Polls, apologies, interest rates and inflation – I thought we had enough to lose sleep over without worrying about bank stocks.
I’m working far harder than I would like to and far harder than I’m used to this week, so I’ll bung a few unrelated topics together and hope no-one notices a lack of continuity.
Sorry about other things
According to the opinion polls, I am perhaps the only Australian unimpressed with the performance of the Rudd Government.
I’ll give the Prime Minister points for the chutzpah demonstrated by his appropriation of the Prime Ministerial gold tie, and more points for the rapid deployment of Australian troops to East Timor, but anything else has been lost in a blur of liaisons, inquiries, consultations and reviews – and only a public servant could confuse them with outcomes.
What about the apology?
Perhaps it’s just that an inadvertent sustained absence of alcohol (four days now) left me even less empathetic and more cantankerous than usual, but the Prime Minister’s apology to the stolen generation left me unmoved.
The damage done to the stolen generation was done by others, a long time ago, and it is too late to do anything about it other than apologise. To me it makes as much sense to apologise for the devastation caused by Cyclone Tracy.
For anyone other than John Howard it would be an easy, if pointless, apology to make.
Today, most aboriginal Australians have a life expectancy around half that of other Australians. Many live in communities where the rape of children is almost expected. That is a national disgrace and a cause of shame for us all.
I would have been impressed if Kevin Rudd had apologised for being part of a society that has tolerated that situation; instead he apologised for what others did in the past..
To be fair, Rudd did add: “It’s not sentiment that makes history, it’s actions.” I hope our Prime Minister makes history.
To other matters.
Interest rates
As I write this, the Reserve Bank has just increased interest rates for the 12th successive time. While I suspect hindsight may show that’s one rise more than necessary, it seems likely that there is at least another hike still to come.
The Government has just announced measures supposedly intended to relieve mortgage stress. One hopes they don’t really mean it. The Reserve Bank is raising rates to slow the economy. The Reserve Bank intends mortgage stress. Anything that the Government does to relieve mortgage stress only increases the chances that a further rate rise will be required.
Inflation in China
In December I said that the China bubble might burst if the Chinese Government was “unable to solve its own inflation problem without killing growth altogether”.
Business Spectator reports that wages in China are expected to rise between 21% and 50% this coming year.
Unless the Chinese Government finds a way to restrain wages growth and inflation – something proving a challenge to the Australian Government notwithstanding far more sophisticated tools and information, and a far less over-heated economy – China will begin to export inflation this year, as more expensive imports feed into their trading partners’ inflation rates.
Bank shares
Also in December I recommended bank shares – they’ve dived. Was I wrong?
Well, certainly you would have preferred to buy bank shares this month rather than December (in fact this is what I did, but through poor execution rather than intention, I assure you), but I was careful to explain that I only believe in shares as a five year investment.
My own view hasn’t changed, but it’s true that margins have been squeezed, so I’ll modify my advice to say that bank shares are a good five year investment – unless you believe that our banks will exercise restraint in passing those increases through to their customers down the track.
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