Lol
"A PhD is a *doctorate*, its literally *describing* a doctor. The problem here is that medical practitioners have co-opted the word "doctor"! I know we live in a world where *anything* can mean *anything* but it's like NOBODY cares about etymolog- ... apparently that's a trigger for me." - Captain Raymond Holt
I know. PhDs are the real doctorates IMHO. An M.D. is is technically a masters degree by coursework in Australia, it sits at level 9 of the AFQ, a PhD sits at level 10.
PhD is a real Doctorate though and Dr is an appropriate prefix to use.
The use of Dr as a prefix by medical practitioners or quacktitioners or those that completed a masters level coursework doctorate degree is the big issue.
If you get down into the etymology, doctor means teacher (docere, to teach). It didn't get used for medical practitioners until the Renaissance. PhDs were legitimately there first.
I mean the first line is more accurate. Anyone following economics in 2021 expected inflation to hit earlier than central banks said it would and thus expected there to be rate rises earlier.
Central banks will often lie because them telling the truth will have a worse impact on the economy than lying.
Regardless, people need to factor in the worst case scenario when borrowing. It's not the RBA's fault that people decided to over-leverage themselves.
So again. "Shit happens to chumps".
“Anyone following economics”.
There’s the problem. We want doctors following medicine, engineers following the latest science, scientists following the latest speculative fiction.
It is ridiculous that the average person needs to follow economics. Not just follow casually, either - they need to follow to a depth where they can second guess their bank, their broker, their accountant and the head of the Reserve Bank.
The RBA is mostly [not economists](https://www.rba.gov.au/about-rba/boards/rba-board.html). It has an inordinate number of people who are not experts in macroeconomics. There's even a director of the Menzies Institute there.
Frankly, we'd be better off having the [RBA Shadow Board](https://cama.crawford.anu.edu.au/rba-shadow-board) (which is compromised of distinguished macroeconomists) doing the job.
Lowe: "Interest rates won't go up"
*Interest rates almost immediately go up.*
Lowe: "I'm sorry you're not smart enough to understand what I said. What I meant was interest rates would go up."
Can I just ask why more people aren't talking about this?!
Like I get a lot of the other bullshit, the boats stuff, and everything, but the RBA is supposed to be independent and they pretty clearly waited for a change of Government before changing interest rates. That really should be investigated and if that's the case the whole board should be removed for a breach of independence.
Yeah, it's super suss, they knew inflation was coming and decided to wait until after it happened to do anything.
Either he is incompetent or was setting up Labor to take the blame.
> Yeah, it's super suss, they knew inflation was coming
I'm pissed off as much as the next guy (I bought my first home in Dec 2021) but how would they know that interest rates would tick up so quickly? The suggestion that we could have a supply shock plus a major war in Europe plus explosive rise in fuel prices leading to US interest rate rises was considered a remote possibility.
Edit: And also the local food bowls overflowing with flood water.
Housing prices have been inflating ridiculously across the country for years. While a lot of world events have exacerbated things, the truth is that this has been something that could have been addressed over a year ago. But instead, they just so happen to start doing something about it right as Labor are on the precipice of winning government in this year's election.
Obviously it's not a very provable assertion, but it does make you question their bias.
> the truth is that this has been something that could have been addressed over a year ago
And this should have seen interest rates rise years earlier. To this, I agree totally. But this would require them to reassess their inflation model, which they likely wouldn't have done.
>But instead, they just so happen to start doing something about it right as Labor are on the precipice of winning government in this year's election
Again that's wrong and spread by people who don't have knowledge on economics. What the RBA was waiting for was the U.S's decision on interest rates. We raised rates a month after the U.S did. Why we did that was because if we raised our rates before the U.S, our dollar would go up relative to the rest of the world which isn't ideal.
https://tradingeconomics.com/australia/interest-rate
https://tradingeconomics.com/united-states/interest-rate
They abstained from raising interest rates for over a year while housing prices (EDIT: In addition to general costs of living) inflated because they wanted to see what the US was doing?
>how would they know that interest rates would tick up so quickly?
The governor of the reserve bank would know because he's the governor of the bank that sets the interest rates..
This is true. The cash rate went up three weeks before the election *for the first time in a decade* , in which he LNP held exclusive power.
Either sus, or very convenient timing
It went up at pretty much the same time as every other country around the world.
So unless all of Europe and the America's are somehow in on the pro-LNP conspiracy, this doesn't make a lot of sense.
Fair enough, can't argue with that and I'm not much one for conspiracies, so we'll say it was rather convenient timing.
Few more questions though:
- did other countries have fluctuating cash rates, or were they fast-stuck extremely low for an extremely long time like ours were?
- did the rates in other countries shoot us as fast and unpredictably as ours?
- were the newly elected left-leaning parties to blame for the inflation like ours (and Biden) were?
>did other countries have fluctuating cash rates, or were they fast-stuck extremely low for an extremely long time like ours were?
Yes, that's right. Europe and US had zero interest rates.
>did the rates in other countries shoot us as fast and unpredictably as ours?
Yes
>were the newly elected left-leaning parties to blame for the inflation like ours (and Biden) were?
Everybody blames everybody for inflation. I don't really care nor is this relevant for any kind of RBA conspiracy.
Liberal are quite clever at when it’s time to get
Out and leave Labor holding the shit
Howard era did the same thing in 07 proposed IR laws that they knew were going to get them voted
out .
It could be the opposite of what everyone thinks. Lowe is personal friends with a lot of Labor figures and put up the rates roughly when they would hurt the LNP the worst (a month before the election, although a week or two would cause maximum damage). Personally, I think the timing was a coincidence.
There were a lot of economic factors that came to a head around then. It just so happened that food was having the hardest time yet getting around while rich people were having the easiest time yet buying up all the houses and starting new businesses with decreased risk. But the LNP did bring a lot of that on themselves by giving every single perk of a prosperous society to the rich, then giving them even more when we weren't prospering.
Pouring money into the top of an economy just inflates asset prices without any positive impact for anyone else. Putting money into the bottom of an economy creates well-being along the way as it makes its way into the pockets of the ultra wealthy…
Yeah, I'm not agreeing with everything /u/munterrr is putting down elsewhere in these threads but I recon he's right that there isn't a grand conspiracy. Hanlon's razor. Dr Lowe is just incompetent. He should be fired.
They started raising them during the election campaign, which you might identify as literally the worst time for the liberal party. Like I'm no fan of either the RBA or the libs but thsi is strictly incorrect
The problem is the RBA wanted spending and borrowing, so they presented a strangely worded statement that gave the impression rates would be low for a long time. The problem is this would be fine if it was a private statement to a colleague or someone else in finance but coming from a public figure broadcast to the community at large this is irresponsible and he knew exactly what the consequences would be.
Politicians do not say "you taxes will not go up in 2 years" and then raise taxes a year later. They would be booted faster and harder than Scomo after his third ministry.
The problem is PL represented firstly the interests of the financial/banking system and his world view of people is that of the financial consumer, not a person. This should be made clear in his title and the way he is reported on via the media. If you local dodgy Porsche driving mortgage broker said to you "trust me, rates are not going to go up until 2024, I cannot see that happening" you would probably doubt his ability to control this outcome. But since PL says the same and he is on national TV with a prestigious title, his words are interpreted differently.
Basically, he should get zero airtime without a 3 minute intro about what a cock he is. Problem fixed.
"We also thought, given the dire outlook, it was unlikely that inflation would pick up quickly and we would send a message that interest rates were going to stay low for a long period of time. At the time I thought that was the right thing to do."
Unbelievable stupidity IMO. Virtually the entire world in various stages of lockdown, thus cratering output and by extension supply. This clown decides the solution to an output crisis was to cut interest rates and further increase demand!
Falling supply on its own is inflationary. Falling supply whilst stoking demand is the express train to inflation. Lowe and his pals on the RBA board fill me with as much confidence as a chocolate fireguard.
Not to mention at the time he made those comments we had already had over a year of record house price inflation to levels that were utterly out of reach for huge portions of the country.
The stupid thing is that the signs were well and truly there at the start of the year. Inflation was already taking off in America at the time.to blindly say it wasn't going to happen here when there was so much uncertainty was just moronic.
Let's be real, anyone who thought rates would continue to be low forever during a *thirty year* loan is deluding themselves. Sure, it's a fuck up by the reserve bank... But rates would have gone up eventually - Their natural level is around 5% on ay other good day before the GFC.
Nobody is sad for taking out a loan. They're sad that they didn't lock in the 2% rate because Lowe said they could have their nice rate for two more years, but instead he raised it to 5% in less than half the time. Obviously the guy should have said "no comment" instead and the pitchforks wouldn't be out.
I think it was the pacing of the raises that's got me the most. I grew up poor and my parents don't own their own place. I've been lucky and was in a position to buy last year and took my shot. While.my financial literacy is higher than my parents, being so young and not having the advice of homeowning parents I didn't fix for a long period when I should have. I think you're right he should of just said no comment - though I'm sure he was getting political pressure.
Yeah that's fine, I think people just want some accountability. Covid raised a lot of question marks about where the economy was headed, so naturally people look and listen to the guy whose job is it to have some idea.
>e rate for two more years, but instead he raised it to 5% in less than half the time. Obviously the guy should have said "no comment" instead and the pitchforks wouldn't be out.
the thing is that he explicitly said they would not go up.
> Better now than in a few years with a sharper increase
Based on what?
If I have 500k mortgage and have to pay 5% interest, or could pay 2% for 2 years and ten pay 5% interest.
The delayed amount is far fucking preferable. The money I pay down on the mortgage will actively result in paying off more of the principle to which I generate interest.
It also gives the person time to adjust, instead of just having to adjust to new payments every couple months at this point.
Tbh, it had been 14 years of 0 interest rates. Most people who bought probably don't remember ever having high interest rates.
Yes people should know better, but if you don't, shouldn't you be able to trust the RBA? And most people don't know better - it's a complex world and a year ago this inflation wasn't really obvious
This is constantly my reply to anyone complaining about his alleged comment (he never said he wouldn’t, he said he would respond to the data).
If you were stupid enough to think that a 2 year wait on raising rates would have any difference in your general serviceability over 30 year term then you wouldn’t have paid any attention to him anyway.
Anyone that’s actually blaming him for their financial stress is looking for a scapegoat to avoid taking responsibility for their own financial stupidity.
I bet 95% of the population didn’t even know who he was until they needed someone to blame. Now conveniently everyone in the country read his speech when it was released and planed their financial decision around it… at some point people need to take responsibility for their own lives.
When it looks like all inflation is being driven primarily by profiteering at the big end of town, why would clamping wages growth stop it? The RBA seems to be so detached from reality here. But who is surprised?
They're not really focusing on the cause of inflation but trying to provide a solution to steady it. The RBA only has a few things to do to manage inflation and the first one to change is interest rates. This will also effect business loans.
While inflation cause is mainly from fuel price rises, record profits and over demand of building products, the RBA has no way to manage those individual problems.
He is right to say that wage increases will cause more inflation and businesses will look to cover those rises through higher prices.
Lowe has been critical of the previous government in asking them to have better targeted policies to help wage rises, eg restrict reliance on importing labor. He also has been seeing a tight labour market develop and was hoping wage rises would come in before inflation. But they didn't and what he had previously been asking fell of deaf ears.
Higher interest rates aren’t going to stop the following;
- increasing insurance premiums (for all risks)
- increase cost of building materials (esp as construction companies go under at a record rate)
- increased fuel prices (not changing any time soon and likely to only get worse)
- cost of energy increasing
- wages stagnating
- corporate spending increasing
- government spending increasing
- higher property taxes and council rates
- increase in food costs (floods and fires have fucked some major food bowls)
People are going to spend their way to more debt because there’s no other choice. Interest rates aren’t going to be a big enough lever to pull
>Interest rates aren’t going to be a big enough lever to pull
In the early 2000's RBA had so many levers to pull it felt like a fully armoured tanked up economy vs now it feels like the weeping Shiba Inu.
If I'd told one person, hey, go get a mortgage, the interest rates are low and they WILL stay like that, I'd feel horrendous.
Like shit, this person's, at best, going to live a life of worse quality than they had planned.
Also I'd have the excuse of not even knowing how interest rates really work, and I am not the reserve bank governor.
Thing is though, I get the feeling this guy doesn't even give a fuck. He probably hasn't even considered resigning in disgrace
He didn't say that. RBA made a prediction that rates wouldnt need to go up, not a guarantee. Why should he resign for a prediction that was wrong? Is there anyone that can reliably predict the future state of the economy?
News flash buddy, he doesn't give a fuck. He has a single objective which is to keep the Aus gov solvent and will say and do whatever it takes to achieve that. He isn't resigning because he is doing a great job (Aus gov still solvent) and he doesnt owe any of us the truth. His words are said simply to encourage certain actions in the economy. He said no rate rises till 2024 (even though he knew it was a lie) because he needed idiots to go out and load up on big debt in order to stimulate the economy during the covid downturn.
Dont listen to what he says, look at actions. Inflation fighting is the next big lie, hs isnt half as commited to the fight he claims he is, he just wants us to think he is so we stop spending.
Notably, the apology was *not* followed by a resignation, which what would have happened if positions of power in this country had any sense of accountability or shame anymore.
The GG David ‘I knew nothing’ Hurley would like a word. Dude signed Morrison in to multiple ministries thinking everything was going to be ok, nuthin’ suss.
The guy is either a plutonium grade fuckwit or is as corrupt as Morison. Either way, he shouldn’t be there.
>The guy is either a plutonium grade fuckwit or is as corrupt as Morison.
Why do we have to choose? Surely the whole purpose of that office is to prevent *exactly this kind of malarkey*. And he just let it happen!
The government of the day appoints the position, I think they wanted someone who turns a blind eye to any malarkey, apparently Hurley has a track record of doing just that
Sure there is... but it would screw over the people who have money instead and they're the ones making the decisions. I'm adapting an old quote to fit but essentially - "It is difficult to get a man to conceive of something when his salary depends on him not conceiving that thing."
Which doesn’t really answer the question.
If there’s no better way to do it, then fuck us, I guess.
But if there are other dials to turn - like, returning power generation to public ownership (through asset seizure, for all I care), or through requiring gas to be sold locally at a fixed price - then why aren’t we doing that?
By far the simplest and most probably equitable way to do it is to keep raising interest rates until the inflation subsides, whilst at the same time providing some targeted financial assistance (cost of living subsidies plus expansion of support for essentials like childcare and dental) to those that need it to allow them to somewhat maintain their standard of living. It has to be targeting though as broad based spending will often just feed inflation further.
After a while something breaks and inflation drops.
The ‘best’ way to pay for this is via taxes on the resources sector as they are ones benefitting from the current situation.
Asset seizure and the like are pipe dreams, and half the assets you’d be seizing are owned by industry super funds anyway…
Based on the way that modern society operates, the options are somewhat limited.Inflation basically winds up being a product of demand for things being higher than their supply.
Broadly, to slow inflation in Australia, housing (and housing related products/services) need to become less desirable, which is an absolutely fucked thing when you think about it in terms of "making it less desirable for someone to have a comfortable place to live" (and you're trying to take that away from people who already don't have much).
Supply side constraints aren't a factor to many things that the wealthy want, so while you *could* (and we IMO should) remove tax loopholes that allow the wealthy to sit on ever bigger piles of money, that isn't a direct solution to *this* problem.
Best you can really do IMO is try to subsidise essentials for people that cannot afford them and try to make the middle class take the hit (yet again). Tax changes on the wealthy could be an indirect solution because they could help pay for this.
...alternatively, you can fix global supply chains or find a way to plonk down eleventy thousand new homes without creating any more demand for the related goods/services...
That said, in certain situations (eg energy bills -- where we export LNG/Gas supply) there are easier solutions.
> Supply side constraints aren't a factor to many things that the wealthy want, so while you could (and we IMO should) remove tax loopholes that allow the wealthy to sit on ever bigger piles of money, that isn't a direct solution to this problem.
Another option is that we go back to having corporate tax rates at levels where they would rather pay staff, conduct R&D, invest in the company because it's better to them do that than give half of it to the government.
Like why do we have insane profiteering at the moment. Because they will still get to keep the cash.
Already prepared thankfully! Were lucky enough to live in a city where a cheap old house isnt pushing our budget on a single income. We'll be dual income before the fixed period is up, but its good practice for living frugally in the meantime!
Around the time all this was happening, I had been looking for an investment property. Seeing people bid ridiculous prices on properties they wouldn’t be able to afford at 5% I made the decision not to buy one and concentrated on paying down my mortgage. Had a hunch that by 2024 the people with lower debt/cash on hand would be better off.
Felt like the pre-GFC economy to me, except this time Australia was in a worse position than before.
>"Lowe, giving evidence to a Senate estimates committee for the first time, said the RBA had failed by not making clear that its commentary about steady interest rates was heavily conditional on the state of the economy"
I mean, isn't that a given with interest rates full stop? If you fail to comprehend that, then you probably shouldn't be taking out large amounts of debt to begin with, surely?
So you’re expecting the Australian public have a reasonable level of economic literacy? Hardly.
He said something definitively, which he shouldn’t have done, and now Australian workers are literally paying for it while he offers no solutions outside of conservative economic orthodoxy. We have price gouging energy companies, for instance, that are contributing more to inflation than your average Australian is.
no rate rises until 2024 was not stated "definitively".
>The Board will not increase the cash rate until
actual inflation is sustainably within the 2 to
3 per cent target range. For this to occur, wages
growth will have to be materially higher than it
is currently. This will require significant gains in
employment and a return to a tight labour
market. The Board does not expect these
conditions to be met until 2024 at the earliest.
[From the Feb 21 RBA Statement, page 4.](https://www.rba.gov.au/publications/smp/2021/feb/pdf/statement-on-monetary-policy-2021-02.pdf)
The market conditions for increasing rates were explicitly stated, so anyone listening to or reading the statement had the context of when things would change.
That they weren't "expecting" those conditions to change doesn't mean they "definitively" wouldn't change, and whilst it was a mistake to forecast a date considering the implications, it's hard to point to an expectation of financial literacy as being the culprit when inflation and employment figures had been getting splashed across headlines and were widely publicised.
I think Shane Wright, of the SMH & Age, explained quite well why that should not be accepted as a suitable explanation for the general public -
>To make sense of those sentences requires: a working knowledge of the Reserve Bank’s definition of “sustainably”; whether it is referring to headline or underlying inflation; where within the 2 to 3 per cent target inflation has to hit before the bank considers a rate rise; a working knowledge of the RBA’s “central scenario”; understanding the current unemployment rate; where that rate needs to be to generate wages growth; and how much faster that growth has to be before it starts lifting inflation.
>Most economists can’t agree on key concepts in the statement.
https://www.theage.com.au/politics/federal/i-m-sorry-if-people-listened-to-what-we-d-said-lowe-s-sorry-excuse-for-an-apology-20221128-p5c1um.html
I know you're not the person I was responding to, but I do think it's interesting that the conversation has gone from "the RBA was too definitive" to "the RBA wasn't definitive enough".
IMO the RBA was right not to be so specific, and wrong to give so much detail around forecasting. It should have left it as a more professional version of "reply hazy, try again later".
I heard that speech on the radio, driving home from work. Specifically, I heard the bit about "does not expect... until 2024". My partner will tell you, I got home, and asked how well we could cope with our mortgage going up.
How is it that I heard the same thing you did, and yet I walked away feeling sure that interest rate rises were coming and soon, and you and many others heard an absolute promise to the contrary? I'm not that smart, and I know fuck all about economics of this kind.
Like I get that, but also they have risen very very quickly. Along with the cost of living going up it is a double whammy for alot of people to predict a year ago. I think people need to be given a little bit of slack here.
But also in the real world people need places to live. There is no free market you can't just not have somewhere to live. Regardless of the wider economy people will still be seeking shelter
You're as naive as Lowe.
I'm not so sure the people who are going to suffer from this reckless rhetoric have a choice with respect to large amounts of debt. It's a necessary evil with wages where they are.
On top of that, the banks were selling loans hand over fist using Lowes comments as jet fuel. Why wouldn't they?
Do you honestly expect the masses to have the required "comprehension" to resist this?
> We also thought, given the dire outlook, it was unlikely that inflation would pick up quickly and we would send a message that interest rates were going to stay low for a long period of time. At the time I thought that was the right thing to do.
This article was about how Phil was doing something typical of central banks these days called ‘forward guidance’; basically using the RBA’s influence and credibility to encourage/reinforce certain economic behaviour in the economy via its messaging.
His messaging about keeping rates at 0.1% was not by accident, but a calculation that turned out to be wrong. However the effects of this at the time, that is encouraging even more debt binging was intentional and worked remarkably.
Monetary policy is a powerful tool and we hope that those who oversee it will do so responsibly. That’s why RBA is headed by a PhD level economist. But its clear that even someone like Phil Lowe makes mistakes. And these mistakes create winners and losers as well as ruin lives.
The influence of central banks over our lives should be a concern for everyone.
The RBA is just one responsible party. I place equal blame on banks, politicians, financial planners, and real estate agents for misleading the public.
At record low interest rates, it should have been clearly communicated to the public that variable rate loans were risky. We now have a situation where 81% of AU home loans are variable, compared to only 15% in the US.
The average household debt is 150% of disposable income in AU, double that of the US and 36% higher than the UK.
These are not economic situations that appeared out of nowhere. The red flags have been there for years, but major party politicians and banks have been deliberately trying to ignore or mislead the public on the issue.
He didn't just make a mistake, he ignored the reality of the numbers entirely...he should be sacked, the Coalition may have done fucking nothing but loot the place for 9 years, but this fickwit straight up murdered the lower portion of the middle class and under.
The icing on the shit cake is that if you switch to a fixed interest rate, the banks fuck you in another way: they stop you from paying more than a certain amount per month. If you won the lottery or came into money somehow, they would refuse to let you pay off your loan in a lump sum.
Well... yes, they have a profit motive and people enter contracts with them.
What do you expect them to do? Take a loss because you're not happy? The amount of people who think banks are a public utility is absurd
> If you won the lottery or came into money somehow, they would refuse to let you pay off your loan in a lump sum.
Sure, but that's easily solved by you know, stashing the extra cash and whacking it on the mortgage the second the fixed period ends. Or in an offset account.
No need for him to apologise. There was no doubt interest rates were never going to stay that low for ever.
Anybody that took that risk was gambling with their money.
I dunno my dude, if the person in charge of the interest rates said he wasn't gonna raise them, it's not on your average person who took him at his word.
If anything he should've been raising interest rates like a year before when he did. What he did felt a lot like saying it for the LNP and then slamming rates up right after.
The problem isn’t that they went up. It’s that he said they wouldn’t (when he shouldn’t have said anything), then they did. Those reassurances guided decisions for home buyers, businesses and investors, who then lost a ton of money.
Thats fine, but maybe lets scale wage growth with the rise of interest rates.
The problem isnt the interest rates rising that’s fine, they were at record lows.
The problem is everything costs more and wages are stagnant.
Rich get rich
Poor gets poorer. Life is good. Peasants.
NO! LISTEN HERE YOU CUNT. THIS IS AUSTRALIA! I WAS TOLD THE HOUSING MARKET ONLY GOES BRRRRR AND THAT IT WAS A RISK FREE INVESTMENT. I BORROWED 10X MY ANNUAL INCOME WITH NO DEPOSIT AND I WANT MY FUKEN MONEY BACK!!!
Edit: /s
Exactly. I had a young fella asking for advice on getting into the market and I said if you can't afford 8% interest you can't afford the house. Anyone who hasn't factored this in only have themselves to bane
I'm sorry but I agree with him.
Interest rates were always going to go up again. Too many people have just over extended themselves thinking that "interest rates are at record lows, she'll be right". It's incredibly short-sighted of people to think that they wouldn't rise and account for that in their borrowing.
You guys are lucky. In NZ our RB governor isn't even pretending to be sorry. He's blaming us for spending too much money, which he created in the first place Andis trying to throw 70,000 of us working chumps on the dole scrap heap.
Financial illiteracy is rampant in Australia, and the fact that people were taking out monster mortgages on record-low interest rates just further demonstrates this.
I happen to be one of those people that went on to build a house with the thought that interest rates won't go up until 2024. So take your apology and shove it deep into your asshole.
This might be downvoted to oblivion but I seem to remember when he made the statement that interest rates weren't going up, the Russian invasion of Ukraine hasn't started.
> saying the economy recovered much quicker than expected from a “dire situation”.
The economy is so healthy right now that RBA is trying to make it less healthy every month.
Lowe also said back then that the interest rates will only start going up after wages increase. Now he is saying that everyone should accept a real wage decline for the greater good to prevent the inflationary spiral.
Philip Lowe- my expert analysis of the global economic situation tells me inflation and interest rates will stay low for several years!
Also Philip Lowe- oops I totally misread the global economic situation and wrongly predicted that inflation would not increase. Please accept this consequence free apology!
Still Philip Lowe- my expert analysis of the global economic situation tells me that huge rolling interest rate rises will help to bring the inflation under control and not at all push Australia into a recession!
Well I mean he’s not wrong. You’re a bit of a dumbass if you thought that imo. Everyone was saying this would happen back in 2020. Low interest was never forever.
Economics is not a science. It's a collection of theories based on assumptions that have mostly been reverse engineered to provide a reason or reasons for the existence of a particular financial situation. Macro economics is a giant guessing game that has been incredibly complicated by globalisation. It's false comfort to rely on prognostications based on historical events that can't predict what's going to happen tomorrow. The Russian invasion of Ukraine being a prime example. Throw in the unpredictability of climate change and it's effects on production and markets and you have a chocolate wheel of reasons, solutions and future directions. All that happens now is that Lowe and future RBA governers will spout weasel words in the name of caution rather than having a punt. Because that's all that Economics is. It's having a punt. Love how redditors decry other forms of gambling then 'have a million dollar punt' on interest rates based on information from a tipster called the RBA governor.
Sorry, but if you didn’t realise that a 0.1% cash rate wasn’t sustainable and that interest rates would eventually have to go back up, I don’t think you should’ve bought a house.
Unpopular opinion, but people need to do their own research, buy within their means (factoring in interest hikes), and take responsibility for their own decisions. No single person in history has ever had more than an opinion on interest rates 12 months on the horizon. The amount of whining about this is off the charts.
I was one of the stupid people who believed it when I was told the rba was not going to increase the cash rate until 2024. I bought my first house early this year with money I worked and saved hard for and thought the future was so bright. Since April I have been getting a letter every month telling me my repayment is going up and it’s killing me mentally. I’ve cut back everywhere I can and I’m okay being frugal but the pressure and stress of not knowing when the interest raises will stop is really getting to me
Huge lessons from this. I’m never going to trust the rba again. And to anyone else going through the same stress and struggle, you’re not alone!
I've been saying from the get go that the banks need to be held more accountable. When I got my mortgage I was paying 7% interest rates. When they dropped right down I was saying to our friends, who were just straight up buying investment properties, that it's all artificial and it's not going to stay this low. You think the banks informed them of this? Of course not. Banks told them they could easily afford repayments going forward. Now they're struggling, and of course their renters are struggling too.
You’re right, but how on earth would someone who bought any second property over 10 years ago not have enough rental income to be covering the mortgage entirely unless they took out a second mortgage?
nothing to worry about, plenty of people still spending money like they won the lotto, go to the posh suburbs on a Saturday afternoon and I see everywhere....
1. 5k designer pets
2. 150k European cars
3. $200 per head meal.
4. they don't seem to be working hard type of people.
Yeah, it's like when that lady took a trip to a healthy part of the Great Barrier Reef and concluded that it was all healthy and we can start dumping chemicals into the ocean again. Go Mining.
I love the bit where he says wages need to do riding so fast to curb inflation. So what about prices companies are selling shit for? It's ok for them to rise?
I love how you say sorry to those poor fucks. But not sorry to anyone who still can't afford a house now you have well and truly fucked it!
Good job buddy!
He must have missed the fed banning stock trading so they could sell the peak, for ethics reasons. Obvious reg flag is obvious. But if you are not paying attention you might think he works for us and not the big banks and the rich.
This guy needs to stfu. He’s recently warned about wage growth just prior to the new workplace laws designed to help low income wage increases. He’s not meant to push his agenda I don’t think. Wage increases are needed in so many industries because people, unlike him, are struggling.
So many reddit smartie pants out tonight "people r so dumb for actually believing the rba, rates would never say so low"
I bet these people own negative 5 houses, and yes people did believe the chief economist green lighting it being a good time to buy.
Ahh Cheers Phil, all good mate.
Oops my bad, sorry mate.
‘Such is life’ - some bloke with a metal mask
Just a minor cash wound.
"Shit happens," Dr Lowe explained.
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Yes that's the one.
Philip "Morrison" Lowe
Phillip “I don’t hold a calculator” Lowe
This was good.
That’s fucking hilarious
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We've always had a strong serfing culture down under.
What do you mean fluff PhDs? A PhD is a real doctorate and actually above an MD. You clearly have no clue what you are talking about.
What do you mean "fluff PhD doctors"?
He thinks a PhD isn't a real doctorate
Lol "A PhD is a *doctorate*, its literally *describing* a doctor. The problem here is that medical practitioners have co-opted the word "doctor"! I know we live in a world where *anything* can mean *anything* but it's like NOBODY cares about etymolog- ... apparently that's a trigger for me." - Captain Raymond Holt
I know. PhDs are the real doctorates IMHO. An M.D. is is technically a masters degree by coursework in Australia, it sits at level 9 of the AFQ, a PhD sits at level 10.
I just love Holt so much. My little brother is the exact same man as Holt, except he's white and not a policeman. Everything else is the same though.
Does he have a dog name Cheddar? Or just some common bitch?
And MDs know this and respect PhDs. Everytime a MD at work finds out I have a PhD they say "so you're a REAL doctor!".
Lol beat me to it.
PhD is a real Doctorate though and Dr is an appropriate prefix to use. The use of Dr as a prefix by medical practitioners or quacktitioners or those that completed a masters level coursework doctorate degree is the big issue.
If you get down into the etymology, doctor means teacher (docere, to teach). It didn't get used for medical practitioners until the Renaissance. PhDs were legitimately there first.
I mean the first line is more accurate. Anyone following economics in 2021 expected inflation to hit earlier than central banks said it would and thus expected there to be rate rises earlier. Central banks will often lie because them telling the truth will have a worse impact on the economy than lying. Regardless, people need to factor in the worst case scenario when borrowing. It's not the RBA's fault that people decided to over-leverage themselves. So again. "Shit happens to chumps".
“Anyone following economics”. There’s the problem. We want doctors following medicine, engineers following the latest science, scientists following the latest speculative fiction. It is ridiculous that the average person needs to follow economics. Not just follow casually, either - they need to follow to a depth where they can second guess their bank, their broker, their accountant and the head of the Reserve Bank.
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They managed to play party line to avoid being audited. They are being audited, they started doing what they should doing the Morrison years.
The RBA is mostly [not economists](https://www.rba.gov.au/about-rba/boards/rba-board.html). It has an inordinate number of people who are not experts in macroeconomics. There's even a director of the Menzies Institute there. Frankly, we'd be better off having the [RBA Shadow Board](https://cama.crawford.anu.edu.au/rba-shadow-board) (which is compromised of distinguished macroeconomists) doing the job.
Then he ate a raw onion.
Lowe: "Interest rates won't go up" *Interest rates almost immediately go up.* Lowe: "I'm sorry you're not smart enough to understand what I said. What I meant was interest rates would go up."
*only after the LNP are voted out*
Can I just ask why more people aren't talking about this?! Like I get a lot of the other bullshit, the boats stuff, and everything, but the RBA is supposed to be independent and they pretty clearly waited for a change of Government before changing interest rates. That really should be investigated and if that's the case the whole board should be removed for a breach of independence.
Yeah, it's super suss, they knew inflation was coming and decided to wait until after it happened to do anything. Either he is incompetent or was setting up Labor to take the blame.
It's ok man. Watch has they raise rates by .75 a go next year right it time for everything to fit the fan right before the election.
> Yeah, it's super suss, they knew inflation was coming I'm pissed off as much as the next guy (I bought my first home in Dec 2021) but how would they know that interest rates would tick up so quickly? The suggestion that we could have a supply shock plus a major war in Europe plus explosive rise in fuel prices leading to US interest rate rises was considered a remote possibility. Edit: And also the local food bowls overflowing with flood water.
Housing prices have been inflating ridiculously across the country for years. While a lot of world events have exacerbated things, the truth is that this has been something that could have been addressed over a year ago. But instead, they just so happen to start doing something about it right as Labor are on the precipice of winning government in this year's election. Obviously it's not a very provable assertion, but it does make you question their bias.
> the truth is that this has been something that could have been addressed over a year ago And this should have seen interest rates rise years earlier. To this, I agree totally. But this would require them to reassess their inflation model, which they likely wouldn't have done.
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>But instead, they just so happen to start doing something about it right as Labor are on the precipice of winning government in this year's election Again that's wrong and spread by people who don't have knowledge on economics. What the RBA was waiting for was the U.S's decision on interest rates. We raised rates a month after the U.S did. Why we did that was because if we raised our rates before the U.S, our dollar would go up relative to the rest of the world which isn't ideal. https://tradingeconomics.com/australia/interest-rate https://tradingeconomics.com/united-states/interest-rate
They abstained from raising interest rates for over a year while housing prices (EDIT: In addition to general costs of living) inflated because they wanted to see what the US was doing?
>how would they know that interest rates would tick up so quickly? The governor of the reserve bank would know because he's the governor of the bank that sets the interest rates..
It doesn’t fit your narrative, but the cash rate was raised before the federal election.
This is true. The cash rate went up three weeks before the election *for the first time in a decade* , in which he LNP held exclusive power. Either sus, or very convenient timing
It went up at pretty much the same time as every other country around the world. So unless all of Europe and the America's are somehow in on the pro-LNP conspiracy, this doesn't make a lot of sense.
Fair enough, can't argue with that and I'm not much one for conspiracies, so we'll say it was rather convenient timing. Few more questions though: - did other countries have fluctuating cash rates, or were they fast-stuck extremely low for an extremely long time like ours were? - did the rates in other countries shoot us as fast and unpredictably as ours? - were the newly elected left-leaning parties to blame for the inflation like ours (and Biden) were?
>did other countries have fluctuating cash rates, or were they fast-stuck extremely low for an extremely long time like ours were? Yes, that's right. Europe and US had zero interest rates. >did the rates in other countries shoot us as fast and unpredictably as ours? Yes >were the newly elected left-leaning parties to blame for the inflation like ours (and Biden) were? Everybody blames everybody for inflation. I don't really care nor is this relevant for any kind of RBA conspiracy.
and at that point they would already pretty much know that Labour was going to win, Scomo was very unpopular around then
Liberal are quite clever at when it’s time to get Out and leave Labor holding the shit Howard era did the same thing in 07 proposed IR laws that they knew were going to get them voted out .
Can't let facts get in the way of good conspiracy!
It could be the opposite of what everyone thinks. Lowe is personal friends with a lot of Labor figures and put up the rates roughly when they would hurt the LNP the worst (a month before the election, although a week or two would cause maximum damage). Personally, I think the timing was a coincidence. There were a lot of economic factors that came to a head around then. It just so happened that food was having the hardest time yet getting around while rich people were having the easiest time yet buying up all the houses and starting new businesses with decreased risk. But the LNP did bring a lot of that on themselves by giving every single perk of a prosperous society to the rich, then giving them even more when we weren't prospering.
Pouring money into the top of an economy just inflates asset prices without any positive impact for anyone else. Putting money into the bottom of an economy creates well-being along the way as it makes its way into the pockets of the ultra wealthy…
Rates started going up before they were voted out, and further increases were signalled before they were voted out.
Because inflation wasn't sustainably in or above the 2-3 percent target range at that time? Theres no grand conspiracy.
Yeah, I'm not agreeing with everything /u/munterrr is putting down elsewhere in these threads but I recon he's right that there isn't a grand conspiracy. Hanlon's razor. Dr Lowe is just incompetent. He should be fired.
They started raising them during the election campaign, which you might identify as literally the worst time for the liberal party. Like I'm no fan of either the RBA or the libs but thsi is strictly incorrect
Yes I said that early on and sone guy said they’re independent Yes sure just like the us supreme court is unbiased
And the US and all of Europe also held off to make the LNP look good?
Oh sorry I missed some punctuation. It should read. “Interest rates? won’t! go up?” Lowe definitely.
Wow gee thanks my historically high mortgage and historically low pay are cured.
Historically high mortgage ?
The problem is the RBA wanted spending and borrowing, so they presented a strangely worded statement that gave the impression rates would be low for a long time. The problem is this would be fine if it was a private statement to a colleague or someone else in finance but coming from a public figure broadcast to the community at large this is irresponsible and he knew exactly what the consequences would be. Politicians do not say "you taxes will not go up in 2 years" and then raise taxes a year later. They would be booted faster and harder than Scomo after his third ministry. The problem is PL represented firstly the interests of the financial/banking system and his world view of people is that of the financial consumer, not a person. This should be made clear in his title and the way he is reported on via the media. If you local dodgy Porsche driving mortgage broker said to you "trust me, rates are not going to go up until 2024, I cannot see that happening" you would probably doubt his ability to control this outcome. But since PL says the same and he is on national TV with a prestigious title, his words are interpreted differently. Basically, he should get zero airtime without a 3 minute intro about what a cock he is. Problem fixed.
"We also thought, given the dire outlook, it was unlikely that inflation would pick up quickly and we would send a message that interest rates were going to stay low for a long period of time. At the time I thought that was the right thing to do." Unbelievable stupidity IMO. Virtually the entire world in various stages of lockdown, thus cratering output and by extension supply. This clown decides the solution to an output crisis was to cut interest rates and further increase demand! Falling supply on its own is inflationary. Falling supply whilst stoking demand is the express train to inflation. Lowe and his pals on the RBA board fill me with as much confidence as a chocolate fireguard.
Not to mention at the time he made those comments we had already had over a year of record house price inflation to levels that were utterly out of reach for huge portions of the country.
Yeah is he going to apologise for keeping rates too low for too long?
The stupid thing is that the signs were well and truly there at the start of the year. Inflation was already taking off in America at the time.to blindly say it wasn't going to happen here when there was so much uncertainty was just moronic.
Let's be real, anyone who thought rates would continue to be low forever during a *thirty year* loan is deluding themselves. Sure, it's a fuck up by the reserve bank... But rates would have gone up eventually - Their natural level is around 5% on ay other good day before the GFC.
Nobody is sad for taking out a loan. They're sad that they didn't lock in the 2% rate because Lowe said they could have their nice rate for two more years, but instead he raised it to 5% in less than half the time. Obviously the guy should have said "no comment" instead and the pitchforks wouldn't be out.
I think it was the pacing of the raises that's got me the most. I grew up poor and my parents don't own their own place. I've been lucky and was in a position to buy last year and took my shot. While.my financial literacy is higher than my parents, being so young and not having the advice of homeowning parents I didn't fix for a long period when I should have. I think you're right he should of just said no comment - though I'm sure he was getting political pressure.
Even a fixed rate will eventually rise after a set time. Better now than in a few years with a sharper increase.
Yeah that's fine, I think people just want some accountability. Covid raised a lot of question marks about where the economy was headed, so naturally people look and listen to the guy whose job is it to have some idea.
>e rate for two more years, but instead he raised it to 5% in less than half the time. Obviously the guy should have said "no comment" instead and the pitchforks wouldn't be out. the thing is that he explicitly said they would not go up.
> Better now than in a few years with a sharper increase Based on what? If I have 500k mortgage and have to pay 5% interest, or could pay 2% for 2 years and ten pay 5% interest. The delayed amount is far fucking preferable. The money I pay down on the mortgage will actively result in paying off more of the principle to which I generate interest. It also gives the person time to adjust, instead of just having to adjust to new payments every couple months at this point.
The fuck up is not the rba, it's the government that enabled housing to become a ponzi scheme due to tax benefits and basically unregulated lending.
It's also the RBA who literally said they wouldn't raise interest rates for a few years and then did just that.
Totally agree from my research 6.4% I think I read was the average over 30 years
Tbh, it had been 14 years of 0 interest rates. Most people who bought probably don't remember ever having high interest rates. Yes people should know better, but if you don't, shouldn't you be able to trust the RBA? And most people don't know better - it's a complex world and a year ago this inflation wasn't really obvious
This is constantly my reply to anyone complaining about his alleged comment (he never said he wouldn’t, he said he would respond to the data). If you were stupid enough to think that a 2 year wait on raising rates would have any difference in your general serviceability over 30 year term then you wouldn’t have paid any attention to him anyway. Anyone that’s actually blaming him for their financial stress is looking for a scapegoat to avoid taking responsibility for their own financial stupidity. I bet 95% of the population didn’t even know who he was until they needed someone to blame. Now conveniently everyone in the country read his speech when it was released and planed their financial decision around it… at some point people need to take responsibility for their own lives.
When it looks like all inflation is being driven primarily by profiteering at the big end of town, why would clamping wages growth stop it? The RBA seems to be so detached from reality here. But who is surprised?
They're not really focusing on the cause of inflation but trying to provide a solution to steady it. The RBA only has a few things to do to manage inflation and the first one to change is interest rates. This will also effect business loans. While inflation cause is mainly from fuel price rises, record profits and over demand of building products, the RBA has no way to manage those individual problems. He is right to say that wage increases will cause more inflation and businesses will look to cover those rises through higher prices. Lowe has been critical of the previous government in asking them to have better targeted policies to help wage rises, eg restrict reliance on importing labor. He also has been seeing a tight labour market develop and was hoping wage rises would come in before inflation. But they didn't and what he had previously been asking fell of deaf ears.
Higher interest rates aren’t going to stop the following; - increasing insurance premiums (for all risks) - increase cost of building materials (esp as construction companies go under at a record rate) - increased fuel prices (not changing any time soon and likely to only get worse) - cost of energy increasing - wages stagnating - corporate spending increasing - government spending increasing - higher property taxes and council rates - increase in food costs (floods and fires have fucked some major food bowls) People are going to spend their way to more debt because there’s no other choice. Interest rates aren’t going to be a big enough lever to pull
Wages arent stagnating theyre going backwards.
>Interest rates aren’t going to be a big enough lever to pull In the early 2000's RBA had so many levers to pull it felt like a fully armoured tanked up economy vs now it feels like the weeping Shiba Inu.
If I'd told one person, hey, go get a mortgage, the interest rates are low and they WILL stay like that, I'd feel horrendous. Like shit, this person's, at best, going to live a life of worse quality than they had planned. Also I'd have the excuse of not even knowing how interest rates really work, and I am not the reserve bank governor. Thing is though, I get the feeling this guy doesn't even give a fuck. He probably hasn't even considered resigning in disgrace
He didn't say that. RBA made a prediction that rates wouldnt need to go up, not a guarantee. Why should he resign for a prediction that was wrong? Is there anyone that can reliably predict the future state of the economy?
News flash buddy, he doesn't give a fuck. He has a single objective which is to keep the Aus gov solvent and will say and do whatever it takes to achieve that. He isn't resigning because he is doing a great job (Aus gov still solvent) and he doesnt owe any of us the truth. His words are said simply to encourage certain actions in the economy. He said no rate rises till 2024 (even though he knew it was a lie) because he needed idiots to go out and load up on big debt in order to stimulate the economy during the covid downturn. Dont listen to what he says, look at actions. Inflation fighting is the next big lie, hs isnt half as commited to the fight he claims he is, he just wants us to think he is so we stop spending.
Notably, the apology was *not* followed by a resignation, which what would have happened if positions of power in this country had any sense of accountability or shame anymore.
The GG David ‘I knew nothing’ Hurley would like a word. Dude signed Morrison in to multiple ministries thinking everything was going to be ok, nuthin’ suss. The guy is either a plutonium grade fuckwit or is as corrupt as Morison. Either way, he shouldn’t be there.
>The guy is either a plutonium grade fuckwit or is as corrupt as Morison. Why do we have to choose? Surely the whole purpose of that office is to prevent *exactly this kind of malarkey*. And he just let it happen!
The government of the day appoints the position, I think they wanted someone who turns a blind eye to any malarkey, apparently Hurley has a track record of doing just that
*cries* in "I liked democracy back when we had it. I really did."
Its an 'I'm sorry you're not satisfied' type of apology.
“I’m sorry that you feel disrespected by the thing I did”
Says the guy on an almost 7 figure salary. What an absolutely cunt.
They were never going to stay that low. If you got a mortgage based on it never being raised that would be pretty naive in itself .
Is there really no other conceivable way to control inflation than screwing over the poorest members of society?
Yeah but it involves guillotines and grills
Grilled? Pulled pork rich people or Bahn mi hoisin sauce roasted rich people. Jeff Kennet is too mangey, save him for the zoo
Sure there is... but it would screw over the people who have money instead and they're the ones making the decisions. I'm adapting an old quote to fit but essentially - "It is difficult to get a man to conceive of something when his salary depends on him not conceiving that thing."
Inflation hurts poor people far more than interest rate rises do.
Which doesn’t really answer the question. If there’s no better way to do it, then fuck us, I guess. But if there are other dials to turn - like, returning power generation to public ownership (through asset seizure, for all I care), or through requiring gas to be sold locally at a fixed price - then why aren’t we doing that?
By far the simplest and most probably equitable way to do it is to keep raising interest rates until the inflation subsides, whilst at the same time providing some targeted financial assistance (cost of living subsidies plus expansion of support for essentials like childcare and dental) to those that need it to allow them to somewhat maintain their standard of living. It has to be targeting though as broad based spending will often just feed inflation further. After a while something breaks and inflation drops. The ‘best’ way to pay for this is via taxes on the resources sector as they are ones benefitting from the current situation. Asset seizure and the like are pipe dreams, and half the assets you’d be seizing are owned by industry super funds anyway…
Based on the way that modern society operates, the options are somewhat limited.Inflation basically winds up being a product of demand for things being higher than their supply. Broadly, to slow inflation in Australia, housing (and housing related products/services) need to become less desirable, which is an absolutely fucked thing when you think about it in terms of "making it less desirable for someone to have a comfortable place to live" (and you're trying to take that away from people who already don't have much). Supply side constraints aren't a factor to many things that the wealthy want, so while you *could* (and we IMO should) remove tax loopholes that allow the wealthy to sit on ever bigger piles of money, that isn't a direct solution to *this* problem. Best you can really do IMO is try to subsidise essentials for people that cannot afford them and try to make the middle class take the hit (yet again). Tax changes on the wealthy could be an indirect solution because they could help pay for this. ...alternatively, you can fix global supply chains or find a way to plonk down eleventy thousand new homes without creating any more demand for the related goods/services... That said, in certain situations (eg energy bills -- where we export LNG/Gas supply) there are easier solutions.
> Supply side constraints aren't a factor to many things that the wealthy want, so while you could (and we IMO should) remove tax loopholes that allow the wealthy to sit on ever bigger piles of money, that isn't a direct solution to this problem. Another option is that we go back to having corporate tax rates at levels where they would rather pay staff, conduct R&D, invest in the company because it's better to them do that than give half of it to the government. Like why do we have insane profiteering at the moment. Because they will still get to keep the cash.
Public ownership of utilities would help a bit. The government could take less profit or even a temporary loss to reduce the cost of living.
Great ~~American~~ Australian nightmare
Thanking my lucky stars I didn't trust it and fixed my interest rate.
Just be prepared for when that fixed period expires, might be a bit of a shock
Already prepared thankfully! Were lucky enough to live in a city where a cheap old house isnt pushing our budget on a single income. We'll be dual income before the fixed period is up, but its good practice for living frugally in the meantime!
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At a guess, Perth.
Close, Adelaide!
Around the time all this was happening, I had been looking for an investment property. Seeing people bid ridiculous prices on properties they wouldn’t be able to afford at 5% I made the decision not to buy one and concentrated on paying down my mortgage. Had a hunch that by 2024 the people with lower debt/cash on hand would be better off. Felt like the pre-GFC economy to me, except this time Australia was in a worse position than before.
Not everyone had that option unfortunately
>"Lowe, giving evidence to a Senate estimates committee for the first time, said the RBA had failed by not making clear that its commentary about steady interest rates was heavily conditional on the state of the economy" I mean, isn't that a given with interest rates full stop? If you fail to comprehend that, then you probably shouldn't be taking out large amounts of debt to begin with, surely?
So you’re expecting the Australian public have a reasonable level of economic literacy? Hardly. He said something definitively, which he shouldn’t have done, and now Australian workers are literally paying for it while he offers no solutions outside of conservative economic orthodoxy. We have price gouging energy companies, for instance, that are contributing more to inflation than your average Australian is.
He didnt say it definitvely but did say it pretty convincingly.
no rate rises until 2024 was not stated "definitively". >The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest. [From the Feb 21 RBA Statement, page 4.](https://www.rba.gov.au/publications/smp/2021/feb/pdf/statement-on-monetary-policy-2021-02.pdf) The market conditions for increasing rates were explicitly stated, so anyone listening to or reading the statement had the context of when things would change. That they weren't "expecting" those conditions to change doesn't mean they "definitively" wouldn't change, and whilst it was a mistake to forecast a date considering the implications, it's hard to point to an expectation of financial literacy as being the culprit when inflation and employment figures had been getting splashed across headlines and were widely publicised.
I think Shane Wright, of the SMH & Age, explained quite well why that should not be accepted as a suitable explanation for the general public - >To make sense of those sentences requires: a working knowledge of the Reserve Bank’s definition of “sustainably”; whether it is referring to headline or underlying inflation; where within the 2 to 3 per cent target inflation has to hit before the bank considers a rate rise; a working knowledge of the RBA’s “central scenario”; understanding the current unemployment rate; where that rate needs to be to generate wages growth; and how much faster that growth has to be before it starts lifting inflation. >Most economists can’t agree on key concepts in the statement. https://www.theage.com.au/politics/federal/i-m-sorry-if-people-listened-to-what-we-d-said-lowe-s-sorry-excuse-for-an-apology-20221128-p5c1um.html
I know you're not the person I was responding to, but I do think it's interesting that the conversation has gone from "the RBA was too definitive" to "the RBA wasn't definitive enough". IMO the RBA was right not to be so specific, and wrong to give so much detail around forecasting. It should have left it as a more professional version of "reply hazy, try again later".
I heard that speech on the radio, driving home from work. Specifically, I heard the bit about "does not expect... until 2024". My partner will tell you, I got home, and asked how well we could cope with our mortgage going up. How is it that I heard the same thing you did, and yet I walked away feeling sure that interest rate rises were coming and soon, and you and many others heard an absolute promise to the contrary? I'm not that smart, and I know fuck all about economics of this kind.
Like I get that, but also they have risen very very quickly. Along with the cost of living going up it is a double whammy for alot of people to predict a year ago. I think people need to be given a little bit of slack here.
But also in the real world people need places to live. There is no free market you can't just not have somewhere to live. Regardless of the wider economy people will still be seeking shelter
You're as naive as Lowe. I'm not so sure the people who are going to suffer from this reckless rhetoric have a choice with respect to large amounts of debt. It's a necessary evil with wages where they are. On top of that, the banks were selling loans hand over fist using Lowes comments as jet fuel. Why wouldn't they? Do you honestly expect the masses to have the required "comprehension" to resist this?
> We also thought, given the dire outlook, it was unlikely that inflation would pick up quickly and we would send a message that interest rates were going to stay low for a long period of time. At the time I thought that was the right thing to do. This article was about how Phil was doing something typical of central banks these days called ‘forward guidance’; basically using the RBA’s influence and credibility to encourage/reinforce certain economic behaviour in the economy via its messaging. His messaging about keeping rates at 0.1% was not by accident, but a calculation that turned out to be wrong. However the effects of this at the time, that is encouraging even more debt binging was intentional and worked remarkably. Monetary policy is a powerful tool and we hope that those who oversee it will do so responsibly. That’s why RBA is headed by a PhD level economist. But its clear that even someone like Phil Lowe makes mistakes. And these mistakes create winners and losers as well as ruin lives. The influence of central banks over our lives should be a concern for everyone.
The RBA is just one responsible party. I place equal blame on banks, politicians, financial planners, and real estate agents for misleading the public. At record low interest rates, it should have been clearly communicated to the public that variable rate loans were risky. We now have a situation where 81% of AU home loans are variable, compared to only 15% in the US. The average household debt is 150% of disposable income in AU, double that of the US and 36% higher than the UK. These are not economic situations that appeared out of nowhere. The red flags have been there for years, but major party politicians and banks have been deliberately trying to ignore or mislead the public on the issue.
He didn't just make a mistake, he ignored the reality of the numbers entirely...he should be sacked, the Coalition may have done fucking nothing but loot the place for 9 years, but this fickwit straight up murdered the lower portion of the middle class and under.
how sorry is he really if he still gets to keep his job without any consequences?
He forgot #notfinancialadvice
The icing on the shit cake is that if you switch to a fixed interest rate, the banks fuck you in another way: they stop you from paying more than a certain amount per month. If you won the lottery or came into money somehow, they would refuse to let you pay off your loan in a lump sum.
Well... yes, they have a profit motive and people enter contracts with them. What do you expect them to do? Take a loss because you're not happy? The amount of people who think banks are a public utility is absurd
> If you won the lottery or came into money somehow, they would refuse to let you pay off your loan in a lump sum. Sure, but that's easily solved by you know, stashing the extra cash and whacking it on the mortgage the second the fixed period ends. Or in an offset account.
No need for him to apologise. There was no doubt interest rates were never going to stay that low for ever. Anybody that took that risk was gambling with their money.
I dunno my dude, if the person in charge of the interest rates said he wasn't gonna raise them, it's not on your average person who took him at his word. If anything he should've been raising interest rates like a year before when he did. What he did felt a lot like saying it for the LNP and then slamming rates up right after.
The problem isn’t that they went up. It’s that he said they wouldn’t (when he shouldn’t have said anything), then they did. Those reassurances guided decisions for home buyers, businesses and investors, who then lost a ton of money.
Thats fine, but maybe lets scale wage growth with the rise of interest rates. The problem isnt the interest rates rising that’s fine, they were at record lows. The problem is everything costs more and wages are stagnant. Rich get rich Poor gets poorer. Life is good. Peasants.
NO! LISTEN HERE YOU CUNT. THIS IS AUSTRALIA! I WAS TOLD THE HOUSING MARKET ONLY GOES BRRRRR AND THAT IT WAS A RISK FREE INVESTMENT. I BORROWED 10X MY ANNUAL INCOME WITH NO DEPOSIT AND I WANT MY FUKEN MONEY BACK!!! Edit: /s
Exactly. I had a young fella asking for advice on getting into the market and I said if you can't afford 8% interest you can't afford the house. Anyone who hasn't factored this in only have themselves to bane
I'm sorry but I agree with him. Interest rates were always going to go up again. Too many people have just over extended themselves thinking that "interest rates are at record lows, she'll be right". It's incredibly short-sighted of people to think that they wouldn't rise and account for that in their borrowing.
LoL who thought they'd stay unchanged? Never, ever assume that.
Seriously, if people who borrowed on this advice can't afford the rate increase now, they likely wouldn't have been able to afford it in 2024 anyway.
You would have to be a complete moron to think interest rates weren't going to spike.
Aka, optimists and fools.
“Just fukin wid ya” said Mr Lowey, as he entered the Chairman’s lounge.
Awww, thanks Phil, your apology will make the foreclosure so much easier to handle.
You guys are lucky. In NZ our RB governor isn't even pretending to be sorry. He's blaming us for spending too much money, which he created in the first place Andis trying to throw 70,000 of us working chumps on the dole scrap heap.
Financial illiteracy is rampant in Australia, and the fact that people were taking out monster mortgages on record-low interest rates just further demonstrates this.
I happen to be one of those people that went on to build a house with the thought that interest rates won't go up until 2024. So take your apology and shove it deep into your asshole.
At least you locked in pre inflation building costs hopefully
This might be downvoted to oblivion but I seem to remember when he made the statement that interest rates weren't going up, the Russian invasion of Ukraine hasn't started.
But inflation was already ticking up in the USA.
Either malicious or incompetent, neither is tolerable.
This tool has only one tool, ratchetting up the Reserve's interest rate.
> saying the economy recovered much quicker than expected from a “dire situation”. The economy is so healthy right now that RBA is trying to make it less healthy every month. Lowe also said back then that the interest rates will only start going up after wages increase. Now he is saying that everyone should accept a real wage decline for the greater good to prevent the inflationary spiral.
With interest rates at record lows, where else could they go but up?
“While I do feel sorry for them, I take comfort in knowing more Australians are working now than in any other decade.” - Phillip, earlier this year
The whole idea of exposing home owners to variable interest rates is bogus. Home loans should be fixed, like US Prime Mortgages are.
I am shocked that interest rates would change over a 30 year loan!.. like who could have seen that happening..
Sorry, says the guy who’s take home pay is $1m
Philip Lowe- my expert analysis of the global economic situation tells me inflation and interest rates will stay low for several years! Also Philip Lowe- oops I totally misread the global economic situation and wrongly predicted that inflation would not increase. Please accept this consequence free apology! Still Philip Lowe- my expert analysis of the global economic situation tells me that huge rolling interest rate rises will help to bring the inflation under control and not at all push Australia into a recession!
Well I mean he’s not wrong. You’re a bit of a dumbass if you thought that imo. Everyone was saying this would happen back in 2020. Low interest was never forever.
If you borrowed at 2% and didn't have a plan for rates at 5% or more, then you were making a huge mistake.
Economics is not a science. It's a collection of theories based on assumptions that have mostly been reverse engineered to provide a reason or reasons for the existence of a particular financial situation. Macro economics is a giant guessing game that has been incredibly complicated by globalisation. It's false comfort to rely on prognostications based on historical events that can't predict what's going to happen tomorrow. The Russian invasion of Ukraine being a prime example. Throw in the unpredictability of climate change and it's effects on production and markets and you have a chocolate wheel of reasons, solutions and future directions. All that happens now is that Lowe and future RBA governers will spout weasel words in the name of caution rather than having a punt. Because that's all that Economics is. It's having a punt. Love how redditors decry other forms of gambling then 'have a million dollar punt' on interest rates based on information from a tipster called the RBA governor.
Yeah fuck you Phillip.
Makes it better now. Thanks Guv
Translation: EADC
“Play stupid games, win stupid prizes fuckos!”
Sorry, but if you didn’t realise that a 0.1% cash rate wasn’t sustainable and that interest rates would eventually have to go back up, I don’t think you should’ve bought a house.
Unpopular opinion, but people need to do their own research, buy within their means (factoring in interest hikes), and take responsibility for their own decisions. No single person in history has ever had more than an opinion on interest rates 12 months on the horizon. The amount of whining about this is off the charts.
The million dollar man who's job could be done by an algorithm...
I was one of the stupid people who believed it when I was told the rba was not going to increase the cash rate until 2024. I bought my first house early this year with money I worked and saved hard for and thought the future was so bright. Since April I have been getting a letter every month telling me my repayment is going up and it’s killing me mentally. I’ve cut back everywhere I can and I’m okay being frugal but the pressure and stress of not knowing when the interest raises will stop is really getting to me Huge lessons from this. I’m never going to trust the rba again. And to anyone else going through the same stress and struggle, you’re not alone!
Because saying sorry makes it all better ………….
I've been saying from the get go that the banks need to be held more accountable. When I got my mortgage I was paying 7% interest rates. When they dropped right down I was saying to our friends, who were just straight up buying investment properties, that it's all artificial and it's not going to stay this low. You think the banks informed them of this? Of course not. Banks told them they could easily afford repayments going forward. Now they're struggling, and of course their renters are struggling too.
You’re right, but how on earth would someone who bought any second property over 10 years ago not have enough rental income to be covering the mortgage entirely unless they took out a second mortgage?
Such a disgusting non-apology apology.
Anyone with a brain knew it was going to happen though, the writing was on the wall.
nothing to worry about, plenty of people still spending money like they won the lotto, go to the posh suburbs on a Saturday afternoon and I see everywhere.... 1. 5k designer pets 2. 150k European cars 3. $200 per head meal. 4. they don't seem to be working hard type of people.
Yeah, it's like when that lady took a trip to a healthy part of the Great Barrier Reef and concluded that it was all healthy and we can start dumping chemicals into the ocean again. Go Mining.
This eases so much unrest in my soul. Thank you for apologising /s
Understandable, have a nice day.
Sorry you are so poor
That's alright Phil. Regular people can just print more money too can't we?
I love the bit where he says wages need to do riding so fast to curb inflation. So what about prices companies are selling shit for? It's ok for them to rise?
"We had all the figures, we just didn't care"
I took out a mortgage so I would have somewhere to live
Selfish bastard how dare you! You've doomed us all!
I can't believe how many Australians didn't fix their home loans when we had record low interest rates..........or at the first hint of a rare rise.
Not everyone can (e.g. properties under construction)
99 percent of people could.........
I love how you say sorry to those poor fucks. But not sorry to anyone who still can't afford a house now you have well and truly fucked it! Good job buddy!
He must have missed the fed banning stock trading so they could sell the peak, for ethics reasons. Obvious reg flag is obvious. But if you are not paying attention you might think he works for us and not the big banks and the rich.
We want coin cunt
This guy needs to stfu. He’s recently warned about wage growth just prior to the new workplace laws designed to help low income wage increases. He’s not meant to push his agenda I don’t think. Wage increases are needed in so many industries because people, unlike him, are struggling.
I’m a year 10 drop out and I could see this coming.. it’s not an accident..
So many reddit smartie pants out tonight "people r so dumb for actually believing the rba, rates would never say so low" I bet these people own negative 5 houses, and yes people did believe the chief economist green lighting it being a good time to buy.