Newsletter – December 13 2019

“The last hurrah for a few things you’ve known so well…from next year, no more Holden Commodore. The other that’s going it seems, according to the Reserve Banks Governor, is cheques!

So that expression ‘the cheques in the mail!’ in 10 or 15 years’ time…will mean nothing to anybody!

Because there will be no cheques and there will be no mail.

So you’ll say to someone ‘The cheques in the mail’ and people will look at you like ‘I have no idea what you’re talking about’” (Listen Here)

Newsletter – December 13 2019

2019 – what a year it was. 

The Banking Royal Commission final report handed down. NAB lost both its CEO and Chairman in the wake of damning criticism from the Royal Commissioner. An early budget, and a budget in surplus. An election, with a surprise Coalition win. Not one, but three interest rates cut. Income Tax cuts. Westpac accused of 23 million breaches of anti-money laundering laws, including aiding child exploitation. 

We’ve seen property prices drop off a cliff, falling double digits from their highs in 2017. Only to record a slight recovery in the latter part of this year. 

We’ve seen consumer confidence hit all-time lows, with more and more retailers shutting up shop as consumers stop spending. 

The Trade War seemed to be heading towards a resolution, only to fall apart multiple times. 

The ASX 200 hit all-time records, hitting 6879.5 on November 28. 

We’ve had a consecutive trade surplus for the first time since 1973. 

Jobs are still being created, taxes are still being paid. 

We seemed to be heading for a beeline towards a recession, but have we turned a slight corner? 

Who knows, is the answer. 

2020 will bring with it another year of incredible business and finance news that right now we could not begin to imagine. 

But interest rates will continue to dominate. Money markets are predicting another 0.25 percent cut in February with many economists including Bill Evans, the chief economist at Westpac saying “We think they will cut interest as early as February/March.

I think they are going to continue with that rate cut in February and another after the budget in June and that will be the bottom of the cycle.

I don’t think they can go any lower” (Listen here)

When keeping the rates on hold in December, RBA Governor Philip Lowe said “Given these effects of lower interest rates and the long and variable lags in the transmission of monetary policy, the Board decided to hold the cash rate steady at this meeting while it continues to monitor developments, including in the labour market,”

“The Board also agreed that due to both global and domestic factors, it was reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target.”(Listen Here)

I mused last week – bringing rate that low might not be the answer to get Australian’s spending again. Rather, doing the complete opposite.


If people hear rates are continuing to be cut, then something must be wrong in the economy. Why would they spend if things could go pear-shaped?!

And what if the rates get to zero? 

In October,  the Reserve Bank acknowledged there is a ‘Plan B ’for when interest rate cuts run out, with RBA Governor Philip Lowe admitting Many central banks introduced unconventional tools – like negative rates and asset purchases.”. (Listen Here)

In other words, quantitative easing.

Think negative interest rates – where investors pay to keep their money safe in government deposits. And asset purchases – where the Reserve Bank effectively prints money to drive more cash into the economy.

Now, the likes of Former RBA deputy governor Stephen Grenville says do not to touch the QE button. One you go there, you can’t come back.

Rob Carnell, the chief economist at ING is another who says “I think the problem is if you look around the world, the central banks that are still using these policies, – the European Central Bank, Bank of Japan – the very clear lesson you get is it doesn’t work.

In fact, I think there’s even an argument that as you start pushing interest rates lower and lower, I have a gut feeling once they drop below one…it can start to have negative consequences.”

“It’s very difficult to pull yourself back from these policies once you start doing them.” (Listen here)

Even though I do not think the RBA should be cutting rates again, it sure seems like they are hell-bent on getting them as low as possible.  

So, my bet – two rate cuts. One in February and one in June. 

I mentioned just before the property recovery – Sydney house prices are rising at their fastest pace in more than 30 years as the RBA’s rate cuts seem to come into effect.

According to Corelogic’s November sales, dwelling prices rose in all eight capital cities in November. (Listen Here)

In Sydney, it rose 2.7 percent. In Melbourne, 2.3 percent and in Brisbane and the Gold Coast, prices are now back to near their April 2018 peak.

The 2.7 per cent rise in Sydney prices was the fastest since October 1988, when prices rose by 3.5 per cent, and beats May 2015, when they rose 2.6 per cent.

Sydney and Melbourne house prices have recovered to within 8 per cent and 4 per cent of their respective peaks in late 2017, while auction clearance rates in the two biggest cities are above 70 per cent, up from 50 per cent last year.

And whilst a recovery in the property market is welcome, the RBA do not want an intense recovery that creates a housing bubble. (Listen Here)

Cause it prices rise too high, too quickly…that bubble will burst.

Next year will see the RBA look closely at the rise of property prices, and quite possibly they may have to step in.

Another which will dominate in Westpac and its anti-money laundering allegations from AUSTRAC. 

In all years of being a financial journalist, I have never been as shocked as when I learnt of these allegations and the fallout.

Some of the revelations that I have seen and heard by, in particular, Australia’s oldest bank, Westpac, really have shocked me.

The speed of which major executives have fallen on their swords is outstanding – five days was all it took.

And if that wasn’t enough, Westpac’s board avoided a spill after surviving a marathon, six-hour annual meeting at which investors delivered a historic “second strike” and hours of excoriation at the hands of small shareholders.

The Chairman Lindsay Maxsted – who for the past five years have been rated as the most respected and powerful director in Australia – gone in the first half of 2020.

Its chief executive Brian Hartzer – the ‘Teflon King’ from the Royal Commission – gone already.

The head of risk and compliance committee Ewen Crouch – did not seek re-election at this weeks AGM

Three major scalps and no doubt more will come.

As the outgoing chairman said – “To not make the change could be damaging to the bank.”

Allegations Australia’s second largest bank breached anti-money laundering and counter-terrorism financing laws 23 million times have rocked the financial world. (Watch here)

AUSTRAC, the financial crimes regulator, alleged Westpac engaged in “widespread, systemic and frequent failures” to adhere to anti-money laundering laws and hampered its ability to prevent child exploitation.

It is alleging Westpac did not report some 3,000 transactions where 12 Westpac customers, who transferred a total of $497,612 in small amounts to the Philippines, and other south-east Asian countries for child pornography going as far back as 2013.

With these allegations hanging over their heads, there was no doubt people had to be held accountable and there is no surprise the chief executive and chairman are gone – there position became untenable.

Home Affairs minister Peter Dutton even saying Westpac gave ‘a free pass to paedophiles’.

Westpac is expected to be hit with a fine of up to $1 billion for these breaches. The Commonwealth agreed to pay $700 million, one of the biggest financial penalties handed out in this country, only last year. And they only had 53,000 allegations. Westpac has 23 million. 

These allegations have rocked the foundation of Westpac and the repercussions will be felt well into the near future. 

As we head into 2020, and as the reality of the lack of consumer confidence and decline in Christmas sales, we will, no doubt, see more retail closures across the country; putting more people out of work and bringing that consumer confidence even lower. 

What a year 2019 has been. Thank you for all your support, your emails, your calls, you kind words.

I will not be returning to Money News in 2020 as I have decided to spend more time with my family. 

Again, thank you for all your support over the years. 

I wish you a Merry Christmas and a Happy New Year. 

9News – 

What is the financial cost of bushfires – Watch Here

Money News – 

Which are the worst super performers? – Listen Here

Highlight – 

Sparks fly at Westpac AGM – Listen Here

Previous: Westpac faces ‘angry’ shareholders over money laundering scandal

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