The price of oil

Ahhhh see, that is the reserve bank, that isn't the Labor party, or Tony Blair mark 2, or the previous government for that matter.

The RBA are an independent body who have been charged to make sure the economy stays on track. The Labor party has just as little control (none) over their policies as the coalition government did. Why do you think Howard and Costello did so much chest beating at them leading up to the election when they were raising interest rates anyway? Did it do any good???? No, they put them up despite the Treasurer and Prime Minister chastising them for doing so.

And i have to agree with you, that if the country is going to go into a recession, it will be on the RBA's hands, it won't be on the governments, be it this one or the previous. When 0ver 50% of our inflation is imported into the country due to higher oil prices and food prices, how can it do anything but go up, and how are interest rates going to control that????? They can't! A high school student should be able to figure that one out!

Although it has to be suggested that the previous government has squandered the last 5 years of the resources boom giving frivolous tax cuts to those who didn't need them. What have the past 9 years of budget surpluses done to improve the country..........nothing! Where has been the encouragement for people to save?????? A last minute......if your really really rich, you might like to put $1million into super before we discourage you from adding money to super by imposing large tax penalties for saving for your retirement so you don't need to go on the age pension.....which by the way, we'll waste more tax payer funded dollars by making it easier to get for those who don't need it!

As for being quiet on the Sunshine coast, i'll have to take your word for that, and all i can suggest is that increase oil prices and strains on the family budget (both of which the Labor government has no control over) have meant people can't afford to fly or drive up there. I remember 7 years ago a trip to Melbourne (I'm only using this because i have a direct comparison) cost me $90 in air fares and $25 in taxes. I went down last weekend, and it cost $110 (fine.... inflation), and $161 in taxes and fuel surcharge. Thats why people aren't traveling! And thats why a tourist location like the sunshine coast will be suffering. Nothing to do with this or the previous government. As i said, shops in Sydney seem to be as busy as ever!

Ben

Not for long
I know Bunnings are not as busy as they used to be
and retail shop sales will be down as well.
Cheers

Where are you hearing these reports???

I find it hard to believe that Australia will dip into a slow down that puts our real GDP growth below 1% let alone a recession...

AHAHAH! That's the funniest thing I have read all week... kevin07 recession08 depression09 - not that I really believe it will happen or that it is Kevin's fault, but it still cracks me up!

I don't think it is fair to blame any present economic slowdown on good ole Kevie Rudd, he has been in power for 6 months as opposed to Johnny Howard's 11-12 years. Whilst I'm a big Johnny Howard fan - he was riding on the back of our mining boom combined with relatively decent global economic conditions, whereas Kevie Rudd has come into power with the US on the brink of recession and rampant World inflation... it seems the Labour government just need to time their runs for office a little better...

Can't remember specifically - I think it was from a news website - I saw the headline in my RSS reader during my morning scan.

Oil is too important to leave to market forces

....But another more important aspect of the oil boom is now attracting political attention: An oil price above $100 a barrel is an enormous danger to the world economy.
It threatens to reignite global inflation, wreck development plans in China and other emerging countries and magnifies geopolitical risks by redistributing some 7 per cent of global GDP, roughly $4 trillion per annum, from the stable societies of America, Europe and developing Asia to potentially hostile regimes.
These regimes then leak this money to Wahhabi fundamentalist madrassas, communist insurgencies in South America and mafia activities from former Soviet states........

Oil is too important to leave to market forces | Anatole Kaletsky - Times Online

It's a bit ridiculous to blame this slow down on the labour government. It takes time for fiscal policy to effect an economy. The Rudd-Labor government have only been in cabinet for less than a year. This is a very naive comment.
I think what we have to bear in mind is that Australia is actuall overheating. Consumer sentiment was still high up until this month when the Westpac-Melbourne institute CSI drop markedly. Inflation fears are very much demand driven within Australia. The RBA is effectively trying to dampen the economy.
Indeed, it is argued that the reason why the RBA did not raise interest rates last board meeting, was because they were waiting for the lag effect of monetary policy to take effect.

Cheers,

Eddy

Yes the RBA are completely independent and their remit is to keep inflation within certain levels.
However this doesn't mean that the government shouldn't at least be trying to exert some external pressure to make them think slightly differently.
I do not believe that fighting inflation should be the one and only consideration and be fought at all costs, especially when much of the inflation is imported.
But rather than help the Australian people by stating the significance that the oil price is having on inflation, they seem to be constantly talking up internal inflationary pressures.
Since Bush decided to invade Iraq the price of oil has shot up by some 400%.
You don't have to bee a brain surgeon to work out that this in itself is a huge inflationary pressure, given that everything that we buy or consume needs to be transported from A to B.
I would love to hear someone from this government come out and say something to try to bring some confidence back to the financial markets.
When the sub-prime crisis first broke, I recall Costello coming out and stating that we shouldn't be as badly affected as the US because our banks were far more conservative in their lending practices, and our economy was still strong.
As yet the write downs from Aussie banks has been minimal in comparison to those in the US.
Despite this our stock market has performed far worse the both the US and the UK.
By my reckoning we have now had four corrections of 10% or more in the past 12 months.
Confidence in the stock market has been shattered and some peoples Super funds have been decimated. Meanwhile this government has stood idly by and watched it happen without hardly a whisper.
The other thing that I find hard to understand is how interest rates here can be so high when Australia sources it's money from overseas markets. The Aussie dollar has never been as high and interest rates in the US and UK are much lower than here.
Once again I've heard nothing from the government on this matter either.

The Australian market is a lot smaller and less mature than the US and UK, so will always be more volatile. Should we have been as affected, no, but until Australian investors (and fund managers for that matter) become more sophisticated traders, we will always follow the US on a daily basis. For the investor, look at the 5 year markets trends, they are totally different, and you just ignore what is happening on the market daily anyway.

People who are worrying about their super funds being down in value don't understand their finances properly. As i ask all of my client, "Are you accessing all of your money today?".....if the answer is no, then you don't need to worry about corrections. "Have we set aside enough cash for you for the next 2-3 years?" Yes........then you don't need to worry about what the balance of your fund is, it will recover before you need to draw down more into cash.

Again, the super fund story is a just a media beat up trying to sell advertising. "Your financial planner has set up your super so you don't need to worry about the stock market" doesn't sell as many papers as "YOU HAVE LOST ALL YOUR SUPER!!!!!!! PANIC!!!!!!!!".

Again, if your not accessing it ALL today, it will recover! It sucks looking at a lower balance, but it will come back! If you did need it all today and you had it all in shares, you were taking too much risk.

What will be really interesting is how oil prices react to the latest announcements that Saudi Arabia (the worlds biggest producer of oil) is going to increase their supply to prevent price getting to a point that they stimulate innovation.

It's a bit of a shame for the world in the long run especially with our battles against climate change, but I get the impression that it will definitely restore a lot of confidence back into the world knowing that the world's biggest produce of oil isn't going to let things get completely out of control.

Does anyone else think that this might be a big turning point in this current economic slow down?

Has anyone seen the documentary Crude awakening? A Crude Awakening: The Oil Crash (2006)

It discusses the fact we are probably past peak oil with a much higher consumption rate and that at best estimates we are 50 years from an alternate power source which could replace oil, but that we would need a lot of oil to produce the technology, so it's a lose lose situation really.

Again, Australia is probably in a good position being a net energy exporter whatever happens.