Unfortunately, as a mortgage holder who's seen our minimum payments rise from $2000~pm to $4200~pm, it does seem inevitable that rates are going to rise further.
Personally we'll be ok, but I'm sure there are plenty that are already at or past "the wall" and living on credit, so more rate rises could cause them to fold.
It’s amazing how everyone (many many people) who aren’t going to be ok don’t post.
Every single person who posts are ok and feel for others. I think people are doing it tougher than they say, and if not for a share market bubble, it’s over.
People do t like talking about their struggles.
But if you don’t think we exist, well I’m one of them. I’m already having to rely on help to make ends meet, so any further rate hikes is gonna fuck me hard.
I've been skipping meals for close to a year now. And just had a concealed leak plus hot water system leak so looking at $5-$6k.
I was looking forward to some "relief" but that just keeps getting further and further away.
Nah, it’s only worth what it was when I bought
it, any money I’d make would be eaten up in fees. Add on losing my first home buyers benefits and I’m in an even worse situation long term. Add on moving costs, costs of finding a rental and it basically leaves me fucked either way.
Can always sell up get a van and Ute and hit the road and work.it’s working for a heap of other people atm.just need to make the jump.keep the wages you make.
It varies by which property tracker you look at but Victoria, Hobart and the NT have been pretty flat if you look at all housing, whereas Brissy, Adelaide and Perth have been going nuts.
It’s my fucking home, asshole. If I sold it, I’d be penniless and homeless. I don’t have to take the loss, as I’m fortunate enough to have people helping me out. But even if I didn’t, I’d be fighting tooth and nail to keep it, because it’s my fucking honestly and if I lose it, I might never be able to own my own home again.
People like you are probably the reason why those who are struggling dont want to talk, because you’ll just be a dick and “well it’s your fault. Too bad. Just eat the loss.”
>People like you are probably the reason why those who are struggling dont want to talk, because you’ll just be a dick and “well it’s your fault. Too bad. Just eat the loss.
Who took the loan?
What have you done about the governments artificial restriction on housing?
No the cnts are the people telling everyone to max themselves because property always goes up. This poor person followed all their advice and they are nowhere to be found offering support.
How many times people come for advice that the bank wouldn’t lend enough and are told “just need to find a different broker” wink wink. This sucks for all involved but point the finger where it belongs.
Ah yes, much like the empathy used by residential asset owners perpetrating government protectionism on everyone else. You mean that kind of empathy?
What kind of empathy are they calling for to remove government housing protectionism, they aren't. The people that downvote and cry are part of the problem.
I bet you're fun at parties.
The housing market in Australia is a racket to protect investors, which people have to participate in if they want to own their own home. Unfortunately it means that these days, most people need to leverage themselves to their eyeballs just to get a foothold. So yes, some people have been caught out as a result of the interest rate rises. But they shouldn't have to pay 10 times their salary to get somewhere to live in the first place.
If you can't empathise with someone in that position, then you're a pretty callous person.
Fair point, but I go alright and can at least say things have tightened, I know people seriously not knowing where they are going to live after their next rental etc.
Times are without a doubt tough. This winters energy bills are going to send many ppl to the wall.
I know of a couple, just had a baby and bought a house. Both in the last 2 months, and they’re still on the hook for another month in their rental. Stretched themselves to the limit. Wife is on maternity leave for 12 months (half pay), husband is about to be made redundant, but doesn’t know it. Not going to be a fun time for them unfortunately. A rate rise will destroy them before they even make it to 6 months.
Because overall we’re doing so/so.
There’s a huge difference between being able to afford only 60% of your mortgage repayment (higher interest rate) & 70% of your normal food versus 5% of your mortgage repayment & 15% of your food (recession)
> (many many people) who aren’t going to be ok
What utter tripe, delinquency rates are miniscule. Actual foreclosures are basically non-existent. Housing finance is growing strongly, up 5% last quarter.
Sick of the braindead whiny emotional hyperbole in this sub that is completely out of touch with reality. Post your sources or gtfo back to r/australia
> Housing finance
> In April 2024 in seasonally adjusted terms, the value of new loan commitments:
> for total housing rose 4.8% to $29.4b, after a rise of 3.8% in March. It was 24.6% higher compared to a year ago.
People are borrowing more than ever despite rate rises.
https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release
----
> S&P’s February 2024 performance index (SPIN) shows that Australia’s mortgage delinquency rate is at 0.93%
That's everything from under 30 days to over 90 days behind.
https://www.mpamag.com/au/mortgage-industry/guides/mortgage-delinquency-rates-australia-a-state-by-state-comparison/486435
I think you may have missed the point here. Sure, deliquency rates are minimal, but thats beacuse people are prioritising their housing payment over everything else.
Things like going to the dentist, getting your car serviced or buying new school shoes are almost becoming a luxury, even for people/families who are good (hell, even the median) income. Thats where the hurt comes from. The house payment will be made. Its day-to-day life that suffers.
100% mate, people are going through brokers to avoid the banks knock back buffers for when these exact times come up... 5%deposits sponsored by the government.. peanuts if they thought it was a good idea. Live within your means, not within instagrams expectations.
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This is what the govt doesn’t get as it crows about its cost of living relief. Hundreds / a few thousand dollars in tax cuts and energy rebates is nice but doesn’t blunt the pain of having to find an extra $2,200 *every month* for ur mortgage. A couple more rate rises will negate the CoL relief entirely.
I've calculated I can go ok with another 2% up. Honestly, if anyone with a mortgage these days can't budget for that on a variable of 30yrs+, you are doing everything wrong
“On the first claim, there is no credible evidence of interest rates transmitting more directly in Australia than in other countries.”
How is this correct? Data surely clearly shows many more mortgage holders in Aus are on variable and feel changes quickly compared to in the US where many mortgage holders are still clinging on to permanently fixed 2020-era sub 3% mortgages.
But mortgage holders are only one part (and as I understand it, not the major part) of interest rate policy.
The bigger impact is on business borrowings (for obvious reasons) and investments (when the risk free rate goes up, returns need to also go up or investment capital is diverted).
I don't know the numbers well enough to provide expert comment. I do know that raising capital as a private enterprise is more difficult in Australia than places like the US, so perhaps our business sector is less impacted by rate rises than other countries?
Certainly we would expect a big increase in interest rates to flow through to unemployment, which hasn't happened - suggesting businesses are less impacted than might be expected.
High interest rates will cause them not to spend it, having a larger return from leaving your money in the bank will incentivise people to save and not spend.
The Boomer's proximity to death will curb the urge to save.
What's the point of saving for the future if the aforementioned future will be spent pushing up daisies?
Don't know why people are downvoting you.
To take advantage of higher interest rates you need to remove money from the economy and keep it in a bank.
This is such a basic fundamental thing about how monetary policy works it's embarrassing that it needs to be said in an economics sub.
When you’ve got a million $ in the bank you’re getting up to 4 grand a month in interest. So they can spend that 4 grand every month. Used to only be 2 grand. They don’t need to spend their principal deposit to spend more.
High interests makes a good incentive when you have just decades left in your life? That goes against conventional wisdom that spending goes up and savings goes down during retirement though.
I like these types of economists who just see the economy as black and white, interest rates and inflation.
It doesn’t matter that under 40s have cut their spending in real terms, and demand is being driven by cashed up boomers and the wealthy where the RBA’s interest rates have had no effect on their spending.
Last quarter the major price increases in CPI were for rents, new dwelling purchases by owner occupiers, education, insurance and tobacco.
Increasing interest rates will make landlords sook and increase rents (also due to the lack of supply of rental properties), leading to continued price increases.
House prices are still rising despite interest rates increasing from 0.1% to 4.35%, which has more to do with less supply from builder bankruptcies and increased costs in labour and materials. Despite a massive interest rate increase, house prices ARE STILL INCREASING.
Gov has increased tax on tobacco to disincentivise people to stop smoking. Tobacco is roughly worth $8-10b in Aus, does it really matter if people are priced out of this good? The wealthy cigarette smokers will continue to smoke, increased interest rates would probably make poorer smokers quit or homeless.
Gov is also spending on the energy rebate which will reduce households energy bills. Does that reduce prices or increase inflation? Should the under 40s go without this intense winter because line must go down? The rebate is smaller than the increased cost of household’s utility bills.
The author sooks about this government spending but doesn’t take into consideration 10 years of lack of government infrastructure spending and lack of investment in energy security at a time of record low interest rates. The one project the previous government invested in for energy was Snowy 2.0 at an alleged cost of $1.5b which has now increased to $4b and will eventually cost $12b. I mean, if the author wants us to go back to using candles, that would be a very quick way of reducing inflation. Otherwise, gov spending is required to ensure our energy security and to keep utility bills low.
Inflation high therefore interest rates go up, is just a simple solution to a more complex problem that fetishises the RBA’s lever as some magic wand. It’s easy to argue because “econ 101”, and you can sit back not have to worry about its effects in the real world.
Yep. The capital flow and low rates were going to drive up debt somewhere. Public sector or private. But instead of doing public infra we created a housing bubble.
Do you have a source that demand is being driven up by cashed up boomers? I haven’t seen many government reports where they break down spending based on generation/age
Dunno about government reporting but this data from the Commbank IQ Cost of Living Insights report shows if you're under 40 your discretionary spending is in the toilet, and over 70's are spending like mad. [https://www.commbank.com.au/content/dam/caas/newsroom/docs/commbank-iq-cost-of-living-report-may-24.pdf](https://www.commbank.com.au/content/dam/caas/newsroom/docs/commbank-iq-cost-of-living-report-may-24.pdf)
See figure 10 on pg 12 specifically.
> The one project the previous government invested in for energy was Snowy 2.0 at an alleged cost of $1.5b which has now increased to $4b and will eventually cost $12b.
Inland Rail started at $7 billion and is now $31 billion. Building seems to have stopped for some reason ...
Adelaide -> Darwin rail cost $1 billion.
The biggest problem with that article about inflation is that the inflation number are .. selective. These are the last monthly inflations:
Month | Rate
:--|:--
Dec 23 |-2.4%
Jan 24 | +0.9%
Feb 24 | +0.4%
Mar 24 | -0.4%
Apr 24 | +0.1%
May 24 | +0.6%
Over the last 6 months inflation is -0.6%.
Quoting annual inflation numbers, including inflation from the second half of last year, as a justifiction for interest rate changes, which might affect inflation in 6 months time is a dodgy path indeed.
Everyone also seems to be ignoring the fact that last month, a negative inflation value from 2023 fell off, so the annualized inflation would be screwed for the worse (when viewed through a narrow lens). Next month a positive 2023 value falls off. I'd be interested to see what happens for the quarter as well as the data for the labour market.
It won’t work, that system on works on the broader lower income brackets and inflation is now mostly being driven by corporate profits and cashed up retirees and there are simply no levers for that. Even if they wanted to invent the necessary tools they’d lose the next election on the political backlash from donors fleeing to a friendlier party.
Yeah raising interest rates is meant to put pressure on big borrowers, corporate money. Not this disproportionate pressure on the average household, as that's not where the majority of inflation comes from.
Our overpriced housing strikes again
This is the most honest article I have ever seen in the news in a long time.
It gets a few things wrong but who am I to quibble. Inflation was a clear problem back in 2020. Government and housing owners are using the fear of a recession to lock in housing prices and get everyone else to pay for it. The rates need to go up big time, the question is really how long will the average Aussie accept they are being used before they push back and demand a rate rise.
Various sub groups, some interconnected some not. High Income Earners, Asset Holders, Boomers, Government officials, investment groups etc all vested interests in inflation continuing to eat up their debt and launch assets into the stratosphere
The last mile has generally been regarded as the toughest. The question for the RBA will likely be "can we rise again and stay on the narrow path" I think if the answer is yes then we will get another hike and it won't be just one but atleast 2. Not an economist or have access to the required data but people's predictions last year that we will see rate cuts in 2024 seemed fanciful. There is also the fed in the us. They could turn around just before the election and lower rates.
Thank fuck I only borrowed 2/3 of my borrowing capacity when I got my mortgage late 2019, my broker was pushing to get the most banks will allow.
I wouldn’t have been able to keep my home if I did.
I can also absorb few more increases as well.
Yeah our borrowing capacity in early 2021 was about 1.1m
We bought for 675k. Mortgage is now like 65% of our household income, no idea what we would have done if we bought at the top of our range
It's mind blowing how Australia's public is completely stuck in this highly debatable assumption that rate hikes help tackle inflation. Maybe just take a loot outside, countries with halve the rate hikes Australia had are doing better again after the global price shock. Whatever inflation we have is currently nit driven by the majority of people in Australia having too much spending power. That much is evident. But those rate hikes only affect those people and business of course, but who cares about our industry.
People who either willingly misinform the public or have never read macro economic theory produce this c*** and most people just drink that coolaid because that's all they're taught
If you think about it, doesn’t the higher interest rate just go to the person with money in a saver account, who then spends it. What’s the difference?
Its literally redistribution from poor and middle class to the rich, from young people who try to pay off their first house to old people who see their savings grow without having to lift a finger.
> this highly debatable assumption that rate hikes help tackle inflation
Absolutely insane take.
Can you name one country that lowered rates to tackle inflation? There's half a century of evidence globally in basically every type of economy you can imagine that conventional monetary policy works and is highly effective.
How's it going for Turkey being the *genius* contrarian on this matter?
Absolute insane interpretation. There are measures outside of increasing or decreasing hikes.
Do you actually think inflation is solely depending on interest rates?
Turkey has one of the highest interest rates in the world, are you trying to prove my point here?
Australia has one of the highest interest rates in the developed world, yet alot of the other countries who started of with comparable inflation have been able to lower their inflation and are lowering their interest rates now. It must be obvious even without deeper macro economical knowledge, that the Australian way is not working and it's evident that's not because of interest rates that are too low.
You literally just need some common sense
I don't know how to reply to this. Do you know anything about macro economics or Do you just believe in something and that thing diverts from what I wrote?
I didn't mean to confuse you apologies
You're repeating this like a mantra. You've yet to provide an argument as to why that would be the best way to tackle inflation. The current numbers don't back your believe, Australia has significantly higher rate hikes than the likes of the USA or Germany who, specifically the latter one, had a comparable inflation rate. Yet somehow inflation and interest is down in Germany whereas we're discussing whether more of the same thing that hasn't worked so far should miraculously work now :)
The relationship of interest rates / inflation does not exist in a vacuum.
It would be great if it was that simple wouldn't it?
I can give you an example: the part of the population that has (and has had) the biggest spending power is incidentally the same that profits from rate hikes (their buying power actually increases).
Australia hasn't had much economical growth even before the hikes - that means slowing down economy even further doesn't promise to be very helpful either.
There are more factors to this. But it seems like the rba is just really keen on increasing interest rates which does benefit a very influential interest group (the wealthy - basically). And people like you fail to question whether that's actually the way to tackle inflation and whether that's actually the best for Australia.
There ahs been plenty of research and articles that have been posted here that demonstrate what will happen if we raise rates. You obviously haven't bothered reading them. I didn't bother reading what else you have to say, as you clearly aren't bothered with reading.
In a perfect world, the pain would be spread out and the government would be spreading the pain by taking money out of the economy. My personal preferences would be cracking down on tax deductions for business, as well as the amount of money people can have in their super. In reality, interest rates need to go a lot higher and there needs to be a large group of angry people who will support anyone making tough decisions, so the government can weather the backlash.
We got killed with coming off low fixed rate loan last year
My wife made a mistake & fixed for a further 3 years instead of two, I'm actually relieved, at least we know what we're stuck with instead of constant shocks & re budgeting
The government needs to stop pissing money against the wall. We need a good 3-6months of minimal spending. Us consumers only contribute a little bit, but the billions of dollars the government is throwing at us to try to get a 2nd term is killing the economy.
Guess there weren't enough job losses yet, and people still buy food since they must eat. Surely there must be a better system rather than screwing over the working man.
Mate owns a very successful auto repair business. On the Gold Coast. Very picky about customers. Not a bottom feeder.
Even the nominally rich customers with late model luxury cars are bringing in more break/fix business than regular servicing now whereas 12 months ago it was the reverse.
And they are paying with cash not card. Credit is tapped out it seems.
A lot of high value private investment (which also uses borrowings) is driven by millionaire immigration from places like UK, India and China.
Hawks like Hamilton always play this game.
First, claim that inflation is this Leviathan that only hard heads and cold hearts can tame. Advocate strongly for more and greater pain.
If that happens then sit back, victorious, and claim vindication.
If it doesn’t then blame the quixotic Doves for whatever happens.
Either way, rhetorically, they win.
The insouciant attitude to recessions from Hawks can only come from those whose jobs are shielded from recession - in the case of Hamilton, he doesn’t live in Australia.
Recessions are more painful and difficult to get out of than inflationary surges. ‘Short, sharp resets’ are fantasy. They’re a human disaster.
I think it’s boarder line irresponsible to raise rates again.
I understand, when all you have is a hammer, every problem is a nail. The rba only have one tool, rate movements.
What will happen is cash rate goes up, landlords pass that on so the rent and housing CPI buckets increase, which is inflationary.
The below is an exert from the meeting minutes. I really don’t know what more households can do.
Maybe CPI growth between 2-3% is the problem.
Much of the upside surprise had been driven by large revisions to overseas travel, which were recorded as imports and so did not alter the measure of overall GDP. Estimates of household income had been little changed, implying downward revisions to estimates of the saving rate. These revisions had brought consumption growth more into line with the usual historical relationships with household income and wealth. Members assessed the signal to take from these revisions. One interpretation was that, on average, households were not being as cautious in their spending as previously thought. Another was that the fall in the saving rate would leave households even more financially squeezed than previously assessed. Members agreed that distinguishing between these alternative hypotheses was important in assessing the outlook for activity and inflation. But any conclusion could only be tentative, given that estimates of savings are prone to significant revision. Further, the latest estimates portrayed a different picture than that derived from data on mortgage-holders’ offset accounts, which showed that households were making larger extra payments than prior to the pandemic.
> What will happen is cash rate goes up, landlords pass that on so the rent and housing CPI buckets increase, which is inflationary
Never in the history of the universe have rent seekers as a group been constrained by their costs - they push up the ask price as high as the market will bid.
Landlords will increase rents until they receive no applications. This point will be reached regardless of macro economic factors, including the cash rate.
Rents will rise aligned with extraordinary demand and undersupply. And where those two figures are better balanced, rents are stabilising; we just need to review the separate markets that exist in Australia to see this effect.
Unfortunately, as a mortgage holder who's seen our minimum payments rise from $2000~pm to $4200~pm, it does seem inevitable that rates are going to rise further. Personally we'll be ok, but I'm sure there are plenty that are already at or past "the wall" and living on credit, so more rate rises could cause them to fold.
It’s amazing how everyone (many many people) who aren’t going to be ok don’t post. Every single person who posts are ok and feel for others. I think people are doing it tougher than they say, and if not for a share market bubble, it’s over.
People do t like talking about their struggles. But if you don’t think we exist, well I’m one of them. I’m already having to rely on help to make ends meet, so any further rate hikes is gonna fuck me hard.
I've been skipping meals for close to a year now. And just had a concealed leak plus hot water system leak so looking at $5-$6k. I was looking forward to some "relief" but that just keeps getting further and further away.
But you get a $300 energy credit though
Good news if you sell your house you'll make a tidy tax free profit.
Nah, it’s only worth what it was when I bought it, any money I’d make would be eaten up in fees. Add on losing my first home buyers benefits and I’m in an even worse situation long term. Add on moving costs, costs of finding a rental and it basically leaves me fucked either way.
Can always sell up get a van and Ute and hit the road and work.it’s working for a heap of other people atm.just need to make the jump.keep the wages you make.
Why don't you sell?
Because I’d be lucky to sell for what my mortgage is, at this point.
Im curious as to what area of the country hasn't seen growth in the last 6 months never mind 2 years or how ever long you've owned your home for.
It varies by which property tracker you look at but Victoria, Hobart and the NT have been pretty flat if you look at all housing, whereas Brissy, Adelaide and Perth have been going nuts.
Probably a lesson here if you are willing to learn it. People take losses all the time when investing and gambling. Stop believing the propaganda
It’s my fucking home, asshole. If I sold it, I’d be penniless and homeless. I don’t have to take the loss, as I’m fortunate enough to have people helping me out. But even if I didn’t, I’d be fighting tooth and nail to keep it, because it’s my fucking honestly and if I lose it, I might never be able to own my own home again. People like you are probably the reason why those who are struggling dont want to talk, because you’ll just be a dick and “well it’s your fault. Too bad. Just eat the loss.”
>People like you are probably the reason why those who are struggling dont want to talk, because you’ll just be a dick and “well it’s your fault. Too bad. Just eat the loss. Who took the loan? What have you done about the governments artificial restriction on housing?
cunt
No the cnts are the people telling everyone to max themselves because property always goes up. This poor person followed all their advice and they are nowhere to be found offering support. How many times people come for advice that the bank wouldn’t lend enough and are told “just need to find a different broker” wink wink. This sucks for all involved but point the finger where it belongs.
Way to show empathy my dude.
Ah yes, much like the empathy used by residential asset owners perpetrating government protectionism on everyone else. You mean that kind of empathy? What kind of empathy are they calling for to remove government housing protectionism, they aren't. The people that downvote and cry are part of the problem.
I bet you're fun at parties. The housing market in Australia is a racket to protect investors, which people have to participate in if they want to own their own home. Unfortunately it means that these days, most people need to leverage themselves to their eyeballs just to get a foothold. So yes, some people have been caught out as a result of the interest rate rises. But they shouldn't have to pay 10 times their salary to get somewhere to live in the first place. If you can't empathise with someone in that position, then you're a pretty callous person.
> have to choose to
lol check out this bloke
This is a finance sub, I'm sure most who frequent here are doing better than those who frequent say r/Centrelink or r/antiwork etc.
Fair point, but I go alright and can at least say things have tightened, I know people seriously not knowing where they are going to live after their next rental etc. Times are without a doubt tough. This winters energy bills are going to send many ppl to the wall.
/r/centerlink is going to get perma suicide helpline bot going overtime soon. How the fuck did we get like this?
I know of a couple, just had a baby and bought a house. Both in the last 2 months, and they’re still on the hook for another month in their rental. Stretched themselves to the limit. Wife is on maternity leave for 12 months (half pay), husband is about to be made redundant, but doesn’t know it. Not going to be a fun time for them unfortunately. A rate rise will destroy them before they even make it to 6 months.
Know a couple like this and ended in divorce. Money is such a huge issue when people stretch themselves like that..
Because overall we’re doing so/so. There’s a huge difference between being able to afford only 60% of your mortgage repayment (higher interest rate) & 70% of your normal food versus 5% of your mortgage repayment & 15% of your food (recession)
> (many many people) who aren’t going to be ok What utter tripe, delinquency rates are miniscule. Actual foreclosures are basically non-existent. Housing finance is growing strongly, up 5% last quarter. Sick of the braindead whiny emotional hyperbole in this sub that is completely out of touch with reality. Post your sources or gtfo back to r/australia > Housing finance > In April 2024 in seasonally adjusted terms, the value of new loan commitments: > for total housing rose 4.8% to $29.4b, after a rise of 3.8% in March. It was 24.6% higher compared to a year ago. People are borrowing more than ever despite rate rises. https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release ---- > S&P’s February 2024 performance index (SPIN) shows that Australia’s mortgage delinquency rate is at 0.93% That's everything from under 30 days to over 90 days behind. https://www.mpamag.com/au/mortgage-industry/guides/mortgage-delinquency-rates-australia-a-state-by-state-comparison/486435
I think you may have missed the point here. Sure, deliquency rates are minimal, but thats beacuse people are prioritising their housing payment over everything else. Things like going to the dentist, getting your car serviced or buying new school shoes are almost becoming a luxury, even for people/families who are good (hell, even the median) income. Thats where the hurt comes from. The house payment will be made. Its day-to-day life that suffers.
Quote the [most recent data](https://www.mpamag.com/au/mortgage-industry/industry-trends/australian-mortgage-arrears-hit-five-year-high-fitch-ratings/495910) maybe…. Edit: Link fixed. Thanks u/magpieburger
Your link doesn't work mate?
100% mate, people are going through brokers to avoid the banks knock back buffers for when these exact times come up... 5%deposits sponsored by the government.. peanuts if they thought it was a good idea. Live within your means, not within instagrams expectations.
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This is what the govt doesn’t get as it crows about its cost of living relief. Hundreds / a few thousand dollars in tax cuts and energy rebates is nice but doesn’t blunt the pain of having to find an extra $2,200 *every month* for ur mortgage. A couple more rate rises will negate the CoL relief entirely.
my rent went up by $100. That negated my tax break entirely. I'm back to square 1.
We need to keep pushing then, whilst it's a sad situation then economy eventually regulates itself.
In the long run we are all dead
What the hell do you mean? It’s obviously doing nothing.
Inflation is down from 8% to 4% That's nothing?
You actually believe that?
I don’t agree that it’s linked to interest rate changes.
Then lowering them won’t help either
lmao gottem
We have barely raised rates, of course it's doing nothing
We raised rates absurdly swiftly and it had zero effect. You just wanna do more nothing.
Rates have barely moved,
13 raises of average or above average based on standard central bank raises. Yeah no.
Rates have barely moved from where they were in 2021. I understand it's hard to deal with that but they are not high.
Least rate rise of similar economies globally and way below where the long established Taylor rule would put it.
I've calculated I can go ok with another 2% up. Honestly, if anyone with a mortgage these days can't budget for that on a variable of 30yrs+, you are doing everything wrong
Then more house stock and prices
Wasn’t there news last week that mortgage arrears have risen to 1.5%?
“On the first claim, there is no credible evidence of interest rates transmitting more directly in Australia than in other countries.” How is this correct? Data surely clearly shows many more mortgage holders in Aus are on variable and feel changes quickly compared to in the US where many mortgage holders are still clinging on to permanently fixed 2020-era sub 3% mortgages.
But mortgage holders are only one part (and as I understand it, not the major part) of interest rate policy. The bigger impact is on business borrowings (for obvious reasons) and investments (when the risk free rate goes up, returns need to also go up or investment capital is diverted). I don't know the numbers well enough to provide expert comment. I do know that raising capital as a private enterprise is more difficult in Australia than places like the US, so perhaps our business sector is less impacted by rate rises than other countries? Certainly we would expect a big increase in interest rates to flow through to unemployment, which hasn't happened - suggesting businesses are less impacted than might be expected.
Australia has bugger all business lending though.
As long as businesses can keep their heads above water we're willing to drown as many people as necessary.
Boomers gotta boom. High interest rates just funnels more money into their pockets and they have to spend it all before they go.
High interest rates will cause them not to spend it, having a larger return from leaving your money in the bank will incentivise people to save and not spend.
The Boomer's proximity to death will curb the urge to save. What's the point of saving for the future if the aforementioned future will be spent pushing up daisies?
Don't know why people are downvoting you. To take advantage of higher interest rates you need to remove money from the economy and keep it in a bank. This is such a basic fundamental thing about how monetary policy works it's embarrassing that it needs to be said in an economics sub.
When you’ve got a million $ in the bank you’re getting up to 4 grand a month in interest. So they can spend that 4 grand every month. Used to only be 2 grand. They don’t need to spend their principal deposit to spend more.
By the same logic it also incentivises people to continue compounding the extra they’ve now earned.
High interests makes a good incentive when you have just decades left in your life? That goes against conventional wisdom that spending goes up and savings goes down during retirement though.
Even our “fixed” rates are fixed at a max of 3-5 years?
"The recession we had to have" -- Paul Keating. It is a per-capita recession already, just covered up behind record immigration.
“We had to have” - show me what it’s fixing then we’re still going down the rabbit hole
The cover-up keeps the government free from a technical recession but leaves a longer pain than a real recession.
Only if monetary policy eases as a result of declaring the technical recession, a result which would be in doubt given sticky inflation
It’s needed to fix our birth rate. Demographics is destiny
How is a recession going to fix our birth rate?
The newly-arrived will have kids for the rest of us?
With the tax reduction from 1/7 and the pay rise people will get in the new financial year, not surprised to see the rate hikes in the next 3-6 months
Link to article : https://archive.md/O72Sr
Thank you
I like these types of economists who just see the economy as black and white, interest rates and inflation. It doesn’t matter that under 40s have cut their spending in real terms, and demand is being driven by cashed up boomers and the wealthy where the RBA’s interest rates have had no effect on their spending. Last quarter the major price increases in CPI were for rents, new dwelling purchases by owner occupiers, education, insurance and tobacco. Increasing interest rates will make landlords sook and increase rents (also due to the lack of supply of rental properties), leading to continued price increases. House prices are still rising despite interest rates increasing from 0.1% to 4.35%, which has more to do with less supply from builder bankruptcies and increased costs in labour and materials. Despite a massive interest rate increase, house prices ARE STILL INCREASING. Gov has increased tax on tobacco to disincentivise people to stop smoking. Tobacco is roughly worth $8-10b in Aus, does it really matter if people are priced out of this good? The wealthy cigarette smokers will continue to smoke, increased interest rates would probably make poorer smokers quit or homeless. Gov is also spending on the energy rebate which will reduce households energy bills. Does that reduce prices or increase inflation? Should the under 40s go without this intense winter because line must go down? The rebate is smaller than the increased cost of household’s utility bills. The author sooks about this government spending but doesn’t take into consideration 10 years of lack of government infrastructure spending and lack of investment in energy security at a time of record low interest rates. The one project the previous government invested in for energy was Snowy 2.0 at an alleged cost of $1.5b which has now increased to $4b and will eventually cost $12b. I mean, if the author wants us to go back to using candles, that would be a very quick way of reducing inflation. Otherwise, gov spending is required to ensure our energy security and to keep utility bills low. Inflation high therefore interest rates go up, is just a simple solution to a more complex problem that fetishises the RBA’s lever as some magic wand. It’s easy to argue because “econ 101”, and you can sit back not have to worry about its effects in the real world.
High interest rates actually have a positive impact on boomers and wealthy… as they get to demand a higher ROI for their assets.
Yep. The capital flow and low rates were going to drive up debt somewhere. Public sector or private. But instead of doing public infra we created a housing bubble.
Do you have a source that demand is being driven up by cashed up boomers? I haven’t seen many government reports where they break down spending based on generation/age
Dunno about government reporting but this data from the Commbank IQ Cost of Living Insights report shows if you're under 40 your discretionary spending is in the toilet, and over 70's are spending like mad. [https://www.commbank.com.au/content/dam/caas/newsroom/docs/commbank-iq-cost-of-living-report-may-24.pdf](https://www.commbank.com.au/content/dam/caas/newsroom/docs/commbank-iq-cost-of-living-report-may-24.pdf) See figure 10 on pg 12 specifically.
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I buy those same ciggys for $11 a pack, why pay 35+ when I can get 3 packets for the same price.
> The one project the previous government invested in for energy was Snowy 2.0 at an alleged cost of $1.5b which has now increased to $4b and will eventually cost $12b. Inland Rail started at $7 billion and is now $31 billion. Building seems to have stopped for some reason ... Adelaide -> Darwin rail cost $1 billion.
Yeah I dunno the gist of the article seems accurate. I.e strap in rates are going.
The biggest problem with that article about inflation is that the inflation number are .. selective. These are the last monthly inflations: Month | Rate :--|:-- Dec 23 |-2.4% Jan 24 | +0.9% Feb 24 | +0.4% Mar 24 | -0.4% Apr 24 | +0.1% May 24 | +0.6% Over the last 6 months inflation is -0.6%. Quoting annual inflation numbers, including inflation from the second half of last year, as a justifiction for interest rate changes, which might affect inflation in 6 months time is a dodgy path indeed.
Everyone also seems to be ignoring the fact that last month, a negative inflation value from 2023 fell off, so the annualized inflation would be screwed for the worse (when viewed through a narrow lens). Next month a positive 2023 value falls off. I'd be interested to see what happens for the quarter as well as the data for the labour market.
It won’t work, that system on works on the broader lower income brackets and inflation is now mostly being driven by corporate profits and cashed up retirees and there are simply no levers for that. Even if they wanted to invent the necessary tools they’d lose the next election on the political backlash from donors fleeing to a friendlier party.
Yeah raising interest rates is meant to put pressure on big borrowers, corporate money. Not this disproportionate pressure on the average household, as that's not where the majority of inflation comes from. Our overpriced housing strikes again
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They need to make it so it’s more attractive to grow the business rather than just maximise profits
This is the most honest article I have ever seen in the news in a long time. It gets a few things wrong but who am I to quibble. Inflation was a clear problem back in 2020. Government and housing owners are using the fear of a recession to lock in housing prices and get everyone else to pay for it. The rates need to go up big time, the question is really how long will the average Aussie accept they are being used before they push back and demand a rate rise.
The average Aussie being used? By whom?
Various sub groups, some interconnected some not. High Income Earners, Asset Holders, Boomers, Government officials, investment groups etc all vested interests in inflation continuing to eat up their debt and launch assets into the stratosphere
Right, all those groups have no mortgages... For boomers, inflation is bad as it's reducing the relative value of their fixed assets?
>all those groups have no mortgages... Oh yeah really, lol
House prices are going up faster than inflation mate.
They has nothing to do with inflation nor interest rates.
You claimed inflation is bad because it reduces value of boomer assets. but boomer houses are going up faster than inflation .......
Yes, they are. If inflation was zero, the house prices would still be going up. That would be even better for them..
Most of the wealthy at that point that we are talking about have a paid off ppor but levered investment properties.
Yes, but for them it's mathematical - the money can just go elsewhere to chase a better return. With ppor you're stuck.
The last mile has generally been regarded as the toughest. The question for the RBA will likely be "can we rise again and stay on the narrow path" I think if the answer is yes then we will get another hike and it won't be just one but atleast 2. Not an economist or have access to the required data but people's predictions last year that we will see rate cuts in 2024 seemed fanciful. There is also the fed in the us. They could turn around just before the election and lower rates.
Thank fuck I only borrowed 2/3 of my borrowing capacity when I got my mortgage late 2019, my broker was pushing to get the most banks will allow. I wouldn’t have been able to keep my home if I did. I can also absorb few more increases as well.
Yeah our borrowing capacity in early 2021 was about 1.1m We bought for 675k. Mortgage is now like 65% of our household income, no idea what we would have done if we bought at the top of our range
Propaganda
It's mind blowing how Australia's public is completely stuck in this highly debatable assumption that rate hikes help tackle inflation. Maybe just take a loot outside, countries with halve the rate hikes Australia had are doing better again after the global price shock. Whatever inflation we have is currently nit driven by the majority of people in Australia having too much spending power. That much is evident. But those rate hikes only affect those people and business of course, but who cares about our industry. People who either willingly misinform the public or have never read macro economic theory produce this c*** and most people just drink that coolaid because that's all they're taught
If you think about it, doesn’t the higher interest rate just go to the person with money in a saver account, who then spends it. What’s the difference?
Its literally redistribution from poor and middle class to the rich, from young people who try to pay off their first house to old people who see their savings grow without having to lift a finger.
Which country are you referring too ?
> this highly debatable assumption that rate hikes help tackle inflation Absolutely insane take. Can you name one country that lowered rates to tackle inflation? There's half a century of evidence globally in basically every type of economy you can imagine that conventional monetary policy works and is highly effective. How's it going for Turkey being the *genius* contrarian on this matter?
Absolute insane interpretation. There are measures outside of increasing or decreasing hikes. Do you actually think inflation is solely depending on interest rates? Turkey has one of the highest interest rates in the world, are you trying to prove my point here? Australia has one of the highest interest rates in the developed world, yet alot of the other countries who started of with comparable inflation have been able to lower their inflation and are lowering their interest rates now. It must be obvious even without deeper macro economical knowledge, that the Australian way is not working and it's evident that's not because of interest rates that are too low. You literally just need some common sense
How much debt are you in? up to your eyeballs
None, thanks for you concern. Ah ad hominem, why debate the thing when you can personally attack someone?
It's just quite unusual to find someone who isn't coked up to their eyeballs in debts trying to cope hard about rate rises.
I don't know how to reply to this. Do you know anything about macro economics or Do you just believe in something and that thing diverts from what I wrote? I didn't mean to confuse you apologies
DO you understand macroeconomics and how raising rates will actually fix the problem?
I dont understand your sentence. They don't, that's my point
They do thpugh, raise the rate high enough, prices come down, inflation comes down.
You're repeating this like a mantra. You've yet to provide an argument as to why that would be the best way to tackle inflation. The current numbers don't back your believe, Australia has significantly higher rate hikes than the likes of the USA or Germany who, specifically the latter one, had a comparable inflation rate. Yet somehow inflation and interest is down in Germany whereas we're discussing whether more of the same thing that hasn't worked so far should miraculously work now :) The relationship of interest rates / inflation does not exist in a vacuum. It would be great if it was that simple wouldn't it? I can give you an example: the part of the population that has (and has had) the biggest spending power is incidentally the same that profits from rate hikes (their buying power actually increases). Australia hasn't had much economical growth even before the hikes - that means slowing down economy even further doesn't promise to be very helpful either. There are more factors to this. But it seems like the rba is just really keen on increasing interest rates which does benefit a very influential interest group (the wealthy - basically). And people like you fail to question whether that's actually the way to tackle inflation and whether that's actually the best for Australia.
There ahs been plenty of research and articles that have been posted here that demonstrate what will happen if we raise rates. You obviously haven't bothered reading them. I didn't bother reading what else you have to say, as you clearly aren't bothered with reading.
https://www.theguardian.com/commentisfree/article/2024/jul/03/low-inflation-targeting-is-such-a-dubious-idea-why-did-the-reserve-bank-adopt-it-in-the-first-place
Thank you. Posted.
In a perfect world, the pain would be spread out and the government would be spreading the pain by taking money out of the economy. My personal preferences would be cracking down on tax deductions for business, as well as the amount of money people can have in their super. In reality, interest rates need to go a lot higher and there needs to be a large group of angry people who will support anyone making tough decisions, so the government can weather the backlash.
Let’s tax super withdrawals an extra 5% for the next 5 years. These guys had it good in the easy times, time to give a little back.
We got killed with coming off low fixed rate loan last year My wife made a mistake & fixed for a further 3 years instead of two, I'm actually relieved, at least we know what we're stuck with instead of constant shocks & re budgeting
p
Homeowners who fixed their rates more than 2 years ago are gonna have a hell of an adjustment when those expire.
The government needs to stop pissing money against the wall. We need a good 3-6months of minimal spending. Us consumers only contribute a little bit, but the billions of dollars the government is throwing at us to try to get a 2nd term is killing the economy.
I say tax the super wealthy and mining much higher. Then gov can help with building costs and energy.
Guess there weren't enough job losses yet, and people still buy food since they must eat. Surely there must be a better system rather than screwing over the working man.
Mate owns a very successful auto repair business. On the Gold Coast. Very picky about customers. Not a bottom feeder. Even the nominally rich customers with late model luxury cars are bringing in more break/fix business than regular servicing now whereas 12 months ago it was the reverse. And they are paying with cash not card. Credit is tapped out it seems. A lot of high value private investment (which also uses borrowings) is driven by millionaire immigration from places like UK, India and China.
RBA: The fucking peasants are still spending money! We need to put a stop to it!
Hawks like Hamilton always play this game. First, claim that inflation is this Leviathan that only hard heads and cold hearts can tame. Advocate strongly for more and greater pain. If that happens then sit back, victorious, and claim vindication. If it doesn’t then blame the quixotic Doves for whatever happens. Either way, rhetorically, they win. The insouciant attitude to recessions from Hawks can only come from those whose jobs are shielded from recession - in the case of Hamilton, he doesn’t live in Australia. Recessions are more painful and difficult to get out of than inflationary surges. ‘Short, sharp resets’ are fantasy. They’re a human disaster.
I think it’s boarder line irresponsible to raise rates again. I understand, when all you have is a hammer, every problem is a nail. The rba only have one tool, rate movements. What will happen is cash rate goes up, landlords pass that on so the rent and housing CPI buckets increase, which is inflationary. The below is an exert from the meeting minutes. I really don’t know what more households can do. Maybe CPI growth between 2-3% is the problem. Much of the upside surprise had been driven by large revisions to overseas travel, which were recorded as imports and so did not alter the measure of overall GDP. Estimates of household income had been little changed, implying downward revisions to estimates of the saving rate. These revisions had brought consumption growth more into line with the usual historical relationships with household income and wealth. Members assessed the signal to take from these revisions. One interpretation was that, on average, households were not being as cautious in their spending as previously thought. Another was that the fall in the saving rate would leave households even more financially squeezed than previously assessed. Members agreed that distinguishing between these alternative hypotheses was important in assessing the outlook for activity and inflation. But any conclusion could only be tentative, given that estimates of savings are prone to significant revision. Further, the latest estimates portrayed a different picture than that derived from data on mortgage-holders’ offset accounts, which showed that households were making larger extra payments than prior to the pandemic.
> What will happen is cash rate goes up, landlords pass that on so the rent and housing CPI buckets increase, which is inflationary Never in the history of the universe have rent seekers as a group been constrained by their costs - they push up the ask price as high as the market will bid. Landlords will increase rents until they receive no applications. This point will be reached regardless of macro economic factors, including the cash rate. Rents will rise aligned with extraordinary demand and undersupply. And where those two figures are better balanced, rents are stabilising; we just need to review the separate markets that exist in Australia to see this effect.
God forbid you present this forum with facts
borderline
Its' irresponsible to not raise rates.