Chillin' out till it needs to be funded
Australias ailing economy got a double dose of desperately needed stimulus on Tuesday as the government pledged billions in new spending to avoid recession and the central bank cut interest rates to record lows.
The news lifted the Australian dollar off 10-week lows against the dollar and bill futures, which had factored in the possibility of a bigger rate cut, fell.
“Australia is facing an unfolding national and international economic emergency,” Prime Minister Kevin Rudd said in announcing $26.5 billionin stimulus spending to protect the Australian economy from the global financial crisis.
The plan includes A$28.8 billion for infrastructure, schools and housing, as well as A$12.7 billion cash payments for low and mid-income earners to be paid in March.
“It is a strategy to which we will add in the future as is necessary,” Rudd said.
The Reserve Bank of Australia RBA cut its key cash rate by a bold 1 percentage point to a record low 3.25 percent, citing the grimmest global outlook in many years.
The cut was in line with market expectations and brought the easing since September to a massive 4 percentage points. Investors are counting on further cuts to take the cash rate to 2.0 percent or less by May.
The latest package takes Australias total stimulus spending announced since last September to A$78 billion, and adds to a raft of similar plans from major economies, including one for $819 billion in the United States.
zyakaira notes: It is still likely that Australia has suffered the least among all global developed economies in sharp contrast to the UK. While among the EU nations, Belgium and Netherlands are probably poised to lead after the mayhem in UK and France and no good news from Germany, the leadership of India and Singapore in the Asia Pac may be questioned by the strides made by Australia. They are also likely larger votaries of Bank nationalization if that pans out. It looks like there is a third roll down of Treasury Cash coming as none of the markets are likely to be investing buyers and mark to market would at least force you to state all your losses out by December 2009. With Deutsche and BNP also declaring large failures and no US bank left standing, Global banking is unlikely to find standing leaders in the private enterprise for coming 2-3 years.
In the Indian example, none of the banks have the size to have more than a representative play in the International markets, nor we have the oil money. A Kotak and a Yes may be fiesty but yet only micro influencers probably even less influencing than myself alone. It is indeterminable at this stage how anyone will find us investors. In the Indian example as in the US example a good start would be to focus on all sectors and not just the banks themselves. The stumbling block to that being no bank is in a position to lend for 2009 and 2010. The unscathed lenders are unscathed because of their voluntary and involuntary non-participation in lending and that along with nationalization may be the only strategies open to a well functioning bank anywhere in the world.
Zyakaira notes: Aside #1 One wonders is the dollar rush to Brazil and Russia was the reason the cookie crumbled as it has in earlier decades? But i wouldn’t think of finding that opening in the dark skies from where the floods came, I would rather someone shows me a desk where one can meaningfully contribute and rediscover profits for another.