Introducing TwIRP

Not ZIRP

The news today is that not only is the RBA unlikely to cut rates any lower than the 2.0% where it sits, but it's also unlikely to start hiking them up for another 3years.

In the statement explaining the bank's decision to cut the cash rate to a record low 2 per cent, RBA governor Glenn Stevens omitted a key phrase used frequently in earlier statements to signal more cuts: "further easing of policy may be appropriate over the period ahead".

Financial markets are pricing in a just 30 per cent chance of a rate cut over the next 12 months, the longest odds for another cut in months. 

Rate cuts are good news for home owners and investors, but a prolonged spell of record low interest rates could be grim news for those who rely on returns from their bank savings, such as many elderly Australians.

Which sort of indicates that even if China's economy implodes under the weight of debt and the nation dissolves into civil warrior something catastrophic, the Property Bubble is unlikely to pop. That's the good news for those who took out (and continue to take out) stupendous mortgages. The RBA's right behind you, even when it says it might block you. Really. 2.0% - get over it! It's good (they say)!

The funny thing is that the RBA can't bring it self to go right down to Zero Interest Rate Policy because after all, Australia's economy is yet to implode and it probably sees those 8 increments of 25 basis points down to ZIRP as being valuable because - I dunno - China may implode and dissolve into utter chaos after all. Otherwise it can't construct a scenario where the Australian economy becomes worthy of high interest rates - as in more interesting - in the near future. 2.0% - get over it. It's just crap (others say)!

So caught between a rock and a hard place, it's likely going to stay on 2.0% for a long time.
As such, we may as well name this the Two-percent Interest Rate Policy: TwIRP.

Those Who Live In Glass Houses

News Corp is hilarious. No, really, they are.

Detail is scant as yet but the first initiative delivers further anti-avoidance powers to the Tax Office to recover unpaid taxes from multinationals and issue fines. The second is the so-called "Netflix Tax" through which GST will be extended to digital downloads from overseas. 

The rich paradox in this Netflix Tax is that it was urged upon the government by Rupert Murdoch's News Corporation, whose Foxtel pay-TV business stands to lose from digital competitors offshore. As previously revealed though, News Corp has now been identified as the Tax Office's number one tax avoidance risk in Australia.

You have to laugh. Especially when you consider it's the Coalition Government going after tax avoidance by multinationals, and we know Rupert loves him some Coalition Government; he put them there and now they're doing this.

At least, they say they're doing this. You can trust a Tory and their professed policy about as far as you are willing to stick your genitals into a meat grinder.