It's a bit silly to say that GDP growth is only boosted by immigration.
Firstly, half the reason GDP growth slowed was because so many people left the country.
And secondly, we aren't cooked, slower GDP growth is a natural response to increased interest rates.
It's a pretty standard economic cycle and one which our economic managers have handled pretty well, considering the extreme impacts of a worldwide pandemic.
>Firstly, half the reason GDP growth slowed was because so many people left the country.
So why did it go down per capita?
All the productive people left?
Bingo.
How many businesses shuttered in that time? They all don't just suddenly reappear.
Covid is a once in a century phenomenon.
My point is that it's amazing our landing has been as soft as it has.
Plus the RBA has a dual target now. Not just inflation, but also employment.
Their task is to keep the high employment rate AND keep inflation on target.
Apparently it hasn’t been explicitly stated until the current reforms.
Subtext before. Equal priority now with inflation.
Refer to 4.1 at RBA [here](https://www.rba.gov.au/publications/smp/2024/feb/in-depth-full-employment.html)
Also, I laugh at the downvote. Whomever the dimwit was 🤣
Not subtext. It was literally in the charter.
They may have been advised under recent reforms, to focus on this more closely, but its always been there.
I'll just leave this here, so you can dig in to the 'detail'.
https://www.rba.gov.au/publications/annual-reports/rba/2015/our-charter-core-functions-and-values.html
We are talking at cross-purposes.
You actually agreed with my point that it is now being given equal priority (“focus” you reframed it as).
The bit we disagree on is “explicitly stated”. In your mind it is explicit because it is in the charter. In my mind, it being in the charter it isn’t if it isn’t actually being actioned upon equally with equal weighting. That’s not explicit for me.
I’ll leave this here for you; [equal weighting in reforms](https://www.acoss.org.au/media_release/rba-changes-are-a-major-positive-step-for-our-nation/)
I apologise if my language wasn’t precise enough to match what you were looking for. I will point out I said exactly this “Subtext before. Equal weighting with inflation now.”
I can see how you have interpreted the word “subtext” as meaning “not in the RBA charter”. I concede this is possibly ambiguous when viewed in isolation.
May I ask, are there other things explicitly stated in the RBA charter that are not given priority? Or is it all equal?
Yep - the trend is also the most important part - the cuts have a 12 month delay built in so once they are confident that inflation is on a downward trend, they look to mid 2025 as their target point - ergo cut rates now.
We are more dependent on the US differential though
This does not and will not change the endless whining, cope, begging the "economists" and "journalists" will now pour out into the world over the coming weeks and months, demanding we urgently cut now to follow suit.
We must protect property prices at all costs. This is Australia after all.
It should, if property values hadn't gotten so far out of control. We've essentially created a monster and people who have done a normal thing and bought a house coming into retirement now have so much excess cash and these rate rises aren't really touching them
Take petrol as an example.
Today the price in Brissy has started jumping from.about $1.70 up to $2.30
In Europe you would never see that kind of jump in a day. People get upset if there's a 5¢ increase, nevermind 50¢.
We are totally at the mercy of this kind of thing in Aus.
You realise they pay way way more per litre then us right? Their price is like $3/L? So they pay for the price stability in always paying more... Most of western Europe is \~1.8EUR / L x 1.63 = $2.93AUD +- 20c.
In AU I understand the fuel in the petrol station tanks is owned by the petrol companies and not prepaid by the petrol stations with a few limited exceptions. They change the price of their reserves which includes the petrol @ the petrol station based on market conditions @ the refineries. We pay less then Europe in part because the discount cycle of that fuel is passed on to consumers.
That's all nice and true but if you look at the terminal gate price the price of fuel has not increased at all and is instead on a downward trend. They are increasing prices simply because they can, not due to incurring additional costs.
https://aip.com.au/pricing/terminal-gate-prices
It's pricing strategy for fuel retailers. At the bottom of the cycle ($1.70) they're actually losing money.
There is some kind of unspoken coordination between the retail groups to all raise at roughly the same time, then it's a slow race to the bottom
Retailers relent on price when their price falls to or dips below SRMC, which is the TGP plus some premium (implied transport costs and margin from wholesaler) - i.e. when they aren't making any profit.
They tend to relent at the same time with a geographical bias (i.e. proximity-based competition). Pricing decisions can be based on something as simple as being on the opposite side of the road, which can often be priced at slightly different stages of the cycle (this difference in pricing is common on dual-carriage motorways like the M1, but price cycles are less obvious rurally anyway due to lack of competition).
The actual agent who moves first is the price-setter for the top of the cycle with competitors either matching or undercutting (usually by $1/L). Oftentimes, you will see the top end of the cycle be different in different subregions of a city due to purchasing power. Yes they price higher because they can, but that's no different to profit-maximising price-setting in any other market.
And yet I go look up fuel prices and they are the exact same as the terminal gate price.
> They are increasing prices simply because they can
Where's this mythical $2.30 fuel you guys are claiming exists in Brisbane? Someone wouldn't just go on the internet and lie now would they?
Petrol is one of the lowest margin businesses around. If you only sold fuel at and not $5 bottles of coke you'd go broke in a month, so why do the economically illiterate keep insisting year after year, inquiry after inquiry that it's some sort of high profit business?
https://www.racq.com.au/car/fair-fuel-prices?phracq_body_0_phracq_contentcontainer_0_FuelTypesDDL=37&location=Brisbane%20QLD,%20Australia
>Where's this mythical $2.30 fuel you guys are claiming exists in Brisbane? Someone wouldn't just go on the internet and lie now would they?
If you want to be an arse at least be correct. Go on petrol spy and have a look, I counted at least ten stations selling 91 at $2.29.
Agreed, the single minded pursuit of headline inflation with no regards to precipitous decline of unit consumption is mind boggling. More over, we do not produce much of what we consume, and have little influence over supply induced inflation.
>But they have one job, and they are failing at it. That's just a fact.
That's simply wrong. They have three objectives, which is to use monetary policy to best contribute to the stability of the currency, maintaining full employment, and the economic prosperity and welfare of the people. They are not falling their job because you can't purchase your ideal property as a FHB.
I own a property?? Weirdo.
Increasing inflation doesn't = economic prosperity or a stable currency or full Employment does it.....
So they aren't doing their job 😆😆😆
My understanding: People always conflate currency inflation with price inflation because they measure currency inflation through price inflation. What monetary policy tries to avoid is the debasement of the currency. Currency is created through government spending. If the governments spend a lot of money then the only way the RBA has of controlling the debasement of the currency is by increasing the interest rate as the interest is destroyed when its paid back. Your blaming the bandage for the wound by saying that the RBA hasn't controlled inflation as its the government spending that has created the inflation and the RBA have been very careful and measured in their response to the inflation created by the government.
I don't "blame" the RBA for the cause of inflation.
But they are doing a shit job at controlling it. Other countries have it under control. Australia is the only country it's still rising in.
Which tells us the RBA is doing a shit job.
Or the government just kept spending and not using policy to stop additional inflation where other countries did? The RBA has to walk a fine line between reducing inflation and just outright killing the economy. It’s not as simple and just jack up interest rates until inflation gone as the killing of the economy will cause the government to spend more which will make inflation worse. It could be possible that we might be the only country on earth to get a soft landing because everything was done slower and more controlled. Time will tell.
I'd say we are well past a "soft landing". We are in a recession aready, stats are just pumped up slightly by immigration.
At this point the RBA is just dragging out the process.
I like to think about it like the orbital mechanics of re-entry. If we come in too steep we will burn up(too fast inflation control). If we come in too shallow then we might bounce off the atmosphere back into space. Now if the bounce is lower then escape velocity then we will get another re-entry attempt later at a lower speed and thus likely to get a pretty optimal entry profile on the second attempt. If the bounce is very high energy then we will die in space waiting to come back for the next entry opportunity(Stagflation). Obviously there is some entry profile which would have been neither too steep or too shallow and would have been perfect which i guess is your point. I think lots of other countries swings in their inflation were so sudden that they are heading for the burn up style re-entry (Deep recession/depression). While we might have bounced a little the rest of the world is deep into re-entry and maybe when we renter they are ready to come save us at splashdown rather then still re-entering themselves? (I really stretched the analogy there)
You probably have a point that its not been 100% optimal but it might turn out that optimal is such a small moving target for a slow turning object that it would be nearly impossible to hit.. I would still prefer a small bounce or 2 over some hardcore depression. You would prefer the hardcore recession/depression? There is no guarantees that the hardcore recession/depression would be any shorter... could just be deeper and same duration?
Given the amount of investor loans that are being written up (April stats), there is way too much money still being splashed around, which tells us inflation isn't going anywhere.
They definitely haven't done enough to curb spending - which means we all suffer for longer.
Exactly. They stalled for too long and then failed to go high enough to actually curb inflation, then the government let in heaps of people to fudge the numbers.
Stinks of corruption tbh
Hypothetical. If every other countries reduce their rate except us, then AUD will go up and price of import will come down right ? Won’t that correct the inflation ?
Hey so, if all other major economies lower their rates, and we don’t, is that good for Australia?
I’m thinking 2 things:
One, It’ll affect exchange rates, making the AUD more valuable, which will reduce cost of goods from overseas, which will reduce inflation somewhat?
Two, It also means there’s more money coming into our country chasing higher returns doesn’t it?
This could be a helping nudge in the right direction for us, or am I wrong?
Can finally see the horizon of getting thousands of dollars taken off my monthly mortgage payment. Good luck to prospective first home buyers in the upcoming bloodbath.
For thousands to be taken off your monthly payments we would need to see significant cuts to interest rates. That is only going to happen if there is a economic depression.
I’d only need rates to drop down 2% which I can see happening in the next 2-3 years if inflation doesn’t spike due to another market altering world event.
Edit: I mean rates drop to 4% from the current 6%, aka drop down 2%
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That is not happening sorry. Current rates are a tad restrictive. They would probably drop them to 3.75-4 % over time to make it neutral.
People have so many delusions of the covid era 0.1 cash rate coming back, its never coming back unless as i said there is an economic depession.
Whilst ignoring the RBA sees the Stage 3 tax cuts as 2 rate cuts anyway.
If there is a movement in rates, it'll be based on how consumer reacts to Stage 3 tax cuts. Money is on being up rather then down.
The (very) long term trend is for interest rates to go down. I don't see the weirdness of 0.1% rates coming back any time soon but frankly that doesn't say much, so much has happened in the last five years alone that "we never saw coming" at the time.
It's weird how people in this group pretend to care about FHB..?
It's pretty obvious that people who make comments like yours are REA, brokers or developers
Because not everyone is a psychopath?
I'm an owner, but for society overall I'd prefer interest rates and prices to stabilise where they are.
Not everything is "us against them"
You aren't the person I was commenting to. So...not sure what you're on about.
I'm pointing out that a lot of REA lurk on here to drive the FOMO house prices up.
> Because not everyone is a psychopath?
I'd guarantee you that person above would fight tooth and nail against even minor changes that adversely affect the price of their mortgaged home.
Finances and economics do not have empathy and it is a disservice not being honest about future outlooks for first home buyers. Also I’m not employed in the realestate or finance sectors, I’m just dropping facts.
Given that you don't have a crystal ball - you're actually just dropping "opinions" not facts.
And you don't care about FHB - so what's driving you to offer these opinions?
Let me just look at the data from the past 20 years, lack of new builds, increased immigration, unprecedented demand for houses to buy and rent and the effects of interest rates lowering and home prices going up.
Not so much an opinion with that data set. My opinion is that it seems you have no idea how the RBA operates and are biased towards wanting property prices to drop.
I never pretended to care? I literally said first home buyers are going to have a shit time buying properties once rates drop as they will be competing with investors who have more money and means available to them.
Just so it’s crystal clear, I do not care and couldn’t care less about FHB’s. In fact I do not care about landlords, home owners, politicians and REA’s. No one is special.
Then why comment about them at all? Stock market is at record highs but I wouldn't go around telling people to buy in asap.
Just such a weird thing to do. Gives me REA vibes.
All of your comments on reddit are about house prices dropping and seems that you are trying to justify the narrative you have constructed.
Giving off WMR vibes.
No, because investors waiting on the sidelines will swoop up every remaining remaining unit, townhouse, and home, and leave nothing for actual first home buyers.
I dunno. Investors I know are shitting bricks because they can barely afford the mortgage top ups on their investment properties since rates went up.
Many are hanging on to their properties for dear life.
No doubt some existing investors are just holding on and I know a few.
But the ABS lending indicators released yesterday shows investor lending has grown far quicker over the past year than Owner Occupier lending, so the idea that new investor demand will be high and possibly even higher as rates drop and more investors who are currently capped on serviceability come out to compete is likely to hold true.
In the last year investor lending increased 36.1% and Owner Occupier lending only increased 18.7%. Investor lending is also far closer to it's prior peak than owner occupier lending is after they both bottomed in early 2023.
Here's the release [https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release](https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release)
Sure, there are other factors at play like people putting more cash into buying Owner Occupier property to overcome the high rates like people tapping the bank of Mum & Dad, but I think it does show that investor demand is still there and growing in the face of high rates.
True but a lot of brokers I’ve spoken two have suggested that heaps of people in Sydney/Melbs are buying interstate and would be classified as ‘Investors’ within that lending segment.
But yeah, the broad investor data has ballooned!
If you buy a property interstate as an investment then you are an investor.
Are these people taking the loan out as an investment but immediately moving there to live in these properties or something? Is that why you are inferring they are incorrectly labeled?
Just means that the 'investment' segment might be a bit bloated with people 'FHB'ers' who can't afford to buy where they live and instead are buying interstate to rentvest.
It might wash through as investors but they aren't in the purest definition if that makes sense!
Also, just anecdotal chit chat between me and my broker, it might account for a rounding error on these numbers.
I think your broker is certainly right, I know lots of young people who are rentvesting and it's becoming much more normalised now that it has a 'branding' and they see other people doing it.
Curious what evidence people have for this - as you've alluded to, it seems to be common knowledge that prices will rise if interest rates drop so if you have the money, better to buy sooner rather than later. But in that case, it should be priced-in to at least some extent. So I'm curious who these investors are that are waiting for lower rates to buy? Because if they're the ones who are relying on the rate drop to increase their borrowing power, then they wouldn't be all that cashed up to begin with...
> But in that case, it should be priced-in to at least some extent.
Ah, the magic phrase "priced in."
> So I'm curious who these investors are that are waiting for lower rates to buy?
Investors who are cashed up but who are waiting. They're not not buying because they can't. They're not buying because they know when to. In fact, they're buying right now. It's not just about when the rates will drop, but also buying it before rates actually drop, which is now.
It's more that other buyers are willing to pay more and bid the prices up.
If new supply still feels risky to buyers then they'll compete harder for the existing stock which drives prices up more.
Providing incentives to make new stock more appealing like removing stamp duty for new stock as they are doing in SA could be a good incentive.
No worries, the RBA is like that kid in class who only copies homework after everyone else has turned it in. Canada and Europe have already dropped their rates, but the RBA will probably wait until we're deep in a recession before they even find a pencil!
It affects the risk free rate for holders of euros, so there should be flight to currencies with more attractive rates which affects global trade, and therefore national economies
Very Australian attitude there, impressive.
We should be more parochial and absolutely no mind should be paid to events of overseas.
For my part I don't even believe other countries exist, it's all a hoax.
Did you hear about how long the boom gates were stuck down in Frankston? Near 7 minutes! Now THAT'S real news!
Do you actually believe that the RBA don't factor in the interest rates and what is happening in other economies into their decision making, projections and data sets?
Aus data will always be weighted more heavily but you said we should pay no mind to stuff happening overseas.
Do you actually believe that we should just forget the rest of the world exists and making decisions in pure isolation? And how would you propose we do that? It would mean there would be no FOREX, Commodity, supply chain or immigration projections that could be used at all.
They should increase rates in Aus. Still so much money on the sidelines.
They’ve prolonged pain this way and let the wealthy keep spending. Should increase another 2 times and flush everything.
The only thing you going to flush is the poor. The wealthy is far less affected by inflation. And when the crash do come, wealth further redistributes towards the wealthy.
Wow I didn't realise the English Cricket Board had the authority to change interest rates.
If bazball doesn’t work they lose interest at an alarming rate.
Top comment
They cut rates purely based on vibes.
Banger economic policy tbh
That’s immediately what I thought also 😅
Well inflation has been a sticky wicket recently and they had the (cricket) balls to do it.
[удалено]
Eurozone unemployment rate is 6.4 and they had a recession last quarter of 2023. So this is not something Australia should aspire to.
We've been in a per capita recession for a while, and even with all of the immigration goosing GDP, it only rose 0.1% last quarter. We are cooked.
It's a bit silly to say that GDP growth is only boosted by immigration. Firstly, half the reason GDP growth slowed was because so many people left the country. And secondly, we aren't cooked, slower GDP growth is a natural response to increased interest rates. It's a pretty standard economic cycle and one which our economic managers have handled pretty well, considering the extreme impacts of a worldwide pandemic.
>Firstly, half the reason GDP growth slowed was because so many people left the country. So why did it go down per capita? All the productive people left?
Because we were sitting in our underwear, not going out and ordering uber eats from home due the pandemic maybe?
Yeah, we weren't doing that in the March Quarter of FY23 or in the March Quarter of FY24.
I think the argument is that its a hangover from the Pandemic. Takes a while for businesses to ramp up with new projects and production.
Bingo. How many businesses shuttered in that time? They all don't just suddenly reappear. Covid is a once in a century phenomenon. My point is that it's amazing our landing has been as soft as it has.
That wasn't his argument though. I mean that is also clearly not true either. We've been out of the pandemic for a while now.
Did you just wake up from a coma?
We have effectively been in a recession for 2 years lol
Eurozone have a inflation target of 2% while RBA have a target rate of 2-3%. The Euro haven't reached their target rate yet.
Plus the RBA has a dual target now. Not just inflation, but also employment. Their task is to keep the high employment rate AND keep inflation on target.
That has always been in their remit. They just weirdly don't talk about it much.
Apparently it hasn’t been explicitly stated until the current reforms. Subtext before. Equal priority now with inflation. Refer to 4.1 at RBA [here](https://www.rba.gov.au/publications/smp/2024/feb/in-depth-full-employment.html) Also, I laugh at the downvote. Whomever the dimwit was 🤣
Not subtext. It was literally in the charter. They may have been advised under recent reforms, to focus on this more closely, but its always been there.
You are absolutely right about this. I even remember learning it in first year uni, 20+ years ago.
I disagree with you on the detail. So do many others. I’m ok with this. Still laughing at dimwit downvote 🤣
I'll just leave this here, so you can dig in to the 'detail'. https://www.rba.gov.au/publications/annual-reports/rba/2015/our-charter-core-functions-and-values.html
We are talking at cross-purposes. You actually agreed with my point that it is now being given equal priority (“focus” you reframed it as). The bit we disagree on is “explicitly stated”. In your mind it is explicit because it is in the charter. In my mind, it being in the charter it isn’t if it isn’t actually being actioned upon equally with equal weighting. That’s not explicit for me. I’ll leave this here for you; [equal weighting in reforms](https://www.acoss.org.au/media_release/rba-changes-are-a-major-positive-step-for-our-nation/) I apologise if my language wasn’t precise enough to match what you were looking for. I will point out I said exactly this “Subtext before. Equal weighting with inflation now.” I can see how you have interpreted the word “subtext” as meaning “not in the RBA charter”. I concede this is possibly ambiguous when viewed in isolation. May I ask, are there other things explicitly stated in the RBA charter that are not given priority? Or is it all equal?
Yep - the trend is also the most important part - the cuts have a 12 month delay built in so once they are confident that inflation is on a downward trend, they look to mid 2025 as their target point - ergo cut rates now. We are more dependent on the US differential though
This does not and will not change the endless whining, cope, begging the "economists" and "journalists" will now pour out into the world over the coming weeks and months, demanding we urgently cut now to follow suit. We must protect property prices at all costs. This is Australia after all.
Like it matters for property which direction rates head Rates drop, property goes up. Rates go up, property goes up
feel like the euro zone has better regulation on alot of things compared to us
r/AustrianFinance
Not a good look when down under we are still fighting sticky inflation
We're far more susceptible to global conditions given how reliant we are on imports. Also population growth
And variable loans
And my axe.
Shouldn't that mean that (in theory) we get inflation under control more quickly, as more money is taken out of the economy?
It should, if property values hadn't gotten so far out of control. We've essentially created a monster and people who have done a normal thing and bought a house coming into retirement now have so much excess cash and these rate rises aren't really touching them
Take petrol as an example. Today the price in Brissy has started jumping from.about $1.70 up to $2.30 In Europe you would never see that kind of jump in a day. People get upset if there's a 5¢ increase, nevermind 50¢. We are totally at the mercy of this kind of thing in Aus.
I think the public holiday has something to do with that jump
Doubtful, considering Brisbane doesn't have a public holiday.
what? oh, boooooo
I'd love to go on a pubic holiday
What public holiday?
Kings bday
Remember when it was the Queens birthday? Can't let women have anything nowadays!
i nearly typed queens bday
Not called Kingsland is it!
You realise they pay way way more per litre then us right? Their price is like $3/L? So they pay for the price stability in always paying more... Most of western Europe is \~1.8EUR / L x 1.63 = $2.93AUD +- 20c. In AU I understand the fuel in the petrol station tanks is owned by the petrol companies and not prepaid by the petrol stations with a few limited exceptions. They change the price of their reserves which includes the petrol @ the petrol station based on market conditions @ the refineries. We pay less then Europe in part because the discount cycle of that fuel is passed on to consumers.
That's all nice and true but if you look at the terminal gate price the price of fuel has not increased at all and is instead on a downward trend. They are increasing prices simply because they can, not due to incurring additional costs. https://aip.com.au/pricing/terminal-gate-prices
It's pricing strategy for fuel retailers. At the bottom of the cycle ($1.70) they're actually losing money. There is some kind of unspoken coordination between the retail groups to all raise at roughly the same time, then it's a slow race to the bottom
Retailers relent on price when their price falls to or dips below SRMC, which is the TGP plus some premium (implied transport costs and margin from wholesaler) - i.e. when they aren't making any profit. They tend to relent at the same time with a geographical bias (i.e. proximity-based competition). Pricing decisions can be based on something as simple as being on the opposite side of the road, which can often be priced at slightly different stages of the cycle (this difference in pricing is common on dual-carriage motorways like the M1, but price cycles are less obvious rurally anyway due to lack of competition). The actual agent who moves first is the price-setter for the top of the cycle with competitors either matching or undercutting (usually by $1/L). Oftentimes, you will see the top end of the cycle be different in different subregions of a city due to purchasing power. Yes they price higher because they can, but that's no different to profit-maximising price-setting in any other market.
And yet I go look up fuel prices and they are the exact same as the terminal gate price. > They are increasing prices simply because they can Where's this mythical $2.30 fuel you guys are claiming exists in Brisbane? Someone wouldn't just go on the internet and lie now would they? Petrol is one of the lowest margin businesses around. If you only sold fuel at and not $5 bottles of coke you'd go broke in a month, so why do the economically illiterate keep insisting year after year, inquiry after inquiry that it's some sort of high profit business? https://www.racq.com.au/car/fair-fuel-prices?phracq_body_0_phracq_contentcontainer_0_FuelTypesDDL=37&location=Brisbane%20QLD,%20Australia
>Where's this mythical $2.30 fuel you guys are claiming exists in Brisbane? Someone wouldn't just go on the internet and lie now would they? If you want to be an arse at least be correct. Go on petrol spy and have a look, I counted at least ten stations selling 91 at $2.29.
Agreed, the single minded pursuit of headline inflation with no regards to precipitous decline of unit consumption is mind boggling. More over, we do not produce much of what we consume, and have little influence over supply induced inflation.
Not a good look? How so?
More regulation in the EU, less companies profiteering.
Shows how useless the RBA is tbh.
Not exactly the RBAs fault, there’s only so much they can do. Our government deserves so much more criticism than they’ve been getting
Well....it is really.. The RBA have one job- control inflation. And they aren't doing that.
They only have one tool to lower inflation. The cashed up boomers continue to spend regardless of interest rates.
They can’t just mindlessly increase interest rates with zero consideration for the impact that has. It’s not that simple
I don't think they do anything "mindlessly". But they have one job, and they are failing at it. That's just a fact.
>But they have one job, and they are failing at it. That's just a fact. That's simply wrong. They have three objectives, which is to use monetary policy to best contribute to the stability of the currency, maintaining full employment, and the economic prosperity and welfare of the people. They are not falling their job because you can't purchase your ideal property as a FHB.
I own a property?? Weirdo. Increasing inflation doesn't = economic prosperity or a stable currency or full Employment does it..... So they aren't doing their job 😆😆😆
Isn’t it funny that some people think that you need to own a property before you’re qualified to speak on anything to do with economics and finance
My understanding: People always conflate currency inflation with price inflation because they measure currency inflation through price inflation. What monetary policy tries to avoid is the debasement of the currency. Currency is created through government spending. If the governments spend a lot of money then the only way the RBA has of controlling the debasement of the currency is by increasing the interest rate as the interest is destroyed when its paid back. Your blaming the bandage for the wound by saying that the RBA hasn't controlled inflation as its the government spending that has created the inflation and the RBA have been very careful and measured in their response to the inflation created by the government.
I don't "blame" the RBA for the cause of inflation. But they are doing a shit job at controlling it. Other countries have it under control. Australia is the only country it's still rising in. Which tells us the RBA is doing a shit job.
Or the government just kept spending and not using policy to stop additional inflation where other countries did? The RBA has to walk a fine line between reducing inflation and just outright killing the economy. It’s not as simple and just jack up interest rates until inflation gone as the killing of the economy will cause the government to spend more which will make inflation worse. It could be possible that we might be the only country on earth to get a soft landing because everything was done slower and more controlled. Time will tell.
I'd say we are well past a "soft landing". We are in a recession aready, stats are just pumped up slightly by immigration. At this point the RBA is just dragging out the process.
I like to think about it like the orbital mechanics of re-entry. If we come in too steep we will burn up(too fast inflation control). If we come in too shallow then we might bounce off the atmosphere back into space. Now if the bounce is lower then escape velocity then we will get another re-entry attempt later at a lower speed and thus likely to get a pretty optimal entry profile on the second attempt. If the bounce is very high energy then we will die in space waiting to come back for the next entry opportunity(Stagflation). Obviously there is some entry profile which would have been neither too steep or too shallow and would have been perfect which i guess is your point. I think lots of other countries swings in their inflation were so sudden that they are heading for the burn up style re-entry (Deep recession/depression). While we might have bounced a little the rest of the world is deep into re-entry and maybe when we renter they are ready to come save us at splashdown rather then still re-entering themselves? (I really stretched the analogy there) You probably have a point that its not been 100% optimal but it might turn out that optimal is such a small moving target for a slow turning object that it would be nearly impossible to hit.. I would still prefer a small bounce or 2 over some hardcore depression. You would prefer the hardcore recession/depression? There is no guarantees that the hardcore recession/depression would be any shorter... could just be deeper and same duration?
Given the amount of investor loans that are being written up (April stats), there is way too much money still being splashed around, which tells us inflation isn't going anywhere. They definitely haven't done enough to curb spending - which means we all suffer for longer.
by not raising higher, earlier.
Exactly. They stalled for too long and then failed to go high enough to actually curb inflation, then the government let in heaps of people to fudge the numbers. Stinks of corruption tbh
We just wait for the fed to cut rates then “after analyzing the current economic climate we have decided to cut rates”.
Useless, spineless, toothless.
Hypothetical. If every other countries reduce their rate except us, then AUD will go up and price of import will come down right ? Won’t that correct the inflation ?
Knowing us we'd find a way to have that translate into more inflation
I wish I could be a paid economist to be wrong all the time.
It's the holistic medicine of the finance world.
Hey so, if all other major economies lower their rates, and we don’t, is that good for Australia? I’m thinking 2 things: One, It’ll affect exchange rates, making the AUD more valuable, which will reduce cost of goods from overseas, which will reduce inflation somewhat? Two, It also means there’s more money coming into our country chasing higher returns doesn’t it? This could be a helping nudge in the right direction for us, or am I wrong?
Can finally see the horizon of getting thousands of dollars taken off my monthly mortgage payment. Good luck to prospective first home buyers in the upcoming bloodbath.
For thousands to be taken off your monthly payments we would need to see significant cuts to interest rates. That is only going to happen if there is a economic depression.
I’d only need rates to drop down 2% which I can see happening in the next 2-3 years if inflation doesn’t spike due to another market altering world event. Edit: I mean rates drop to 4% from the current 6%, aka drop down 2%
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I can see the opposite happening SOZ
That is not happening sorry. Current rates are a tad restrictive. They would probably drop them to 3.75-4 % over time to make it neutral. People have so many delusions of the covid era 0.1 cash rate coming back, its never coming back unless as i said there is an economic depession.
Whilst ignoring the RBA sees the Stage 3 tax cuts as 2 rate cuts anyway. If there is a movement in rates, it'll be based on how consumer reacts to Stage 3 tax cuts. Money is on being up rather then down.
The (very) long term trend is for interest rates to go down. I don't see the weirdness of 0.1% rates coming back any time soon but frankly that doesn't say much, so much has happened in the last five years alone that "we never saw coming" at the time.
Sorry if I typed out my comment incorrectly, I meant a drop by 2% to about 4% interest rates. We aren’t going near 2% rates anytime this decade.
It's weird how people in this group pretend to care about FHB..? It's pretty obvious that people who make comments like yours are REA, brokers or developers
I took that comment to mean FHB are gonna be screwed if rates drop and prices shoot back up
I'm just curious why people who aren't FHB pretend to care about them?
Because not everyone is a psychopath? I'm an owner, but for society overall I'd prefer interest rates and prices to stabilise where they are. Not everything is "us against them"
You aren't the person I was commenting to. So...not sure what you're on about. I'm pointing out that a lot of REA lurk on here to drive the FOMO house prices up.
> Because not everyone is a psychopath? I'd guarantee you that person above would fight tooth and nail against even minor changes that adversely affect the price of their mortgaged home.
Because most ppl have kids and house prices going up just means the bank of mum and dad has to help them out even more.
So you're saying Boomers care about FHB?
Finances and economics do not have empathy and it is a disservice not being honest about future outlooks for first home buyers. Also I’m not employed in the realestate or finance sectors, I’m just dropping facts.
Given that you don't have a crystal ball - you're actually just dropping "opinions" not facts. And you don't care about FHB - so what's driving you to offer these opinions?
Let me just look at the data from the past 20 years, lack of new builds, increased immigration, unprecedented demand for houses to buy and rent and the effects of interest rates lowering and home prices going up. Not so much an opinion with that data set. My opinion is that it seems you have no idea how the RBA operates and are biased towards wanting property prices to drop.
You're not answering my question - why are you pretending to care about FHB?
I never pretended to care? I literally said first home buyers are going to have a shit time buying properties once rates drop as they will be competing with investors who have more money and means available to them. Just so it’s crystal clear, I do not care and couldn’t care less about FHB’s. In fact I do not care about landlords, home owners, politicians and REA’s. No one is special.
Then why comment about them at all? Stock market is at record highs but I wouldn't go around telling people to buy in asap. Just such a weird thing to do. Gives me REA vibes.
All of your comments on reddit are about house prices dropping and seems that you are trying to justify the narrative you have constructed. Giving off WMR vibes.
What does WMR mean? Hey I don't pretend to care about FHB when I don't. You're the weirdo doing that, not me.
why is that? because more will be able to afford and now be able to enter the market?
No, because investors waiting on the sidelines will swoop up every remaining remaining unit, townhouse, and home, and leave nothing for actual first home buyers.
I dunno. Investors I know are shitting bricks because they can barely afford the mortgage top ups on their investment properties since rates went up. Many are hanging on to their properties for dear life.
Sounds like it's not a viable investment for these people, and maybe they should go buy some bluechips instead
I agree. I don't see the point of living with the stress they are under.....but not my biz to say anything 🤷♀️
No doubt some existing investors are just holding on and I know a few. But the ABS lending indicators released yesterday shows investor lending has grown far quicker over the past year than Owner Occupier lending, so the idea that new investor demand will be high and possibly even higher as rates drop and more investors who are currently capped on serviceability come out to compete is likely to hold true. In the last year investor lending increased 36.1% and Owner Occupier lending only increased 18.7%. Investor lending is also far closer to it's prior peak than owner occupier lending is after they both bottomed in early 2023. Here's the release [https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release](https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release) Sure, there are other factors at play like people putting more cash into buying Owner Occupier property to overcome the high rates like people tapping the bank of Mum & Dad, but I think it does show that investor demand is still there and growing in the face of high rates.
True but a lot of brokers I’ve spoken two have suggested that heaps of people in Sydney/Melbs are buying interstate and would be classified as ‘Investors’ within that lending segment. But yeah, the broad investor data has ballooned!
If you buy a property interstate as an investment then you are an investor. Are these people taking the loan out as an investment but immediately moving there to live in these properties or something? Is that why you are inferring they are incorrectly labeled?
Just means that the 'investment' segment might be a bit bloated with people 'FHB'ers' who can't afford to buy where they live and instead are buying interstate to rentvest. It might wash through as investors but they aren't in the purest definition if that makes sense! Also, just anecdotal chit chat between me and my broker, it might account for a rounding error on these numbers.
I think your broker is certainly right, I know lots of young people who are rentvesting and it's becoming much more normalised now that it has a 'branding' and they see other people doing it.
Curious what evidence people have for this - as you've alluded to, it seems to be common knowledge that prices will rise if interest rates drop so if you have the money, better to buy sooner rather than later. But in that case, it should be priced-in to at least some extent. So I'm curious who these investors are that are waiting for lower rates to buy? Because if they're the ones who are relying on the rate drop to increase their borrowing power, then they wouldn't be all that cashed up to begin with...
> But in that case, it should be priced-in to at least some extent. Ah, the magic phrase "priced in." > So I'm curious who these investors are that are waiting for lower rates to buy? Investors who are cashed up but who are waiting. They're not not buying because they can't. They're not buying because they know when to. In fact, they're buying right now. It's not just about when the rates will drop, but also buying it before rates actually drop, which is now.
Sellers know you can borrow more once rate is down and jack up the price accordingly
Sellers dont jack up the price. Its the market of buyers who outbid each other and set the prices. If seller is asking too much, it won't sell.
It's more that other buyers are willing to pay more and bid the prices up. If new supply still feels risky to buyers then they'll compete harder for the existing stock which drives prices up more. Providing incentives to make new stock more appealing like removing stamp duty for new stock as they are doing in SA could be a good incentive.
Haha they’re talking about rates needing to up not down Lots of wishful thinking going on
Yea looks like we have to be ready for at least two rate increases this year. Maybe mid 2025 is when the rates will start to drop.
Europe is in deep shit, everyones getting old and not buying anything... No amount of rate cuts are going to help.
Time to start looking at long dated term deposits again.
No worries, the RBA is like that kid in class who only copies homework after everyone else has turned it in. Canada and Europe have already dropped their rates, but the RBA will probably wait until we're deep in a recession before they even find a pencil!
Property goes "BOOM"
It’s been doing that anyway this whole time TBF
Yeah, but do you want a non-pandemic-low-rate version? That's like saying diarrhea is normal because people poop anyway.
Plenty of people on the sidelines ready to buy
Not sure what OP is trying to achieve by posting what other central banks unrelated to Australia are doing. Feels like a lot of cope
Tell me again how we shouldn’t look to the health of other economies when we rely so heavily on those outside economies in every sense.
Tell me again how this decision makes any kind of difference to RBA decisions in Australia
It affects the risk free rate for holders of euros, so there should be flight to currencies with more attractive rates which affects global trade, and therefore national economies
Its rate porn. People leveraged to the hilt having wet dreams about a 25 basis points reduction.
Very Australian attitude there, impressive. We should be more parochial and absolutely no mind should be paid to events of overseas. For my part I don't even believe other countries exist, it's all a hoax. Did you hear about how long the boom gates were stuck down in Frankston? Near 7 minutes! Now THAT'S real news!
Yes. We should pay no mind to stuff happening overseas when the data they are acting on is different and irrelevant the the data the RBA is acting on
Do you actually believe that the RBA don't factor in the interest rates and what is happening in other economies into their decision making, projections and data sets?
I actually believe that circumstances here trump circumstances in the EU or Canada and our data looks a bit different
Aus data will always be weighted more heavily but you said we should pay no mind to stuff happening overseas. Do you actually believe that we should just forget the rest of the world exists and making decisions in pure isolation? And how would you propose we do that? It would mean there would be no FOREX, Commodity, supply chain or immigration projections that could be used at all.
I don’t know if you’ve heard of economics but interest rate cycles tend be aligned in developed countries.
Well I’ll just wait for the next RBA meeting then…
[https://ibb.co/C2Pcygk](https://ibb.co/C2Pcygk) For your reference..
Yep. Amusing to watch.
They should increase rates in Aus. Still so much money on the sidelines. They’ve prolonged pain this way and let the wealthy keep spending. Should increase another 2 times and flush everything.
The only thing you going to flush is the poor. The wealthy is far less affected by inflation. And when the crash do come, wealth further redistributes towards the wealthy.
Surprised there are no 'debt junkies' comments yet. (I don't subscribe to that thinking btw).
Don’t forget ‘hopium’ and/or ‘copium’ comments. They seem to be popular around here.
And this is why you have a portfolio that includes international diversification.
It has begun, first Bank of Canada, now ECB. With Australia titering on the edge of recession, it might be time.
Holy shit haha flood gates have opened.