on Sky News, pledged to work with the Government on the stimulus budget but said the Opposition would go through the spending proposals ''line by line'' in the coming days.The "substantial" package ''will be felt in the short term,'' said ANZ economist Katie Dean. "It should provide a significant boost to growth in the March and June quarters" and "may delay a technical recession''.Nonetheless, the scale of the global slowdown will likely overpower the Government's best efforts to prevent the recession from taking hold here, she said.''A lot of the shock has already flowed into the economy and it will be very difficult to for Government to avert a very sharp downturn in business investment.''
Today's additional outlays are expected to support about 90,000 jobs over the next two years, the Government said.Calling the global financial crisis ''a crisis not of Australia's making,'' Mr Rudd flagged an "exit strategy" to running public debts and said economic growth should eventually return the budget to surplus ''over time''.The Government would keep future discretionary spending to 2% in coming years in an effort to ease debt.However, he warned, "no one knows how long and deep this part of the economic cycle will be''.The announcement comes just hours before the Reserve Bank is expected to do its bit to help spark a revival in confidence among consumers and businesses alike. The bank's board is meeting today and markets expect it will cut its key interest rate by at least 100 basis points, or 1 full percentage point, to 3.25% when it reveals its decision at 2.30pm.
Red ink
The additional spending - coming on top of other measures including October's $10.4 billion stimulus plan - means the Federal budget faces years of deficits. Canberra has not clocked up a budget deficit since 1997-98.Mr Rudd said the Government now predicts its deficit for the year to June 30 will total $22.5 billion alone. That shortfall compares with projections of a surplus of $5.4 billion as recently as November and a massive $21.7 billion surplus when it announced its budget last May.The deficit will expand further to $30 billion in the following two years.
Feb 5, Mr Rudd said the global financial crisis would punch a $115 billion hole in the Government's expected revenues between this year and 2011-12, with taxes from businesses set to shrink by $76 billion alone as profits wither.That revenue drop prompted ANZ economist Katie Dean to forecast this year's Federal deficit would come in at between $10-15 billion (about 1% of gross domestic product), rising to as much as $35 billion next fiscal year.''The Government is doing what they can, given their finances, but the pull from not only dysfunctional credit markets and but deepest global recession since the 1940s, is too much,'' ANZ's Dean said.
Other countries are preparing big spending programs in a bid to reverse a slowdown that is now dogging virtually every economy.The new US administration led by President Barack Obama is seeking Congressional support for a stimulus package of at least $US819 billion ($1.3 trillion), or equivalent to about 5.8% of the country's GDP.
Growth, jobless
Asia, home to six of Australia's 10 largest trading partners, has seen a sharp slowdown in growth in the past six months, triggering big falls in prices of many of Australia's main exports with more to come.''The global economic outlook has drastically deteriorated since Mid-Year Economic and Fiscal Outlook 2008-09," today's report by the Government stated.In the wake of the intensification of the financial crisis in September 2008, confidence has fallen and the inter-connected impacts of declining orders, production and employment have combined to produce the most extraordinarily synchronised slump in global economic activity in decades."
"The December quarter 2008 is likely to have recorded the weakest quarterly global GDP performance since World War II."Apart from halving this year's GDP growth rate for Australia, the Government today predicted growth would slow further to 0.75% next fiscal year.Those tallies compare with respective forecasts of 2% and 2.25% made by the Government in November.More people are now expected to lose their jobs as the economic downturn savages business, with the unemployment rate now forecast to rise to 5.5% in 2008-09 and 7% in 2009-10.In November, the Government had forecast respective jobless rates of 5% and 5.75%.
The unemployment rate was 4.5% in December.
Bonus payments
The $12.7 billion cash payments will include one-off bonus payments of $950 each for low- and middle-income households and individuals through five bonuses to be paid in the next few weeks through either the Australian Tax Office or Centrelink.It means 8.7 million workers earning $100,000 or less will receive a lump sum payment of $950 each from April.About 1.5 million single-income families will also receive the payment, provided they receive Family Tax Benefit Part B, in the fortnight beginning March 11.Farmers will also receive a $950 bonus payment, as will families eligible for FTB Part A who have a child at school. They will receive an immediate payment of $950 this week.The Government will also provide a one-off $950 training and learning bonus for eligible students and people outside of the workforce returning to study to help with the costs of education and training.The package, which is virtually a mini-budget in all but name, is the second major economic stimulus package announced by the Government since the $10.4 billion economic security strategy released in October.
$88.7 billion and counting
It takes the total amount spent by the Government on stimulating the economy since september to $88.7 billion, including bank deposit guarantees, the car industry package, as well as nvestment in residential-backed mortgage securities, local government, infrastructure projects, and on the states through the Council of Australian Governments (COAG).The statement said that while the nation was in a better position than most other countries to weather the global recession, Australia could no longer ''resist the pull of global economic forces''.The infrastructure spending in this package involves a major roll-out of $890 million to fix accident black spots, install rail boom gates, repair regional roads and build community infrastructure such as libraries, town halls, community centres and sport centres.Schools around Australia will benefit from $14.7 billion over three years to construct school halls, libraries, indoor sports facilities and performing arts centres.The package includes funds of between $250,000 and $3 million for primary schools for capital expenditure projects and $1 billion for the construction of science and language laboratories in secondary schools, while all schools will be able to apply for extra funding of between $50,000 and $200,000 for minor maintenance and infrastructure.
Housing, small business
Public and community housing will receive a $6 billion boost to allow for the construction of about 20,000 new homes to be completed by December 2010.Small business also gets $2.7 billion in extra tax breaks aimed at supporting jobs.This means, for example, a business which buys a $2000 computer by the end of June this year will receive a $600 additional deduction while a business which buys a $60,000 backhoe before the end of June will receive an extra $18,000 deduction.The Government will also provide free ceiling insulation to 2.7 million homes to improve energy efficiency by increasing the solar hot water rebate from $1000 to $1600 from Tuesday and the low emissions plan for renters rebate will double to $1000.

Rates to be 2.5%, cost of living falls

A massive fall in petrol prices has pushed the cost of living down for the first time in two years and opened the way for interest rates to fall to as low as 2.5 percent.Petrol prices fell by more than 18 percent in the December quarter as unleaded petrol fell from around $1.50 per litre in September to close to $1.00 per litre in December, mirroring falling oil prices.According to official figures released today, the consumer price index – which tracks the cost of living in Australia – fell by 0.3 percent in the December quarter. Over the 12 months to December, the CPI rose by 3.7 percent, well below its previous reading of 5 percent.The fall in the cost of living - which is the fastest decline logged in 10 years - is expected to open the way for further rate cuts from the Reserve Bank of Australia (RBA), starting with its first meeting of the year, to be held next week.Economists expect the RBA to trim the cash rate by 75 basis points, a move that would take the cash rate to 3.5 percent.“There’s nothing of concern in these figures for the Reserve Bank that will stop it aggressively cutting interest rates next week,” Riki Polygenis, economist at ANZ Bank told ninemsn.She believes rates will fall by 75 basis points next week and will ventually fall to 2.5 percent this year.While the fall in prices and interest rates may be good news for consumers, other economic figures released today showed a sharp slowdown in economic activity.The Westpac/Melbourne Institute index of economic activity - which tracks the likely pace of economic growth in the future - contracted by 2.2 percent in November, and analysts said it showed that the odds of Australia entering a recession this year are shortening.“With the –2.2 percent growth rate for November we are now reporting the first negative reads for growth since May 2001,” said Bill Evans, Westpac’s chief economist. “In the past this has been a useful signal ofthe likelihood of Australia experiencing a recession.

28/01/2009 By Stuart Fagg, ninemsn Money

3 day work week

British workers could have their working week cut to three days under plans being considered by the government to help companies cope with recession.The government is understood to be considering paying firms to cut the working hours of thousands of staff instead of retrenching them in an attempt to stop unemployment soaring past two million.Now business secretary Peter Mandelson is facing calls to offer compensation for workers who have their hours cut.Unnamed ministerial sources told The Observer newspaper that a compensation scheme for workers was an option being discussed but was "not imminent"."Government sources said there were issues about whether to restrict compensation to the car industry or apply it to all firms," the newspaper said.The Department for Business is already advising employers on its website to consider cutting staff hours as a way to save money, saying it might be better than making staff redundant.Similar measures were after a series of crippling strikes by mine workers in the 1970s which had dramatic knock-on effects through the rest of the nation's economy.Former prime minister Margaret Thatcher introduced a short-time working directive in the 1980s to cover earnings lost through shorter hours.

Aus economy

Federal Treasurer Wayne Swan says he won't speculate on whether Australia will go into a recession, despite a new report saying Australia's budget is "buggered".The Access Economics report, to be released on Monday, warns Australia will go into recession this year as the economic boom unwinds.A blow out in the account deficit and a loss of 300,000 jobs is likely to be a result of the downturn, it says.The report demonstrates the difficult global conditions that Australia confronts, topped off with a shrinking economy in the US and slowing in economic growth in China, Treasurer Wayne Swan told ABC Radio on Monday.But when asked whether Australia would go into a deficit, he replied: "I certainly don't speculate about that."I mean every day will bring a new set of private sector forecasts and I don't intend to... respond to them on a daily basis."But I guess what this report does do is point to the impact of a global recession, and what it will mean for world growth."The government would respond "if necessary in a timely way", with a further stimulus package if it was needed, Mr Swan said.

More on this subject from an ABC report....
A key economic forecast says Australia will definitely fall into recession this year and has described the Federal Budget as being "buggered".The latest business outlook from Access Economics says that Australia's prosperity will unwind quickly because of the slowing Chinese economy and unemployment will be up to 7 per cent by next year.The report says global growth is slowing at a scary speed, and Australia's growth prospects are expected to follow the lead in similarly swift fashion.Chris Richardson from Access Economics says the implications for this year's Federal Budget are tough, and the Government faces some ugly policy choices."It doesn't however mean that the Government should stop doing what it's doing," Mr Richardson said.Federal Treasurer Wayne Swan told ABC Radio's AM program that budget revenues will be more seriously affected than first thought.He says the report confirms the very difficult global conditions faced by the Australian economy, but he would not speculate on a recession."Revenues will take a heavier hit than was thought at the end of last year, but we'll account for that in good time," he said"We face the prospect of the United States economy shrinking, and of course the prospect of China not growing anything like [what] was expected only a few months ago.
"There's no doubt that a slowing China will have a very substantial impact on countries in this region, and most particularly Australia."Both those events are deeply concerning for growth in this country and the impact in terms of revenue for the Budget and also the impact on employment."

A Path Less Travelled

A friend of mine was saying how much they are enjoying a book called "A Path Less Travelled" by Scott Peck and it reminded me that it was this book that I first read many, many years ago that started me on my quest for personal fulfillment. With this I would like to recommend this book to anyone who has an interest in self development and achieving the maximum achievement, wealth, abundance, freedom and everything their heart desires to read this book.

What to do to acquire a multi million dollar net worth

what does an individual need to do in order to acquire a million dollar

net worth?

There are several things that you can do to propel yourself to this

enviable position, each comes with diligence and perseverance.

When you are working in a job you need to invest extra time.

Arrive an hour earlier than you have to and put that time in working

on upgrading your skill and understanding of your job.

The other end of the spectrum is that you leave an hour later than

others and capitulate the day's work and information processed.

Learn from your job and also by following these steps you are bound

to impress your superiors that you are keen to learn and expand

your horizons. Remember you do this for yourself but there are

other benefits along the way.

This is just a beginning to getting a person started on the road

to vastly expanding their net financial worth.

Stay tuned for more tips over the coming weeks.©