Economists At It Again!

Was listening to Radio National this afternoon whilst doing the dishes (item 3, standard daily house bitch duties).

Now three banks have increased their interest rates and (yet more) speculation that the RBA next meet will consider another rate increase due to stronger than the only 0.8%! forcast increase in November RETAIL spending. The report, amongst other things, went on to say that consumer spending was substantially up over the previous month depite previous interest rate increases.

Hello!

Might it JUST have to do with Christmas spending? Surely the vast majority of people that do buy presents will continue to do so and that is likley to increase around November when most are purchasing presents. (This sort of spending is always shown to inelastic and not affected in any way by market forces)

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Andy Mac's picture

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Seasonally Adjusted

Wed, 2008-01-09 15:07

Hi Colin,

I am no economist but I think you will find that most economic forcasts have seasonally adjusted equations in there, so the concern is not that the level of spending is high but that it was beyond their forcasts. The inflation trend is still upwards so the previous rate hikes haven't necessarily stemmed the tide. Q4 data will give a good indication of where rates are likely to head from an official cash rate perspective at the next February RBA meeting.

The sub-prime issues are what is driving the recent rate increases by the banks as their cost of funds is dependent on both official interest rates and market influences. I would expect most banks to follow suit, but there will be some variances in how much each bank passes on to the consumer. NAB, CBA and ANZ have raised their variable rates so far, but each has risen rates slightly differently.

Always a good idea to shop around however in these days of volatility the bank with the cheapest variable rate price today might not be the cheapest tomorrow, so care needs to be taken when choosing simply on price. Talk to a good finance broker if you have any concerns.


Cheers

Andy Mac

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Cheers

Andy Mac (Fishwrecked Reeltime Editor & Forum Moderator)

Youngest member of the Fishwrecked Old Farts Club

Dreamweaver's picture

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G'Day Andy

Wed, 2008-01-09 16:13

G'Day Andy

Yup, as you say, a 'cheap' bank today could be an 'expensive' one tomorrow.

Problem was Andy, there wasn't any mention of seasonally adjusted figures (as you say though, 'seasonal adjustments are a standard economists tool).

Q4 data Andy? Would you expand on that please?

It would be a bit more informative if they mentioned not only that there was (as you say usually) a season adjustment (remember that from my High School and Uni economics units) but what eaxtly that was.

Also, was there an allowance for annual growth in the setting of the 0.8% base indicator from the previous month.

Colin MOLLOY

**** RECFISHWEST No. 576 ****

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Andy Mac's picture

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email sent Colin

Wed, 2008-01-09 16:36

I have some info you might be interested in, but not fishy enough to post on the site.


Cheers

Andy Mac

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Andy Mac (Fishwrecked Reeltime Editor & Forum Moderator)

Youngest member of the Fishwrecked Old Farts Club

ody's picture

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Hi Ya, Oh, Andy, Andy,

Wed, 2008-01-09 19:15


Hi Ya,

Oh, Andy, Andy, Andy.  And you being in the finance business and all.  Surely by now you must recognise everything to do with banks is fishy and stinks as such.  LOL

Cheers.



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Dreamweaver's picture

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Date Joined: 01/12/07

Thanks Andy

Wed, 2008-01-09 18:00

I don't know Andy, on the big SCALE of things, I like to see an eFISHently running economy :)

Thanks for the email buddy!

...I'll digest that...


wouldn't worry too much about not being fishing related, we all post tons of fishing stuff and love it - pretty natural and ok I reckon to exchange thoughts and ideas on wide world stuff

Colin MOLLOY

**** RECFISHWEST No. 576 ****

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Andy Mac is right consumer

Wed, 2008-01-09 18:45

Andy Mac is right consumer spending is seasonally adjusted and Q4 means qtr 4 of the year (ie three month period).

big john's picture

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Aussie $$$$

Wed, 2008-01-09 18:56

Righto Andy, here's one for you.

When are we going to see the impact of a high aussie dollar on high end tackle prices?

John

PS. Don't feed me that bumpkin about things were ordered when the $$$ was low as she's been up in the high 80c range for some time now.


I head a little FURTHER NORTH each year,
Leave the cities behind, out of sight of mind,
.......

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ody's picture

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edit.whoow, what happened

Wed, 2008-01-09 19:15


edit.
whoow, what happened there.  Made one post and another with nothing appears as well.


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Andy Mac's picture

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Crikey John

Wed, 2008-01-09 19:29


That's one for the tackle suppliers (wholesalers, not necessarily retailers) to answer. Don't take my word for it, but the economics of supply and demand are probably at play there. With a bumper state unemployment figure and big dollars being paid to hold a lollypop sign on a building site, there is plenty of latent demand for higher value products because there are lots of people with more dollars in their pockets than ever before and they are looking to spend it (just look at the new prestige car market....record year, sales of plasma tv's record year, even sales of new boats). Unfortunately high demand helps to create (and maintain) high prices for these sorts of items even if the cost of supply is arguably lower. With Plasmas the influx of new technology and also high competition with multiple suppliers has driven prices down, I can't say the same appears to have been the case with high end tackle? Recent consolidation and convergence with Shakespear/Penn/etc all gobbling each other up suggests a lowering of competition and therefore less impetus to compete on price.
 
As I said don't take my word for it, its just a theory. I really have no idea.

Anyone want to talk petrol prices?

Better still... how about talking fishing?

Cheers

Andy Mac

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Cheers

Andy Mac (Fishwrecked Reeltime Editor & Forum Moderator)

Youngest member of the Fishwrecked Old Farts Club

deefa's picture

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i'm going fishing tonight

Thu, 2008-01-10 07:34

i'm going fishing tonight

Dreamweaver's picture

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Some Good Comments LOL

Thu, 2008-01-10 07:37

Andy  - thanks again for the email - I'll digest the contents of that very wordy PDF. Yeah, good comment on the (so called) luxury items. Especially cars. As to downward prices - the standard (Keynesian, or was it Adams - can't remember LOL) principle of supply and demand I guess. Amongst other reasons. Petrol prices - I think we all agree that there a rip off - easy one that LOL.

Jay - thanks on Q4 - DUH! I should have realised that. Not disputing the seasonally adjusted stuff - just wish the journos (sorry COL LOL) had encouraged some more insight. Given the radio station - there style is usually a bit more in depth that the commecial ones. Mind you, no where as much as a good print article I suppose.

John -  good question! As Andy said, a hard one to answer. Supply and demand, agreed, but maybe inellasticity (of demand) play a part here. In other words, no matter the overall price, fishos will still want gear. Comparative prices between competing elements may see some shift in peoples spending habbits though. But good products will always sell and have demand. For instance, we wouldn't buy cheap and nasty reels would we?

Hopefully, as the commentators say, our fiscal alignment more with SE Asia, rather than USA will act as a ride out buffer if the USA does take a nose dive. 



Colin MOLLOY

**** RECFISHWEST No. 576 ****

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G'day guys Just a question

Sat, 2008-01-12 08:19

G'day guys

Just a question to those wiser than myself. Do petrol and grocery prices fall into the "retail sales" category? Because I'm sure we are all spending more on these items purely due to increases in price rather than volume. So I guess the real question is when does it stop? When we finally cant afford to fill our cars, pay our mortgages and feed our families? It really makes the mind boggle as we supposedly live in the lucky country where we are packed to the hilt with resourses, have first class farming and producing industries and the like yet we import fresh fruits and veges from around the world, buy our resourses back as a value added commodity and buy imported fish from the nether regions of the world where you wouldn't wash your feet let alone eat out of it. It's got me absolutely stuffed.
Off my box now

Cheers Mike

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Dreamweaver's picture

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Not sure

Sat, 2008-01-12 09:00

G'Day Mick

I'm not an economist, and I'm not sure.

One thing is evident and obvious, the more petrol prices rise, the more the incidence of a flow on effect into cost of related produce. All food items rely on transport of some sort, either road or rail. A lot by road. Therefore as road transport prices escalate, there's historical evidence of a flow on causing increased prices to these goods.

From my basic studies of economics (high school and uni), as far as produce demand goes vs price, item demand is decribed somewhere as elastic at one end of the scale to inesastic at the other - inelasticity and elasticity are the terms used.

Goods are deemed to be elastic when price varaitions have a large impact on demand (consumarability) whereas inelastic goods are not, or marinally, impacted by price, and/or it takes comparatively extreme variations in price to affect demand.

Goods of course are classified through this spectrum, not just at either end.

Whilst mainstream transport technology remains to be relied on fossil fuel derivatives and geographical mobility as a right (reasonably) subsists within our culture, then there inelastic demand for petrol, and other derivatives will continue to have a huge effect. Sure, car pooling, attenuation of non essential trips and other periferal reactions will occur, but increases in petrol prices is going to hurt a lot of people. The increase will be a ripple (conductive?) effect through the whole chain - from produce raw material extraction to value add of the final product, supply etc. 


 
Colin MOLLOY

**** RECFISHWEST No. 576 ****

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sid's picture

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you could try checking the

Sat, 2008-01-12 22:12

you could try checking the oil
or perhaps the tyre pressure is wrong
just a thought
sid