INTEREST
RATES OUTLOOK
RBA CHRISTMAS PRESENT
NO CHANGE TO OFFICIAL INTEREST RATES
The Board of the Reserve Bank of Australia has not changed official
interest rates at its monthly meeting. The basic remains untouched
at 5.25 percent for the twelfth consecutive month.
INFLATION ON THE HORIZON
The latest figures from the Bureau of Statistics paints a worrying
picture in one area of industry. Manufacturing prices are rising
at the fastest pace for nearly 20 years which means consumer prices
are set to rise. This kind of situation usually raises fears that
the economy may become over-heated which precedes the traditional
remedy of a lift in interest rates to keep a lid on inflation.
TIPPING A RISE
The Westpac CEO has made public his confidence that his bank will
continue to deliver record profits despite what he says is a worsening
economic outlook. He says there will be a rise in interest rates
along with further slowing in the property market.
U.S. ON THE INCREASE
Reaction was very muted to the move by the U.S. Federal Reserve
in increasing interest rates from 1.75 to 2 percent. Markets believe
it has to increase by a bigger step to have a realistic knock-on
effect.
U.S. WOES CONTINUE
It looks like being a bleak mid-winter in Washington. As the trade
and budget deficit levels continue to climb and the U.S. dollar
weakens so the earnings gap continues to plunge. Currently the
debt level is at 6 percent of that country's GDP and climbing.
The dropping dollar is helping force other currencies up to unrealistic
levels. In the past two months the US dollar has dropped nearly
10 percent against nearly all major currencies.
OZ DOLLAR TO RISE
Exporters are bracing themselves, importers celebrating and the
Federal Treasury is fearing another reduction in earnings as the
Australian dollar continues to climb. Currently, an 80 cents exchange
rate seems highly probable with even higher speculated for later
next year.
BUSINESS
NEWS
CAR BOOM CONTINUES
With just a matter of weeks to go, this year's new car sales look
like being the best ever. It will be the second straight year
new vehicles have broken the records. New 4WDs as well as cars
are pushing the numbers to dizzy levels. The only bad spot is
the way Mitsubishi woes continue with many unsold Magnas filling
storage areas.
NOT ALL FUNDS SAME
Research into comparative performances by the various superannuation
schemes has revealed some alarming results. The best overall category
with up to triple the returns are the funds administered by an
industry group or a union body which outperform most of the retail
funds. The main difference is the level of fees and costs.
OFFSHORE AT LAST
Australia's two massive retail chains have been slow to take their
skills off-shore other than NZ. But now Woolworths is about to
move into the rapidly expanding Chinese market where the conditions
are as tough as they are different but the growing rewards are
very attractive.
BUSINESS OUTLOOK
STORM CLOUDS CLOSING
Despite the latest GDP figures revealing a slowing growth, more
and more observers are becoming increasingly concerned with Australia's
ballooning trade deficit. The last set of figures show we are
currently running world fourth in dollar terms. Expressed as a
percentage, the new debt level at 6.6 percent of GDP is worse
than the 6.5 figure which contributed to the economic problems
of the 1980s. However, international investor confidence in this
economy continues to be high so off-putting any harsh corrective
action at this stage.
TRADE AGREEMENT FORECAST
Australian trade with China has risen no less than 50 percent
in the past year and Canberra is pushing for a formal Free Trade
Agreement. Initial approaches have been favourably received in
Beijing. Prime Minister Howard is set to lead a major visit in
April and that appears to be the target for the signing ceremonies.
PROPERTY BAROMETER
One time apartment high-flier Mirvac has a sober outlook for 2005
as the property market continues to soften. It's own forecast
is that the developer will have a "challenging" year
and will continue to take a hard line against investors wishing
to renege on property purchase settlements.
WATCH GOLD
Commodities punters have had a busy 2004 and they are now tipping
gold as a good bet for 2005. They say now that oil has begun a
medium-term drop and the US dollar continues to slide, the precious
metal could be a good bet.
To find out more about the benefits of Debtor Finance
please contact Oxforddirect on 1800 850 509. Alternatively visit
www.oxfordfunding.com.au.
