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How do they do that without inflation/higher interest rates?
I thought they were trying to stimulate the economy like that, but would they care if the economy crashes as long as their debt isn't worthless?
I thought they were trying to stimulate the economy like that, but would they care if the economy crashes as long as their debt isn't worthless?
The cute arrangement between the RBA and treasury is keeping interest rates lower than market
The RBA and government are independent of each other, by design.The government cant afford to raise interest rates - they need people spending money in the economy, not worrying about their mortgage payments.
The government has shown to everyone now that they are absolutely steadfast in fighting any natural correction to the Australian housing market.
Lowering interest rates in the first place hasn't done anything to allow people to enter the housing market, all its done is allow people to pay more for a property which has essentially inflated the market. Its absolutely crazy and has just created a huge divide between people who already own property compared to those who don't. People literally have no choice but to get a $1,000,000 mortgage. Raising interests rates on that would be a disaster for anyone new in the market.
Its absolutely nuts what's going on, and the government has essentially allowed it to happen.
The RBA and government are independent of each other, by design.
Rates globally are low (negative in some countries) so we're hardly outliers.
Adelaide housing market continues to be insane. Houses going for above asking prices in no time. Just offered top dollar on a house yesterday and was knocked back. It’s getting disheartening looking at very mediocre houses pop up and seeing their asking prices. I’m honestly not sure what to do at this point. I want a house but I don’t want to settle for anything, but I know the longer I wait the more prices will escalate.
The government cant afford to raise interest rates - they need people spending money in the economy, not worrying about their mortgage payments.
The government has shown to everyone now that they are absolutely steadfast in fighting any natural correction to the Australian housing market.
Lowering interest rates in the first place hasn't done anything to allow people to enter the housing market, all its done is allow people to pay more for a property which has essentially inflated the market. Its absolutely crazy and has just created a huge divide between people who already own property compared to those who don't. People literally have no choice but to get a $1,000,000 mortgage. Raising interests rates on that would be a disaster for anyone new in the market.
Its absolutely nuts what's going on, and the government has essentially allowed it to happen.
I would love to see the statistics of how many people own houses that couldn't actually afford to buy, without taking into accounting equity.
Unless inflation happens overseas first. They raise rates, then we're forced to raise rates.Before we get inflation, we need to get wage inflation. Basically people will need to be able to push prices up before they go up (inflation).
As a result, even if rates increase to curb inflation, people will have more income to pay the added interest.
Also, if we do get a bunch of inflation, people and the government can inflate away their debt.
We're not in a bad spot.
Before we get inflation, we need to get wage inflation. Basically people will need to be able to push prices up before they go up (inflation).
As a result, even if rates increase to curb inflation, people will have more income to pay the added interest.
Also, if we do get a bunch of inflation, people and the government can inflate away their debt.
We're not in a bad spot.
Unless inflation happens overseas first. They raise rates, then we're forced to raise rates.
Pretty simple equation. If US rates go up Aussie banks must raise to remain competitive.I'm pretty sure "forced" isn't the right word.
Please explain why raising rates can't be avoided if, say, the USA raises theirs.
Pretty simple equation. If US rates go up Aussie banks must raise to remain competitive.
Aussie banks. Though the reserve will have to worry about AUD value.That can't be the simple equation. Having higher rates makes you less competitive. Customers will go where they pay less interest.
Also are we talking about reserve banks or just general banks. Because inflation is more a reserve bank thing but you're making it sound like the big 4 matter the most here.
Aussie banks. Though the reserve will have to worry about AUD value.
Not saying they'll rush in to it, but bottom line is we generally follow the trends of the US and OECD in regards to interest rates.Got it. Funding costs for our retail banks who have to get funds from overseas increase so they pass on the cost to households.
That's all well and good but the banks here aren't going to rush into blowing up the housing market. That would be cutting off their nose to spite their face, seeing as mortgage defaults are lost revenue for them and the equity in a house is their cushion.
Our banks would rather have their net interest margin squeezed than have the property market blow up.
Can never lose with owning property.