With the recent increase in the official cash rate to 3.85% I'm looking to hear your thoughts as to weather you agree with Philip lowe and the reserve bank for being aggressive with interest rates to stifle inflation, or perhaps you feel they are out of touch with the average Aussie?
I'm interested in public perception.
Got term deposits, to da moon!
just doesnt have the same ring to it as [inset some random crypo/meme stock]
Interest rates should have never been dropped below 3% - let alone be left under 3% for like a decade! That was criminal incompetence. The RBA should be abolished. Why do we need a group of fat cats to decide what the interest rates will be? How about just let the free market decide what the best rate of interest should be? An equilibrium will be found. For every person who benefits from lower interest rates - another person is harmed by low interest rates - being forced to take more risks with their capital in chase of a return. No central bureaucracy - and no not even AI - can find the best interest rate. Only the laissez-faire free market - with its unfettered price discovery mechanism - can find the truly correct interest rate.
Nobody put a gun to anyone's head and told them to borrow at 2% rates, and importantly, nobody put a gun to anyone's head and forced them to borrow as much as they could (to keep up with the Jones')
Nobody put a gun to anyone's head and told them to borrow at 2% rates
and now Dan is trying to save face by cancelling major projects by trying to find people to blame.
Victoria will soon need to borrow money just to pay the interest on all the loans he has taken out…
Its irrelevant though isn't it? House prices are high and staying high.
Were adding 1000 people a day to the country and there's a rental crisis. If you bought you did well, that ships not coming back.
Why exactly? Did we have inflation issues when they were that low for that long? our current inflation issues are something that cant be easily fixed by simply raising interest rates. They are being caused by more than simply people having money to spend. Partly due to the war in Ukraine, partly due to supply chain issues, partly due to wage pressures in certain sectors due to staff shortages and in part simply by some sectors assumption that people are happy to accept price creep. There are a few example but one i can easily pinpoint is dairy. Why exactly have products like cream, butter, cheese etc all jumped up by 30-40%. Sure there were issues with fuel increases being blamed, transportation, etc. But i dont get why they keep creeping? Is there a legitimate reason or is that industry just choosing to keep jacking up prices because they know dairy products are just something that most people have to buy no matter what.
Exactly. We have not had massive inflation problems for the last 10 years. We haven't had the cost of essentials go through the roof every year for the last 10 years. The interest rates aren't the problem, but they're being used as a poorly thought solution.
Raising the interest rates isn't going to get cadbury to put that missing 50g back in to the box of favourite while also dropping the extra dollar off the price, nor is it going to drop the price of steak from $15 for 300g back to where it was a few years ago at < $10. The RBA only has one move, raising/lowering interest rates, and it's the wrong one for the situation we're in. Taking money away from people as the cost of living increases dramatically is not the way to do it. It's not like the only thing that is going up in price are luxury goods - people NEED to spend more money just to survive.
Interest rates should have never been dropped below 3% - let alone be left under 3% for like a decade! That was criminal incompetence. The RBA should be abolished.
Let's not pretend that the RBA has much choice here - they were mostly following global trends. Our banks need to source liquidity from somewhere. A lot of those sources are from overseas markets. The global markets essentially set the cash rate, the RBA just make decisions that hover around it but don't stray too far from it.
But I 100% agree that low interest rates were a guaranteed recipe for disaster - it's just that the RBA wasn't really in control.
Ahh but you miss the point
The global elite (Cabal) control the central banks around the world.
And its now very obvious they control governments around the world as well.
They all work to serve the Elite
See how the COVID-19 outbreak was carefully orchestrated as yet another excercise of control over the world.
We are mere pawns in the play who are readily sacrificed to strengthen their wealth and control over the world.
Dont be surprised if this all ends in very high interest rates followed by a massive depression to wipe out the middle class around the world.
Because the free market doesn't care about a inflationary price wage spiral or a deflationary spiral. An independent entity is needed for that with that as the sole goal.
Technically there is a free market, the banks can charge whatever they like above the funds rate.
Also, low interest rates means a weaker currency which means anything made or sold overseas costs more. Low interest rates are a direct attack upon the proletariat.
Just because they are out of touch with the average borrower, doesn't mean they are wrong in doing what they do.
Interest rates need to be away from the lower bounds of 0% to give them some wiggle room to adjust when shock to the system invariable arise.
They haven't handled it as well as they could, but that is easy to say in hindsight.
The RBA is also not acting alone, and global interest rates also need to be considered (which also impact exchange rates, which affect costs for imports and exports).
It is a complex system, so you cannot appease everyone. Someone is always getting burnt. It is time for borrowers to pay their dues.
The only people that are really getting screwed are first home buyers, which have purchased since 2021. Everyone who purchased before this should have made capital gains (and have no strong reason to be complaining).
They are out of control. Punishing homeowners for inflation that is supply side caused (due to covid, Ukraine & profiteering) is crazy. Many inflationary things that the RBA is punishing us for are inelastic like fuel, gas and electricity. Adam Bandt Is 100% right that normal Australians are being used as cannon fodder. Oh, and according to the media, Phillip Lowe earns a million dollars a year and has no mortgage whilst hardworking Australians are being pushed to the brink. This is absolutely disgusting.
Why were you negged?
Philip Lowe should have his pay cut inline with rate rises.
Philip Lowe gets 5 down vote credits per day, just like the rest of us.
If Philip Lowe earns a million dollars a year and has no mortgage, then good on him and we should ask him how did he do it and probably ask him to teach us how to do it.
Very most likely (like many other Australians who have seen this coming for many years), he probably worked his effin arse off to pay off his debts and probably didn't take holidays as many during his hey days. Maybe he made a lot of sacrifices along the way (maybe he didn't go to Bali or overseas as many as others?).
I know in many cultures, low interest rates = pay off your debt now. To some, low interest rates = living like a sultan and gear up (ie: increase debt and spend big).
This is purely a consequence of their choices.
and we should ask him how did he do it a
he works for the government
There you go. Obviously being an APS pays a lot. Too bad I can't join the rank.
How can someone who earns only a million dollars a year put enough money aside to pay of their mortgage? What lessons can he impart? Maybe we should be buying one of those 50k homes so our mortgage proportionally the same, spend anything more and you only have yourself to blame!
This is some next level trolling
Oh, and according to the media, Phillip Lowe earns a million dollars a year and has no mortgage
insider trading?
They're not punishing home owners.
They're using the only tool they have to control inflation.
When the rates were dropping homeowners were rejoicing at the insane increase in property value.
Rates are increasing, the opposite is happening - there is no "punishing", it's the cycle completing its rotation.
Rates can not be lowered and never increased again - that will never happen.
If your only tool is a hammer but you need a screwdriver, you don't try and use the hammer anyway.
Raising the interest rate isn't going to fix inflation, but it damn sure is going to hurt a lot of regular people who are already struggling to live, and before they realise this it will be too late. In 2 years time if inflation is still 7% or higher and interest rates are at 10%, will they finally admit that it doesn't work? Or will they just double down and keep raising while homelessness climbs?
You say that like this is the first time central banks have used interest rates to control inflation.
We should not bother pretending that the RBA has any real say in the matter.
If you can't fix supply in the short term you use demand instead. And who's to say it isn't a demand problem? We consume more as a society than we ever have.
The problem is that the LNP refused to do anything and left it to the RBA. The RBAs 'solution' to cut rates helped struggling businesses stay afloat, while also giving a handout to the wealthy.
The RBA should have left rates alone and the government should have addressed COVID with more targeted relief, but unfortunately the armchair experts (many right here) having recieved their economics degree from the school of hack libertarians and propaganda straight from the US republican party - will blame government spending for inflation, while government inaction has no negative political consequences
The housing market just recovered even with such a high interest rate due to lower supply. millionaires are still investing in housing. how exactly are home owners punished? i don't see the market been flooded with repossessed homes.
Two groups of people;
Those with debt - hates the RBA and think they are a bunch of idiots
Those without debt - loves the RBA and thinks they are doing great.
Or 2 groups
Battlers
Idiots.
In order of course.
Not sure if those two groups are mutually exclusive either… The intersection between the two are probably the ones up in arms about these rate rises.
Try living on $485 per week.
@BewareOfThe Dog: Free meds? Still $7.30 per prescription, and some things aren't PBS subsided so you could pay $100+ for a months supply eg agomelatine, ozempic, bellsorma. The last time people with Health Care cards had free medicine was the early 90s.
Idiots for not getting up to their eyeballs in debt during a frenzy of low interest.
Yeah, them damn fools!
I hated the RBA for 3 years with no debt.
Username checks out
Those without debt - loves the RBA and thinks they are doing great.
Even those with no debt are likely to have a sizable investment portfolio which is negatively affected by interest rate rises.
But they are probably still ahead; most things have gone up - shares, super, cars, watches, and even property after considering the recent10-20% drop - plus they are unlikely needing to realise any asset, while enjoying increased yield.
You mean the haves and the have nots?
If you have a mortgage or rent, you're going to be eating shit.
That leaves the cashed up and retired and trust fund kids.
Pretty much just doing their job using the only tools they have. Despite the protestations of both parties about the ‘independence’ of the Reserve Bank, THE RBA mandate is set by law (ie government), the ‘target inflation rate’ is an agreement between government and the RBA, and they have limited tools to use, as also set in legislation ( ie government). There are other ways to keep inflation down but these are down to the government not the RBA. Governments love to trumpet the RBA independence but this is a facade, they could change the RBA mandate but they quite like having someone else to blame.
PS, this is not only true of the current government it’s true of both parties, when things go well they want to take the glory, when it’s goes badly it’s the RBAs fault.
The government and the law are two different things, you shouldn't conflate them. The government is the party currently in power.
You are absolutely correct however, both major parties prefer it when the RBA is blamed for a bad economy - who have very limited ability to address issues, while ignoring their own responsibility
Would have been nice for them to raise the rates before property prices were at record highs.
It doubles the pain of those stupid enough to lie on their mortgage applications.
You don't need to lie on your mortgage application. Scomo was letting you borrow 95% for first home buyers/
Scomo was letting you borrow 95% for first home buyers
Banks decide to loan you money, not the government.
Oh my sweet summer child jv. You're not that naive are you?
Hindsight.
What about renters suffering because landlords can't absorb repayments?
The havent gone nearly as hard and fast as they perhaps ought to have.
It is completely unhelpful that particular economists continue to buck against the RBA but dont particularly own up to their vested interests in seeing increased lending or profits.
Entrenched inflation is incredibly dangerous for the economy. People complaining about mortgage repayments (where the rates havent even bounced back to historical norms), and yet seem to see no real concern long term if goods and services continue to skyrocket. It makes no sense.
People need to suck it up. The RBA is not there to keep roofs over peoples heads.
If people are concerned, they ought to write their MPs and ask why immigration is back up to pre Covid levels, why company tax rates havent moved or why MRRT hasnt increased.
If people are concerned, they ought to write their MPs and ask why immigration is back up to pre Covid levels, why company tax rates havent moved or why MRRT hasnt increased.
Maybe they can also ask for a "HomeKeeper" payment to be introduced?
The biggest beneficiaries from the RBA's TFF were the banks. Banks also have a vested in interest in ensuring that the property wagon keeps on going. Defaults aren't good for business.
It is completely unhelpful that particular economists continue to buck against the RBA
That view sells well at the moment, modern media is the pants.
Putin is the one to blame.
Invasion means higher fuel prices, and the Saudis aren't helping. This caused cost of living to rise therefore inflation.
The sooner that c#$t dies of lung cancer the better, from all the cigs.
In the meantime we should support ukraine more, and send troops into support them against this bully.
It's hilarious if you read the RBA's speeches in chronological order starting from 2021:
June 2022 "we are now expecting inflation to peak at around 7 per cent"
November 2022 "inflation will peak later this year at around 8 per cent"
May 2023 "Inflation in Australia has passed its peak, but at 7 per cent is still too high"
This is literally that meme gif with the guy putting on clown make up but in slow motion.
Other than that I see nothing wrong with the RBA lifting rates. The US is stuck in real inflation of 10%+ and will be 15-20% by next year…..kek
infaltion is still out of control.
however people's spending is out of control, i have a bunch of cafes around and they are constantly full
Look harder. Retail in suburbia is in struggle mode, shops are closing up fast and "For Lease" signs are everywhere. Cafes/Restaurants are a place for people to escape reality as they tell their mates everything is fine despite their cuppa tasting a little saltier than usual.
i guess depends on where the suburbia is, mine is pretty middle to upper class (but nothing close to the eastern suburbs of syd) and everything is full up.
Yet I have to goto 711 for a coffee, instead of maccas.
Thanks Gerry.
Yet I have to goto 711 for a coffee, instead of maccas.
I can't afford 711 since they raised the price from $1 to $2
Now I have to go to Coles Express for the $1.50 coffee.
Now I have to go to Coles Express for the $1.50 coffee.
I can't afford Coles Express since they raised the price from $1 to $1.50
yep reflecting in the latest spending report. Cafes and eating out are higher than last quarter. Smashed avosssssssssss
Go and visit VIC Glen Waverley on Friday/Sat/Sun evening and you wonder, "What recession?". I imagine it's like this across the country.
They are all happy to pay 25% Surcharges (https://7news.com.au/business/restaurants-public-holiday-sur…), 2% Credit Card Fees, and now 7% split bill surcharge (https://www.news.com.au/lifestyle/real-life/news-life/brisba…).
The roads are busy despite $2 petrol.
Yeah mate I ask that everyday. What recession, lines waiting to goto cafes, I saw someone spend $1100 at coles on 2 trolleys a few weeks ago.
"I saw someone spend $1100 at coles on 2 trolleys a few weeks ago."
The person must be after Masterchef cookwares :-).
I saw someone spend $1100 at coles
The must have bought a couple of Scotch fillet steaks to feed their kids.
You should see Chadstone shopping centre on a normal working day. I was shocked when i saw the place is filled taking 20mins to find parking.
however people's spending is out of control
Yes, because feeding your family is now costing about 30% more and utility prices are through the roof…
out of touch with the average Aussie
What has out of touch got to do with the RBA?
If you borrow, you need to take personal responsibility for rate increases.
A lot of retirees are very happy with the increases - they were earning next to zip on their deposits.
If you borrow, you need to take personal responsibility for rate increases.
The rate increases are not justified though because they are not fixing the inflation problem.
The Reserve Bank are either not looking into the actual cause of inflation, or are just plain incompetent.
Didn't know you were an economist JV, or own a crystal ball.
own a crystal ball.
Got one for $3.48 from Temu.
So JV, what's the actual cause?
All your post are vague and close to shitposting honestly.
what's the actual cause?
Increases in the cost of food, fuel and gas & electricity is the cause of inflation. Not excess borrowing.
close to shitposting honestly.
That's exactly what your comment appears to be.
Not great. They shouldn't have kept rates so low for so long and should have raised them faster.
On the flipside they only have one lever to get inflation under control and it is limited in its effectiveness.
If you give "Janet" unlimited free calls to Canberra……..
What they've done has been ok, they could have gone harder a bit earlier, but it was a very weird time.
What they have been is very poor with their messaging and the face of it Philip Lowe is not a great communicator.
They are doing an ok job. Inflation has to come down. There is no choice but to push up interest rates.
Would people rather 10-20% or more inflation if they didn’t raise rates? The country would collapse into chaos.
Although we did have it a bit too easy for a bit too long. Should have started raising rates earlier. Everyone got too cashed up (covid lockdowns also contributed) and the spending is still out of control.
The RBA has got it horribly wrong for the last 20 years that I have been watching their performance. Lowe is a poor choice for this important job judging by his performance. His "promise" to keep rates low for a stated period would mean the sack for any other mere mortal…but he's still there, unfortunately. He has caused a lot of misery to so many unfortunates who believed his words.
I get the gauge at my local PO's and the RBA has killed a lot of small bizs .
They are no where near as busy as before.
Actually I have a pretty low level questions and it has been buzzing me for years, if someone can answer.
When we talk about increase interest rate to tackle inflation, it seems to me that this strategy only works for specific category of goods/products/services. My understanding is as follows:
Higher interest rate> lower purchasing power/more incentive to save> less demand for goods and services> Market cooldown> price will come down
From my experience and understanding, this seems to only work on "raw/unprocessed" goods or services such as milk, major grocery item, veggies/fruit and etc. I haven't seen how interest rate hike can work on value added goods/service such as restaurant price. During the high inflation market, all dining venues seems to take opportunity to increase the price in order to survice their cost, however, once the interest rate effect kick in and their cost come down, how many of these restaurant will do the courtesy of lowering their price back down? Considering there is no wage increase. Did the worker class always get worse off?
Should the government setup a watchdog body to overlook the hospitality industry?
On average menu prices are unlikely to come down, even groceries probably won't. The rate hikes are intended to slow price rises.
Of course the worker class always get worse off. Someone has to be worse off from bad policies, it's not going to be the ruling class.
If there is positive inflation then prices overall are still increasing, not coming down, they just prefer it to be at a lower rate. If the restaurants are still increasing their prices then they obviously still have enough customers willing to pay. I’d say raw food products are also a way more competitive industry than restaurants
While I agree that they should've raised rates, I believe they should've never lowered it that low to begin with. I'm talking about the decreases in rates from the peak of 4.25% after the GFC but before covid-19.
I find it hilarious that people borrowed more than they can afford and are shrieking when the official rate is still only 3.85% which is still historically low.
It just highlights the ridiculous state of our property market where people are literally borrowing their max loan amount to buy.
News flash, giving people more credit is not the answer to housing unaffordability. The unpalatable truth is increasing supply to drive down prices (or at least make the market flat) is the fix that is needed.
it's like a national ponzi scheme that nobody knows how to exit without everyone losing.
No, but only because they haven't gone hard enough.
Honestly the media needs to stay out of it, it's only perpetuating what the big business owners and banks want (cheap money). RBA needed to go harder, faster and we're still a good percent below where we need to be. Inflation is at 7% which is still excessive.
Yeap haven't gone hard enough at Gerry and the like : Stanford says the evidence shows the additional billions of dollars in company profits have led the soaring inflation Australia is experiencing.
And that without those profit gains, inflation since the pandemic would have risen much more slowly, at just 2.7%.
How i see it is banks allow people to overborrow at low mortgage rates, ramp up interest rates - profit.
I'm not sure what the "weather" has to do with the RBA or interest rates but when you've got headline inflation sitting at 7%, you'd better hope that the central bank of any country is implementing appropriate monetary policy to counter it and bring it down to reasonable levels - which is exactly what the RBA are doing. They don't really care if you've taken out a mortgage which you can't afford or haven't factored in interest rate increases into your repayment calculations, that's not their job or responsibility, that's yours.
They make it up as they go along
Been there - done that
The Australian economy last experienced a period of stagflation in 1975, when unemployment reached 5.3% and inflation reached an astonishing 14.4%
Took many years to fix it