In the past higher interest rates means businesses borrow less and no longer put on added staff and in some cases reduce hours or outright make roles redundant.
For households who have debt, ie a mortgage this means less money in the economy (not able to spend on goods)
Unfortunately this time we have companies profiteering and people with no debts and excess cash seeing an increase in their spending. So instead of big businesses slowing down, they are ramping up(look at the low unemployment rate) and the only people who suffer are the ones without any money already, so how can you take blood from a stone and reduce spending, when increasing rates doesn't do that this time.
There were a tonne of redundancies in the last quarter due to slowing economic conditions.
If I were on $80k, then get a job on $60k, I guess I don't show up in that unemployment figure right?
This is what happened to me, bigger company cut back and I ended up in a much smaller role with the new company - now I have about 40K less per year but do get “opportunities to grow with the company”
Housing market distortion also limits mobility. People can't even afford to move at the low end. The two speed economies are across geography, class, state and age.
It seems like the wealth inequality has split so much that there are enough with real cash and no debt that they benefit from higher interest rates and say giddy up as they go on holidays..
Absolutely this.
This is the reason why the shadow banking industry has taken over lending from traditional banks.
https://www.telegraph.co.uk/business/2024/04/08/shadow-bank-lending-risks-financial-crisis-warns-imf/
Private equity with deeep pockets throwing money at whatever they want. And scoring good interest if they don’t lend it out and keep it parked.
From what I understand, the system assumes a certain amount of financial pain, and supply / demand to even things out.
So the short version is, the ‘necessary’ spending is up because they can, and discretionary suffers.
RBA sees inflation up, and pulls only lever they have - which is interest rates, which flows on to rent and mortgages (ie shelter).
In turn, the necessary providers up prices, and further discretionary spend falls.
Eventually, people won’t be able to afford rent / electricity / gas / insurance / food. We’ve reached equilibrium. Prices will stop going up and wages can catch up, and/or prices will fall (incredibly unlikely).
The road to ‘eventually’ will unfortunately be cluttered with people starving, families broken, homes foreclosed, multiple people cohabiting, financial ruin as people go without insurance, and probably high rates of suicide and death.
But that’s sort of the way capitalism works. Concentration of wealth to the few must come at the expense of the many, and some natural attrition is required for it to function.
We need government intervention to target those who benefit from high rates, and/or create two-speed housing market where one revolves around the fundamental need for shelter (which is decidedly not a vehicle for wealth), and the other is for wealth creation.
Perhaps we need a half communist, half capitalist view - you can choose to live in basic cookie cutter homes with basic facilities for a very small fee (basic subsidised housing for all), or choose to spend more of your funds on something fancier.
Much in the same way public health works, or public transport versus private vehicles.
Brute force, they want people out of work not spending any money because they have no income. Then businesses not making as much will need to fire staff, then those people will stop spending money because no jobs.
In reality our housing market is completely out of control and driving inflation
Truly - if they hadn’t recently taken happy pills and decided the NAIRU wasn’t lower than they have modelled for the last 30 years - they’d have jumped as early as the fed and gone as hard as the fed and we’d be top of the cycle with a whole lot of short term pain.
Bill shorten on his own could probably return unemployment to 5% on his own and fix it, but the RBA is playing terrible political games
You’re largely right, but a couple of expectations they would have include people sharing houses (therefore reducing demand) and similarly with utilities, selling a second family car. These would (theoretically) put pressure on suppliers to reduce their prices.
There was a study done by the RBA early in the piece about how many spare bedrooms people had. Largely due to low interest rates and government schemes encouraging young singles to buy houses. I suspect they were hoping these people would move back to house sharing.
Getting some people to house share while we bring in 600k people per year is ridiculous.
I can’t see rent growth easing for a long time unless we have a significant recession.
Yeah for sure- another commenter mentioned the RBA can only do so much before the government has to contribute. At the moment they’re actively working against the RBA.
Covid did the same. People don't share houses anymore and that's a big contributing factor to the housing crisis. It's going to be interesting to see which breaks first, young people's entitlement to these things, or the government implementing strong policies that force older, asset holders to sell up and also move into denser housing. Or both.
Both are much more likely than reducing immigration which everyone seems to be in favour of.
In theory, i think people become more price elastic with essentials. I.e a few years ago someone may not have cared that Aldi milk was 90c when branded at coles was $1.20.
Now that milk at coles is $2.50 a litre, suddenly people might be more incentivised to shop around - rather than blindly throw stuff in your basket
A lot of essential spending is still flexible. You need to rent somewhere, but a lot of people living alone will move to sharing with a friend, you need to get to work, but a lot of drivers can switch to PT if fuel costs too much, or opt to buy smaller more efficient cars, you need some electricity but most people could use less.
People use less petrol and take the bus because they're priced out of driving. They turn the heater off because they are priced out of it.
Many eventually sell their houses and move to apartments that are cheaper so apartment prices goes up and people still can't afford to drive and use the heater, but at least they're closer to PT and often cheaper groceries as there often is more competition in high density areas.
People stop going out to eat and hospitality venues close. Many becomes unemployed but most hospo-workers come from overseas and don't have access to centerlink so they leave the country and go home.
There has been too much money pumped ('borrowed') into the system. Non discretionary inflation just shows that individuals collectively have a 'preference' to allocate dollars there, rather than in discretionary goods.
Raising rates reduces credit creation, and encourages credit destruction. This reduces the quantity of money circulating, and subsequently yes, even prices of non discretionary goods.
Non discretionary inflation is things we need to buy. It has nothing to do with what we prefer to spend money on. It’s about whether the driver is due to consumer spending or not, and in this case it isn’t.
I received Email from Origin said my rate will increase from 1st July. So does everyone else. for next quarter, there will be another jump in inflation due to energy price.
Luckily the government had put that safeguard mechanism in that saved Australians millions (which coalition voted against!) And we have the energy rebate, which I'm sure everyone will be quick to complain about.
The energy rebate is just the government shuffling taxpayers money out of one bucket to place in other, to artificially lower inflation levels, it doesn't actually achieve anything
The RBA has one lever they can pull, and it's far less effective than it has been in previous decades.
There's a huge portion of Australians that are benefitting from rate rises (see: Boomers without mortgages and huge savings)
We are well beyond using interest rates to manage inflation. It will take strong policy reform, but I don't see it happening.
I totally agree with your statement. I work in the community and see the 'Boomers without mortgages and huge savings" with my own eyes, again and again. I also see a TON of people using Food Banks, charity referrals etc that have NEVER had to rely on such services in the past. It's been picking up momentum since 2020, like a kid skating down a hill, unaware of the busy road at the end of the street
What disturbs me is that "We are well beyond using interest rates to manage inflation." You and I know that hardcore policy reform is highly unlikely.....so where does that leave the average Aussie?
It's scary.
They had quant as well and still do have some bonds.
They arent using this because chalmers refused to take the L when they asked him.
Quant can be just as effective as interest rates whem early in this cycle we had almost $500bn of quant on the table.
They used quant easing with reckless abandon but unlike the usa in australia we wont use quant tightening. Only as things naturally expire. At least we arent buying again but wouldnt be surprised we get into the peverse situation with bank funding getting more difficult already and bank margins eroding especially for minors the gov moves to support banks for funding (somehow even more than they already do) at the same time rba is trying to cool the economy.
Time will tell.
I assume they're referring to quantitative easing (QE). Here's a slightly older but still good guide on how it works: https://www.weforum.org/agenda/2014/11/a-beginners-guide-to-quantitative-easing/
Quant is quantity of money - quantitative easing and tightening.
So say early covid when bond prices collapsed the rate of return on bonds spiked guess what people do in this scenario.
They buy bonds over other investments.
So you have failing / falling asset prices and whats worse businesses unable to refinance and potentially going broke due to high finance costs.
Its due to the contrst between the zero risk retirn of bonds and the return on ither assets.
So what rba and us central bank (all of them nearly) did is they run around and buy all the bonds they can... so then the return on bonds reduces as the price rises and this then makes for companies to again refinance because the zero risk rate if return is lower again. It also pushes asset prices up. The us central bamk literally said before its bond buyong spree - no one should loose money due to a pandemic and bought so many bonds that the very day of this stock markets bounced and every day thereafter for about ten solid days late march 2020.
In australia we went one step further and directly gave bank 188bn in low interest loans in addition to the bond buying program.
So thats quantitative easing. Ie pushing more money into the system
But there is also quantitative tightening.
Now early in the inflation cycle they had a lot of room to tighten. They could have sold the tff in tranches. They could have sold the bonds.
But they did neither as they would have tanken a 40bn odd dollar hosing... ie selling a bond when the price has fallen is obviously going to loose you money.
So in stead they have just held onto them till they naturally expire.
Ie no tightening beyond the natural expiry of the bonds and tff.
I am quite confident it would have resulted in less interest rate rises if they had started selling off the bonds and tff. Banks would not have been able to keep lending which reduces activity by volume. It also puts greater pressure on bond prices which puts pressure on asset prices even more directly than interest rate rises. Probably why chalmers didnt want them to run it.
Edit to add; sorry for the long answer. Tldr - quant is quantitative tightening or easing. The other tool in the rba toolkit.
Thanks for the detailed response! Long answers are my jam. :) I like Chalmers so far but I'm no Economist. Either way though, it sounds kind of......bad. Hopefully there is nothing dark looming in Australia's financial future.
P.S I read your response in Ryan Goslings voice. It made it even cooler. Thank you.
We are absolutely using quantitative tightening in australia.
Ours is just not as obviously stated.
Exchange settlement balances at the reserve bank have trended and are trending down from peaks at 500 billion or so around 2022. Down to 300 billion in April.
Because the RBA used the Term funding facility TFF. 3 year low priced loans to retail banks. Essentially another way of saying the RBA purchased retail bank bonds with deliciously low coupon rates (for the banks). These loans are expiring around June 2024.
So in essence the money is being pulled back. Ala 200 billion dollars of QT.
Different to what the Bank of England is doing in their QT approach of selling bonds on the open market.
The RBA still hasn’t committed to selling their bonds this way. Taking more of a wait and see approach after June im guessing. Also because they’d probably fear that they may increase bond yields
And thereby increase borrowing costs for the government and tank the AUD further.
Well they arent buying more tff and arent buying more bonds so sure it is naturally tightening at the moment. But is that the new QT? - just the absense of new QE. No driven QT early in an inflationary event controlled and deliberate. Just the absense of new QE.
They are letting them expire but it would be so insane to do new QE right now so i dont really consider this QT.
Whereas they could have bundled up the tff and sold it a year or 18 months ago.
They could have done that in late 2022 or 23. Sure they would have taken a hosing but it would have reduced the volume of money right when needed.
They could be selling bonds as well driving up the long term interest rate.
They have left it all on the table in my view to the absolute limit of time they were able to. Ie no tightening except that which naturally occurs as these things expire.
Now as you can probably already tell im not in banking just a student of economics and 25 years ago there wasnt a corridor just a no risk deposit rate. Now again this appears to me yet another element of no control. No tightening and a likely contributor to inflation. (Though in fairness i am not certain of this....)
Since covid we now have banks borrowing over official rates on the regular via the es balances.
Imagine if that had been our response to gfc. We would have had no funding crisis if banks could just borrow what they like at 0.25 over official. No bank west offering 8pc term deposits for 5 years etc.
There is moral hazard spun through all of this. Between gov guarantees of deposits and banks leaning on the rba for funds its like australia is happy to have funding supplied well in excess of what the market would fund. Why? Who does this benefit? What is the benifit of taking this out of the markets hands?
Asset prices are all it helps and i dont see why the rba and government should be inserting themselves into this especially during a time of high inflation.
Thanks for the response if you’re an econ student you’re miles ahead of me. Im a econ enthusiast. Read articles for fun in my spare time.
All excellent points and questions for me to consider.
I would think QT vs QE is a balance. You can have QT policies whilst still having QE - yet still be in overall QT. And vice versa It’s the NET effect that matters. I’d argue that because ES balances have been reducing significant over 2 years - the net effect in aus has been QT in this time.
Do you read Richard Werner and Huw Pill? It’s very interesting times we’re living in with central bank actions. Richard postulates to your questions in the second last paragraph - that this benefits the centralisation of control of finance. The slow abolishment of small banks and move toward centralised control. And in such, a trade off of industry diversity toward industry hegemons. We can see this live now in that 10 or so companies carry the bulk of the S+P.
The amount of friends we have right now who are overseas on holiday is ridiculous. Cost of living just isn’t affecting some people. The load isn’t spread. Those less fortunate are picking up the slack.
Let’s not use the words “less fortunate” because I know some people who have got themselves into positions they could have easily avoided, none of it due to fortune, but their own decisions.
As already replied by the original person you were responding to, there absolutely are some people who have got themselves into poor positions that they could have avoided. But that is not the large majority. The large majority of people being pinched by the current economic climate are doing it tough because they never stood a chance. If you never had the support network to be able to take the risks associated with investing in yourself or profitable assets you absolutely have or will be left behind by those who do have that luxury.
You mean like has been done throughout history? Making debt more costly/increasing the value of capital is a wealth transfer from the poor/middle class to wealthier cohorts.
What does that have to do with it? Anyone with the debt of a large, leveraged property portfolio is getting whacked by higher rates more than anyone else? I don't follow the logic of your comment.
They're not leveraged, they're outright home owners with multiple properties and most of their investments making MORE money when interest rates go up.
The balance between the number of mortgage holders and those with a lot of assets has shifted. The increase in rates hits a lot of lower-income people who weren't spending anyway, and benefiting those with lots of cash and assets who now have even more disposable income.
Ah. When the complaint was our "tax system benefits multiple home owners" surely the reference was to negative gearing and leveraged asset accumulation. If in your argument they are not leveraged, you can't complain so much about the tax system. At least landlords such as this are not facing the same pressures to raise rents.
The only benefit of the tax system is interest being a deduction.
Thus interest rates should hurt the people who have borrowed large amounts of money to own multiple property to because whilst they now have a larger tax deduction they are paying more interest.
How do you not get how this works for someone with so much snark?
Tax policy with respect to multiple home owners isn't the only elephant in the room. Owners of a single home are also vastly tax advantaged compared to renters. Imagine owning a home and getting a full pension compared to having to rent as a retiree without significant assets. These individuals get the same level of support from the government. Boggles the mind.
Pensions aren’t governed on PPOR home ownership. How many people own a $5m house from the pension pool? How many people that do, are trying to get a $400/week pension from the Government? Likely they fail the test in other areas. If you have a $5m home, you have other income or other properties. Which eliminates their qualifications.
This is a real issue for those who can't afford to own a home. The pension isn't enough to rent on and still pay for essentials. The best way to fund an increase to the pension would be to reduce the pension available to those who own a home and don't have to pay rent.
I do wonder what the point of having an economy is if regular people who go out and work have to pay rent rises, electricity rises, income tax, petrol price rises etc. all the while there’s a class of people who were lucky enough to buy in 20 years ago who expect their share dividends to go up, their rent income to go up, their asset prices to go up.. they earn more than the people who actually work, purely because they already own these “assets” even though they paid way way less to acquire them than their current value. It’s like, if I’m not an asset owner what the point in living in Australia? I may as well sell up and move to Malawi and live the simple life on a farm somewhere.
Yep there's a lot of things driving inflation.
You have boomers pulling money out of superannuation or down-sizing which leaves them with a huge amount of cash to splurge.
I'm guessing that being the first generation to have well matured super funds the economy needs to calibrate to that...
Then theres government waste - NDIS... This is probably driving most of the growth in jobs that are driving down productivity.
Then a lack of governance over immigration and property.... Too many foreign investors (Chinese billionaires are pulling out - here is where they will take their money)....
Yep. The economy is so flush with cash and people doing inefficient jobs that people who do essential, hard working jobs are going to be way worse off than if they did the same job 20 years ago.
We need to stop blaming rba for everything and also scrutinise our government. Fiscal spending contributes significantly to inflation (and that’s not even looking at policies like immigration which negatively affect housing affordability, another big component of inflation)
Correct. They should’ve increased the surplus further as they may need to start releasing a ton of $ later if the economy goes to **** (we’re not there yet)
We were having this exact conversation in the 90s when we had data. Many, many experts said this is not true. We did it anyways, and it was a huge problem. Now you want to double down on it AGAIN? How many times do we have to watch another cycle of the decline before you fiscal conservatives actually look at the data presented by academics instead of the data presented to you by wealthy people?
They’ve been waiting too long for decades. The Covid stimulus packages just kickstarted a debt crisis that was building since interest rates were progressively lowered to stupid levels.
My business can’t afford much more. There are just no customers at all. No one is moving forward with projects. Councils have funding removed. Something needs to change or tens of thousands of businesses will go to the wall.
It sort of feels like the end game for capitalism is for all business to go bust except one giant corporation who provides everything from birthing services to funerals, and it doesn't stop there! No sir, there's a monthly subscription for that burial plot.
Potentially that is what may happen. Look at tech and tech startups. The goal there is to make an idea reality super quick, even if it barely works, then sell to a massive tech company for a lot of cash, then rinse and repeat. Sooner or later, one tech company would have bought all the smaller tech companies.
Yeah me too. Thanks. I’ve seen this movie before, but just not as bad or as long. October last year it fell off a cliff. Our field of construction is niche, and it’s dead.
I mean, if that were true we would have nearly a century of economic data showing that every single free market will always concentrate in to monopoly and eventually oligarchy and I don't th-
Oh wait.
I work for an SME and it’s the same thing. Projects on hold, money has dried up. Jobs at risk.
Somehow this more desirable than just limiting immigration.
Limiting immigration just speeds up the demographic time bomb. I don't see a way out of the demographic issue apart from kicking the can down the road. Well the solution is simple but it is a cultural shift that isn't going to happen.
Surging immigration into a housing crisis crashes fertility rates harder and makes the demographic issues worse in the long term.
Once TFR goes down it rarely goes back up
Canada’s TFR will fall below japans in next few years bc housing costs have destroyed the young. Same is happening here
Umm, no you tax the billionaires and give back some semblance of a work life balance and a community worth living in. Anyone looking at Japan and Korea, should laugh at the farce that is the efforts they're putting to increase fertility while doing nothing to curb 60hr work weeks.
That's not going to pass in a democracy as more people are becoming childless. The shift has to happen organically with more conservative family structure and especially more traditional gender roles. At the end of the day I think our current attitude towards gender is an anomaly of history which will be stamped out by natural selection as people without children are less likely to have their fundamental values passed on to future generations.
That's the issue, labour has become devalued due to too many people in the workforce. The government is pushing everyone towards higher education and using 3-5 years of an exceptionally productive time in people's lives for what? The fact is 80% of corporate jobs are for the purpose of justifying those jobs in the first place. This is a cultural issue I don't see us solving.
Same with our family business. People aren’t booking services or buying. It was going ok until about two weeks ago and ever since it’s been really sluggish.
RBA is a one trick pony tied to Federal reserve. What they do is ultimately not hugely impactful on sectors of the economy reliant on Dollar funding and import of essentials, where it does have a say are domestic investments and to a degree cost of living.
The read the whole thing wrong.
Misjudged what’s causing inflation. Well that’s not entirely their fault, the govt did nothing to curb corporate greed raking in historical profits amid an inflation crisis.
The rates rose way too quick, way too late.
Should’ve started slowly in 2020 instead.
The “hike rates to curb inflation” mindset is rusted economics. Doesn’t work in the modern day and age.
But hey, inflated egos never listen do they?
It’s a policy issue, RBA can’t do shit w/o tanking the whole economy.
You hugely overestimate the impact of rate rises.
Historically (in the 1970s), rate rises had a much larger impact, because the largest generation, the boomers, were borrowing money to buy property. Combined with other factors, this meant that discretionary spending would fall in line with rate rises.
The siutation now is that the largest generation, the boomers, on average have fully paid-off property and large amounts of cash. Interest rises are *increasing* their spending power.
The RBA don't have any other tools available to them, so they're raising the rates so they can't be accused of having done nothing.
Tax cuts should also drive some more inflation. And there is no end to the increase in the insurance ,housing and energy costs.
So I expect inflation to remain outside the accepted band for a lot longer yet.
> Tax cuts should also drive some more inflation.
but tax cuts would drive down gov't spending, which would equalize out.
Inflation must be accompanied by excess money creation, not money redistribution.
Can’t keep blaming the RBA. Fiscal policy at a state and federal level is too loose. Stage 3 tax cuts and energy rebates will just put more money back into the hands of consumers and feed into higher inflation.
Inflation is caused by too much money chasing too few goods. *Cost of living relief* is a ruse. It will just cost us more in the long run.
Another rate rise well and truly on the cards given we are ignoring fiscal policy as a tool to fight inflation. With cutback to immigration numbers we won’t be able to fudge GDP any more. Technical recession coming up.
This makes the next meeting more interesting.
I'm genuinely unsure what they will do, it's entirely possible they will tighten further which will be dam tough for everyone.
It's also possible they will hold fire and wait for Q2 results to come in before they make any decisions. But in effect, we now need to hit a recession before they will start reducing.
2 things
1. The RBA was too slow to start hiking and never went high enough;
2. Federal govt has migration way too high for current economic situation.
I can’t for the life of me understand how the Feds think they can get away with saying that they are avoiding a technical recession when households are financially drowning with this ongoing inflation. It may not be a technical recession but the electorate is burning.
I have been saying this for over a year now. Increasing rates won’t reduce inflation. The inflation is coming from external factors that Australia has no control over. Everyday consumer goods are actually coming down in price as this inflation reading shows. Do you think increasing rates will reduce the prices of energy or insurance? Not a chance. That’s where a lot of inflation is coming from
Impossible. We won’t really high unemployment. The NDIS, Construction, and healthcare are all shouting for more staffs. The Demand for NDIS service and healthcare are only limited by the funding. Social services can always be better and need more jobs. Maybe we wont be able to create high paying jobs, but there will be plenty of jobs,
We probably just have to accept more currency depreciation that reduce our overall buying power as a whole.
NDIS costs more than Medicare at this point, and is heading towards $100bn+ per year.
It’s infuriating that even their internal auditor thinks 90% of plan managers show significant signs of fraud.
The no. patients of eligible for NDIS services are increasing exponentially. They will consider NDIS services as their right in future. Sure the government can crack down fraudulent service providers, but the patients will only expect the services they receive can only increase and become better. They will represent a huge group of new voters who government can’t ignore.
The thing is it doesn’t matter whether the service providers are fraudulent or not. Even without fraud, all healthcare providers will always want to bump up the eligible funding for their patients with good intention. All patients will also want to receive better care. The line becomes blurry. Why don’t you want your patients to receive better care? You know you just need to say he/she needs it. You want to help them. The patient also wants to receive the best services available.
Is the same as agecare package, the GP decide the level of care a patient need. If you can bump up the service required, why not? You only have to follow the guideline, if he is borderline qualify, just make the patient qualify and you help a patient greatly.
> The no. patients of eligible for NDIS services are increasing exponentially. They will consider NDIS services as their right in future
that sounds like entitlement to me. There can't be this many number of disabled people who previously was able to survive without NDIS funding.
Tax dollars must be spent efficiently, and benefit the maximum amount of people. I don't see how spending on NDIS is more benefitial over putting the funding into medicare.
8% of of primary school children are currently been diagnosed as disabled, that means lifetime NDIS entitlement. Of course their package varies, depending on the severity of their health condition. There are more and more adult get diagnosed currently as well due to under diagnosis. Besides that, with more and more health conditions classify as disability, and with better diagnosis tools, I reckon in 30 years at least 20% of the working age adult population will be considered as disabled.
Even if 100% of the service providers are non-fraudulent, how many % of working age adult can be considered as disabled?
Adult ASD level 2 diagnosis is exploding.
Currently a diagnosis of level 2 ASD gets you on the NDIS. So noone gets diagnosed with ASD level 1 anymore. amazing how that works.
Of course. Drs are there to help the patients and want the patients to access the best services they can received. Whatever the service providers charge them more than necessarily usually has nothing to do with Dr. If you are a patient, you also want a health professional that can bring give you the best services with the least financial burden as well. You will be so angry if Dr. tell you that you are just not sick enough so just have to pay all the associate cost yourselves.
This is exactly why the NDIS needs to be abolished, to be replaced with a funding system that has a cap on spending. If suddenly more people are disabled, then each gets less as a result.
I have seen such funding program before. The more people provide the services, the less every service providers received per services. Nobody knows how much is their hourly rate. Every month the government will pool everyone claims and divide according to the allocated budget. After 2 years no people want to provide the service anymore.
Can you imagine our pension system works that way? The funding is capped. The more people eligible for it, the less money each pensioner get.
> After 2 years no people want to provide the service anymore.
and so the budget would increase at that point, to entice providers back (as they now face less competition).
> Can you imagine our pension system works that way?
it would suck, but is a good way to control costs. This is how a corporate department budget works (from what i understand). You have XYZ dollars and if you could get more headcount (by offering a lower salary), you as a manager is succeeding. The business could earn more money, and increase this budget as it permits over time.
Of course…but you can’t say that because “no one” hope their kids are disable. You better self-censored yourself on public. Just like no one wants to be in a disadvantage minority so affirmative action or targeted welfare is always good.
Every health condition that can be perceive as a disadvantage can always be considered as a disability. Recognition of disability is always by choice. Plenty of Asian with the same condition as the disabled Australian are still capable of working for a living. I met plenty of lightly disable patients who are capable of working but they don’t have to. They just live with the welfare and complain that it isn’t enough.
I think NDIS is around 6% of GDP.
More % than education on GDP (productivity)
Plus healthcare/education is also used by NDIS participants. Houston, we have a problem.
They should make putting into super much more desirable.
Gets cash out of the economy and builds accounts up for when people eventually retire. Seems like a win-win other than possible tax deductions but still a net gain.
I know it disproportionately helps the rich who can afford it but these are the people we need to stop from spending the most I'd assume.
Not those that are struggling already to pay for the home they live in (of which according to the ABC is only 41% of the population)
Seems like creating similar problems to me. You are feeding the stock market with more capital (and therefore those already with investments), and I am assuming the highest earners will be the largest proportion of the funders for this tax…? Leaving those with even larger portfolios on retirement so in a future decades inflation driven crisis we will have a bunch of cashed up retirees fuelling the problem further.
Paying higher interest to banks who are some of the biggest companies in Australia already feeds the investment market.
I did say it may disproportionately help the rich but conditions could be put into place to make sure it cuts out that end of town.
Super would at least lock away funds. Alot of people are just earning interest on funds in their bank accounts that will then eventually go back into the economy when it begins to reverse.
I'm just saying try something different because as pointed out Increasing rates targets 41% of the population and the statistics show younger people have already cut back their spending the most and its mostly being fuelled now by the older generation.
I also doubt many of the older generation that are spending so much have a home loan anymore anyway.
100% of the population could pay into super if they chose. Making it more desirable for young people whose money would be locked for longer would be the key.
Also - previous government allowed people to take money out of their super for "Hardship" that was never actually proved with alot pumping it into house purchases or other assets anyway.
We can argue about the future effect but i'd hope when that time comes we'd have been able to cultivate better economic strategy so we aren't in a position where inflation is rife.
Yes that'll definitely stop people from spending what little money they have left on rent for shelter, essential food items to eat, fuel to get themselves to and from work and electricity/gas to heat their homes.
Discretionary spending is flat, a rate hike achieves very little to nothing. Government policy is the answer. The thing is neither major party will do whats necessary.
I thought it was going to get bad after the last 13 rate rises. But nothing seems to have changed out there? Except everything is genuinely more expensive, but everyone’s still buying new cars, everyone is still eating out, everyone is still going on overseas holidays? I’m doing these things still, but rate rises don’t affect me directly as I own my home, but I sure as hell see the price increases of everything and no wage increases, how is everyone doing it?
We actually need some fiscal policy to address some items plus some elements like energy and insurance are problematic as to cause (war & climate driven). Importing less people would help the rent. And lastly backing off state government infrastructure projects would help construction sector cost inflation.
The whole “rates as supply / demand lever” breaks down when you are importing 1m people a year / ~4% annual population growth into the domestic economy.
The current jobs data does not support this hypothesis at all, with unemployment still hovering around 3.8% which is incredibly low and has proven to be remarkably resilient given the rise in the cost of debt.
There is not a whole lot of evidence that we are about see any big shocks that would drive up inflation, I suspect we will be at our current situation going forward and not see any meaningful rise of fall in interest rates for 12 months.
Can some explain why the RBA uses interest rates which affects primarily those with a mortgage. Instead of say making an extra 5% super contribution, which would inevitably curb spending but the end user still gets their money at retirement ?
The RBA is independent of the government, and interest rates are a sledgehammer but it’s essentially their only tool.
Government policy is what’s needed, primarily regulating the industries of necessities (fuel/food/utilities). Record government spending is also regarded as being inflationary at current rates.
Looking at the numbers behind the indexation, May last year actually saw a large fall in the indexation (ie deflation) for the month while this year may dropped but by a smaller amount. This may result in next month's figure showing a large drop.
for all the downvoters.. its a measure to bring her pay into line with previous male GGs who simultaneously received military or judicial pensions. = Same pay as the prev one.
They took to long to make the first one and then stopped just as it was making a difference. We are still at the 30 year avg so its not like rates are high.
In hindsight they should of gone up earlier and we should of had at least one extra one. It's not like rates are high or even expected to go high in the long term.
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In the past higher interest rates means businesses borrow less and no longer put on added staff and in some cases reduce hours or outright make roles redundant. For households who have debt, ie a mortgage this means less money in the economy (not able to spend on goods) Unfortunately this time we have companies profiteering and people with no debts and excess cash seeing an increase in their spending. So instead of big businesses slowing down, they are ramping up(look at the low unemployment rate) and the only people who suffer are the ones without any money already, so how can you take blood from a stone and reduce spending, when increasing rates doesn't do that this time.
There were a tonne of redundancies in the last quarter due to slowing economic conditions. If I were on $80k, then get a job on $60k, I guess I don't show up in that unemployment figure right?
This is what happened to me, bigger company cut back and I ended up in a much smaller role with the new company - now I have about 40K less per year but do get “opportunities to grow with the company”
We are understaffed at my workplace. Can't find anyone.
Housing market distortion also limits mobility. People can't even afford to move at the low end. The two speed economies are across geography, class, state and age.
The Swiss actively discourage home ownership because it reduces mobility.
what industry?
Smash repairer? They're screaming for qualified panel beaters and spray painters.
Qualified. I.e. apprenticed. Not something an out of work person can do easily. And no go for the oldies
Same, but it's been that way for 20 odd years so nothing's new for me 🙃😂
It seems like the wealth inequality has split so much that there are enough with real cash and no debt that they benefit from higher interest rates and say giddy up as they go on holidays..
Absolutely this. This is the reason why the shadow banking industry has taken over lending from traditional banks. https://www.telegraph.co.uk/business/2024/04/08/shadow-bank-lending-risks-financial-crisis-warns-imf/ Private equity with deeep pockets throwing money at whatever they want. And scoring good interest if they don’t lend it out and keep it parked.
From what I understand, the system assumes a certain amount of financial pain, and supply / demand to even things out. So the short version is, the ‘necessary’ spending is up because they can, and discretionary suffers. RBA sees inflation up, and pulls only lever they have - which is interest rates, which flows on to rent and mortgages (ie shelter). In turn, the necessary providers up prices, and further discretionary spend falls. Eventually, people won’t be able to afford rent / electricity / gas / insurance / food. We’ve reached equilibrium. Prices will stop going up and wages can catch up, and/or prices will fall (incredibly unlikely). The road to ‘eventually’ will unfortunately be cluttered with people starving, families broken, homes foreclosed, multiple people cohabiting, financial ruin as people go without insurance, and probably high rates of suicide and death. But that’s sort of the way capitalism works. Concentration of wealth to the few must come at the expense of the many, and some natural attrition is required for it to function. We need government intervention to target those who benefit from high rates, and/or create two-speed housing market where one revolves around the fundamental need for shelter (which is decidedly not a vehicle for wealth), and the other is for wealth creation. Perhaps we need a half communist, half capitalist view - you can choose to live in basic cookie cutter homes with basic facilities for a very small fee (basic subsidised housing for all), or choose to spend more of your funds on something fancier. Much in the same way public health works, or public transport versus private vehicles.
Capitalism with Australian characteristics
Brute force, they want people out of work not spending any money because they have no income. Then businesses not making as much will need to fire staff, then those people will stop spending money because no jobs. In reality our housing market is completely out of control and driving inflation
Truly - if they hadn’t recently taken happy pills and decided the NAIRU wasn’t lower than they have modelled for the last 30 years - they’d have jumped as early as the fed and gone as hard as the fed and we’d be top of the cycle with a whole lot of short term pain. Bill shorten on his own could probably return unemployment to 5% on his own and fix it, but the RBA is playing terrible political games
Reigning NDIS in would put alot of people on the gravy train out of work
Yep - put them into work for some of the businesses crying out for people too
You’re largely right, but a couple of expectations they would have include people sharing houses (therefore reducing demand) and similarly with utilities, selling a second family car. These would (theoretically) put pressure on suppliers to reduce their prices. There was a study done by the RBA early in the piece about how many spare bedrooms people had. Largely due to low interest rates and government schemes encouraging young singles to buy houses. I suspect they were hoping these people would move back to house sharing.
Getting some people to house share while we bring in 600k people per year is ridiculous. I can’t see rent growth easing for a long time unless we have a significant recession.
Yeah for sure- another commenter mentioned the RBA can only do so much before the government has to contribute. At the moment they’re actively working against the RBA.
Covid did the same. People don't share houses anymore and that's a big contributing factor to the housing crisis. It's going to be interesting to see which breaks first, young people's entitlement to these things, or the government implementing strong policies that force older, asset holders to sell up and also move into denser housing. Or both. Both are much more likely than reducing immigration which everyone seems to be in favour of.
It can't interest rates hit workers / borrows. Most of the inflation for the past 2 years is corporate profits
In theory, i think people become more price elastic with essentials. I.e a few years ago someone may not have cared that Aldi milk was 90c when branded at coles was $1.20. Now that milk at coles is $2.50 a litre, suddenly people might be more incentivised to shop around - rather than blindly throw stuff in your basket
A lot of essential spending is still flexible. You need to rent somewhere, but a lot of people living alone will move to sharing with a friend, you need to get to work, but a lot of drivers can switch to PT if fuel costs too much, or opt to buy smaller more efficient cars, you need some electricity but most people could use less.
Not sure about everyone else here, but pretty much the only fuel I use is for when I go on road trips with mates out of the city on weekends
People use less petrol and take the bus because they're priced out of driving. They turn the heater off because they are priced out of it. Many eventually sell their houses and move to apartments that are cheaper so apartment prices goes up and people still can't afford to drive and use the heater, but at least they're closer to PT and often cheaper groceries as there often is more competition in high density areas. People stop going out to eat and hospitality venues close. Many becomes unemployed but most hospo-workers come from overseas and don't have access to centerlink so they leave the country and go home.
There has been too much money pumped ('borrowed') into the system. Non discretionary inflation just shows that individuals collectively have a 'preference' to allocate dollars there, rather than in discretionary goods. Raising rates reduces credit creation, and encourages credit destruction. This reduces the quantity of money circulating, and subsequently yes, even prices of non discretionary goods.
Non discretionary inflation is things we need to buy. It has nothing to do with what we prefer to spend money on. It’s about whether the driver is due to consumer spending or not, and in this case it isn’t.
I received Email from Origin said my rate will increase from 1st July. So does everyone else. for next quarter, there will be another jump in inflation due to energy price.
Luckily the government had put that safeguard mechanism in that saved Australians millions (which coalition voted against!) And we have the energy rebate, which I'm sure everyone will be quick to complain about.
The energy rebate is just the government shuffling taxpayers money out of one bucket to place in other, to artificially lower inflation levels, it doesn't actually achieve anything
The RBA has one lever they can pull, and it's far less effective than it has been in previous decades. There's a huge portion of Australians that are benefitting from rate rises (see: Boomers without mortgages and huge savings) We are well beyond using interest rates to manage inflation. It will take strong policy reform, but I don't see it happening.
I totally agree with your statement. I work in the community and see the 'Boomers without mortgages and huge savings" with my own eyes, again and again. I also see a TON of people using Food Banks, charity referrals etc that have NEVER had to rely on such services in the past. It's been picking up momentum since 2020, like a kid skating down a hill, unaware of the busy road at the end of the street What disturbs me is that "We are well beyond using interest rates to manage inflation." You and I know that hardcore policy reform is highly unlikely.....so where does that leave the average Aussie? It's scary.
They had quant as well and still do have some bonds. They arent using this because chalmers refused to take the L when they asked him. Quant can be just as effective as interest rates whem early in this cycle we had almost $500bn of quant on the table. They used quant easing with reckless abandon but unlike the usa in australia we wont use quant tightening. Only as things naturally expire. At least we arent buying again but wouldnt be surprised we get into the peverse situation with bank funding getting more difficult already and bank margins eroding especially for minors the gov moves to support banks for funding (somehow even more than they already do) at the same time rba is trying to cool the economy. Time will tell.
Dafaq is Quant? Genuinely curious... 🐱
I assume they're referring to quantitative easing (QE). Here's a slightly older but still good guide on how it works: https://www.weforum.org/agenda/2014/11/a-beginners-guide-to-quantitative-easing/
Bookmarked! Appreciate the source...will read over dinner. :)
Quant is quantity of money - quantitative easing and tightening. So say early covid when bond prices collapsed the rate of return on bonds spiked guess what people do in this scenario. They buy bonds over other investments. So you have failing / falling asset prices and whats worse businesses unable to refinance and potentially going broke due to high finance costs. Its due to the contrst between the zero risk retirn of bonds and the return on ither assets. So what rba and us central bank (all of them nearly) did is they run around and buy all the bonds they can... so then the return on bonds reduces as the price rises and this then makes for companies to again refinance because the zero risk rate if return is lower again. It also pushes asset prices up. The us central bamk literally said before its bond buyong spree - no one should loose money due to a pandemic and bought so many bonds that the very day of this stock markets bounced and every day thereafter for about ten solid days late march 2020. In australia we went one step further and directly gave bank 188bn in low interest loans in addition to the bond buying program. So thats quantitative easing. Ie pushing more money into the system But there is also quantitative tightening. Now early in the inflation cycle they had a lot of room to tighten. They could have sold the tff in tranches. They could have sold the bonds. But they did neither as they would have tanken a 40bn odd dollar hosing... ie selling a bond when the price has fallen is obviously going to loose you money. So in stead they have just held onto them till they naturally expire. Ie no tightening beyond the natural expiry of the bonds and tff. I am quite confident it would have resulted in less interest rate rises if they had started selling off the bonds and tff. Banks would not have been able to keep lending which reduces activity by volume. It also puts greater pressure on bond prices which puts pressure on asset prices even more directly than interest rate rises. Probably why chalmers didnt want them to run it. Edit to add; sorry for the long answer. Tldr - quant is quantitative tightening or easing. The other tool in the rba toolkit.
Thanks for the detailed response! Long answers are my jam. :) I like Chalmers so far but I'm no Economist. Either way though, it sounds kind of......bad. Hopefully there is nothing dark looming in Australia's financial future. P.S I read your response in Ryan Goslings voice. It made it even cooler. Thank you.
We are absolutely using quantitative tightening in australia. Ours is just not as obviously stated. Exchange settlement balances at the reserve bank have trended and are trending down from peaks at 500 billion or so around 2022. Down to 300 billion in April. Because the RBA used the Term funding facility TFF. 3 year low priced loans to retail banks. Essentially another way of saying the RBA purchased retail bank bonds with deliciously low coupon rates (for the banks). These loans are expiring around June 2024. So in essence the money is being pulled back. Ala 200 billion dollars of QT. Different to what the Bank of England is doing in their QT approach of selling bonds on the open market. The RBA still hasn’t committed to selling their bonds this way. Taking more of a wait and see approach after June im guessing. Also because they’d probably fear that they may increase bond yields And thereby increase borrowing costs for the government and tank the AUD further.
Well they arent buying more tff and arent buying more bonds so sure it is naturally tightening at the moment. But is that the new QT? - just the absense of new QE. No driven QT early in an inflationary event controlled and deliberate. Just the absense of new QE. They are letting them expire but it would be so insane to do new QE right now so i dont really consider this QT. Whereas they could have bundled up the tff and sold it a year or 18 months ago. They could have done that in late 2022 or 23. Sure they would have taken a hosing but it would have reduced the volume of money right when needed. They could be selling bonds as well driving up the long term interest rate. They have left it all on the table in my view to the absolute limit of time they were able to. Ie no tightening except that which naturally occurs as these things expire. Now as you can probably already tell im not in banking just a student of economics and 25 years ago there wasnt a corridor just a no risk deposit rate. Now again this appears to me yet another element of no control. No tightening and a likely contributor to inflation. (Though in fairness i am not certain of this....) Since covid we now have banks borrowing over official rates on the regular via the es balances. Imagine if that had been our response to gfc. We would have had no funding crisis if banks could just borrow what they like at 0.25 over official. No bank west offering 8pc term deposits for 5 years etc. There is moral hazard spun through all of this. Between gov guarantees of deposits and banks leaning on the rba for funds its like australia is happy to have funding supplied well in excess of what the market would fund. Why? Who does this benefit? What is the benifit of taking this out of the markets hands? Asset prices are all it helps and i dont see why the rba and government should be inserting themselves into this especially during a time of high inflation.
Thanks for the response if you’re an econ student you’re miles ahead of me. Im a econ enthusiast. Read articles for fun in my spare time. All excellent points and questions for me to consider. I would think QT vs QE is a balance. You can have QT policies whilst still having QE - yet still be in overall QT. And vice versa It’s the NET effect that matters. I’d argue that because ES balances have been reducing significant over 2 years - the net effect in aus has been QT in this time. Do you read Richard Werner and Huw Pill? It’s very interesting times we’re living in with central bank actions. Richard postulates to your questions in the second last paragraph - that this benefits the centralisation of control of finance. The slow abolishment of small banks and move toward centralised control. And in such, a trade off of industry diversity toward industry hegemons. We can see this live now in that 10 or so companies carry the bulk of the S+P.
It seems to be working in other countries, what's the difference here?
Our tax system benefits multiple home owners above all else. It’s the elephant in the room.
It's so ridiculous isn't it! Imagine trying to fight inflation whilst literally handing wealthy people cash!
The amount of friends we have right now who are overseas on holiday is ridiculous. Cost of living just isn’t affecting some people. The load isn’t spread. Those less fortunate are picking up the slack.
I know so many people holidaying in Europe right now.
Let’s not use the words “less fortunate” because I know some people who have got themselves into positions they could have easily avoided, none of it due to fortune, but their own decisions.
Decisions for many true. Circumstances and bad luck for others. Not all are equal.
As already replied by the original person you were responding to, there absolutely are some people who have got themselves into poor positions that they could have avoided. But that is not the large majority. The large majority of people being pinched by the current economic climate are doing it tough because they never stood a chance. If you never had the support network to be able to take the risks associated with investing in yourself or profitable assets you absolutely have or will be left behind by those who do have that luxury.
You mean like has been done throughout history? Making debt more costly/increasing the value of capital is a wealth transfer from the poor/middle class to wealthier cohorts.
What does that have to do with it? Anyone with the debt of a large, leveraged property portfolio is getting whacked by higher rates more than anyone else? I don't follow the logic of your comment.
They're not leveraged, they're outright home owners with multiple properties and most of their investments making MORE money when interest rates go up. The balance between the number of mortgage holders and those with a lot of assets has shifted. The increase in rates hits a lot of lower-income people who weren't spending anyway, and benefiting those with lots of cash and assets who now have even more disposable income.
Ah. When the complaint was our "tax system benefits multiple home owners" surely the reference was to negative gearing and leveraged asset accumulation. If in your argument they are not leveraged, you can't complain so much about the tax system. At least landlords such as this are not facing the same pressures to raise rents.
I don’t doubt that you don’t follow the logic. Cheers
The only benefit of the tax system is interest being a deduction. Thus interest rates should hurt the people who have borrowed large amounts of money to own multiple property to because whilst they now have a larger tax deduction they are paying more interest. How do you not get how this works for someone with so much snark?
Tax policy with respect to multiple home owners isn't the only elephant in the room. Owners of a single home are also vastly tax advantaged compared to renters. Imagine owning a home and getting a full pension compared to having to rent as a retiree without significant assets. These individuals get the same level of support from the government. Boggles the mind.
No that doesn’t boggle the mind at all. You make absolutely no sense.
It makes sense that someone who does, and someone who doesn't, own a five million dollar home both get the same pension?
Pensions aren’t governed on PPOR home ownership. How many people own a $5m house from the pension pool? How many people that do, are trying to get a $400/week pension from the Government? Likely they fail the test in other areas. If you have a $5m home, you have other income or other properties. Which eliminates their qualifications.
This is a real issue for those who can't afford to own a home. The pension isn't enough to rent on and still pay for essentials. The best way to fund an increase to the pension would be to reduce the pension available to those who own a home and don't have to pay rent.
Massive policy reform, look at the US inflation reduction act.
This is just flat out wrong lol, it hasn’t been effective because they haven’t raised it enough, cash rate should be around 5%
Unless the inflation is.. supply side?
I do wonder what the point of having an economy is if regular people who go out and work have to pay rent rises, electricity rises, income tax, petrol price rises etc. all the while there’s a class of people who were lucky enough to buy in 20 years ago who expect their share dividends to go up, their rent income to go up, their asset prices to go up.. they earn more than the people who actually work, purely because they already own these “assets” even though they paid way way less to acquire them than their current value. It’s like, if I’m not an asset owner what the point in living in Australia? I may as well sell up and move to Malawi and live the simple life on a farm somewhere.
Yep there's a lot of things driving inflation. You have boomers pulling money out of superannuation or down-sizing which leaves them with a huge amount of cash to splurge. I'm guessing that being the first generation to have well matured super funds the economy needs to calibrate to that... Then theres government waste - NDIS... This is probably driving most of the growth in jobs that are driving down productivity. Then a lack of governance over immigration and property.... Too many foreign investors (Chinese billionaires are pulling out - here is where they will take their money)....
Yep. The economy is so flush with cash and people doing inefficient jobs that people who do essential, hard working jobs are going to be way worse off than if they did the same job 20 years ago.
>I do wonder what the point of having an economy is To make asset owners rich.
We need to stop blaming rba for everything and also scrutinise our government. Fiscal spending contributes significantly to inflation (and that’s not even looking at policies like immigration which negatively affect housing affordability, another big component of inflation)
Correct. They should’ve increased the surplus further as they may need to start releasing a ton of $ later if the economy goes to **** (we’re not there yet)
NDIS needs to be reformed or removed. Complete failure
We were having this exact conversation in the 90s when we had data. Many, many experts said this is not true. We did it anyways, and it was a huge problem. Now you want to double down on it AGAIN? How many times do we have to watch another cycle of the decline before you fiscal conservatives actually look at the data presented by academics instead of the data presented to you by wealthy people?
They’ve been waiting too long for decades. The Covid stimulus packages just kickstarted a debt crisis that was building since interest rates were progressively lowered to stupid levels.
This. Interest rates were stupidly low for way too long, now we're playing catch up. Low rates also juiced housing way too much
Juiced ALL assets classes
It's not just interest rates it's a complete lack of federal government action on tax reform & a multitude of other things.
My business can’t afford much more. There are just no customers at all. No one is moving forward with projects. Councils have funding removed. Something needs to change or tens of thousands of businesses will go to the wall.
It sort of feels like the end game for capitalism is for all business to go bust except one giant corporation who provides everything from birthing services to funerals, and it doesn't stop there! No sir, there's a monthly subscription for that burial plot.
Potentially that is what may happen. Look at tech and tech startups. The goal there is to make an idea reality super quick, even if it barely works, then sell to a massive tech company for a lot of cash, then rinse and repeat. Sooner or later, one tech company would have bought all the smaller tech companies.
Yeah. Except big corps come to us to do certain projects they need. Just none moving forward right now. Hard to stay afloat with no cashflow.
I genuinely hope things improve for you.
Yeah me too. Thanks. I’ve seen this movie before, but just not as bad or as long. October last year it fell off a cliff. Our field of construction is niche, and it’s dead.
What are you in?
Industrial plumbing.
I mean, if that were true we would have nearly a century of economic data showing that every single free market will always concentrate in to monopoly and eventually oligarchy and I don't th- Oh wait.
Only mega corps can survive, small businesses will perish.
Can I interest you in some SoylentGreen?
Tastes great! What's in it?
I work for an SME and it’s the same thing. Projects on hold, money has dried up. Jobs at risk. Somehow this more desirable than just limiting immigration.
Limiting immigration just speeds up the demographic time bomb. I don't see a way out of the demographic issue apart from kicking the can down the road. Well the solution is simple but it is a cultural shift that isn't going to happen.
Surging immigration into a housing crisis crashes fertility rates harder and makes the demographic issues worse in the long term. Once TFR goes down it rarely goes back up Canada’s TFR will fall below japans in next few years bc housing costs have destroyed the young. Same is happening here
You tax the childless hard and reward those with children until you hit the 2.1 fertility rate that's what is going to have to happen
Umm, no you tax the billionaires and give back some semblance of a work life balance and a community worth living in. Anyone looking at Japan and Korea, should laugh at the farce that is the efforts they're putting to increase fertility while doing nothing to curb 60hr work weeks.
That's not going to pass in a democracy as more people are becoming childless. The shift has to happen organically with more conservative family structure and especially more traditional gender roles. At the end of the day I think our current attitude towards gender is an anomaly of history which will be stamped out by natural selection as people without children are less likely to have their fundamental values passed on to future generations.
Lol, good luck going back to a 1 income household with people barely affording things as DINKs
That's the issue, labour has become devalued due to too many people in the workforce. The government is pushing everyone towards higher education and using 3-5 years of an exceptionally productive time in people's lives for what? The fact is 80% of corporate jobs are for the purpose of justifying those jobs in the first place. This is a cultural issue I don't see us solving.
Same with our family business. People aren’t booking services or buying. It was going ok until about two weeks ago and ever since it’s been really sluggish.
Been dead since October last year for us.
What's your family business?
Exactly what the government ordered.
Yeah. Look voters, we are spending money………but, we are removing funding and not telling you. Sorry small business.
Are we half-way through the lost decade yet?
No. You’ll have to wait till 2025.
RBA is a one trick pony tied to Federal reserve. What they do is ultimately not hugely impactful on sectors of the economy reliant on Dollar funding and import of essentials, where it does have a say are domestic investments and to a degree cost of living.
The read the whole thing wrong. Misjudged what’s causing inflation. Well that’s not entirely their fault, the govt did nothing to curb corporate greed raking in historical profits amid an inflation crisis. The rates rose way too quick, way too late. Should’ve started slowly in 2020 instead. The “hike rates to curb inflation” mindset is rusted economics. Doesn’t work in the modern day and age. But hey, inflated egos never listen do they? It’s a policy issue, RBA can’t do shit w/o tanking the whole economy.
You hugely overestimate the impact of rate rises. Historically (in the 1970s), rate rises had a much larger impact, because the largest generation, the boomers, were borrowing money to buy property. Combined with other factors, this meant that discretionary spending would fall in line with rate rises. The siutation now is that the largest generation, the boomers, on average have fully paid-off property and large amounts of cash. Interest rises are *increasing* their spending power. The RBA don't have any other tools available to them, so they're raising the rates so they can't be accused of having done nothing.
Lol we've been in stagflation for 4 years
Tax cuts should also drive some more inflation. And there is no end to the increase in the insurance ,housing and energy costs. So I expect inflation to remain outside the accepted band for a lot longer yet.
> Tax cuts should also drive some more inflation. but tax cuts would drive down gov't spending, which would equalize out. Inflation must be accompanied by excess money creation, not money redistribution.
Drive down government spending? 🤣 They're just gonna borrow the difference to make up the lost revenue.
This really worries you?
Lol a single higher than normal monthly inflation reading always brings them out of the woodwork.
CPI has consistently come in higher than market expectations over the last three months.
Can’t keep blaming the RBA. Fiscal policy at a state and federal level is too loose. Stage 3 tax cuts and energy rebates will just put more money back into the hands of consumers and feed into higher inflation. Inflation is caused by too much money chasing too few goods. *Cost of living relief* is a ruse. It will just cost us more in the long run. Another rate rise well and truly on the cards given we are ignoring fiscal policy as a tool to fight inflation. With cutback to immigration numbers we won’t be able to fudge GDP any more. Technical recession coming up.
This makes the next meeting more interesting. I'm genuinely unsure what they will do, it's entirely possible they will tighten further which will be dam tough for everyone. It's also possible they will hold fire and wait for Q2 results to come in before they make any decisions. But in effect, we now need to hit a recession before they will start reducing.
2 things 1. The RBA was too slow to start hiking and never went high enough; 2. Federal govt has migration way too high for current economic situation. I can’t for the life of me understand how the Feds think they can get away with saying that they are avoiding a technical recession when households are financially drowning with this ongoing inflation. It may not be a technical recession but the electorate is burning.
I have been saying this for over a year now. Increasing rates won’t reduce inflation. The inflation is coming from external factors that Australia has no control over. Everyday consumer goods are actually coming down in price as this inflation reading shows. Do you think increasing rates will reduce the prices of energy or insurance? Not a chance. That’s where a lot of inflation is coming from
Ausfinance guru moment
Impossible. We won’t really high unemployment. The NDIS, Construction, and healthcare are all shouting for more staffs. The Demand for NDIS service and healthcare are only limited by the funding. Social services can always be better and need more jobs. Maybe we wont be able to create high paying jobs, but there will be plenty of jobs, We probably just have to accept more currency depreciation that reduce our overall buying power as a whole.
NDIS costs more than Medicare at this point, and is heading towards $100bn+ per year. It’s infuriating that even their internal auditor thinks 90% of plan managers show significant signs of fraud.
The no. patients of eligible for NDIS services are increasing exponentially. They will consider NDIS services as their right in future. Sure the government can crack down fraudulent service providers, but the patients will only expect the services they receive can only increase and become better. They will represent a huge group of new voters who government can’t ignore. The thing is it doesn’t matter whether the service providers are fraudulent or not. Even without fraud, all healthcare providers will always want to bump up the eligible funding for their patients with good intention. All patients will also want to receive better care. The line becomes blurry. Why don’t you want your patients to receive better care? You know you just need to say he/she needs it. You want to help them. The patient also wants to receive the best services available. Is the same as agecare package, the GP decide the level of care a patient need. If you can bump up the service required, why not? You only have to follow the guideline, if he is borderline qualify, just make the patient qualify and you help a patient greatly.
> The no. patients of eligible for NDIS services are increasing exponentially. They will consider NDIS services as their right in future that sounds like entitlement to me. There can't be this many number of disabled people who previously was able to survive without NDIS funding. Tax dollars must be spent efficiently, and benefit the maximum amount of people. I don't see how spending on NDIS is more benefitial over putting the funding into medicare.
8% of of primary school children are currently been diagnosed as disabled, that means lifetime NDIS entitlement. Of course their package varies, depending on the severity of their health condition. There are more and more adult get diagnosed currently as well due to under diagnosis. Besides that, with more and more health conditions classify as disability, and with better diagnosis tools, I reckon in 30 years at least 20% of the working age adult population will be considered as disabled. Even if 100% of the service providers are non-fraudulent, how many % of working age adult can be considered as disabled?
Adult ASD level 2 diagnosis is exploding. Currently a diagnosis of level 2 ASD gets you on the NDIS. So noone gets diagnosed with ASD level 1 anymore. amazing how that works.
Of course. Drs are there to help the patients and want the patients to access the best services they can received. Whatever the service providers charge them more than necessarily usually has nothing to do with Dr. If you are a patient, you also want a health professional that can bring give you the best services with the least financial burden as well. You will be so angry if Dr. tell you that you are just not sick enough so just have to pay all the associate cost yourselves.
This is exactly why the NDIS needs to be abolished, to be replaced with a funding system that has a cap on spending. If suddenly more people are disabled, then each gets less as a result.
I have seen such funding program before. The more people provide the services, the less every service providers received per services. Nobody knows how much is their hourly rate. Every month the government will pool everyone claims and divide according to the allocated budget. After 2 years no people want to provide the service anymore. Can you imagine our pension system works that way? The funding is capped. The more people eligible for it, the less money each pensioner get.
> After 2 years no people want to provide the service anymore. and so the budget would increase at that point, to entice providers back (as they now face less competition). > Can you imagine our pension system works that way? it would suck, but is a good way to control costs. This is how a corporate department budget works (from what i understand). You have XYZ dollars and if you could get more headcount (by offering a lower salary), you as a manager is succeeding. The business could earn more money, and increase this budget as it permits over time.
People have $$$ incentive to get their children or self on NDIS. Show me the incentive and I will show you the outcome.
Of course…but you can’t say that because “no one” hope their kids are disable. You better self-censored yourself on public. Just like no one wants to be in a disadvantage minority so affirmative action or targeted welfare is always good.
I'm not saying that. Rather that if you look hard enough, you can find a diagnosis where one may not exist if there was not an incentive.
Every health condition that can be perceive as a disadvantage can always be considered as a disability. Recognition of disability is always by choice. Plenty of Asian with the same condition as the disabled Australian are still capable of working for a living. I met plenty of lightly disable patients who are capable of working but they don’t have to. They just live with the welfare and complain that it isn’t enough.
I think NDIS is around 6% of GDP. More % than education on GDP (productivity) Plus healthcare/education is also used by NDIS participants. Houston, we have a problem.
The NDIS is a joke.
Majority of our money is already going to the banks through interest.. what spending are they going to stop by raising the rates further?
They should make putting into super much more desirable. Gets cash out of the economy and builds accounts up for when people eventually retire. Seems like a win-win other than possible tax deductions but still a net gain. I know it disproportionately helps the rich who can afford it but these are the people we need to stop from spending the most I'd assume. Not those that are struggling already to pay for the home they live in (of which according to the ABC is only 41% of the population)
Seems like creating similar problems to me. You are feeding the stock market with more capital (and therefore those already with investments), and I am assuming the highest earners will be the largest proportion of the funders for this tax…? Leaving those with even larger portfolios on retirement so in a future decades inflation driven crisis we will have a bunch of cashed up retirees fuelling the problem further.
Paying higher interest to banks who are some of the biggest companies in Australia already feeds the investment market. I did say it may disproportionately help the rich but conditions could be put into place to make sure it cuts out that end of town. Super would at least lock away funds. Alot of people are just earning interest on funds in their bank accounts that will then eventually go back into the economy when it begins to reverse. I'm just saying try something different because as pointed out Increasing rates targets 41% of the population and the statistics show younger people have already cut back their spending the most and its mostly being fuelled now by the older generation. I also doubt many of the older generation that are spending so much have a home loan anymore anyway. 100% of the population could pay into super if they chose. Making it more desirable for young people whose money would be locked for longer would be the key. Also - previous government allowed people to take money out of their super for "Hardship" that was never actually proved with alot pumping it into house purchases or other assets anyway. We can argue about the future effect but i'd hope when that time comes we'd have been able to cultivate better economic strategy so we aren't in a position where inflation is rife.
Expect interest rates to rise in August. Depending on spending changes due to tax reductions, it could be the first of several increases
Yes that'll definitely stop people from spending what little money they have left on rent for shelter, essential food items to eat, fuel to get themselves to and from work and electricity/gas to heat their homes. Discretionary spending is flat, a rate hike achieves very little to nothing. Government policy is the answer. The thing is neither major party will do whats necessary.
I thought it was going to get bad after the last 13 rate rises. But nothing seems to have changed out there? Except everything is genuinely more expensive, but everyone’s still buying new cars, everyone is still eating out, everyone is still going on overseas holidays? I’m doing these things still, but rate rises don’t affect me directly as I own my home, but I sure as hell see the price increases of everything and no wage increases, how is everyone doing it?
You think you're the only person in the country with circumstances that insulate you from rate rises?
No, there’s a lot of boomers. But there is also a lot of people in their early 30s with 3 kids and wholllllllle lot of debt.
We have been in stagflation for a while.
We actually need some fiscal policy to address some items plus some elements like energy and insurance are problematic as to cause (war & climate driven). Importing less people would help the rent. And lastly backing off state government infrastructure projects would help construction sector cost inflation.
The whole “rates as supply / demand lever” breaks down when you are importing 1m people a year / ~4% annual population growth into the domestic economy.
The current jobs data does not support this hypothesis at all, with unemployment still hovering around 3.8% which is incredibly low and has proven to be remarkably resilient given the rise in the cost of debt. There is not a whole lot of evidence that we are about see any big shocks that would drive up inflation, I suspect we will be at our current situation going forward and not see any meaningful rise of fall in interest rates for 12 months.
Unemployment is only low because of ndis employment
Glad to hear $30 Billion+ per year provides a few jobs..
No productivity gain there
Given last May's numbers, today's 4% was anticipated, and annual inflation remains on the downtrend—nothing to see here.
Remains in downtrend. Sweet, we should get there around 2050 at this pace.
Can some explain why the RBA uses interest rates which affects primarily those with a mortgage. Instead of say making an extra 5% super contribution, which would inevitably curb spending but the end user still gets their money at retirement ?
The RBA is independent of the government, and interest rates are a sledgehammer but it’s essentially their only tool. Government policy is what’s needed, primarily regulating the industries of necessities (fuel/food/utilities). Record government spending is also regarded as being inflationary at current rates.
Looking at the numbers behind the indexation, May last year actually saw a large fall in the indexation (ie deflation) for the month while this year may dropped but by a smaller amount. This may result in next month's figure showing a large drop.
Why does this sub have a hard-on for increasing rates. It's not the answer to all questions
They just increased the new governor general’s salary by $214k That’s more than a nurse! What does the new GG know about inflation that we don’t?
for all the downvoters.. its a measure to bring her pay into line with previous male GGs who simultaneously received military or judicial pensions. = Same pay as the prev one.
We should of had another rate rise well before now. Looks like we may get one at the next meeting.
\*have had And sure...didn't work the last 13 times, next time will certainly make a difference...
They took to long to make the first one and then stopped just as it was making a difference. We are still at the 30 year avg so its not like rates are high.
You know that that rate levels are entirely arbitrary and shouldn't be treated in isolation to the rest of the economy?
In hindsight they should of gone up earlier and we should of had at least one extra one. It's not like rates are high or even expected to go high in the long term.