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It will be OK, says RBA head
By staff writers and wires
The Australian

RESERVE Bank governor Glenn Stevens has played down the effects of massive falls on the Australian and international stock markets.

The local market has endured one of its worst performances in its history this week, notching up its biggest losing streak in more than 17 years.

Asked at a business lunch in London overnight what his message would be to Australian mum and dad investors who had been hit by the market falls, Mr Stevens said: "Share markets go up and down.

"Mums and dads shouldn't be trying to play them on a short-term basis."

Inflation

Mr Stevens, who was delivering his first public speech offshore as governor, said inflation was set to remain uncomfortably high in Australia as global financial markets enter an "interesting" year that is likely to test the skill of the world's central banks.

He said RBA had taken steps to limit the direct financial effects of the recent turmoil in global credit markets on Australia.

"As a central bank, while we have been careful to ensure ample liquidity in the money market at a time of international uncertainty and re-pricing of risk, we have remained concerned about the outlook for inflation, which is likely to be uncomfortably high in the near term," he said.

His comments signal that the RBA is still focussed on the inflation question in Australia, ahead of the release of local December quarter consumer price index figures on Wednesday, January 23.

The report is expected to show annual inflation remains above the central bank's two to three per cent comfort zone, and could pave the way for an official interest rate increase in February.

However, economists have argued that falling equities markets, general financial market volatility and concerns that the US economy may fall into recession could stay the RBA's hand.

The RBA board next meets on February 5 and its rates decision will known later that day.

"World growth will slow"

Mr Stevens said world economic growth was set to slow noticeably in 2008, as the US deals with the fallout from a credit crunch sparked by defaults in the US sub-prime mortgage market.

The US had to work off an excess of housing market stock, recognise bad loans and repair corporate balance sheets, he said.

"So the US economy is in a period of adjustment, as is the banking core of the international financial system," he said.

"Even with the renowned flexibility of both, and good policies, this will take a bit of time.

"Just how long remains uncertain."

While Australia was weathering the turmoil in financial markets since August 2007, local investors and borrowers had not escaped completely unscathed.

"Firms whose business models relied on short term debt funding have been tested - a couple have, for practical purposes, left the scene," he noted.

"Yet these events have been absorbed thus far with little disruption in the broader economy.

"The availability of credit to sound borrowers has not been impaired."

Mr Stevens said the direct financial effects of the global turmoil on Australia were likely to be confined mainly to the impact on borrowing costs, which have risen in recent months.

"Taking into account the strength of demand, this increase in borrowing costs does not seem likely to pose a particular problem for the economy as a whole," he said.

"There is no evidence, moreover, of a 'credit crunch' in the domestic financial sector."

Labour costs

Mr Stevens added that labour costs in Australia and elsewhere have been well behaved.

"By and large, labour costs have been quite contained in the present episode, even in cases of tight labour markets like Australia's," he said.

Market

The local bourse lost about $83 billion over the course of the week, and about $136 billion over the past two weeks, as measured by the all ordinaries index.

It has been hurt by mainly offshore factors, such as concerns about the US economy and hefty earnings losses reported by major US investment banks.

The benchmark S&P/ASX 200 index yesterday lost 0.84 per cent, or 48.8 points, to 5,747.3 today, while the broader all ordinaries index fell 0.98 per cent, or 57.6 points, to 5799.4.

The fall in the all ordinaries completed 10 successive declines in the index for the first time since September 1990.

If the index continues to fall next week, marking 11 or more declines in a row, it will be the first time since January 1982.

With AAP

-------------------------

COMMENTS

Edward Karan was correct, expect a 40% correction in Real Estate prices over the next 2 years as the bubble deflates. The tipping point has arrived and people are correct to be scared !
Posted by: J Kict 6:34pm today
Comment 75 of 75

Yeah, let's trust the globalist banking cartel! Financial crash = destruction of the middle class = worldwide Fascism.
Posted by: Ben H of Dandenong Ranges 6:02pm today
Comment 74 of 75

Some are raising questions as to whether the PM and Treasurer should give assurances to the markets. We do not really have a long history of this sort of intervention by the government into gyrations on the stock market and I am not sure that this intervention is welcome. I note that Peter Costello commented in August on the previous correction, but I have no recollection of him commenting that the market had become overheated over the last year or two or of him commenting on other corrections.
Posted by: Investor of Kingsford 6:02pm today
Comment 73 of 75

labor rudderless #43, you make an extremely good point! Why have we heard nothing from Rudd and Swan? They had so very much to say before the election; an election that unfortunately brought them to power. Yet now they are silent at a time when Australia needs leadership!
Posted by: Peter T. 5:57pm today
Comment 72 of 75

Hark, are these the sounds of lust, gluttony, greed, sloth, wrath, envy and pride I hear? Indeed, tis true ¿The love of money is the root of all evil¿, you have allowed yourselves to be merchandised!!
Posted by: Col de Scmbstr of Central Vic 5:50pm today
Comment 71 of 75

Why haven't Wayne Swan and Kevin Rudd given an interview to reassure the Australian people? What are they doing? Having a nice cup of tea and an iced vovo?
Posted by: labor rudderless of Brisbane 5:39pm today
Comment 70 of 75

Rudds fault again. John Farnham was the best PM we've ever had.
Posted by: kp 5:28pm today
Comment 69 of 75

Kevin Rudd gave a gilt-edged promise that he would make housing affordable - no ifs, buts or maybes! This was the most critical of all promises he made that lead to him being elected. More so, he was elected on his statements that he was a better economic manager than the Howard Liberal Government. He cannot blame the local or world economy and nor can he blame the previous Government because everything now happening was predicated during the election. Now is the time for Rudd (and Swan) to put-up or shut-up!
Posted by: Peter T. 5:24pm today
Comment 68 of 75

come on you small time investers, you are killing me , there is only the sheep and the shearer, you have no chance, you are the meat in fat boys pie. the fat boys know whats going on all the time ,every time. stick to what you know ,put your money in what you KNOW>
Posted by: David of byron bay 5:10pm today
Comment 67 of 75

Oh really Murray nice try, but the fact is the markets in trouble son, and sounds like you are too. Somebody thats about to feast on other peoples fear doesnt get up and tell the world about it, he does it quietly, if hes so confident. The US is about to pump money into the markets for what reason Murray ? Not because everythings roses mate, no quite the opposite. Mum and dad investors should be very careful not to listen to people like you, politicians or the RBA. The fact is its going to crash, the only thing is when? do i wait or take the warning signs now and invest elseware. The US is printing money Murray thats the only reason that there still floating, but not for long buddy times up. Unless we start another war hmmm lets see who can we invade next Iran maybe, they have oil, now thats an idea
Posted by: George 5:01pm today
Comment 66 of 75

Fact is that we have had 4 years of outstanding returns and the market was well and due for a correction. A recession is likely in the US and that will affect us here despite what the so called experts say, but its all part of a cycle and in the long term it will recover. Its true, markets do go and up down but they always go up long term. However I am surprised that these real estate spruikers keep projecting higher house prices and are trying to encourage people to buy now, people house prices will be the next to fall, they are also unsustainable on fundamentals so hold off, there will be bargains to be had in the future
Posted by: a withers 4:57pm today
Comment 65 of 75

aureliano of perth raises the question of fault for interest rate rises and implies that some are suggesting that it was Howard's fault. I do not know of anyone who seriously believed that either interest rate rises or falls were the fault of the Howard government, other than supporters of the Liberal party. The liberal party ads in the 2004 election certainly had the Liberal party taking credit for the interest rates, and John Howard's rhetoric certainly took responsibility for the interest rates in the 2004 election campaign.
Posted by: Investor of Kingsford 4:53pm today
Comment 64 of 75

Mark of Perth - are those "other experts" the ones down at the local watering hole? After this they may be exactly that - ex-spurts. Travelling internationally, including trips to the USA at least annually for the last seven years, has made me aware of this pending situation. I don't like rate increases as much as the next guy, but I've felt far more secure about our national economy after seeing first hand what is happening over there (1200 new foreclosure listings per week in ONE state alone!? ...does not reflect a healthy economy) sustainability isn't just about the environment. I won't be surprised if China knocks the US off their economic perch sooner than expected, simply because they can balance their books. Craig of Melbourne has made a quite poignant comment regarding "economics involves humans and their worst emotions", that's what also drives inflation, recession ....and the advertising companies profits.
Posted by: Elley of VIC 4:07pm today
Comment 63 of 75

"Give me control of a nations money supply, and I care NOT who makes its laws" Mayer Amschel Rothschild.
Posted by: Hmm 3:43pm today
Comment 62 of 75

murray mackenzie of Bendigo: You must be in one of those high rise apartments in bendigo then muz? My mate Murray lost all his stocks in London, he was picking up farthings from the street in 1981. Oh how the mighty fall.
Posted by: Martin J of Melbourne 3:42pm today
Comment 61 of 75

murray mackenzie of bendigo - a person like you, who did his Master degree by completeing few 'Get Rich' seminars is really wasting your time and the Cyber Space talking to idiots like us. I'd say, a persona of your caliber would make more money passing this knowledge to other money-hungry idiots like yourself than trying to get a bargin on a stock market. I must say, I can afford to buy a nice new car every year regardless of what the stock market is doing. but I wonder how old is your bomb you drive at the moment? To others - if Mr Stevens said, no need to panic, it means it's not really good, and I can read in his speach, there will be another interest rate increase. Only one. The question I'll ask - is history going to forgive him this decision?
Posted by: Reader 3:38pm today
Comment 60 of 75

The RBA is not credible as they sell margin loans for shares. They even get paid in bank shares Posted by: Dave of Wodonga Oh God. Of all the drivel about this correction this takes the cake. The RBA is a Government agency. They are not a commercial entity. They don't sell anything let alone margin loans. They don't have shares let alone pay their shares to anyone as remuneration. It is a purely Government body just like The Department of Foreign Affairs.
Posted by: jf 3:38pm today
Comment 59 of 75

I sold my business and moved my money out of the stock market in December. Why, Because we have a bunch of Chicken Littles now running the country. Blind freddy could have tould you this was going to happen, but rather than listen to your own hearts, all of you trusted the hype of the political advertising gurus who told you changing to a party with a solid proven BAD ecconimic track record (just look at the states) was a good idea. Australia you have made a bad purchase, and you will have to live with it. I bet inflation will jump as the first sign of the real troble ahead.
Posted by: Dave of Sydney 3:35pm today
Comment 58 of 75

I'm not panicking!! I'm calm and smiling :)
Posted by: Andrew of Sydney 3:33pm today
Comment 57 of 75

HANRAHAN WAS RIGHT. "We¿ll all be doomed, said Hanrahan"
Posted by: Max Marino of Wool Ranch 3:29pm today
Comment 56 of 75

If I read one more comment from a dung-for-brains Aussie about how the new government is to blame for the worldwide market meltdown, I shall SCREEEEAAAAMMMM!!!
Posted by: Dumb Aussies Everywhere of Especially HERE 3:25pm today
Comment 55 of 75

Mark of Perth, the world is not lowering rates, the PRC raised them a little while ago as well.
Posted by: Andrew of Sydney 3:22pm today
Comment 54 of 75

You want to stop the rate rise, manage your finances better. Only buy what you need and don't buy on credit what you can't afford. The government is not responsible for rate rises.... 21 million idiots are.
Posted by: Andrew of Sydney 3:19pm today
Comment 53 of 75

Well said graham at 10am. I think murray mackenzie is right. A little bit of pessimism is probably the right outlook. That doesn't mean that doom and gloom is a much better interpretation. He who is too pessimistic, too conservative loses. The winner is the one who best estimates where the balance is. Even if there is a recession, history tells us it won't last that long. Watch defaults on houses here. If that doesn't get out of hand then the outlook is ok.
Posted by: paul 3:07pm today
Comment 52 of 75

If half the population wasn't stupid, the other half wouldn't make any money. THINK ABOUT IT.
Posted by: Bill of Port Macquarie 2:52pm today
Comment 51 of 75

James of Red Dirt you've got it the wrong way around. Inflation by its very nature is an increase in the money supply adn this is done by the RBA not consumers. We've had 10% plus annual growth in the money supply for years in Australia. That's what pushed up property and share prices and at some point its inevitable that it will likewise push up food and the like. History in numerous contries shows that the public loves the early stages of inflation when it's in stocks and houses but hates the later consequences. History repeats.
Posted by: Shaun of Hobart 2:46pm today
Comment 50 of 75

Somehow I don't recall John Howard ever explaining just how he was running the US economy. He only ever claimed to have some influence here in Australia. Certainly he didn't warn that the US share market would crash depending on the outcome of an Australian election. Anyone who thinks the election result has anything to do with this has a seriously inflated view of Australia's importance in world finance - we follow the US, not the other way around.
Posted by: Shaun of Hobart 2:42pm today
Comment 49 of 75

Its amazing noone is yet talking the Aussie Housing crash of 2008. We have a much worse house-old debt situation, a significantly more inflated housing bubble than any western countires is finally confronting the triad of global recession, inflation and credit crunch. House prices in parts of the US worst affected by subprime aready fell 40%. UK prices in the DEC have fallen quicker than in the last housing crash in the 90s. Mortgagee sale, foreclosures and reposessions in many parts of MELB & SYD have been hushed up by banks & estate agents for more than a year. We don't have a subprime problem like the US. Our situation is worse, we have a prime housing bubble that will take everything in the econmomy down with it on the way down. The excesses built up over the last 7-8 years under the Howard Government will now unwind violently. Expect an average 50% fall in naitonal house prices in the next 2 year. Even then (based on the then prevailing economic conditions), it may still not be fair value.
Posted by: Dr Jose Murphy 2:37pm today
Comment 48 of 75

What's all the panic ? It's just another cycle. Now LC 's comment re: coalition. What in the name of anything is that about. Labor has been in 5 minutes ! The cycle this time is more extreme because Howard and co. created bubbles like their USA and British counterparts under the pretence of being good economic managers. "Election fallout" is a through away line. Funny how Peacock has stuffed up the company he chairs. Surprise Surprise ! Inflation is the real danger. The figures our Government use are dubious at best. I suggest 7 to 8% inflation calculated by old models. The West has to stop printing money as a panacea for everything. Labor's greatest danger is to agree with treasury and agree to mass migration to Queensland and WA. Another bubble in the making. We in Queensland do not have the infrastructure and plenty of people seek work. Take out the 1 hour a week "Full-timers and real unemployment is high. You don't have to have a piece of paper to work in most jobs. That is the real BS of our society.
Posted by: Simon Illing of Toowoomba 2:34pm today
Comment 47 of 75

Dave of Wodonga, you seemed to be quite confused about the RBA and other banks. The RBA does not sell margin loans, or anything else for that matter. And RBA employees are not paid in shares, because the RBA isn't even listed! It's a government authority. Yes, it has the word 'bank' in its title, but it's nothing like any other bank around. It's a central bank, not a commercial bank.
Posted by: Tim of Sydney 2:33pm today
Comment 46 of 75

No need to panic, get real, I just had my investment property in Eastern Sydney valuated. It was down 27% in value from last year. I'll panic all I want !
Posted by: S Irish 2:26pm today
Comment 45 of 75

Guys the share market is a very complicated game, sure people will hopefully make money off this downturn (myself included :P), but remember when you listen to other people about the share market, especially the media, you will lose money. Investing is about your own predictions and your own forecasts, not some big time investor who pulls out, creates fear within a particular stock, sends it crashing then reinvests his money.... I guess it rings true - the rich get richer, and the poor get poorer
Posted by: Bryan 2:24pm today
Comment 44 of 75

All of the couch economist please stop! the glaring inconsistencies and obvious lack of any understanding of global economics are laughable. Absence of tertiary education in economics is why you do what you do and do not work for the RBA (thank God!). Please, if you have not bothered to inform yourself on how these things actually work, buy a textbook and don't bother posting!
Posted by: Worried of Sydney 2:21pm today
Comment 43 of 75

you people are quick to blame labor government, they have been in power for less than 3 months. how in the world would they be responsible for the latest rates increase from the banks, share market collapse and much more. please write something worth reading ..... we needed a change now we have it, wait a year or two then talk crap about labor as much as you want.
Posted by: bruce of sydney 2:10pm today
Comment 42 of 75

What is it with Labor Governments inheriting previous Governments Recessions? Because this recession had already started under Howard. Maybe we should have let Howard win, and then kicked his ass in the next Federal Election.
Posted by: john iurincich 2:01pm today
Comment 41 of 75

Panic and fear are the new drivers for world economy at large. I am surprised it took so long considering the long run of prosperity. I have to say people are like sheep. They buy shares at the wrong time when the market is behaving bullish. They don't want to get their fingers wet when share values drop - this is precisely the time to buy (albiet after careful analysis). People only act on old information which has already become common knowlege. Only the precious few who buck the trend are the ones who make the real money in the long run. Regardless of whether it is shares or houses the same approach applies. Buck the trend and reap greater rewards later in life.
Posted by: abezza of Canberra 1:56pm today
Comment 40 of 75

The world won't end with this correction... It just proves humans never learn. If you own shares in good companies and they have plummeted in price just sit back and wait. They will rise again. Don't sell unless you absolutely have to... As for this having anything to do with elections L.C.... get real! Howard was still whining and moaning about Keating 11 years after Keating had been defeated. Guess it's Ok for Johnnie to do it when it suits him but not for others. It doesn't matter who you voted for... inflation & upward interest rate pressures were happening anyway! And this would have happened under any Govt.
Posted by: Hoppy of Brisbane 1:47pm today
Comment 39 of 75

WOW, some of the comments here are just mind blowing. So many people think they know what its all about and you are WAY off. On that note, there are just as many commenting with common sense. Its not the RBA's fault, or the governments that interest rates are increasing. It is our own! Stop spedning money on crap that you don't need with CREDIT! On that note, i really don't care. We were not stupid enough to buy a house that would have put us in crisis if the rates did go up. I have no sympathy for anyone who is now too short because they borrowed as much as they could and have a house decked out in the best home goods credit could buy. The bank is going to love it in a few months that is for sure! Think before you buy/borrow.
Posted by: Adrian 1:45pm today
Comment 38 of 75

It's oil. Everything revolves around oil. But that aside, the Reserve Banks, laws, regulations and protectionism only breeds weakness. We have a weak financial system. Everyone should but out, deregulate the whole financial industry and let the fools and the market sort it out.
Posted by: harry of adelaide 1:36pm today
Comment 37 of 75

The RBA warned the libs repeatedly that they had to implement long term programs to counter inflation and that the huge middle class spendathon they kept cranking up would not help the cause either.....did they listen....no. Thier appetite for vote grabbing handouts coupled with our resource driven low employment levels all help to increase pressure on inflation. Anyone that lays blame on a government that has been in power for a handful of weeks is quite frankly an idiot. What that new government can do to help curb inflation from this point on has yet to be seen (scrapping 31 billion in tax cuts would be a good start) but at least they appear to be willing to tackle it and take the advise of the RBA...something the libs refused to do.
Posted by: Mike of Perth 1:34pm today
Comment 36 of 75

If there is no need to panic, then they can not use the market fluctuations as a reason for not raising rates in Feb.
Posted by: Pete of Sun Coast 1:23pm today
Comment 35 of 75

dow is headed for 10,700 .... so still plenty to fall
Posted by: sb 1:23pm today
Comment 34 of 75

a handy rule of thumb for the market - when joe average is selling, buy & when joe average is buying, sell.... Look at some of the ratios, yeilds and general fundamentals of many of our companies - absolute madness them being at the levels they are....There is one company in particular on the ASX which has $2 Billion in cash reserves, trading at a P/E of 3 (when 7-8 is its industry rule), is yeilding 15% fully franked, and volatity means option premiums on the stock just out of the money are offering nearly 10% - that is, 10% per month! When at its stablest, the options premiums hover at 4-5%. An absolute no-brainer which I am accumulating right now at current levels....It's times like these where the educated separate themselves from the flukes.
Posted by: Norm of Sydney 1:19pm today
Comment 33 of 75

comment 28 LC What an idiot. The markets across the world, namely the USA fall and it's all due to Kevin Rudd's defeat of John Howard. Next you'll be telling people that the markets were healthy because of the Costello and Howard team. Grow up and get educated LC. If the US economy takes a dive then it's because of their economy, the rest of us that have shares and investments also take the fall.
Posted by: Tomarn of vicwesternsurbs 1:16pm today
Comment 32 of 75

The tipping point is here, get over it folks, the ONLY commentator to call it correctly was the blogger on new.com who thru out 2007 stated clearly that Q1 2008 was a tipping point. And that property prices would subsequently fall 40% over 2 years. Thats right, we were warned by Edward Karan, as his prediction unfolds before our eyes, people are still trying to impersonate him on various forums in an attempt to discredit his warning.
Posted by: A Shadow 1:14pm today
Comment 31 of 75

comment 28 LC What an idiot. The markets across the world, namely the USA fall and it's all due to Kevin Rudd's defeat of John Howard. Next you'll be telling people that the markets were healthy because of the Costello and Howard team. Grow up and get educated LC. If the US economy takes a dive then it's because of their economy, the rest of us that have shares and investments also take the fall.
Posted by: Tomarn of vicwesternsurbs 1:14pm today
Comment 30 of 75

James of red dirt believes the public is to blame for inflation, because they keep spending more and more. Who do you think keeps creating that money in the first place genius? Surely not the Reserve Bank?
Posted by: John of Gold Coast 1:11pm today
Comment 29 of 75

Perfect, the election fallout begins. Don't get on here and bitch about interest rates and inflation if you voted against the Coalition. You made your bed Australia, now lie in the unaffordable house. While everyone hits the panic button the smart ones are buying your houses and buying your shares! And Jay of Adelaide, why the bollocks would you invest in the share market for 3 years, tell you what, you stick to your low growth blue chips and I'll take the rest.
Posted by: L.C. 12:11pm today
Comment 28 of 75

Mark of Perth, why bother posting when you have no idea what you are talking about.
Posted by: dave of Buderim 12:09pm today
Comment 27 of 75

once again the ill informed, uneducated know-it-alls are telling us the old 'told you so story'. well consider this all you know nothing idiots. Where does all the money go when shares go down? they only go down because people are are fearing the dribble the media feeds them - doom and gloom! sure it might be for a while, but its the smart ones who are buying your shares when you fold under pressure and cant ride out the wave of paranoia. So don't look down at me while i feast on your fear and snap up your shares for a bargain and then have you wonder why in 2weeks, 2 months or 2 years time why i can afford the nice cars while you still ride the bus! fear and greed - i love it!
Posted by: murray mackenzie of bendigo 12:08pm today
Comment 26 of 75

Let's face it: Glenn Stephens is just taking an (well) educated guess. He's looking at the strong local economy, the strong Chinese economy and reckons we'll be okay. But economics involves humans and their worst emotions, and the world economy is so integrated and complex, national governments have to react to situations outside their control. So they way I read it, everything looks good in the near term, anything longer than that and prediction is a mugs game. Look out for strong companies at cheap prices!
Posted by: Craig of Melb 11:56am today
Comment 25 of 75

Money everywhere is about to be poured into cash accounts with banks and into precious metals..........I was told to buy gold ages ago I never did...gold will go to 2000 eventually ... I think australias property will have a tough few years but then recover dramatically even boom as the deserters jump sinking national economies abroad.....be aware though america is finished there is no turning back.........they are trying to make it as gradual and as less frightening as possible.........
Posted by: Max Powers of Illawarra 11:50am today
Comment 24 of 75

Well said Doomsdayer of Sydney, I agree with you things are only going to get worse from here. The price of petrol is ridiculous as well as food. If people are spending it's on credit card, and they are only doing that cause they have no money to begin with. I have two children and a mortgage and only one income coming into the household. I have chosen to stay home and look after my children while they are still little and also one child has a disability which makes it very hard. 2008 looks like grim to me.
Posted by: Tess of South Coast 11:47am today
Comment 23 of 75

The RBA is not credible as they sell margin loans for shares and have been on television saying it was not that bad etc when it the biggest loss in our history. They have no independence anymore. They even get paid in bank shares so of course they will try to lie about the market. Remember it is our biggest loss in history and will continue. Sell now while you can!
Posted by: Dave of Wodonga 11:45am today
Comment 22 of 75

If I not mistaken, does this mean the money men have already pulled their money and waiting for the mug punter to feel the squeeze before buying up under valued rental properties. Yes money makes money.
Posted by: the guru of the vale 11:36am today
Comment 21 of 75

ns of sydney must be a labor supporter if its not there fault then it wasnt howards fault either for the interest rate hikes because its global and he had no control over the increases but the labor used it as a tool to win the election. howard was always talking to the banks and the RBA to make sure they did not take advantage off the situation, not like swan comes out supporting them and making all sorts off excusese for them.listen to kev 1month and (2weeks holiday) he is already blaming the libs for everything in just 3weeks of work he is good.
Posted by: aureliano of perth 11:30am today
Comment 20 of 75

Even other investment experts are saying RB has it wrong. Posted by: Mark of Perth Who Mark? Give us the names of these experts.
Posted by: jf of Brissy 11:27am today
Comment 19 of 75

--US Sub prime means CRAP loans- in Australia personal debt and Bad Lending is is a massive problem - Stockmarkets and property prices DO CRASH...it`s happening. Spoiled kids are going to lose a few toys.
Posted by: jeff of Gold Coast 11:26am today
Comment 18 of 75

Don¿t panic, don¿t rush the banks, wait till the big boys get their billions out first as per usual.
Posted by: Coloured Glass of Darwin 11:25am today
Comment 17 of 75
It is times like this that the institutional and professional investors rub their hands together in glee for now stocks are going at bargain prices... going going going... gone!
Posted by: Trev 11:23am today
Comment 16 of 75

The government, or the RBA dont cause inflation. Its the public with a bit more cash to spend, and willing to pay a bit more. Suppliers, and producers charge a bit more.... Thats inflation. The public spending habits largly drive inflation. People should remember that next time they pull out the credit card....
Posted by: James of red dirt 11:12am today
Comment 15 of 75

Perhaps the silver lining of this outcome may begin to see the drop of house prices in Australia soon making it affordable for first home owner.
Posted by: Eddie Yapp of Brisbane 10:51am today
Comment 14 of 75

Stevens has it right. The violent swings in the market are caused by short-term speculators panicking -- the Gadarene Swine rushing over the precipice. Share prices drop because speculators sell off, and speculators sell off because the prices drop. If most would act like true investors instead and hold still, the oscillations would be much smaller and we'd come back to normal much quicker. The actual businesses that produce the real value have not gone bad (except a few shonky lenders), and in the fullness of time the market will be back to normal. It's not rocket science.
Posted by: Jan Wikstrom-Nigg of The Bush 10:48am today
Comment 13 of 75

Sell everything and prepare for the storm of recession to hit. With all this money wiped off the sharemarket what is happening to the mums and dads superannuation? Get ready for food prices and petrol prices to go up to compensate company losses. 2008 looks to be a tough year for everyone, so save the pennies.
Posted by: Doomsdayer of sydney 10:39am today
Comment 12 of 75

The RBA is probably not considering the effects of global money market crisis on Australian home owners i.e. the Interest rate increase by the banks early this month. I think the RBA should wait for couple of months to see the effect of that on Inflation, as it will definitely have an affect on inflation, as it takes time for the affects to filter through. If RBA also becomes very aggressive like the US federal reserve was, we may end up like US i.e. on the verge of recession. Also the Liberal party will take benefit of that and accuse labour for the downturn for almost no fault of theirs.
Posted by: ns of Sydney 10:38am today
Comment 11 of 75

Mark of Perth........One the main roles of the RBA is to control inflation through interest rates. Currently our inflation rate is dangerously high. We just had another record christmas spending binge. If the RBA chickens out and leaves rates unchanged or worse lowers the cash rate the inflation rate would sky rocket. NZ RBA just raised their rates for the same reason. Common sense dictates if you increase the cost of funds, ie interest rate it should lower its demand for cash and hence lower spending........go to the RBA website to confirm. Not everyone looses when rates go up. There are plenty out there looking for better rate of return with higher rates.
Posted by: Chocsta of Sydney 10:37am today
Comment 10 of 75

Its days like these that will be remembered fondly by SMART investors! Mr Market is "on sale". Quality blue chip dividend paying stocks have been discounted by "market forces" - thats all. If a quality stock is on sale then buy when the panic is out there and profit. Always buy on the market with a minimum 3-5 year outlook.
Posted by: Peter Jay of Adelaide 10:34am today
Comment 9 of 75

How about raising taxes on the billion $'s Chinese imports we stupedly buy every second and make China start paying, they are richer than any of us.,
Posted by: Lynne of Sydney 10:26am today
Comment 8 of 75

rba is hopeless. i think its a reverse phychology. i was jittered looking at the share market and world economic instability. the moment i hear rba will increase the rate, i felt compulse to spend more!!! makes me wonder how the share market will ever grow with higher interest by the month! bring on the collapse and blame rba!
Posted by: Jame of Sydney 10:25am today
Comment 7 of 75

Share markets do go up and down and that's part of the risk of investing. I say bring on the much needed recession to bring people's lifesyle's back under control!
Posted by: Lucky Strike 10:12am today
Comment 6 of 75

Mark of Perth, how does the RBA have it wrong? Inflation needs to stay within 2-3 percent to allow the Country to grow at a sustainable rate, whilst not allowing it to grow out of control. Australia is a country of great waste, people spend huge amounts on luxury items, and this is not only the well off people. Our economy is going great, that is why the RBA needs to keep a close check on inflation. Perhaps the RBA is extra-cautious due to having a new Government leading Australia?
Posted by: Mark of Sydney 10:12am today
Comment 5 of 75

Just like global warming, the warning signs have been obvious for some time, and been ignored. But then, the truth is sometimes inconvenient, isn't it.
Posted by: Radagast of Adelaide 10:08am today
Comment 4 of 75

here is my 2 cents worth. US is already in recession. Japan may be entering another one. Europe and UK are slowing, especially the UK. China is attempting to slow to a more measurable pace of growth. Canada are slowing a little. Australia will slow only slight;y. What I believe this means is that interest rates globall y are heading lower. This can only mean that Ausssie rates will have to stop rising very soon. Canada's economy is very similar to ours and they have been talking rate cuts for some time as the strong Canadian currency has begun to hurt exports. Likewise rate rises are only going to hurt exporters here, especially manufacturers as they contend with weaker export markets like the US and Japan. So there could be one more rate rise although one next month is not a certainty. I reckon in a funny way the US credit crisis has been good for Australia as it will manage to slow the OZ economy without the need for further tightening from the RBA.
Posted by: graham 10:00am today
Comment 3 of 75

The Reserve Bank is hopeless. All they consider is increasing rates. The world is lowering theirs and people are suffering enough with expenses rising and losses of capital. Even other investment experts are saying RB has it wrong.
Posted by: Mark of Perth 9:53am today
Comment 2 of 75

If the media keeps on telling everyone that there is going to be a recession and they need to save, then everyone will most probably stop spending as much, hence slowing the growth of the world economy, which will top people spending even more, until this process ends up in a cycle and we end up in depression
Posted by: Jay of Sydney 8:29am today
Comment 1 of 75

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Link to this article: http://www.news.com.au/business/story/0,23636,23075733-462,00.html