Mortgage Funds block redemptions
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The Australian Mortgage Funds are in a stay of disarray at the moment as a host of major funds have blocked redemptions of mortgage funds to prevent a run on funds that will not only destroy the funds but also seriously damage the long term results of the funds.
Earlier in the week the Challenger Howard Mortgage Fund worth $2.8 billion suspended redemptions. They have now been joined by Australian Unity, AXA Asia Pacific Holdings and Perpetual
The suspension of redemptions has sent fear through the economy as pensioners and long term investors had recently been withdrawing funds in some cases in excess of ten fold on normal levels due to the government guarantee on bank deposits.
The Australian Governement recently announced a plan to guarantee all bank deposits but mortgage funds were not included. This has caused people to run for the doors drawing investments from such funds and transferring into the safety of bank deposits.
No doubt in coming days these mortgage funds will be joined by others as the fear spreading through the economy will continue for a while to come as people see dollars in the bank as the only safe investment.
Have you had your funds suspended for redemption by the mortgage funds? Share your thoughts in our comments section.
Has Australian Inflation peaked?
The Australian Bureau of Statistics revealed yesterday that annualised inflation had hit 5% in the September quarter. Excluding volatile items it was 4.6% still well above the rate the RBA have traditionally been happy to accept.
The RBA have indicated that the likely pressure on inflation will disappear through 2009 as slowing ecomonic growth, consumer demand and increasing jobless figures help drag down the inflation rate.
But the question begs what if the inflation risk does not disappear in 2009. We are likely to see as much as 1.5% come off interest rates in the next 12 months, perhaps more should the economic climate deteriorate further than expected. This would take the RBA cash rate down to 4.5%.
If inflation continues to persist as some economic forecasters speculate then the Australian and world economies could be heading for a disaster. The jury is still out at this stage but economic forecasters are sitting on both sides of the fence.
Do you think our inflation rate has peaked? Share your thoughts in our comments section.
Australian jobless rate forecast to skyrocket by 2010
JP Morgan’s Australian chief economist Stephen Walters has forecast the Australian jobless rate to double by the end of 2010 to 9% as over 1 million people are out of work. This would be the highest level since 1994.
Walters forecast comes on the back of growing insecurities surrounding the domestic economies growth rate and the ongoing world slowdown in particular in China.
With China showing signs of a slowing economy from the previous breakneck growth rates in excess of 10% the world slowdown is likely to take a heavy toll particularly on economies like Australia who have leveraged off the Chinese economy.
Walter indicated a that the domestic growth in the economy would fall to 1.4% in 2009 as the growing slowdown in China takes hold.
The grim predictions bode well for further rate cuts as the domestic markets have priced in a forecast 50 basis point cut in the next month or two.