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Cheese and chalk

The best news out this week was the fact that there is a big a difference between cheese and chalk. And no - I have not lost my marbles, but I have found an economist who thinks the next official move in interest rates is more likely to be down.
And while that augurs well for anyone panicky about home loan repayments, the next big worry has to be: is my job safe?
To the matter of cheese and chalk and Macquarie Bank’s main man when it comes to interest rates is economist Rory Roberston. I regularly watch this guy’s reports - he is paid to watch the Reserve Bank.
After looking at the Reserve Bank’s latest interest rate meeting statement, Rory could not believe those commentators who thought the Big Bank had a tightening bias.
That’s eco-speak for inclination to want to raise interest rates. Rory thinks the tone in the statement compared to past ones is like the difference between chalk and cheese.
“The RBA essentially moved to a neutral policy stance, withdrawing its long-standing threat of further tightening,” he wrote.
He doesn’t expect even a shocker of an inflation result on June 23 to be enough to push the Bank to raise again.
Right now the global economy is in a lot more trouble than what most commentators tipped. The credit crunch is dragging on longer than expected and the likes of St George recently raising interest rates by 20 basis points proves this.
Our economy is slowing at a much faster rate than most expected, including the Reserve Bank, and history will show they imposed too many rises.
The ANZ job ads have now shrunk by 21 per cent in the first half of this year and both business and consumer confidence is shot to pieces.
The second black cloud hanging over the global economy and world share markets is the price of oil, which is being manipulated by hedge funds and other speculators.
There are oil experts out there who argue that based on fundamentals the right price for oil is $US60 a barrel while others go as high as $US100. And commodities’ speculation is out of control.
This will unwind one day burning speculators and that day can’t come too soon for real economies and stock markets.
Only on Friday morning the Dow Jones gave away a triple-digit gain to slide into negative territory because oil spurted up $US5 a barrel. Simultaneously, the smarties shorted finance stocks and the overall market dived.

Eventually the penny will drop that a weaker global economy can’t justify these oil prices, nor these high interest rates. 

Published on: Saturday, July 12, 2008

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