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(Re)defining low interest rates

February 28th, 2005

I was watching Costello discussing the likely increase in interest rates on the news last night and he said something “Whenever you have a single digit in front of your interest rate, it’s low”. I couldn’t see a reference to this in the papers today, and I wonder if any readers can locate a transcript or similar.

This is all relative of course. My first home loan was at 9.5 per cent and that was considered outrageously high. For those who experienced the economic management of Howard and Keating in the 1980s, such a rate came to seem amazingly low. But with the levels of indebtedness prevailing now, I’d have thought 9.5 per cent would be ruinous for many.

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  1. Ian Gould
    March 10th, 2005 at 08:17 | #1

    Razor,
    Guess what – I too have a degree from a sandstone university and I too work daily in the fields of superannuation and fund management. I also worked as a policy officer, statistician and environmental economist for the Queensalnd government for about a decade. I am currently the Vice-President director of Foresters ANA Friendly Society and inter alia chair their investment committee.

    Now that the dick-waving is out of the way.

    “Tragedy of the commons” is a term most economics students would have picked up by the end of first year University.

    There’s no shame in not knowing it but I’d suggest a more apporpriate response than a dummy-spit is to go to google and look it up.

    While you’re there, you might also want to look up “market power”; “market failure”; “externality”; “public goods”; and “Pigovian taxes”.

  2. Razor
    March 10th, 2005 at 13:25 | #2

    Dear P.M. Lawrence – thanks for the pointer.

    Dear Ian Gould,

    Had a look at your Foresters ANA website. I trust you sleep well at night protecting the environment and pursuing social justice outcomes while your fund members’ returns lag behind everyone else’s. Of course you can probably point to that period in 2001/2002 and maybe 2003 where many superfunds went backwards. I am happy to say that my clients have outperformed often by double the returns your fund has achieved in ever comparable year, even the early 2000′s.

    A couple of questions – how does your investment strategy meet the different needs of clients with different risk profiles? (as you are required to do by law).

    And, why isn’t your Australian Financial Services Licence Number included clearly in your website? (I’m pretty sure you are required by law to do that, too. Better get on to your IT guys before ASIC or APRA get shirty).

    Regards

  3. Ian Gould
    March 10th, 2005 at 19:57 | #3

    Dear Razor,

    Thanks for the invective and the veiled threats.

    The Super Fund is designed to be and advertised as a conservative, low-risk capital stable investment.

    The share portfolio component of the fund has actually outperformed the ASX for the past several years but the bulk of our funds are invested in fixed interest and mortgages.

    I haven’t checked the relevant figures lately but the last time I checked we were outperforming many of the large mainstream funds over 3 and 5 years.

  4. Razor
    March 11th, 2005 at 15:30 | #4

    Ian,

    Let us be absolutely clear that there are no veiled threats in my last post – I was just giving you a friendly pointer, maybe I’m wrong about AFSL numbers. From what I saw, as long as your investors knew what they were getting into, and I have no doubt that they would, then you really don’t have anything to fear from ASIC or APRA. If the only thing they can chip you for is AFSL numbers then you, as a Director, are doing a grand job.

    As for invective – I wasn’t attacking – just making reasonable comparisons of investment returns. If you think that is invective, there’s nothing I can do about that.

    Best of luck for the future prosperity and sustainability of your beneficiaries’ funds.

    Kind regards

  5. Ian Gould
    March 11th, 2005 at 17:34 | #5

    Razor,

    Sorry if I overreacted. AS it happens the website isw currently being reviewed by our new CEO in any case.

  6. Razor
    March 11th, 2005 at 23:10 | #6

    No Probs.

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