The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Tuesday, August 9, 2011

De facto rate cuts coming whether RBA likes it or not...

CBA announced today that they are cutting their fixed-rate home loans by up to 60 basis points. They are able to do this because the yield curve has inverted and 3 year government bonds are trading at just 3.59%, which is more than 100 basis points below the cash rate. Expect to see a huge surge in home loan refinancing out of variable rate loans into much cheaper fixed products back to 2007 levels subject to the yield curve remaining inverted and the cash rate staying constant (see chart). The circa 10% fall in the currency is also equivalent to 1-2 rate cuts based on RBA  research. So, whether the central bank likes it or not, Australians will probably be the beneficiaries of de facto rate cuts (and imported inflation via the exchange rate)...

at 1:45 PM