Australia's Banks Are Preparing For Negative Interest Rates!

Discussion in 'Markets & Economies' started by whay, Dec 30, 2019.

  1. whay

    whay Well-Known Member

    Joined:
    Jan 8, 2016
    Messages:
    462
    Likes Received:
    251
    Trophy Points:
    63
    Economist John Adams and Analyst Martin North look at recent Hansard records where the Banks discussed their plans for negative interest rates. The link between the Cash Restrictions Bill and potential Negative Rates are very real, no conspiracy theory here - but fact!


     
  2. harry_mr

    harry_mr Active Member

    Joined:
    Oct 17, 2015
    Messages:
    135
    Likes Received:
    107
    Trophy Points:
    43
    With just a few rate cuts left negative interest rates will become the norm once consumers accept that life goes on and the world wont end.
    Overseas countries will be held up as exemplars of this fact. Its all good till its not.
     
    66rounds likes this.
  3. bubblebobble2

    bubblebobble2 Well-Known Member Silver Stacker

    Joined:
    Feb 6, 2012
    Messages:
    2,704
    Likes Received:
    1,004
    Trophy Points:
    113
    Location:
    Seedeneey
    Who's going to pay fo for those fat-cats?!
     
  4. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

    Joined:
    Nov 15, 2010
    Messages:
    19,667
    Likes Received:
    2,835
    Trophy Points:
    113
    Location:
    昆士蘭
    Probably not. The RBA is aware that negative rates have not worked in other countries so that strategy is unlikely to be used in Australia. It’s not even on the radar nor worth considering when deciding on your investment strategy.
     
    Silver260 likes this.
  5. STKR

    STKR Well-Known Member Silver Stacker

    Joined:
    Aug 19, 2019
    Messages:
    658
    Likes Received:
    1,025
    Trophy Points:
    93
    The RBA have already said they're testing their systems for a negative rate environment. They also say it's "Not likely" we'd go to negative, but I wouldn't trust a word that spins out of the mouths of the RBA when it comes to the strength of the economy. Too many political and financial reasons to lie or avoid the truth.

    Regardless of whether negative rates are working in other countries, the possibility of going negative is high in my view. Central banks have two main tools at their disposal:

    *Controlling the money supply:
    The volumes and frequency of currency being loaned to the retail banks. Higher volumes and frequency = more aggressive lending etc.
    and
    *Controlling the interest rate:
    The rate at which currency/debt is loaned to the retail banks. The RBA expect part of the rate cuts to be passed on the the borrowers, and this will help 'stimulate' the economy.

    The IMF says it best:

    "Many central banks reduced policy interest rates to zero during the global financial crisis to boost growth. Ten years later, interest rates remain low in most countries. While the global economy has been recovering, future downturns are inevitable. Severe recessions have historically required 3–6 percentage points cut in policy rates. If another crisis happens, few countries would have that kind of room for monetary policy to respond."

    The full article is here and it's a good read.
    https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/

    So where do we go from here If we have a recession?

    As Raven said: "how do you explain legislation on the table to limit, and go cashless?" - It's all straight out of the IMF handbook.
    I wonder what negative rates and restricted cash use would do for Gold and silver demand?
     
    Last edited: Dec 30, 2019
    Silver260 and 66rounds like this.
  6. pmbug

    pmbug Active Member

    Joined:
    Oct 22, 2011
    Messages:
    308
    Likes Received:
    68
    Trophy Points:
    28
    Location:
    Texas
    This is from August (just a few months ago):
    https://www.abc.net.au/news/2019-08-09/reserve-bank-cuts-economic-forecasts-again/11399576

    That was on the heels of the $10K cash limit (in effect the month before).
     
    66rounds and STKR like this.
  7. harry_mr

    harry_mr Active Member

    Joined:
    Oct 17, 2015
    Messages:
    135
    Likes Received:
    107
    Trophy Points:
    43
    Nothing is off the table according to Lowe however I do think QE, bank account bonuses, handout helicopter money might be trialed before negative rates were used. 2% inflation must be achieved however with no wage growth coming it seems something is not working in their handbook.
     
    66rounds and Silver260 like this.
  8. Silver260

    Silver260 Well-Known Member Silver Stacker

    Joined:
    Dec 11, 2014
    Messages:
    431
    Likes Received:
    612
    Trophy Points:
    93
    Location:
    Queensland
    I tend to agree with this view. I think we'll go down the QE / Fiscal path before going negative.

    I wouldn't be suprised if the following happened...

    A couple more rate cuts ( to 0% or 0.25%) , then QE for the banks ( which won't work), then QE for the people ( helicopter money). Plus a good dose of Government spending + Subsidies thrown in.

    @STKR, regarding PM prices in a negative rate environment. I suspect rates could go to negative 20%, and as long as the US economy "appears" strong and equities continue to rally, they ( PMs ) will see little change. But even the most experienced economists / investors are scratching their heads over the long term effects of this monetary experiment.
     
  9. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

    Joined:
    Nov 15, 2010
    Messages:
    19,667
    Likes Received:
    2,835
    Trophy Points:
    113
    Location:
    昆士蘭
  10. Shaddam IV

    Shaddam IV Well-Known Member Silver Stacker

    Joined:
    Mar 22, 2010
    Messages:
    7,711
    Likes Received:
    3,607
    Trophy Points:
    113
    Location:
    House Corrino
    Well, the big banks are getting ready to make it harder for you to withdraw your money...


    "Major banks removed hundreds of ATMs in the latest year, as the industry responded to the scrapping of withdrawal fees and consumers further reduced their use of cash.

    In a trend that is tipped to ramp up as digital payments take off, all of the big four have made cuts to their ATM networks in the latest 12 months for which figures are available, with one lender culling one in four machine".


    https://www.smh.com.au/business/ban...ore-customers-ditch-cash-20190118-p50s5j.html
     
    66rounds and STKR like this.
  11. Oddjob

    Oddjob Well-Known Member Silver Stacker

    Joined:
    Aug 19, 2018
    Messages:
    3,504
    Likes Received:
    3,957
    Trophy Points:
    113
    Location:
    Oz
    This is probably the correct outcome given current circumstances but the bank's will be preparing their systems regardless to account for a negative interest rate environment if it does come.

    Back in the good old days of the GFC when Greece was looking at a total debt default and talk re Greece (and maybe others in financial strife like Spain and Portugal) leaving the EU was abounding (right or wrongly), the major Aust banks where making changes to their FX dealing and FGN currency accounting so in need if the Greek drachma came back into being, their could deal with it. If fact, I think they did same for all former currencies of EU members in case the EU started to fall apart.
     
  12. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

    Joined:
    May 25, 2018
    Messages:
    2,219
    Likes Received:
    1,269
    Trophy Points:
    113
    Location:
    Singapore
    To me, negative rates are just a ploy by Germany to weaken the euro to boost EU exports. It only works as long as the US has a much higher rate. Once US interest rates start to fall to zero, other countries that have marginally negative or close to zero rates will need to go even more negative, maybe punitive measures like each time you put money into the bank or withdraw cash there is a 1-2% commission.
     
    Silver260 and 66rounds like this.
  13. Ag bullet

    Ag bullet Well-Known Member

    Joined:
    Dec 27, 2013
    Messages:
    1,183
    Likes Received:
    892
    Trophy Points:
    113
    Location:
    SE QLD
    did somebody say helicopter money? convert straight to gold!
     
    66rounds, sgbuyer and Silver260 like this.
  14. STKR

    STKR Well-Known Member Silver Stacker

    Joined:
    Aug 19, 2019
    Messages:
    658
    Likes Received:
    1,025
    Trophy Points:
    93
    I haven't heard this speech from Philip Lowe, but I can understand what you're trying to say. Any rate that is lower than the achieved % of inflation for that year is essentially a negative rate. If inflation was 3% for that year and the retail banks loan at 3.25%, then essentially the interest rate repayments are only 0.25% above the depreciation rate of the currency loaned.
    This means the retail banks are already in a negative rate environment relative to inflation, and have been for years.

    Check out the RBA's cash rate history from 1990 @ 17% to now:
    https://www.rba.gov.au/statistics/cash-rate/
    It's not a pretty sight.
     
  15. harry_mr

    harry_mr Active Member

    Joined:
    Oct 17, 2015
    Messages:
    135
    Likes Received:
    107
    Trophy Points:
    43
    STKR what you are refering to is negative 'real rates'. Negative interest rates refer to the Central banks lending rate.
     
    66rounds likes this.
  16. STKR

    STKR Well-Known Member Silver Stacker

    Joined:
    Aug 19, 2019
    Messages:
    658
    Likes Received:
    1,025
    Trophy Points:
    93
    :D That sounds like an appropriate name for it. The Real Negative Rate.
     
    Silver260 and 66rounds like this.
  17. 66rounds

    66rounds Well-Known Member Silver Stacker

    Joined:
    Jun 22, 2019
    Messages:
    1,738
    Likes Received:
    1,716
    Trophy Points:
    113
    Location:
    Melbourne
    Don't you love when you get free stacking money? The only question is how to split it between gold and silver!
     
  18. projack

    projack Well-Known Member Silver Stacker

    Joined:
    Aug 12, 2009
    Messages:
    3,188
    Likes Received:
    160
    Trophy Points:
    63
    Location:
    Brisbane
    The only way Greece pay back anything is with negative rates
     
  19. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

    Joined:
    May 25, 2018
    Messages:
    2,219
    Likes Received:
    1,269
    Trophy Points:
    113
    Location:
    Singapore
    As long as long the metals are bought cheap, ratio is immaterial if everything has appreciated. The most important is the number of ounces in total. A person who has bought 5 ounces of gold and no silver, versus another with 5 ounces of gold and 500 ounces of silver. Who is better off?
     
  20. 66rounds

    66rounds Well-Known Member Silver Stacker

    Joined:
    Jun 22, 2019
    Messages:
    1,738
    Likes Received:
    1,716
    Trophy Points:
    113
    Location:
    Melbourne
    Some would argue that the second person is, because his silver will convert to gold at a better rate than if he had just bought gold alone. I argue that every dollar wasted on silver is a dollar not spent on gold, but this is a silver forum so I must be friendly with the masses :D
     

Share This Page