Menzies House

Pickering draws the right picture

Larry Pickering is famous for his sharp-witted political cartoons. His damning attacks on government scandals have gone viral and his open taunts for government to sue are hair-raising to editors, journalists and lawyers. However, Larry does admit he is a story teller.

Nevertheless, his keen appraisal of the Reserve Bank's rate cutting measures to stimulate the economy makes more sense than does Governor Glenn Stevens. GC.Ed.

The Reserve Bank chairman is pulling what's left of his hair out over the ineffectiveness of his rate cuts. It's a different game now and we won't be returning to the old game.

Despite the October rate cut, housing loans have actually dropped and housing prices on average fell. There was a marginal increase in Sydney that can be blamed entirely on a long-term, critical lack of land supply.

Read more:http://pickeringpost.com/article/rate-cuts-will-not-stimulate-this-economy/859

Finance Minister Wong warns elderly pensioners

The old maxim, "engage brain before putting mouth in gear" is good advise for former Reserve Bank official, Peter Mair for his idiotic attack in which he cast criminal suspicion on 2 million elderly pensioners. Having poked the hornet's nest, pensioners and several related associations have come out fighting.

That the SMH gave a virtual re-run of yesterday's story suggests Mr. Mair might have been advised to go home, water the garden and shut-up?

"It is highly offensive to the millions of Australians who are currently on pensions. We have had a lot of responses from people this morning and they are insulted by the suggestion."

Read more: http://www.smh.com.au/money/pensioners-fume-at-welfare-fraud-claims-20120925-26ii2.html#ixzz27WNRXZzS

Elderly pensioners are crooks?

Pensioners around Australia will be rushing to their mattresses and cookie jars as the Herald reveals the true reason for a dwindling economy. “Elderly Australians committing welfare fraud on a massive scale are behind the extraordinarily high number of $100 notes in circulation, a former senior Reserve Bank official says.”
 “One popular explanation is that they are used for illegal transactions as part of the cash economy.” Former Reserve official, Peter Mair, rejects that notion as a “furphy”.
Now that we know exactly who is buggering the economy, “elderly Australians” will be flocking to clubs and large businesses to break their stash of $100 bills into 50’s to avoid the tentacles of The Australian Taxation Office. Not to mention the evil looks and snide remarks like “tax cheat” from cash register personnel against those who prefer larger notes. Money that wicked “elderly” earned, paid tax on, and saved.

However, Mair blamed “elderly people” for hiding cash income to increase pension benefits. “The bank is basically facilitating a tax avoidance scheme by issuing high denomination notes,” he told the Herald. “They are not needed for day-to-day transaction purposes, or even as reasonable stores of value.” What poppycock Mr. Mair!

Shopping online is good?

Brent Fleeton has strong views about online shopping. Gerry Harvey might not agree!

Overnight the Australian Retailers Association (ARA) announced their response to the Low Value Parcel Processing Taskforce final report. Now, it is to be expected that protectionism is the ruling economic policy of the ARA, but their call for Australian consumers to be taxed for purchasing goods online that will see a parcel arrive from overseas shows how out of touch this lobby group is with everyday Australians. I must admit I am unlike many of the good burghers at the ARA, as I am biased towards consumer freedom in a global economy.

Like many friends and colleagues, I shop online for many goods for one reason – the power of my dollar gets a better quality product for a lower price online than if I was to shop in Australia. As an example I unashamedly have expertise in, buying a suit from an Australian retailer doesn’t make economic sense because the prices are lower and the quality is better if you visit the online shopping sites of a host of British or American tailors. To tax my purchase and use the reason that “... the additional state revenue will translate to community benefit - police, teachers and nurses.” is simply laughable.

Is the RBA Becoming Irrelevant?

ANZ has increased its standard variable interest rate by 6 basis points to 7.36 per cent despite no move in Australia's official cash rate earlier this week.

ANZ said it has increased its standard variable home loan rate to 7.36 per cent from 7.30 per cent.

The move follows the Reserve Bank of Australia's decision on Tuesday to leave the cash rate on hold at 4.25 per cent.

ANZ no longer announces interest rate movements in lock-step with the RBA. The move was designed to change the public's perception ANZ's loan rates, and cost of funds, were tied to the RBA's cash rate.

So is the RBA becoming irrelevant?

I’d say it is becoming less relevant. The banks for example don’t price their credit card, or bank overdraft, or personal loan rates on the changes to monetary policy. The banks price the “credit” they offer on what the market is prepared to pay and the risk of the loan.

ANZ’s move is justified and welcome. Anyone who is critical of ANZ’s decision should remember that the only thing worse than a super profitable bank is a bankrupt bank. Just have a look at Greece, Italy, Spain, France, Germany, the UK and the US.

Also, you can forget about the RBA trying to defend (sell down) the hot AUD. FX markets worldwide trade around $250 billion per day in the AUD exchange trades and our RBA has only enough reserves to last about 4 hours.

 

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Joe Hockey, Political Lies & Bank Regulation

Economists Dr. Joe Clark and John Humphreys analyse Joe Hockey's economically illiterate calls for the RBA to 'act as referee' on bank interest rates, and conclude that they really, really hope he's lying and doesn't mean what he says:

We hope that Joe Hockey is a liar. We can understand why a politician would want to bash banks, and we can understand why a politician would want to promise more regulation to control the “naughty market”. Both of these are populist positions which hit the political funny bone, and score cheap points.

It is no surprise that Wayne Swan regularly complains about evil bank profits, and we’re sure the Greens (and other assorted reds) would eagerly agree to more regulation. But while we can understand the political desire for populism, when it actually comes to managing the rules for our economy, we can only hope that Hockey is not serious about his stated desire to have the RBA act as referee on interest rates.

We already know that Joe Hockey wanted to introduce a psuedo-national bank, and he wanted more regulation to ensure that banks gave more risky loans, and also gave fewer risky loans. 

Now the issue is whether banks should be able to set their own prices for loans. To be fair, Hockey has only suggested that the Reserve Bank of Australia (RBA) should nudge banks, but given his track record on not understanding finance it’s a dangerous start. It hints very much towards government regulation of interest rates, which is price fixing of some of the most important prices in the economy.

Tell Him He’s Dreaming

Chalk up another success of the Gillard government – Budget Blowouts.

The Gillard government will slash public sector funding and pare back the baby bonus in an attempt to turn a forecast $37 billion deficit this year into a $1.5 billion surplus by 2012-13.

The government's mid-year economic and fiscal outlook, released today, reveals the deficit is expected to come in well above the $22.6 billion forecast at budget time, on the back of a $20 billion revenue write-down over the forward estimates.

  

And Mr. Swan is Euromoney’s world's finance minister of the year!

From a commitment, to an objective and soon it will be all but a dream.

 

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Europe’s Disaster Is Headed Our (USA’s) Way: Niall Ferguson

Harvard University history professor Niall Ferguson says that Americans should be paying more attention to the eurozone crisis. He believes that the issues facing Europe are going to make their way to the U.S.

Will Gold be the only winner from the eurozone crisis?

Niall Ferguson explains the current financial crisis.

  

 

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