Interest Rates Up Again For Aussies

[bmanly]

If any of you are living off interest bearing accounts that are in Australia then this will affect you. Official RBA interest rates are up to 6.25%, a jump of .25% as of today. This is good news for those living off interest and if you hold an online cash account like Bankwests "Telenet Saver Account" it will be paying you 6.25% within a Month. This of course is good for our currency too which has held up very well against the Thai baht. Sorry for the people with mortgages though, more can be found at this Daily Telegraph article, cheers.

[bendix]

This is already translating through to savings accounts. I just received an email from Citibank in Australia informing me that their online saver account is now paying 6.00%

[steveromagnino]

The Ministry for Lies about Grain Production have some extra cash lying around does it there Bendix?!

(great avatar BTW)

[bendix]

I'm not sure Steve.

I was transferred to the State Bureau for the Persecution of Kulaks sometime ago. We have a big budget and it needs looking after.

[cclub75]

By the way, as an Aussie, how do you see the economy in your home country ?

I'm not, but i have some money invested on AUD currency.

It was a bet short and mid term : AUD looks good because Australia have strong natural ressources, and I still believe that commodities have a bright future. AUD has high interest rate. Less then NZD but the country looks stronger (New Zeland is too small). A concern : house market going crazy (like in many other places) and severe climate disorders with negative effects on crops.

Long term : a bad liability with populations in pacific region, who will become "climate refugees" and will try to flee their flooded islands.

What do you think ?

If any of you are living off interest bearing accounts that are in Australia then this will affect you. Official RBA interest rates are up to 6.25%, a jump of .25% as of today. This is good news for those living off interest and if you hold an online cash account like Bankwests "Telenet Saver Account" it will be paying you 6.25% within a Month. This of course is good for our currency too which has held up very well against the Thai baht. Sorry for the people with mortgages though, more can be found at this Daily Telegraph article, cheers.

[steveromagnino]

I'm not, but i have some money invested on AUD currency.

It was a bet short and mid term : AUD looks good because Australia have strong natural ressources, and I still believe that commodities have a bright future. AUD has high interest rate. Less then NZD but the country looks stronger (New Zeland is too small). A concern : house market going crazy (like in many other places) and severe climate disorders with negative effects on crops.

Long term : a bad liability with populations in pacific region, who will become "climate refugees" and will try to flee their flooded islands.

What do you think ?

Immensely rich in natural resources demanded by resource short China/Japan/Indo/Thailand etc right on their doorstep. Many very capable entrepreneurs and business people (including many migrants); some race relations problems with both immigrants and the indiginous people but nothing near the levels of say France.

Big time obsession with owning property doesn't help them, but they'll be ok I think, just wouldn't be wanting to buy right now; lots of immigrants wanting to move there helps prop the market up there (and in NZ).

South Pacific nations get fleeced by Aussie and Kiwi e.g. Nuie from time to time, but mostly aid is not that much going the other way anyway and most PIers live in NZ/Aussie already and provide some labour if they can be persuaded to work; Aussie still could do a bit more reform to go 'free market' and the Pauline Hanson type factor is an odd one (NZ equivalent Winston Peters and the NZ First Party) but slowly some of those people are dying off from old age and purple hair dye anyway.

Decent education system; complete disregard for CO2 emissions; good standard of living; better workforce (probably) than USA/Europe and proximity to the world's growing markets. I think Aussie will do just fine (just don't tell any of those w*nkers I said that). I guess NZ will do ok too; but as you say, size and location combined with brain drain offshore don't help the Kiwis. most of the family trust money of ours is in Aussie dollars, not Kiwi ones anymore.

<deleted> sad for such a big country how useless the Aussies are at rugby, but then again you cannot have everything ;_)

[thedude]

Pauline Hanson is so 90's. Get wid the program man, its all love and rainbows now, cept for the arab gangs down sidney side. but yeah, property prices are just nuts, especially in the west where the earth is bursting with resources and they need massive inflows of labour just to keep their order books moving, those that have come over from the east have driven property prices through the roof. i keep saying WA is the new LA.

[TizMe]

Well if you are living as an expat Aussie and investing in interest bearing accounts or real-estate, then you are nuts.

Invest in the ASX, earn growth of +20%, and earn tax free fully-franked dividends.

[bmanly]

By the way, as an Aussie, how do you see the economy in your home country ?

I'm not, but i have some money invested on AUD currency.

It was a bet short and mid term : AUD looks good because Australia have strong natural ressources, and I still believe that commodities have a bright future. AUD has high interest rate. Less then NZD but the country looks stronger (New Zeland is too small). A concern : house market going crazy (like in many other places) and severe climate disorders with negative effects on crops.

Long term : a bad liability with populations in pacific region, who will become "climate refugees" and will try to flee their flooded islands.

What do you think ?

I think Steve answered your questions very well. In my opinion I think our economy is strong and will remain strong for sometime. We have virtually no unemployment and in fact we are inviting foreign workers to fill in the gaps. There is plenty of money around and Aussies are spending up big. Interest rates were increased to slow up the spending and the increases in house prices. It seems to have taken effect, house prices on the Eastern seaboard are now leveling off and in some cases dropping. In Western Australia house prices are booming but that is a niche market covering a small percentage of the population.

When I look at investment opportunities around the world, I still think Australia is the better way to go at this present time. With good Goverment, strong financial laws, a vibrant economy and a peaceful community it seems to be a good bet.

Well if you are living as an expat Aussie and investing in interest bearing accounts or real-estate, then you are nuts.

Invest in the ASX, earn growth of +20%, and earn tax free fully-franked dividends.

True to a certain extent, however the share market does not only go in one direction. At the moment we are seeing all time highs and more highs. This situation will not continue forever. If you have a crash the same as in 1987 you can lose half your money overnight, I remember those days well.

If you do not have have cash on the sidelines waiting for such an event then you may end up losing half your life savings. What is wrong with having cash on the sidelines to buy when such an opportunity presents itself? This little black duck is keeping some of his powder dry for such an event and is getting 6.25% while doing it.

[TizMe]

If you take the bumps out of any charts, then the share market does indeed travel in one direction. Even if you invested all of your investments the very day before the crash of 1987 your average return is still well over 10%. (and much, much higher if you invested 1/12 of this amount each month of 1987)

Not investing in the stock market because there might be a crash is just like not driving your car because you might be in a crash.

There is more money to be made by "Time in the market" than "Timing the market".

Cash is for buying beer and for the kid’s pocket money. 6.25% return on cash is a pittance when you take into account tax and inflation.

[bmanly]

I think you might have read the same books as me but I prefer to take my stand. Warren Buffetts famous quote was, "If you can not handle a 50% drop of the market then you shouldn't be in it".

Now I ask you, if the market dropped 50% tomorrow will you be drinking a beer with me in Thailand or will you be worried about what you are going to next? I'll be here

[TizMe]

I certainly wouldn't be missing any beers if there was a 50% drop tomorrow, However a crash anywhere near 1987 is highly unlikely.

The 1987 share price bubble in Australia was associated with rapid growth in corporate debt and gearing, asset churning and highly speculative developments by a group of entrepreneurial stocks (eg Bond Corp, Qintex, etc).

By contrast corporate debt/gearing is now relatively low and the huge profit growth being generated by resources companies is real.

[bmanly]

Thanks for your opinion, it is obvious to me now that you are financially secure. In the end we are out to achieve the same goal, it's just that we have different ideas on how to get that end result. I agree with all of your comments mind you except for that cash bit.

18 Months ago NAB hit the skids and was hovering around $28. I had been watching this stock as I do many others for years. To me it was a bargain at that price. If I didn't have a bit of cash on the sidelines I would not have been able to buy a swag of it at that time. Now of course NAB is trading at $39.20. That was the point I was trying to make about keeping cash on the sidelines. How do you fund purchases when situations like that arise? Or do you just let it ride and reinvest your dividends through the dividend reinvestment plans?

[TizMe]

That's what credit is for

[bluedragon]

Well if you are living as an expat Aussie and investing in interest bearing accounts or real-estate, then you are nuts.

Invest in the ASX, earn growth of +20%, and earn tax free fully-franked dividends.

TizMe, by ASX do you mean the American Stock Exchange, and if so what do you mean by fully-franked dividends.

I am invested in several mutual funds in my 401K, a couple of which are at 25% ytd.

Regards, BD

[bmanly]

bluedragon, the ASX means the "Australian Stock Exchange". In the case of the discussion above in usually means the top 200 companies in Australia and is quoted as XJO or in other cases it might be quoted as the All Ordinaries which is AXO and is the top 500 companies. A typical quote will look like this:

ALL ORDINARIES [XAO] 5,303.40 -88.10 -1.60

S&P/ASX 200 [XJO] 5,322.40 -97.30 -1.80

S&P/ASX 50 [XFL] 5,192.00 -96.70 -1.80

Fully Franked dividends means that those dividends are 30% company taxed already. If you earn $75,000 or less in Australia and you receive fully franked dividends then there is NO MORE tax to be paid on those dividends, that's why it is so attractive. Hope that helps.

[bluedragon]

bluedragon, the ASX means the "Australian Stock Exchange". In the case of the discussion above in usually means the top 200 companies in Australia and is quoted as XJO or in other cases it might be quoted as the All Ordinaries which is AXO and is the top 500 companies. A typical quote will look like this:

ALL ORDINARIES [XAO] 5,303.40 -88.10 -1.60

S&P/ASX 200 [XJO] 5,322.40 -97.30 -1.80

S&P/ASX 50 [XFL] 5,192.00 -96.70 -1.80

Fully Franked dividends means that those dividends are 30% company taxed already. If you earn $75,000 or less in Australia and you receive fully franked dividends then there is NO MORE tax to be paid on those dividends, that's why it is so attractive. Hope that helps.

bmanly, yes thanks. Regards, BD