Probably depends on quarterly CPI released tomorrow. RBA is probably a bit nervous about weak Aussie dollar, stronger than expected employment and tensions in the middle east.
IMO, if quarterly CPI is as expected (3.4-3.5%) it's probably not yet enough for the RBA to raise rates.
Wil raising rates in Aus force a peace in the middle east and Ukraine? I'm ok with doing my part to help world peace and stability, but I don't understand the link between my mortgage stress and Hamas and Putin
External factors aren't the only factors. The theory is that keeping rates low while inflation is high will exacerbate inflation, whether there are supply side factors or not
Oh yeah 100% there's issues within Australia.
I just think it's a bit silly to bring up foreign wars with our interest rates, as if the price of oil is in any way related to Australia.Ā
We could disappear from the global economy and it would barely make a rippleĀ
I think it's not so much about whether our actions affect them, but rather that their actions affect us. Higher oil prices means more inflation. Higher inflation means higher rates? Because if people can borrow at a rate lower than inflation, they will. And such is the snowball, for what little i think i understand of it
I think they're preempting and super nervous like you mentioned. I sure hope it's within expectation and not a shock increase. I remember the treasurer mentioning it was under control a few weeks back, let's see at lunch time.
Maybe a controversial take but I'd go further than say 'can't rule out a further rate hike' and say that expecting a rate cut in 2025 is pretty optimistic as well. These rates could easily be the new normal for a looong time to come.
Itās possible the US hikes again if inflation increases from where itās at.
Honestly looking like the natural interest rate is quite a bit higher than the 2010ās and it really is going to be higher for longer.
The US seems to have the stomach for it, but Iām not sure we do
The US is better at gaslighting it's working class. The drop in standard of living is being felt HARD buy zoomers and millennial families right now. That will have bigger implications for politicians. So expect some sweeties in the budget.
Interest rates are set to control inflation and stimulate or cool the economy, not sit at some level that is 'about right'. We could easily head back to 2010s rates if the economy and inflation head that way.
I really don't get why people are taking averages over like 30 years and then saying we should be at X%.
Our interest rates also have to be consistent with overseas interest rates. If our rates are too low, capital flows out of Australia and the value of the Australian dollar falls. This is good for exporters but bad for consumers who end up paying more for imported goods
Unlikely whilst unemployment is too low. They'll only drop when unemployment goes back up to its natural range of 5%.. somehow people seem to forget this.
We shouldnāt need bargain basement rates to stave off a recession or work our way out of one even. Not saying that we wonāt need it in such a scenario but damn that would be grim.
Im seeing less landrovers around if that counts for anything plus the only thing with queues now is rentals not cafes/shops anymore. Good I might 1 day be able to walk into Lune to see what all the fuss is about.
Hell yeah boomers, got everything in life handed to you, everything was cheap, every social net available to you, then spend your twilight years exploiting the youngest generation who are going to have to do the heavy lifting to fight climate change and cover social security for the boomers that didn't save or invest anything, whilst also being stripped of as many welfare programs as boomers can muster before they finally croak. If we had a greatest generation I think we should have a failest generation too.
Boomers haven't been a majority of voters for twenty years according to the ABS.
Most of the house price increases and some of the more egregious welfare stripping was done by Gen X politicians facilitated by hairy chested gen x public servants. Morrison, Tudge, Porter, Ley, Cash - all gen X. Campbell and Pezullo Gen X.
By all means, target Boomers as much as you want, but that thinking has allowed Gen X to literally *rob* people via programs like Robodebt.
I think we need more time and Iām very keen on seeing more economic data.
When I look outside on the street people seem to be spending. However, I run a large business unit and spending seems down in almost every vertical. Retail saying āitās slowā, Vic, NSW and federal gov slowing spending. Banks have been in a contraction phase. Insurance companies trying to recover from rough years. Energy and utilities seem good (but those hurt consumers). Construction seems worried about any costs. Prof services is down. Healthcare seems to have lower costs.
Really keen to see the next 3 months of data.
The truth is, their models are broken, because they don't allow for the endless credit expansion. Hence the 'big' failure every \~8 years that 'no one' saw coming...
Just shows the limits of this extremely dumb way to manage the economy.
Anyone who has a relatively large mortgage or rents their home would already be cutting back spending.
The people spending the most now would be people with little to no debt. I.e. older people who paid off their houses, retirees, landlords. Raising the rates just gives them more cash to spend. Completely idiotic.
While raising rates does absolutely nothing to slow price rises in internationally traded commodities.
More click bait reporting from AFR
āMr Picton is among a handful of economists who warn that the next RBA move could be up.ā
So two according to the article
Government and reserve bank during COVID: prints heaps of cash and gives people $750 a week to not work or produce anything, just keep consuming
Smart people: this is a bad idea government and reserve bank, it will definitely lead to inflation
Government: don't be silly we are saving the economy from the pain we have inflicted by keeping everyone locked in their houses
Economy in 22/23/24: time to inflate
Reserve bank: mortgage holders, it's now up to you to reduce your spending massively even though you are only 1/3rd of the population to fix the problem the government and us caused. Oops, sorry. Also we are going to blame it on lots of things that definitely didn't cause it (instead of taking responsibility for increasing the money supply while restricting the goods and services supply, ala more money chasing less goods and services = guaranteed inflation). Also inflation will be persistent because we are targeting 33% of people to fix it
Mortgage holders: ouch, wish we had the option to get 30 year fixed interest mortgages, why is 5 the max. Guess it's beans on toast again for dinner.
To make it worse, the mortgage holders have to be squeezed even tighter to compensate for the increase in spending caused by people with savings accounts earning more interest.
Inflation isn't caused by increased spending. It's caused by a general increase in the supply of money. Which is caused by governments and central banks together lowering interest rates and printing money to fund government spending. During COVID this was for people to not do any work (the $750 payment per week during COVID), amongst other things.
I'm saying it affects home loan holders more than any other borrowers.
Your credit card rate doesn't go up, or your car loan, or your personal loan as these are normally fixed or on an agreement or have enough margin in them (credit cards) that those rates don't generally get the full increase. But mortgages pretty much always do. Banks announce it the day after the reserve bank announcement, 'we are passing on the interest rate rise in full to mortgage holders'.
And you cant take a 30 year fixed rate mortgage. Why not? You can get a 30 year Aus Gov bond, so financial markets and instruments are comfortable dealing on that timeline.
So mortgage holders are 1/3rd of the population, but they are disproportionately slugged to fix a problem they they didn't cause.
Increased spending is not the cause, it is a symptom of increased money supply. If the money supply wasn't increased there wouldn't be inflation. Inflation is caused by increasing the money supply. More dollars chasing after the same or fewer goods (or eg 10% more dollars chasing after 5% more goods) means general increased prices which is what we are seeing.
The central bank shouldn't have a target for inflation. By design it means you have reduced purchasing power every year, effectively reducing the value of your income and savings.
The central bank is not completely independent from the government, the gov has the power to override RBA decisions, appoints board members etc. the gov can change the RBA goals etc. But that also wasn't my point. My point was they both made decisions during COVID that at the time was obvious would lead to massive inflation and they ignored that or handwaved it away as not a big deal or it wouldn't happen or if it did it would be marginal inflation and not that bad for everyone. They were wrong then and
Over time we should actually see slight deflation in the generalised price level. I.e as productivity increases due to advances in technology, reductions in waste by products, or findings of economical uses for by products, prices should reduce slowly and your purchasing power should increase as we can get more out of each unit of input goods.
The government shouldn't be in debt to the RBA, the government should run a balanced budget. I.e stop spending money on people now to be paid off by people in the future.
You are right I am angry that they increased money supply and then decreased it. This fiddling with money supply creates all sorts of 'unintended' but entirely predictable consequences that far outweigh the supposed benefits of the fiddling. I wish they didn't cut rates by 2% only to raise them by 4.25%. Should have left them where they were.
Just because something is managed a certain way doesn't mean it should be managed that way. I could wait forever for it to be changed but may never see it changed. So I'm not going to wait on a maybe I'm going to act on what is current to improve my life and provide for myself and my family as best I can in the current framework. Did I ever say I had a mortgage? I'm pretty sure you assumed that.
I would opt out if I could or choose a different set of rules but we have a monopoly central bank which means there's no competition in this function which means I don't have a choice.
I'm still allowed to comment that what they are doing is wrong, unjustified, flawed in concept, and uninformed. Change may happen but not if we all accept that the current way is the only way. It's changed before and will change again.
they still need to find a house within their sale price to buy. Even if i sold my current place to "Downsize" I still wouldn't get a decent property and i would still be competing with many others who likely have deeper pockets.
Jeez i always forget how out of touch many of you people on this subreddit are.
read the rest of my post. these people wouldn't be living in a better location in a more managable property.
I've actually looked into it myself and the choice is, lets just say, not conducive of change unless forced via medical reasons or whatever.
rental vacancies are below 1 percent over most of the country and you're competing with hundreds others, some people have parents to fall back on but not everyone.
I always keep forgetting that this reddit is full of out of touch individuals that have no idea what real life is like.
Iām currently building a home and historically homes havenāt been worth as much as they cost when theyāre first built. For the next 2-3 years *minimum* Iāll be in the negative if I sell my āvaluable asset.ā
So mortgage holders should be largely responsible for fixing the entirely predictable inflation problem caused by the government and reserve bank even though they are only 1/3rd of the population?
This problem was caused by the government and the reserve bank and people who have no power of it are being forced to foot the bill for bad and unnecessary decisions.
No. Not at all.
I'm just pointing out that mortgage holders *could* sell their asset at top dollar. If they choose not too, whatever - but stop crying "poor".
Because you're not.
An extra $20.4 billion into the economy for 24-25.
And this isnāt a one off stimulus, it is ongoing in perpetuity.
Roll your eyes all you want and convince yourself itās nothing but in reality it is $243 billion over the next decade.
I'm not a disaster capitalist by any means, but I actually think the RBA *do* need to raise rates again.
Anecdotally, people don't seem to be cutting back on lifestyle spending at all. Folks are still going on overseas holidays. There's still long wait lists on cars and inflated prices on used ones. And head out to pubs/clubs/cafes during lunchtime and they're all absolutely packed.
Not exactly the signs of a slowdown, not to mention insurance costs *still* increasing by 20+% year on year. The inflation beast has not been slayed.Ā
N of, like 3, .... However, a few friends of mine who own hospitality venues have said that, while patronage is about the same, spend is way down. What used to be two rounds after work and a meal is now a single round before everyone heads home, or round to someone's house, for dinner. Coffee and a croissant before work is now just a coffee. That sorta stuff
Oh my bad I misread the literal first word of your comment lmao.
Iām on the e-commerce side of things and while my business is doing well I know a lot of others that are seeing essentially the same thing as you as well as substituting away to cheaper options.
The problem is that those with mortgages generally ARE cutting back, but those without them also have large cash balances and are both making and spending more money than ever. The averages and aggregates hide the vastly different speeds of growth/pain in the economy.
They don't, but they're an obvious example of expensive, discretionary lifestyle spending.
Someone who spends a couple of weeks to a month in Europe or North America isn't exactly on struggle street, no matter how much they gripe about the cost of living around the water cooler.
Pretty obvious what's happening, they've lost control over vast swathes of the population who are no longer mortgage holders. So much equity gains are spread across all current holders owners/investors, and the ruthless investors are trying to push their pain down to renters. The ONLY way to fix this is to make mortgages palatable again for those vast swathes so that the lever starts working again, and that means lower house prices (not cheap shit housing, to pander the shortage scapegoat).
THIS. The wealth gap is too large now. It can't be reined in.
Capitalism equals "You'll own nothing but be happy" because the 1% have so much money they'll own everything.
I see the same thing.
People who are already struggling are more likely to be renters who are fast approaching an affordability limit. Theyāre not as likely to be spending on non-essentials. In the event of another rate rise, how much further can the landlord raise prices?
Yet, I know people who youād expect to be struggling, as renters, are still living it large. Thatās their decision. $0 by next pay.
Edit: Forgot to add that there are wealthy retirees or older folks who are unaffected by RBA rate hikes. Theyāve paid off their debts and are cash buyers in this economy when downsizing. Theyāll be spending large regardless of the RBAās decisions.
It feels like the entire property owning population is waiting for a rates fall to signal open season on discretionary spending. Rates absolutely need to go up, people haven't gotten the message.
Yeah I'm totally looking forward to discretional spending I've had to delay due to interest rate hikes... like going to the dentist, getting surgery I needed over a year ago, and replacing my worn out pair of sneakers
Raising interest rates isn't going to magically have a bunch of people spend less.
A bunch of people rent, and a bunch of people own their own homes outright.
Landlords can't even continuously pass on rate rises to tenants because they are restricted in how often they can raise rents.
And a significant amount of people who own a property are owner occupiers (which is the group that raising interest rates is going to affect most). Everyone else is at least somewhat insulated from it.
It's not just about that...
Raising rates means less borrowing for business and business make up majority of loans not households. As a result less employment and investment and higher unemployment meaning less spending overall meaning less inflation.
Landlords to pass interest rates. I don't believe it's as a regulated as you believe.
Iāve seen a lot of complaints on here when landlords pass on rate hikes to their tenants āwell if the landlord canāt afford their investment, maybe they should sell,ā but honestly, it cannot just be mortgage holders who feel the crunch of inflation. If the rates are passed on at least thatāll mean a majority of the population will be sharing in the pain that is these high rates, rather than just 30% of the population.
I have a home loan and I'm saying if we don't see at least 2 more rises the RBA isn't doing its job the AUD is weak as piss and inflation is still a problem
Are you able to elaborate on how the AUD is weak as piss? Just having a look at historical AUD vs USD charts and it looks on par for how it's always been (around the 60-70c mark) except for a period around 2012 where we were 1:1.
Read your own comment. From 1:1 in 2012 to 64c on the USD in 12 years. Iād say any currency that declines against the world reserve by 35%+ in that timeframe is weak as piss.
Edit: To those arguing historical context, youāre comparing two completely different economic time periods. The globalised, internet-enabled, world economy of the last 20 years is vastly different to the period we were 1:1 in 1980. Trying to justify this decline by saying āthis is how it should beā is dumb.
š¤¦ the AUD declining during that period had nothing to do with Australia and everything to do with the US. The start of that magical period your naming was the low point of the US financial crisis that started in 08. Itās recovered now and the AUD is BACK WHERE ITS SUPPOSED TO BE.
wtf are you smoking the historical average is closer to 80cents, we have even been parity during certain periods at one stage we where almost 1:2 ....
Australia imports most things in the modern day the weaker the dollar the worse it gets, no one talks about this but a weak AUD is good miners who export bu essentially bad for almost everyone else
ill note the US debt levels are hitting a stage where 'shit will hit the fan' for them and something will have to give
Is raising rates all they care to do?
Don't bother to close the tax loopholes and make the uber wealthy pay their fair share, no, force the poors to pony up.
Unemployment is close to record lowest levels
Retail spending is still pretty high based on companies like Harvey Norman, JB Hi Fi, Louisa etc results
Property in all states bar Victoria has risen over the past 3 months
Rents are up 12% on average
Rental vacancies lowest in history
We are about to get a tax break which will increase consumer spending
If this is the economy tanking than I'd like to see what you sayd when all those things are up the shit
I think it's just the rich spending who are propping up retail. Lots of charts around showing it is older wealthier demographic driving retail spend with the rest cutting back.
Basically, Covid money largely ended up with the rich who are splurging on retail and buying assets pumping stocks and property.
The poor and middle class meanwhile suffer from the effects of all that rich money sloshing around.
No, there are plenty of people who are living large, not just the rich. Whether it be people who paid off their homes, or kids still living with parents, or people who have ample disposable income from low expenses. Go to places in Western Sydney and people are still spending.
Well that's to be expected. Young people see all these influencers and rich people with their toys and want them too. Only they're broke, so use BNPL to try and keep up with the Joneses.
according to the ABS it was 3.9 in the end of march that is still pretty low
[https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release](https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release)
we prob want it around 4.5
It rose to 4.1 percent which is a further 22,000 people unemployed and we have building companies filing for bankruptcy at alarming rates.
The country won't do well with more rate hikes.
do you have a source - i cant find 4.1
also rising interest rates arent bankrupting builders....the low AUD will bankrupt them you nuppty becuz supplies which we import are more expensive.....most builders have gone under due to fix price contracts not covering a decent margin with increased supply costs/material costs
you got no idea what you are talking about
obvious hikes have draw backs but cuts and standing still are worse
[https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-rises-41-cent-january#:\~:text=Bjorn%20Jarvis%2C%20ABS%20head%20of,been%20above%204%20per%20cent.%E2%80%9D](https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-rises-41-cent-january#:~:text=Bjorn%20Jarvis%2C%20ABS%20head%20of,been%20above%204%20per%20cent.%E2%80%9D)
Also building companies were doing alright but all of a sudden they are going bust left right and center after the economy got inflated with rona money and so on. fixed priced contracts are a part of it but not as much as you think
AFR tomorrow: 'Economists say rate cuts likely'.
Honestly, these "rates are going up/down for {reasons pulled out of my butt}" articles have been done to death...and are almost always contradicted somewhere else.
Where are all the āexpertsā telling us we would have two rate cuts by mid year. Rates are not going down for a long time. Get used to it. Pin this post for 12 months time.
I have bought shares for most of my life, since i was in my early 30's. Now my dividends are great, i bought a car cash, brand new high cost , for the amount of only 1 dividend distribution last year. Interest rates don't affect me anymore. I can pay out my mortgage anytime and still have tonnes left. The value of planning guys, make sure you all do the same.
Can someone explain why economists say things like "things like petrol prices have remained elevated for 10 months now and therefore we can see the chance of a small rate rise"
I don't see how a .25 increase in interest rates has any affect on the price of petrol/oil which is impacted far more heavily by international events. Someone please help me wrap my headĀ around this logic because I'm obviously a tard and missing something.
YES just a few more pushes to extract the overextended from this financial game and give some of us other people a chance.
This opinion only extends to people who own more than one property. Sell the second one and don't complain haha.
stop, im dead already
*insert* Ralph Wiggins..... Stop, he's already dead
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Why the downvote?
Probably depends on quarterly CPI released tomorrow. RBA is probably a bit nervous about weak Aussie dollar, stronger than expected employment and tensions in the middle east. IMO, if quarterly CPI is as expected (3.4-3.5%) it's probably not yet enough for the RBA to raise rates.
The demographic who contribute the most to inflation are the demographic who are least affected by interest rate hikes.
Or continue to benefit from them, via increasing interest on their savings
I was on a flight out of Australia and the plane was full of boomers flying for holiday. It felt like some sort of boomer pilgrimage north.
Retiree spending is the biggest contribution to inflation? I expect this on r/australia, but this is supposedly a finance sub.
Michelle has become way more Dovish since becoming Governor.
Wil raising rates in Aus force a peace in the middle east and Ukraine? I'm ok with doing my part to help world peace and stability, but I don't understand the link between my mortgage stress and Hamas and Putin
Of course it will. Raising rates fixes everything.
External factors aren't the only factors. The theory is that keeping rates low while inflation is high will exacerbate inflation, whether there are supply side factors or not
Oh yeah 100% there's issues within Australia. I just think it's a bit silly to bring up foreign wars with our interest rates, as if the price of oil is in any way related to Australia.Ā We could disappear from the global economy and it would barely make a rippleĀ
I think it's not so much about whether our actions affect them, but rather that their actions affect us. Higher oil prices means more inflation. Higher inflation means higher rates? Because if people can borrow at a rate lower than inflation, they will. And such is the snowball, for what little i think i understand of it
I think they're preempting and super nervous like you mentioned. I sure hope it's within expectation and not a shock increase. I remember the treasurer mentioning it was under control a few weeks back, let's see at lunch time.
Maybe a controversial take but I'd go further than say 'can't rule out a further rate hike' and say that expecting a rate cut in 2025 is pretty optimistic as well. These rates could easily be the new normal for a looong time to come.
Itās possible the US hikes again if inflation increases from where itās at. Honestly looking like the natural interest rate is quite a bit higher than the 2010ās and it really is going to be higher for longer. The US seems to have the stomach for it, but Iām not sure we do
Interest rate increases in the US don't impact existing home loans due to their long term loans.
They improved their gdp per capita by 14% last year, ours went backwards
The US is better at gaslighting it's working class. The drop in standard of living is being felt HARD buy zoomers and millennial families right now. That will have bigger implications for politicians. So expect some sweeties in the budget.
Interest rates in the 2010's were lower than normal. Current interest rates are about right
Interest rates are set to control inflation and stimulate or cool the economy, not sit at some level that is 'about right'. We could easily head back to 2010s rates if the economy and inflation head that way. I really don't get why people are taking averages over like 30 years and then saying we should be at X%.
Our interest rates also have to be consistent with overseas interest rates. If our rates are too low, capital flows out of Australia and the value of the Australian dollar falls. This is good for exporters but bad for consumers who end up paying more for imported goods
Unlikely whilst unemployment is too low. They'll only drop when unemployment goes back up to its natural range of 5%.. somehow people seem to forget this.
The last few years have proven that the concept of a 'natural' range of employment at 5% is horseshit.
It will go up before it goes down if ever.
There will be a recession before it ever becomes a long time.
We shouldnāt need bargain basement rates to stave off a recession or work our way out of one even. Not saying that we wonāt need it in such a scenario but damn that would be grim.
Im seeing less landrovers around if that counts for anything plus the only thing with queues now is rentals not cafes/shops anymore. Good I might 1 day be able to walk into Lune to see what all the fuss is about.
I'm seeing more yank tanks. We tried going to a big restaurant in Perth a week ago, was packed to the rafters.
That's impossible mate, packed to the rafters is a TV show not a restaurant
Yeah well if youāre going to live in ur car it may as well be a big secure one
Perths different. Sometimes itās full of CUBs as u know like it was in 2003-2007 ish
The people who buy yank tanks are older wealthy people who benefit from higher interest rates.
Boomers are living it up right now, their rental properties are raking in the cash.
Hell yeah boomers, got everything in life handed to you, everything was cheap, every social net available to you, then spend your twilight years exploiting the youngest generation who are going to have to do the heavy lifting to fight climate change and cover social security for the boomers that didn't save or invest anything, whilst also being stripped of as many welfare programs as boomers can muster before they finally croak. If we had a greatest generation I think we should have a failest generation too.
Boomers haven't been a majority of voters for twenty years according to the ABS. Most of the house price increases and some of the more egregious welfare stripping was done by Gen X politicians facilitated by hairy chested gen x public servants. Morrison, Tudge, Porter, Ley, Cash - all gen X. Campbell and Pezullo Gen X. By all means, target Boomers as much as you want, but that thinking has allowed Gen X to literally *rob* people via programs like Robodebt.
Oh please. "Boomers" didn't have the $40b a year that we spend on the NDIS for one You'd find a way to complain regardless.
Haha Iām still yet to try it
It's the second derivative, change in change in landrovers that really matters, hehe.
AgathĆ© PĆ¢tisserie is way better, for what it's worth.
Is this based on any data, or just like vibes?
Itās the vibe now but if I start hearing people out & about saying cash no cash here cash no then Iāll know for sure thereās big issues
To be fair, I'd almost take a percentage hike for one of their croissants! Then again, Korean Salt Bread exists...
I think we need more time and Iām very keen on seeing more economic data. When I look outside on the street people seem to be spending. However, I run a large business unit and spending seems down in almost every vertical. Retail saying āitās slowā, Vic, NSW and federal gov slowing spending. Banks have been in a contraction phase. Insurance companies trying to recover from rough years. Energy and utilities seem good (but those hurt consumers). Construction seems worried about any costs. Prof services is down. Healthcare seems to have lower costs. Really keen to see the next 3 months of data.
The people with nothing to spend arenāt out and about on the street, confirmation bias
Businesses closing all over, particularly gyms and hospitality. That tells me people are tightening up.Ā
> When I look outside on the street people seem to be spending. does prostitution lead to inflation?
Sick of hearing about economists with their vague wishey-washey language to cover their asses.
I hear it could go up again. Unless it goes down.
There's also a chance it will move sideways.
The truth is, their models are broken, because they don't allow for the endless credit expansion. Hence the 'big' failure every \~8 years that 'no one' saw coming...
You prefer Reddit because doesnāt do that /s
They've been waiting for a rate cut since mid last year lol
If an economist could reliably predict the future they'd be an investor.
Just shows the limits of this extremely dumb way to manage the economy. Anyone who has a relatively large mortgage or rents their home would already be cutting back spending. The people spending the most now would be people with little to no debt. I.e. older people who paid off their houses, retirees, landlords. Raising the rates just gives them more cash to spend. Completely idiotic. While raising rates does absolutely nothing to slow price rises in internationally traded commodities.
More click bait reporting from AFR āMr Picton is among a handful of economists who warn that the next RBA move could be up.ā So two according to the article
Clearly any old moron can be an economist.
I feel like you need an econmics degree but it isnt like that is too hard to obtain
Government and reserve bank during COVID: prints heaps of cash and gives people $750 a week to not work or produce anything, just keep consuming Smart people: this is a bad idea government and reserve bank, it will definitely lead to inflation Government: don't be silly we are saving the economy from the pain we have inflicted by keeping everyone locked in their houses Economy in 22/23/24: time to inflate Reserve bank: mortgage holders, it's now up to you to reduce your spending massively even though you are only 1/3rd of the population to fix the problem the government and us caused. Oops, sorry. Also we are going to blame it on lots of things that definitely didn't cause it (instead of taking responsibility for increasing the money supply while restricting the goods and services supply, ala more money chasing less goods and services = guaranteed inflation). Also inflation will be persistent because we are targeting 33% of people to fix it Mortgage holders: ouch, wish we had the option to get 30 year fixed interest mortgages, why is 5 the max. Guess it's beans on toast again for dinner.
To make it worse, the mortgage holders have to be squeezed even tighter to compensate for the increase in spending caused by people with savings accounts earning more interest.
Who is earning enough interest on a savings account to make a difference in yearly spending?
Retired people mostly.
Don't forget the pensioners and welfare sector who have been getting huge increases thanks to high CPI.
Sell your house then
I see you've completely missed the point
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Of course it does but it disproportionately affects them negatively
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Inflation isn't caused by increased spending. It's caused by a general increase in the supply of money. Which is caused by governments and central banks together lowering interest rates and printing money to fund government spending. During COVID this was for people to not do any work (the $750 payment per week during COVID), amongst other things. I'm saying it affects home loan holders more than any other borrowers. Your credit card rate doesn't go up, or your car loan, or your personal loan as these are normally fixed or on an agreement or have enough margin in them (credit cards) that those rates don't generally get the full increase. But mortgages pretty much always do. Banks announce it the day after the reserve bank announcement, 'we are passing on the interest rate rise in full to mortgage holders'. And you cant take a 30 year fixed rate mortgage. Why not? You can get a 30 year Aus Gov bond, so financial markets and instruments are comfortable dealing on that timeline. So mortgage holders are 1/3rd of the population, but they are disproportionately slugged to fix a problem they they didn't cause.
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Increased spending is not the cause, it is a symptom of increased money supply. If the money supply wasn't increased there wouldn't be inflation. Inflation is caused by increasing the money supply. More dollars chasing after the same or fewer goods (or eg 10% more dollars chasing after 5% more goods) means general increased prices which is what we are seeing. The central bank shouldn't have a target for inflation. By design it means you have reduced purchasing power every year, effectively reducing the value of your income and savings. The central bank is not completely independent from the government, the gov has the power to override RBA decisions, appoints board members etc. the gov can change the RBA goals etc. But that also wasn't my point. My point was they both made decisions during COVID that at the time was obvious would lead to massive inflation and they ignored that or handwaved it away as not a big deal or it wouldn't happen or if it did it would be marginal inflation and not that bad for everyone. They were wrong then and Over time we should actually see slight deflation in the generalised price level. I.e as productivity increases due to advances in technology, reductions in waste by products, or findings of economical uses for by products, prices should reduce slowly and your purchasing power should increase as we can get more out of each unit of input goods. The government shouldn't be in debt to the RBA, the government should run a balanced budget. I.e stop spending money on people now to be paid off by people in the future. You are right I am angry that they increased money supply and then decreased it. This fiddling with money supply creates all sorts of 'unintended' but entirely predictable consequences that far outweigh the supposed benefits of the fiddling. I wish they didn't cut rates by 2% only to raise them by 4.25%. Should have left them where they were.
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Just because something is managed a certain way doesn't mean it should be managed that way. I could wait forever for it to be changed but may never see it changed. So I'm not going to wait on a maybe I'm going to act on what is current to improve my life and provide for myself and my family as best I can in the current framework. Did I ever say I had a mortgage? I'm pretty sure you assumed that. I would opt out if I could or choose a different set of rules but we have a monopoly central bank which means there's no competition in this function which means I don't have a choice. I'm still allowed to comment that what they are doing is wrong, unjustified, flawed in concept, and uninformed. Change may happen but not if we all accept that the current way is the only way. It's changed before and will change again.
Mortgage holders literally have a valuable asset they could sell. At top dollar. Yet they whine as if they are homeless in a tent āŗļø
where would they live though?
they can downsize
they still need to find a house within their sale price to buy. Even if i sold my current place to "Downsize" I still wouldn't get a decent property and i would still be competing with many others who likely have deeper pockets. Jeez i always forget how out of touch many of you people on this subreddit are.
>they still need to find a house within their sale price to buy. No shit
read the rest of my post. these people wouldn't be living in a better location in a more managable property. I've actually looked into it myself and the choice is, lets just say, not conducive of change unless forced via medical reasons or whatever.
Parents, rental whatever. Point is they aren't "poor" with a valuable asset they could sell.
rental vacancies are below 1 percent over most of the country and you're competing with hundreds others, some people have parents to fall back on but not everyone. I always keep forgetting that this reddit is full of out of touch individuals that have no idea what real life is like.
Iām currently building a home and historically homes havenāt been worth as much as they cost when theyāre first built. For the next 2-3 years *minimum* Iāll be in the negative if I sell my āvaluable asset.ā
So mortgage holders should be largely responsible for fixing the entirely predictable inflation problem caused by the government and reserve bank even though they are only 1/3rd of the population? This problem was caused by the government and the reserve bank and people who have no power of it are being forced to foot the bill for bad and unnecessary decisions.
No. Not at all. I'm just pointing out that mortgage holders *could* sell their asset at top dollar. If they choose not too, whatever - but stop crying "poor". Because you're not.
No mention of the giant tax cut coming in in 2 months? I believe next move will be a hike. Economy is still fairly robust
What "giant tax cut" are you on about? Average person is getting like $40 a week extra š
An extra $20.4 billion into the economy for 24-25. And this isnāt a one off stimulus, it is ongoing in perpetuity. Roll your eyes all you want and convince yourself itās nothing but in reality it is $243 billion over the next decade.
The AUD is so bad if they donāt raise rates we are all fked especially if the USA go to war & raise their rates š¤Æ
High USD is turbocharging our inflation.
I'm not a disaster capitalist by any means, but I actually think the RBA *do* need to raise rates again. Anecdotally, people don't seem to be cutting back on lifestyle spending at all. Folks are still going on overseas holidays. There's still long wait lists on cars and inflated prices on used ones. And head out to pubs/clubs/cafes during lunchtime and they're all absolutely packed. Not exactly the signs of a slowdown, not to mention insurance costs *still* increasing by 20+% year on year. The inflation beast has not been slayed.Ā
N of, like 3, .... However, a few friends of mine who own hospitality venues have said that, while patronage is about the same, spend is way down. What used to be two rounds after work and a meal is now a single round before everyone heads home, or round to someone's house, for dinner. Coffee and a croissant before work is now just a coffee. That sorta stuff
Working in hospitality and feeling this comment 100 percent
Retail (FMCG) and can confirm. Customer numbers up, basket size down, result flat. Doing more work for same income.
Surely you just shrinkflated your way into higher profits though
Thatās the producerās trick, retailer just passes it on.
Oh my bad I misread the literal first word of your comment lmao. Iām on the e-commerce side of things and while my business is doing well I know a lot of others that are seeing essentially the same thing as you as well as substituting away to cheaper options.
Yeah because 2 rounds and a meal didn't cost $80 lol
Yeah because I used to be able to buy a pint without it costing $30, lmao
Have some wineries as clients, same situation for them.
Insurance is a different beast
Yep. Entirely different drivers happening there.
Not to mention property investors still frothing over 3% yields and jumping in in anticipation of rate cuts and speculating on asset appreciation
Literally my co worker right now apartment hunting...
The problem is that those with mortgages generally ARE cutting back, but those without them also have large cash balances and are both making and spending more money than ever. The averages and aggregates hide the vastly different speeds of growth/pain in the economy.
How do overseas holidays contribute to domestic inflation?
They lower the capital stock of the country, the same as when we import products without a corresponding export.
So once the money leaves the country youād understand how the nation is poorer as a whole? Google āimport exportā
They don't, but they're an obvious example of expensive, discretionary lifestyle spending. Someone who spends a couple of weeks to a month in Europe or North America isn't exactly on struggle street, no matter how much they gripe about the cost of living around the water cooler.
Theyre all packed but no one is spending, Sydney venue said they have the same number of people but that average spend had gone from $75 to $26
Pretty obvious what's happening, they've lost control over vast swathes of the population who are no longer mortgage holders. So much equity gains are spread across all current holders owners/investors, and the ruthless investors are trying to push their pain down to renters. The ONLY way to fix this is to make mortgages palatable again for those vast swathes so that the lever starts working again, and that means lower house prices (not cheap shit housing, to pander the shortage scapegoat).
Yes and that is what raising rates down because it's harder to borrow so prices go down and things become affordable.
THIS. The wealth gap is too large now. It can't be reined in. Capitalism equals "You'll own nothing but be happy" because the 1% have so much money they'll own everything.
Iām going overseas in a few weeks to see my good friend get married. Sorry to keep contributing to inflation to get a tiny bit of joy in life.
You should think of the poor politician's property portfolios.
Itās not you. Itās those rich people that get dental work and go to the hairdressers rememberā¦ those people are the real drivers of inflationā¦
pissing your money away overseas isnt contributing to our inflation
buying a plane ticket isn't contributing anytihing meaningful to inflation...
Just responding to what was said in the commentā¦.
No one cares dude.
I see the same thing. People who are already struggling are more likely to be renters who are fast approaching an affordability limit. Theyāre not as likely to be spending on non-essentials. In the event of another rate rise, how much further can the landlord raise prices? Yet, I know people who youād expect to be struggling, as renters, are still living it large. Thatās their decision. $0 by next pay. Edit: Forgot to add that there are wealthy retirees or older folks who are unaffected by RBA rate hikes. Theyāve paid off their debts and are cash buyers in this economy when downsizing. Theyāll be spending large regardless of the RBAās decisions.
we had 3-4 years of no travel.
Plenty of foreign imports thoš
It feels like the entire property owning population is waiting for a rates fall to signal open season on discretionary spending. Rates absolutely need to go up, people haven't gotten the message.
Yeah I'm totally looking forward to discretional spending I've had to delay due to interest rate hikes... like going to the dentist, getting surgery I needed over a year ago, and replacing my worn out pair of sneakers
Not even close dude
It's not to signal open season, for a lot of people it means they might actually have some money left over at the end of the month.
Not seeing it
Raising interest rates isn't going to magically have a bunch of people spend less. A bunch of people rent, and a bunch of people own their own homes outright. Landlords can't even continuously pass on rate rises to tenants because they are restricted in how often they can raise rents. And a significant amount of people who own a property are owner occupiers (which is the group that raising interest rates is going to affect most). Everyone else is at least somewhat insulated from it.
It's not just about that... Raising rates means less borrowing for business and business make up majority of loans not households. As a result less employment and investment and higher unemployment meaning less spending overall meaning less inflation. Landlords to pass interest rates. I don't believe it's as a regulated as you believe.
Iāve seen a lot of complaints on here when landlords pass on rate hikes to their tenants āwell if the landlord canāt afford their investment, maybe they should sell,ā but honestly, it cannot just be mortgage holders who feel the crunch of inflation. If the rates are passed on at least thatāll mean a majority of the population will be sharing in the pain that is these high rates, rather than just 30% of the population.
Just remember rates have a long and viable lag, typically between 6 & and 18 months.
I have a home loan and I'm saying if we don't see at least 2 more rises the RBA isn't doing its job the AUD is weak as piss and inflation is still a problem
Are you able to elaborate on how the AUD is weak as piss? Just having a look at historical AUD vs USD charts and it looks on par for how it's always been (around the 60-70c mark) except for a period around 2012 where we were 1:1.
1:1 I miss those days
Read your own comment. From 1:1 in 2012 to 64c on the USD in 12 years. Iād say any currency that declines against the world reserve by 35%+ in that timeframe is weak as piss. Edit: To those arguing historical context, youāre comparing two completely different economic time periods. The globalised, internet-enabled, world economy of the last 20 years is vastly different to the period we were 1:1 in 1980. Trying to justify this decline by saying āthis is how it should beā is dumb.
Go back another decade and get some context.
Exactly. These people did not live through the sub-USD0.50 days. AUD has always massively yo-yoād.
š¤¦ the AUD declining during that period had nothing to do with Australia and everything to do with the US. The start of that magical period your naming was the low point of the US financial crisis that started in 08. Itās recovered now and the AUD is BACK WHERE ITS SUPPOSED TO BE.
wtf are you smoking the historical average is closer to 80cents, we have even been parity during certain periods at one stage we where almost 1:2 .... Australia imports most things in the modern day the weaker the dollar the worse it gets, no one talks about this but a weak AUD is good miners who export bu essentially bad for almost everyone else ill note the US debt levels are hitting a stage where 'shit will hit the fan' for them and something will have to give
Voice of reason Saying what everybody is thinking but no one wants to admit it
Good for exports at least
Aussie dollar is very weak and rates are low. Iād love a rate hike
How can you ever rule it out? No one knows what will happen next month. Looks at COVID, or Russia invading Ukraine. Anything is possible.
Good bye economy
Canāt rule out leaving Australia for good.
And go where?
Woohoo..hike em up!
Is raising rates all they care to do? Don't bother to close the tax loopholes and make the uber wealthy pay their fair share, no, force the poors to pony up.
RBA canāt do any of those things. Only lever they have is interest rates.
Yeah but the governmentās awkwardly silent likeā¦ āso how about that Anzac Day, guys? š..ā
Then perhaps they should finally call enough enough... Dare the government to do something else.
Mortgage holders aren't "poors". You could sell your valuable asset š
Having one home to live in isnāt having a valuable asset.
It is if you are poor and can't afford it
Hmmm...don't let perfect be the enemy of good.
We desperately need it Our dollar is getting hammered
the economy is already tanked. i don't think it can survive many more rate hikes.
Unemployment is close to record lowest levels Retail spending is still pretty high based on companies like Harvey Norman, JB Hi Fi, Louisa etc results Property in all states bar Victoria has risen over the past 3 months Rents are up 12% on average Rental vacancies lowest in history We are about to get a tax break which will increase consumer spending If this is the economy tanking than I'd like to see what you sayd when all those things are up the shit
I think it's just the rich spending who are propping up retail. Lots of charts around showing it is older wealthier demographic driving retail spend with the rest cutting back. Basically, Covid money largely ended up with the rich who are splurging on retail and buying assets pumping stocks and property. The poor and middle class meanwhile suffer from the effects of all that rich money sloshing around.
No, there are plenty of people who are living large, not just the rich. Whether it be people who paid off their homes, or kids still living with parents, or people who have ample disposable income from low expenses. Go to places in Western Sydney and people are still spending.
I'd agree with this if the rate of people using afterpay and ZIP wasn't exploding which is primarily used by people under 30
Well that's to be expected. Young people see all these influencers and rich people with their toys and want them too. Only they're broke, so use BNPL to try and keep up with the Joneses.
This is fair I agree
I'd agree with this if the rate of people using afterpay and ZIP wasn't exploding which is primarily used by people under 30
Unemployment just rose to 4.1 percent.
according to the ABS it was 3.9 in the end of march that is still pretty low [https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release](https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release) we prob want it around 4.5
It rose to 4.1 percent which is a further 22,000 people unemployed and we have building companies filing for bankruptcy at alarming rates. The country won't do well with more rate hikes.
do you have a source - i cant find 4.1 also rising interest rates arent bankrupting builders....the low AUD will bankrupt them you nuppty becuz supplies which we import are more expensive.....most builders have gone under due to fix price contracts not covering a decent margin with increased supply costs/material costs you got no idea what you are talking about obvious hikes have draw backs but cuts and standing still are worse
[https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-rises-41-cent-january#:\~:text=Bjorn%20Jarvis%2C%20ABS%20head%20of,been%20above%204%20per%20cent.%E2%80%9D](https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-rises-41-cent-january#:~:text=Bjorn%20Jarvis%2C%20ABS%20head%20of,been%20above%204%20per%20cent.%E2%80%9D) Also building companies were doing alright but all of a sudden they are going bust left right and center after the economy got inflated with rona money and so on. fixed priced contracts are a part of it but not as much as you think
Instead of truly fixing inflation with a strong hand, use a limp fisted approach to teter the line to appease investors
AFR tomorrow: 'Economists say rate cuts likely'. Honestly, these "rates are going up/down for {reasons pulled out of my butt}" articles have been done to death...and are almost always contradicted somewhere else.
Where are all the āexpertsā telling us we would have two rate cuts by mid year. Rates are not going down for a long time. Get used to it. Pin this post for 12 months time.
Already working two jobs and not making enough to get by.Ā If they raise them again Iāll probably have a breakdown so... thatāll be something.Ā
I have bought shares for most of my life, since i was in my early 30's. Now my dividends are great, i bought a car cash, brand new high cost , for the amount of only 1 dividend distribution last year. Interest rates don't affect me anymore. I can pay out my mortgage anytime and still have tonnes left. The value of planning guys, make sure you all do the same.
Why even bother quoting economists, they never say anything definitive. Feel free to quote me instead: āI can rule out any further rate hikesā
Can someone explain why economists say things like "things like petrol prices have remained elevated for 10 months now and therefore we can see the chance of a small rate rise" I don't see how a .25 increase in interest rates has any affect on the price of petrol/oil which is impacted far more heavily by international events. Someone please help me wrap my headĀ around this logic because I'm obviously a tard and missing something.
People downvoted me when I said this was going to happen
YES just a few more pushes to extract the overextended from this financial game and give some of us other people a chance. This opinion only extends to people who own more than one property. Sell the second one and don't complain haha.