Why won't the reserve bank increase interest rates already? With everything going on at the moment why is borrowing still being encouraged? The only people cashing in are real estate agents everyone else left holding a balloon.
Delusional is my new favourite word.
the RBA have loaded the banks up with billions in interest free loans. They will never let it fail, all one big Ponzi scheme . Problem is if it spirals beyond their means for example a world crash, which given the way the US is handing out stimulus like candy, i dont see it happening. They will let inflation rip before they let the markets crash again (given the amount of debt, inflation might actually be their strategy out of this!).
But surely increasing the cost of borrowing will tank the housing market… will tip tonnes of people over into unsustainable mortgages. That will in turn crash the market.. no?
gov has bond buying scheme, $4 billion per week to be exact! this keeps interest rates artificially low. Rising interest rates normally combats run away inflation. But YOLO right haha. the banks are also provided with cheap $$$ by the gov so they can loan it out at cheap rates (dont have to increase rates) and still make money / its a form of almost compensation to the banks to forgive mortgages in arrears or under stress
@dandosr: So you think they might ‘let inflation rip’ but then forgive mortgage arrears? I dont think that sounds likely… I would imagine we would see truck loads of people lose their homes. So many people must be leveraged to a horrible degree.
@dandosr: Ok. I get what you're saying. But if we have inflation 'unchecked' without some level of correspending salary increases + unprecedented levels of mortgage debt isn't that still a recipe for economic disaster?
@mooney: Article on RBA comments on low wage growth To save you reading the article they aren't going anywhere.
What is essentially happening is a wedge is being driven between those with assets and those who do not. Do not be fooled by the threat of an "economic disaster" the rich are now wealthier than ever.
@dandosr: More helicopter money to the poor to help hide the fact that the super rich gets richer, and the middle working class gets squeezed on both ends.
@dandosr: Omg this is coming back to me from year 11 economics I did last term hahaha , something about monetary policy
Send bikies to next RBA meeting.
Interest rates would then be 10% per week otherwise you lose a kneecap.
Reserve bank says it's because of recession and depressed wages that interest rates are going to be low for a while. They said they did what they can and blame the LNP for not doing their part.
They refuse to count house prices and stock market as part of inflation.
And food?
They refuse to count house prices and stock market as part of inflation.
because assets are not something you consume, and the Consumer Price Index is there to measure the cost of consumption.
Using asset prices as part of the measure of consumption will give the wrong figures, and thus lead to wrong conclusions.
Housing/rent should most definitely be included in CPI as its a substantial part of consumption. The CPI numbers are rigged to tell whatever story the RBA/government wants to enrich themselves and their cronies at the expense of the rest of us.
Because if they raise interest rates they will cause the housing market to collapse.
They don't need to raise it by much just show the public that the numbers on the board are real and not a game. Halt this housing and investing pump already. People should have to save money
Housing pump is the only way to get people spending. House prices go up, they refinance and spend that money.
With stamp duty the bar is too high for people to get in. Those few transactions that happen sets a new all time high for owners. If they get tempted enough they can refinance. Getting them to refinance is easier than to get poor first home buyers already struggling to get a deposit together to spend some more.
People should have to save money
Why? How do you know that people aren't saving as well as buying a house?
People should have to save money
Thanks for telling us how we should live our lives. Low interest rates don't mean that people aren't saving.
Relative to what they are borrowing? And then borrowing on borrowing based on pumped numbers??? With no downside and easy repayments.
@jdawg7: That the greedy get what they want, and everyone else gets shafted? Can't fix human behaviour.
Relative to what they are borrowing?
When the interest rates are low, the house prices go up because of demand so people actually need to save more for the initial deposit.
It's the ongoing payments that might be the problem - but then if interest rates remain low, the payments won't increase much. Those that don't plan a buffer for interest rate increases will suffer the consequences.
Relative to what they are borrowing? And then borrowing on borrowing based on pumped numbers??? With no downside and easy repayments.
How are you in one breath saying that
everyone else left holding a balloon
and in the next breath saying that there is no downside…?
which is great in one respect as those not wearing cossies when the tide goes out will regret their behaviour and with lots of fire sales there will be options for those who have cash.
Because if things are as good as it seems then they could raise interest rates.
There is something that is not being said.
All of this talk of inflation is crap. Even before COVID19 interest rates were low. You think that people have suddenly stumbled upon a lot of money under the mattress, those who believe in permanent inflation doesn't know how QE works. The money is given to the banks who are actually struggling to lend it all out not because there is lack of money it is because there is lack of credit worthy borrowers. The banks won't lend to businesses because small to medium size businesses are likely to go bust.
struggling to lend it all out not because there is lack of money it is because there is lack of credit worthy borrowers
well said - banks will lend out as much money as they are able to find customers to lend to.
If unemployment is back at pre-covid levels and yet our economy is still in the doldrums then it's pretty obvious we're not out of the recession.
We went into one prior to covid and we're heading straight back there. Anyone saying otherwise is pulling the wool over our eyes. When you inject/print $250+ billion into the economy everything's going to look rosy temporarily. Long term we're in for some pain like Japan has been in for the last decade.
Also my bet is the economy isn't functioning because people are saving rather than spending money for their over inflated property. And the money that is spent on that property just sits in someone's bank account.
Reduce prices of property
Increase disposable income
Increase economy's turnover and product.
Reduce prices of property
Rich people aren't going to have a bar of that. If you got $1bn in real estate, having it go down by half so they can have more disposable income? It is already more than they could use in a hundred lifetimes.
Increase disposable income
Why give the poor people more money to spend when you can squeeze them by getting them to pay interest on debt and then get it back as dividends from the banks.
good idea on reducing property prices, first offer gets the house! cannot accept a higher offer from someone else!
Offer $0.01
Yes!!!
Society has the same downtrend as the interest rate chart. Might be a coincidence.
Society has the same downtrend
Huh?
Point proven.
because covid is still here
The velocity of money is likely at all time lows.
True, unless they can make mattresses move faster.
The charts say up to the right.
Buy assets, sit on them and wait for wife changing wealth.
Get divorced?
Cause we're not out of the woods and anyone suggesting we are is deluding themselves. In fact, with the current lockdowns, talk of interest cuts have re-emerged. Now is not the time to turn off the nozzle.
We'd rather be complaining of an inflated bubble then of long dole queues and families on the bread line. We tried austerity measures and they only make things worse.
Spending our way out of a crisis seems to work - maybe that Keynes guy was onto something?
Spending our way out of a crisis seems to work - maybe that Keynes guy was onto something?
Yes - sad that some people seem to not be able to learn from history.
What few people don't understand is that austerity and the accompanying mentality of fear will only make everything worse. The whole point of monetary policy is to smooth out boom-bust cycles so that people don't recklessly spend and burn up all available capital when times are good and so that people don't hide under their bed and freeze all available capital when times are bad.
My view (as an economist myself) has always been that monetary policy is the counter to greed in the good times and fear in the bad.
Nice sentiment. I did an Honours degree in Economics and then had the foresight never to work in that field. When I was taught in the 90s, it was mostly Keynesian. Though the current settings appear equally monetarist (though my memory is fast fading).
Have you not seen the price of houses I'm going to say 20-30% of people would be financially ruined if interest rates went up 2%
noice
with lots of nice fire sales……
More affordable homes for genuine first home buyers instead of millionaire investors? Sounds great!
Millionaires wont be the ones 'fire selling' their homes. I am 31 and most people i know who own there home are in debt up to there eye balls due to how competitive the market is and the barrier of high stamp duty in VIC.
Affordable housing isnt the issue, it is lack of work/jobs outside of the major city
Over the twelve months to the June 2021 quarter, the CPI rose 3.8% ,
https://www.abs.gov.au/statistics/economy/price-indexes-and-…
They can't just wack up the interest rates a few basis points - the markets and economy would implode overnight.
First they have telegraph that at some point they might think about winding back on the bond buying. In fact that was what happened and then delta hit Sydney.
They can gradually though, and they will sooner rather than later.
If they increase interest rates the Australian dollar will go up because they will be out of step with the rest of the world and that will decrease the value of exports and will also cause home mortgage payments to go up resulting in mortgagee sales that will ripple through the economy. Most of Australians’ wealth is in real estate. If that crashes the country crashes with it. The whole world need to keep interest rates within a similar range or the world economies will be in free fall. There are many moving parts to this equation of which I have only touched on a couple.
The artificially inflated market was designed to convey the sense of worth.
You don't really think a dump in the western suburbs is worth 1mil?
It is artificially created, and suckers want look rich and important
Coz everyone is invested in either real estate and/or the stock market.
If the house bubble bursts then the banks will feel it too.
Dam you guys are amazing with the comments, I’m actually learning stuff as a year 11 student since I’m learning about the monetary policy
The best economics advice I ever received was be good to your mother and stay in school. The rest takes care of itself.
because the house of cards is going to fall over, very soon