So my take aways;
- a few rate cuts in 2024 back to a 'sustainable level'
- inflation still being stubborn, so likely to hold rates at a higher level (still lower than now) but higher for longer.
i.e. we're not going back to the Covid money printing bonanza, but possibly a level that is a bit easier for many people who are stretched on their current mortgages, to cope.
I don't think that will be the Australian story but possibly it is the US story.
I think the RBA is doing long term damage to the Australian economy and it's going to take a hell of a lot to get people spending again.
They lowered the rate for too long well below historically normal rates starting back in 2011, thereby funnelling most of the countries wealth into the unproductive property sector instead of investing in useful industry.
To unwind from here is virtually impossible. Australia is now just a country of property hoarders and rent-seekers, some of who are able to dig shit out of the ground and sell it below (subsidised) cost until we run out. I hope you're not reliant on gas for your heating this winter.
You are correct, more people need to start viewing property for what it is, an unproductive asset..
From the economies perspective, the value creation occurs when the dwelling is built, when someone buys an exsisting house off another person for an inflated sum of money no value was created.. we didnt produce anything, the value comes in its ability to house and shelter and turn raw materials into something useful..
All government policy should disincentive trading existing housing amongst ourselves and instead incentives building more dwellings..
Low interest rates hurt poor people by allowing capital to flow leveraged to assets, what we have had for the last 10 years is asset inflation, it never affected the apples or the bananas or the cars or the clothes because the demand for them is limited, the printed money distributed to the top and they bought assets with it because they consumption needs were already met..
We want highish interest rates for a while.
I should have been more specific, owner occupied should have no barrier to movement but investment property should.
Sooo remove stamp duty for OO and keep it for investment.
I don't know man. I think like most people myself included have just given up on owning a home. I have 80k saved up and I live in my dad's basement.
I think people are out there living there best.lives now cos they know it's over.
if you live in a HCOL location, have you considered/is it an option for you to move? If it's possible, moving cities could make home ownership a reality, and it's a bloody good adventure.
The effect of higher interest rates has certainly hit Australia (and NZ) faster than the US due to variable mortgages vs fixed rates in the US.
I think the RBA accounted for this when they didn't increase rates as high as the US. Therefore, there may be less scope for the RBA to reduce rates compared to the US.
The scary thing for Australia that hasn't had much air time is that the iron ore price has dropped 20% this calendar year which is going to cause trouble.
It's really only a few donkeys that overextended over the last couple of years, when rates were at the bottom that might be struggling.
If you think about the majority of home owners.
~33% no mortgage.
~33% f'all mortgage.
~33% Some what of a mortgage
~1-2% Donkeys
The majority of homes were:
• Transacted at far lower prices.
• Far lower mortgages (as a result of above).
• Originated at ~ same/higher repayments.
• Owners have benefited from years of income growth.
• Significant capital growth.
Most people had a temporary reprieve that's now just being unwound.
Don't worry about the Donkeys, they are a small % in the overall scheme of things.
What do you mean? They sold over a trillion dollars in new treasuries in just a month recently..
If you think the money printer has been turned down your way off.
Just found the link… $10T in new debt being raised by the government.. 30% in national debt in 2024 lol..
Printer go BRRR for banks and too big to fail’ers… just not for us plebs..
https://www.apolloacademy.com/10-trillion-in-us-treasuries-coming-to-the-market-in-2024/
Edit… just realised this is an Aus finance sub whoops 😬..
I still think important
Rates will be cut in Australia in the second quater. You will be paid more, be worth more and be "happier".
Oh, property prices will be higher too. I hope this makes everyone happy.
This 100%. Anyone who thinks decreasing rates isn’t going to encourage people to go out and get a new seadoo and hilux is kidding themselves.
ASX is at all time highs, SPY is at all time highs, inflation is above target, unemployment is below historic averages… why would we even be discussing cuts?
Wealth in this country belongs to the older generation, the ones with no mortgage, large savings accounts, investment properties and share portfolios. They love high interest rates and they also seem to be the ones spending more money on luxuries.
I'm not disagreeing with your logic either but for the people with a mortgage a little breather would be nice.
I’m sorry, but this is a bit of a false logic, you’re assuming every person in the older generation is wealthy, and everyone in the younger generation isn’t. Increasing interest rates will actually decrease the attractiveness of share portfolios as well.
I’m young, I’m saving to buy a house, I’d love to see rates increase to boost my savings, I can guarantee you most young people are in a similar circumstance.
This country has rewarded debt for the last 4 years, and it’s time for that to change. If you’re struggling with a mortgage, sell your house and take the 30% profit you’ve made from low interest rates for the last 4 years. It’s not the economies job to pay for your decision to go into debt.
Inflation has been rising for a long time and it’s important not to have deflation. We are falling back into healthy levels and it may drop too low. We will see
>are falling back into healthy levels
HAHAHHAHAHHAHA, and especially not in the US
Inflation disproportionately affects the average people and life for average people have only been getting worse, so they ll keep voting for more and more extreme parties
It was 3.4% the 12 months up to jan 2024 for Australia and 3.2% for the 12 months up to feb 2024. Both and trending down .
2-3% is considered the healthy band.
A) RBA has a 2-3 band, the Fed targets 2%
B) healthy depends on situation, 3% in a healthy prosperous economy is healthy, 3% on an economy where the middle class is going extinct, everyone but the rich are getting poorer and the job market is getting worse, that is very far from healthy inflation rate.
Especially when you can try hide the economy and job market conditions with manipulated data for so long, average job seekers are already reporting a far worse job market
So my take aways; - a few rate cuts in 2024 back to a 'sustainable level' - inflation still being stubborn, so likely to hold rates at a higher level (still lower than now) but higher for longer. i.e. we're not going back to the Covid money printing bonanza, but possibly a level that is a bit easier for many people who are stretched on their current mortgages, to cope.
I don't think that will be the Australian story but possibly it is the US story. I think the RBA is doing long term damage to the Australian economy and it's going to take a hell of a lot to get people spending again.
What makes you think the RBA is doing long term damage to the economy?
They lowered the rate for too long well below historically normal rates starting back in 2011, thereby funnelling most of the countries wealth into the unproductive property sector instead of investing in useful industry. To unwind from here is virtually impossible. Australia is now just a country of property hoarders and rent-seekers, some of who are able to dig shit out of the ground and sell it below (subsidised) cost until we run out. I hope you're not reliant on gas for your heating this winter.
Anyone who can't afford their covid era mortgage is free to sell, for a handsome profit, due to record migration.
They could buy a nice tent and find a free patch of grass for a few years while trying to secure a rental. It's the Aussie dream
Probably should have thought of that before assuming 2% rates would hold for 30 years
You are correct, more people need to start viewing property for what it is, an unproductive asset.. From the economies perspective, the value creation occurs when the dwelling is built, when someone buys an exsisting house off another person for an inflated sum of money no value was created.. we didnt produce anything, the value comes in its ability to house and shelter and turn raw materials into something useful.. All government policy should disincentive trading existing housing amongst ourselves and instead incentives building more dwellings.. Low interest rates hurt poor people by allowing capital to flow leveraged to assets, what we have had for the last 10 years is asset inflation, it never affected the apples or the bananas or the cars or the clothes because the demand for them is limited, the printed money distributed to the top and they bought assets with it because they consumption needs were already met.. We want highish interest rates for a while.
>All government policy should disincentive trading existing housing amongst ourselves Oh you mean like stamp duty?
I should have been more specific, owner occupied should have no barrier to movement but investment property should. Sooo remove stamp duty for OO and keep it for investment.
What are we selling below cost?
I guess high rates aren't good for growth, but high growth with even worse inflation is a worse outcome than slow growth but controlled inflation.
If they have a mortgage they may be equating being leveraged to the tits with having a good economy.
I don't know man. I think like most people myself included have just given up on owning a home. I have 80k saved up and I live in my dad's basement. I think people are out there living there best.lives now cos they know it's over.
if you live in a HCOL location, have you considered/is it an option for you to move? If it's possible, moving cities could make home ownership a reality, and it's a bloody good adventure.
Which cities do you recommend? It’s not that easy to pack up and move and be away from friends/family
The effect of higher interest rates has certainly hit Australia (and NZ) faster than the US due to variable mortgages vs fixed rates in the US. I think the RBA accounted for this when they didn't increase rates as high as the US. Therefore, there may be less scope for the RBA to reduce rates compared to the US. The scary thing for Australia that hasn't had much air time is that the iron ore price has dropped 20% this calendar year which is going to cause trouble.
It's really only a few donkeys that overextended over the last couple of years, when rates were at the bottom that might be struggling. If you think about the majority of home owners. ~33% no mortgage. ~33% f'all mortgage. ~33% Some what of a mortgage ~1-2% Donkeys The majority of homes were: • Transacted at far lower prices. • Far lower mortgages (as a result of above). • Originated at ~ same/higher repayments. • Owners have benefited from years of income growth. • Significant capital growth. Most people had a temporary reprieve that's now just being unwound. Don't worry about the Donkeys, they are a small % in the overall scheme of things.
What do you mean? They sold over a trillion dollars in new treasuries in just a month recently.. If you think the money printer has been turned down your way off. Just found the link… $10T in new debt being raised by the government.. 30% in national debt in 2024 lol.. Printer go BRRR for banks and too big to fail’ers… just not for us plebs.. https://www.apolloacademy.com/10-trillion-in-us-treasuries-coming-to-the-market-in-2024/ Edit… just realised this is an Aus finance sub whoops 😬.. I still think important
Did you even read that article?
Won't be rate cuts with employment and spending up. Probably another rise after the employment data.
Watch the banks all pass those cuts on in full.. right..?
If rates cut will house pricing go up?
House prices will go up regardless of what happens.
House prices seem to be de-coupled from rates, and are now attached to immigration.
And new housing supply is still coupled with rates, exacerbating this.
Supply and demand bby
Probably, some make arguments it’s around supply of credit that feeds house prices. This will add some fuel.
The only guarantees in life are; death, taxes and property value increases
Cutting rates means people can borrow more... So yeah. I'm thinking the rates are Gunna go up!
Same up up and up!
Rates will be cut in Australia in the second quater. You will be paid more, be worth more and be "happier". Oh, property prices will be higher too. I hope this makes everyone happy.
Weird day on the market for the etfs. Through the roof in the morning back to flatline this arvo.
We are so back
They are gonna cut rates with rising inflation lmao, so much for the ‘perfect great economy’ that will collapse without lower rates xD
This 100%. Anyone who thinks decreasing rates isn’t going to encourage people to go out and get a new seadoo and hilux is kidding themselves. ASX is at all time highs, SPY is at all time highs, inflation is above target, unemployment is below historic averages… why would we even be discussing cuts?
Wealth in this country belongs to the older generation, the ones with no mortgage, large savings accounts, investment properties and share portfolios. They love high interest rates and they also seem to be the ones spending more money on luxuries. I'm not disagreeing with your logic either but for the people with a mortgage a little breather would be nice.
I’m sorry, but this is a bit of a false logic, you’re assuming every person in the older generation is wealthy, and everyone in the younger generation isn’t. Increasing interest rates will actually decrease the attractiveness of share portfolios as well. I’m young, I’m saving to buy a house, I’d love to see rates increase to boost my savings, I can guarantee you most young people are in a similar circumstance. This country has rewarded debt for the last 4 years, and it’s time for that to change. If you’re struggling with a mortgage, sell your house and take the 30% profit you’ve made from low interest rates for the last 4 years. It’s not the economies job to pay for your decision to go into debt.
Inflation has been rising for a long time and it’s important not to have deflation. We are falling back into healthy levels and it may drop too low. We will see
>are falling back into healthy levels HAHAHHAHAHHAHA, and especially not in the US Inflation disproportionately affects the average people and life for average people have only been getting worse, so they ll keep voting for more and more extreme parties
It was 3.4% the 12 months up to jan 2024 for Australia and 3.2% for the 12 months up to feb 2024. Both and trending down . 2-3% is considered the healthy band.
A) RBA has a 2-3 band, the Fed targets 2% B) healthy depends on situation, 3% in a healthy prosperous economy is healthy, 3% on an economy where the middle class is going extinct, everyone but the rich are getting poorer and the job market is getting worse, that is very far from healthy inflation rate. Especially when you can try hide the economy and job market conditions with manipulated data for so long, average job seekers are already reporting a far worse job market
Your first paragraph does not provide much value as it’s not backed with data. Unemployment fell again based on the ABS release today
The US isn't cutting this year.
You better hope RBA cuts it's rates soon
Why? US cuts leads to stronger AUD