Bearish Peter Costello

Has anyone noticed that Peter Costello has had a bearish mood all year? I would think that Peter Costello as Australia's Federal Treasurer would have some reason why he is trying to warn the Australian people about impeding doom in the markets all year. Is it because he is a politician and by knowing that the market simply goes in cycles of booms and busts, he will inevitably be right anyway? And then, when the election year comes around he can look back and say, "Oh, I've been warning the people of Australia for a long time already about the crash... so if you've been affected it ain't my fault".

I’m surprised that Peter Costello has such a bearish outlook on the market. He isn't just neutral (I think John Howard is neutral – he hasn't really commented much about the market other than interest rates). In February this year, the Australian Treasurer Peter Costello, said that "...you don't want to kid yourself that all-time record price will last forever. They won't and we have to take that into account when we are making our decisions." Actually that was true for Oil prices which has fallen dramatically from highs of $80 to about $60 a barrel. Then in April this year, Mr Costello was talking about how the Australian Stock Market Boom won't last and was quoted as saying "This boom, like all booms, will come to an end."

Peter Costello has continued the bearish outlook with these more recent comments: "I think we've reached a high point and I think prices are going to return to more normal levels.The increase in commodity prices, the mining boom that was the story of the last couple of years, I don't think will be the story of the next couple of years." The consequence is this: if this commodities boom is over, The treasurer is implying that inflationary pressures will ease. As a result the Reserve Bank of Australia would have less reason to raise interst rates at their meeting on Tuesday November 7 (Yep, Melbourne Cup Day!). Mr Costello continues, "In my assessment, if you put three factors together, the globe is probably moderating, we've seen the peak of commodities, and the drought is knocking growth, so I'm just saying that I have no expectation at all of a boom in the years ahead - we will have moderate growth."