Winson-Talk

What is the interest rate trend like now ?

Lately bank interest rate has reached 8.93% and another raise is expected in February 2008 after the governor of the Reserve Bank made it clear about controlling the inflation. The interest rate is the highes ever since Nov 96. The only way government is able to control inflation is to raise the interest rate. This is to encourage people to save money in the bank rather then spending it out at the market. The economy boom in Australia has just past us. There is a cycle for economy. There was an economic recession that hit much of the world beginning in 1987. During then I was too young to know anything about the things happen in the global economy. As I grew older, my parents used to tell me the things happen during then as they had been through it before. In 1997 there is an East Asian Financial Crisis. During then I was old enough to understand what was going on. I always believe that the economy cycle repeat it self every 12 years. But 1997 crisis happens earlier then expected. It is a lifetime experience to go through once as you will know what are the indication to look for before something happen. Property wont get effected much. But for those who gets involved in shares, you will need to know when to get out of it as shares is never a long term investment. During an economy crisis, shares that worth thousand of dollars will ended up to be worthless. Have you read the news about what happened to centro ? There will be many more company that will be in such situation during bear market. To be in involved in business, most of the company do borrow money from the bank. As interest rates goes up, companies who are in debt will have difficulty in making their repayment. Sometimes you will be wondering how can a quarter of a percent raise does effect anything. If a quarter of a percent raise happens a few times in a year, the impact towards their debt may be quite significant. Usually people have the most confident during the peak of the economy. But I always believe that this should be the time that we should be caution on what will happen next. As interest rates starts going up, this should be the time people should start thinking how to reduce their debt and not create one. Inflation, interest rates, shares and property are all co-related. To know what happens on each component, you will need to find out what happens to the rest of the component. At this point of time no one knows the answer. Different people perceived things differently as well based on what has happen. I believe 95% of the people will perceived that the property price will still go up this year. This perception is normal as people perceived the situation based on the past and the fact is that last year the price did went up for more then 25.2%. I wonder what is the thought of the other 5%.

Current Interest Rate

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