Newsletter Issue 42

It seems that the main topic of conversation these days is the world financial crisis or some aspect of it, and this is understandable because its affects and touches us all individually and as a nation. In some ways it renders us powerless because we are unsure what, if anything, we can do about it and we know that Governments are charting new territory as well.

In a sense we have no choice but to hope that the "powers that be" know what they are doing even if deep down we sense they are unsure themselves and hoping as much as the rest of us. This is actually part of what leads to a lack of confidence, because when human beings are unsure, fear can take over and they are likely to do nothing but wait and see if things improve. Unfortunately this ultimately leads to a worse condition, because when people stop spending or living as they normally would in better times, this can actually paralyze the economy even further.

Media coverage is partially to blame because even though facts must be presented and not dressed up or spun to appear better than they really are, relevant information is almost always reported in a negative sense. Confidence may only return when at some point enough people get sick and tired of all the negative publicity and decide that no matter what is happening around them, they will make the best of their own situation.

It's a little like the glass "half empty" or "half full" syndrome. Let's face it, there is always a silver lining if we look for it and we know that the dawn always follows the darkest hour. I'm not suggesting an unrealistic mindset but if we allow negativity to capture our mind and dictate our actions, we will not see the opportunities that will surely come and for that matter are already here.

Lets contemplate for a moment some opportunities that have emerged because of the financial crisis.

1. Interest rates are the lowest in memory for most of us, and this has eased pressure on thousands of home owners who have a mortgage, effectively putting more money in their pockets.
2. Government grants have helped many young people purchase their first home and get out of the rent trap.
3. Rents have continued to rise which coupled with low interest rates means that it's a great time for investors to come back in to the market. Unfortunately this is not good news for tenants in the short term but even here there may be a silver lining. If more investors buy rental property this will eventually help the supply side of the equation and make rents level out and become more affordable for tenants.
4. Many millions of dollars are about to flow from Government coffers into infrastructure projects which we will all benefit from as they use this spending to stimulate the economy. If it were not for the current crisis, funding for most of these projects would be a long time coming.
5. We have all had to explore ways of belt tightening both personally and in business. This is not always a bad thing because in good times we are more likely to waste and harder times cause us to think about ways of being less wasteful. Despite current conditions few of us have had to suffer as much as earlier generations.
6. Difficult times tend to make us more grateful for what we actually do have and allow us to focus attention on those who aren't as fortunate. The sick, the elderly, the unemployed and the poor and destitute of all nations strangely come into clearer focus when we ourselves are doing it a little tougher. Let's hope this focus doesn't shift when good times come again.

We could continue adding to the above list but the point is there are always two sides to any coin. We can choose to concentrate on the positives rather than the negatives. We serve ourselves and others best when we choose to focus on positives. We must always be aware of the negative. For example as a result of the current crisis many more will become unemployed. We must be aware of that and try to be part of the solution, but if we are fortunate to enjoy employment ourselves we should focus on working to the best of our ability making use of every opportunity. That way we are in a better position to help others whatever their needs may be.

Our randomly selected winners for a weekend away at Hobart's Grand Chancellor are James & Tammy Edmunds. James & Tammy had an appraisal done on their house through Towns Shearing. They were delighted when Managing Director Noel Towns informed them of their win. Congratulations James & Tammy and we sincerely hope you have a great weekend away.

• I'll tell you one thing, if things keep going the way they are, it's going to be impossible to buy a week's groceries for $20.00.
• Have you seen the new cars coming out next year? It won't be long before $2,000.00 will only buy a used one.
• If cigarettes keep going up in price, I'm going to quit. 25 cents a pack is ridiculous.
• Did you hear the post office is thinking about charging 10 cents just to mail a letter?
• If they raise the minimum wage to $1.00, nobody will be able to hire outside help at the store.
• When I first started driving, who would have thought petrol would someday cost 29 cents a gallon. Guess we'd be better off leaving the car in the garage?
• I'm afraid to send my kids to the movies any more. Ever since they let Clark Gable get by with saying DAMN in GONE WITH THE WIND, it seems every new movie has either HELL or DAMN in it.
• I read the other day where some scientist thinks it's possible to put a man on the moon by the end of the century. They even have some fellows they call astronauts preparing for it down in Texas.
• Did you see where some baseball player just signed a contract for $75,000 a year just to play ball? It wouldn't surprise me if someday they'll be making more than the President.
• I never thought I'd see the day all our kitchen appliances would be electric. They are even making electric typewriters now.
• It's too bad things are so tough nowadays. I see where a few married women are having to work to make ends meet.
• It won't be long before young couples are going to have to hire someone to watch their kids so they can both work.
• I'm afraid the Volkswagen car is going to open the door to a whole lot of foreign business.
• Thank goodness I won't live to see the day when the Government takes half our income in taxes. I sometimes wonder if we are electing the best people to government.
• The drive-in restaurant is convenient in nice weather, but I seriously doubt they will ever catch on.
• There is no sense going on short trips anymore for a weekend, it costs nearly $15.00 a night to stay in a hotel.
• No one can afford to be sick anymore, at $35.00 a day in the hospital, it's too rich for my blood.
• If they think I'll pay 50 cents for a hair cut, forget it.

As I finish this newsletter it is a little over a week before the treasurer delivers the Federal budget. One item of interest to many will be Mr. Swan's announcement concerning the first home buyer's grant for established and new housing. Mr. Rudd has made conflicting statements recently, leading commentators to guess whether the grants will be retained or not. The most likely outcome appears to be a modified version with emphasis on stimulating new home construction but we will have to wait and see.

The issue has divided economists and commentators. Some point to the negative affects of stimulating one end of the market and fear that this will lead to a prices bubble that cannot be sustained over time. However, although there has been some price movement at the affordable end of the market, these fears are largely unfounded.

Another concern has been that first home buyers will over commit themselves while interest rates are cheap and be unable to meet mortgage repayments later on when interest rates eventually rise. This is a valid concern and first home buyers would be wise to consider what level of debt they could comfortably afford if interest rates were to rise by say 2% over time. This is not a reason however not to buy a home, but a prudent reminder to think carefully about your debt level.

As usual if you have any comments or questions, do not hesitate to contact me.

Regards,

Noel R. Towns
Managing Director