The RBA, politicised conmen with a gun to the head of the Australian economy

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Gigantic

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Summary of the terms of reference for the RBA review

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Anyone have a link to the full version?
 

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madmug

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See this doesn't get enough attention.

Even in Aus, the Government (not an attack on the libs - labor would've done similar) pumped 100's of billions into the economy during Covid for stimulus reasons and didn't even bat an eye lid about thinking what all that money in the system means.

Resource shortages haven't helped but the first point of call is trying to cool the economy. Likely that we will head into a recession, as will many other countries around the world.

It certainly wasn't helped by the increase in Federal debt, in fact over doubling it from $250billion by over another $250billion+ between, 2013 & 2019 to over $550billion.

We'd got through the 2008 GEC so then we needed to get the debt back under control. But NO, Abbott etc more than doubled it!!!

So Now Government have less ability to support sectors of the community & business when they need to.

The double edged whammy of Covid variations & inflation have hit, we are less able to combat these issues.

Add to that the crap way we've handled the housing bubble. Housing has gone being a staple need to being a commodity in this country. Supporting prices with investment deductions. So fueling the demand side combined with very little supply side actions have landed us in this mess.
 

hamohawk1

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It certainly wasn't helped by the increase in Federal debt, in fact over doubling it from $250billion by over another $250billion+ between, 2013 & 2019 to over $550billion.

We'd got through the 2008 GEC so then we needed to get the debt back under control. But NO, Abbott etc more than doubled it!!!

So Now Government have less ability to support sectors of the community & business when they need to.

The double edged whammy of Covid variations & inflation have hit, we are less able to combat these issues.

Add to that the crap way we've handled the housing bubble. Housing has gone being a staple need to being a commodity in this country. Supporting prices with investment deductions. So fueling the demand side combined with very little supply side actions have landed us in this mess.
The ability to service debt and the ability to provide stimulus is worrying, particularly considering the precarious nature of the economy.

This scares me and must scare economists as well.

Think both sides of government are going to realise how hard it is to run a modern economy without pumping inflation and housing to the moon.
 

Seeds

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The ability to service debt and the ability to provide stimulus is worrying, particularly considering the precarious nature of the economy.

This scares me and must scare economists as well.

Think both sides of government are going to realise how hard it is to run a modern economy without pumping inflation and housing to the moon.
Federal debt is not our problem guys.

its our ridiculously high net external debt that scares me.


japan has the highest federal debt in the world (by a very long way) but cash still floods into their economy during periods of rising risk aversion because their net external balance is in surplus.

its the net external balance that matters.

and australia has the highest net external debt out of nearly all developed economies.

its a bomb that will soon go off.
 

hamohawk1

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Federal debt is not our problem guys.

its our ridiculously high net external debt that scares me.


japan has the highest federal debt in the world (by a very long way) but cash still floods into their economy during periods of rising risk aversion because their net external balance is in surplus.

its the net external balance that matters.

and australia has the highest net external debt out of nearly all developed economies.

its a bomb that will soon go off.
A great time to buy your first 10 jet ski's or 10 hilux's at a fantastic rate though.
 

Evolved1

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You still being open and honest about being a moron?
Looks like OP bought the top of the market with a variable low interest rate. :straining:

In all honesty, crashing the housing market is in the best long term interests of this nation. I hope ANZ predictions are right.
 

QuietB

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Looks like OP bought the top of the market with a variable low interest rate. :straining:

In all honesty, crashing the housing market is in the best long term interests of this nation. I hope ANZ predictions are right.
What are ANZ predicting?
 

Seeds

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Four consecutive fifty basis point rate rises.

This should happen. it probably wont though.

commodity prices are already falling across the board. Inflation will fall quickly before wage demand effects take hold. And the rba is desperate to protect the housing market at all cost.

go short on the aud. I think it will take a tumble when aussie rate rises fall well short of expectations.

the one big uncertainty though is china. It could upset this story if it goes on a spending spree.
 

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Taylor

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Why did they keep them so low.

What happens if a nation with a good credit rating and no obvious stability issues or troubles transferring power between political parties - so an objectively safe place economically, lifts it's interest rates ahead of the world?

Money moves towards their currency, lifting their currency value with that demand. That makes it harder to do business in that nation, trying to sell to the world that now finds your product more expensive as the currency value is up.

But hey, I'm sure almost everyone will never find out about how trade wars leads to currency wars leads to actual wars.

What has been going on prior to 2020 was trade wars. Now we are in currency wars.

Start buying tarps and sandbags.
 

Seeds

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What happens if a nation with a good credit rating and no obvious stability issues or troubles transferring power between political parties - so an objectively safe place economically, lifts it's interest rates ahead of the world?

Money moves towards their currency, lifting their currency value with that demand. That makes it harder to do business in that nation, trying to sell to the world that now finds your product more expensive as the currency value is up.

But hey, I'm sure almost everyone will never find out about how trade wars leads to currency wars leads to actual wars.

What has been going on prior to 2020 was trade wars. Now we are in currency wars.

Start buying tarps and sandbags.
We want to live in countries with high currencies. High currencies means we are wealtheir. goods and overseas services become cheaper with high currencies.

this is especially what we want when we are facing supply side inflation problems.
 

Taylor

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We want to live in countries with high currencies. High currencies means we are wealtheir. goods and overseas services become cheaper with high currencies.

this is especially what we want when we are facing supply side inflation problems.
When we want to buy from the world, but Australia is a selling to the world country. We don't pay our staff in USDs, they get paid in AUD no matter what it costs to buy the goods in USD. When the AUD costs too much, we can't sell our goods anymore
 

Seeds

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When we want to buy from the world, but Australia is a selling to the world country. We don't pay our staff in USDs, they get paid in AUD no matter what it costs to buy the goods in USD. When the AUD costs too much, we can't sell our goods anymore
But if we cant export the exchange rate endogenously falls to counter that issue. As balance of payments must add up.

the exchange rate falling is a sign of a losing economy. an exchange rate rising is a winning economy.

Real prices of goods impacts every person in the economy. Everyone benefits from an appreciating currency. exportable goods prices only positvely influence a very small group of society. And that small group that benefits from a depreciating currency from selling more goods also lose out from higher prices of imports. Foreign interest payments also rise with a depreciating currency but fall with an appreciating currency. Governments need to raise taxes more if the currency is depreciating. All countries that turn to basket cases do so with a massive depreciation in their currency and the depreciation is part of what causes them to become a basket case.


all the currencies in the world with high exchange rates are developed. All the countries with low exchanges rates are low income basket cases. this is not a coincidence.
 

Carn The Berries

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But if we cant export the exchange rate endogenously falls to counter that issue. As balance of payments must add up.

the exchange rate falling is a sign of a losing economy. an exchange rate rising is a winning economy.

Real prices of goods impacts every person in the economy. Everyone benefits from an appreciating currency. exportable goods prices only positvely influence a very small group of society. And that small group that benefits from a depreciating currency from selling more goods also lose out from higher prices of imports. Foreign interest payments also rise with a depreciating currency but fall with an appreciating currency. Governments need to raise taxes more if the currency is depreciating. All countries that turn to basket cases do so with a massive depreciation in their currency and the depreciation is part of what causes them to become a basket case.


all the currencies in the world with high exchange rates are developed. All the countries with low exchanges rates are low income basket cases. this is not a coincidence.
That's a very simplistic view of the "winners" and "losers" from a change in exchange rate. You could argue that a declining exchange rate benefits everyone due to higher (relative) commodity prices and associated royalties and taxes. If you believe the LNP (though it is a very dubious claim for a number of reasons) this exact situation improved the budget bottom line by 10s of billions of dollars. This (generally) has a positive impact on the entire nation.

I'm not necessarily advocating a depreciation of the currency as there are many other factors to consider, but I don't think it is accurate to say that a falling AUD benefits only a few.
 

Seeds

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That's a very simplistic view of the "winners" and "losers" from a change in exchange rate. You could argue that a declining exchange rate benefits everyone due to higher (relative) commodity prices and associated royalties and taxes. If you believe the LNP (though it is a very dubious claim for a number of reasons) this exact situation improved the budget bottom line by 10s of billions of dollars. This (generally) has a positive impact on the entire nation.

I'm not necessarily advocating a depreciation of the currency as there are many other factors to consider, but I don't think it is accurate to say that a falling AUD benefits only a few.
Yes wealth per capita is clearly higher with an appreciated exchange rate. Its not a simplification. Its true in all but the most extreme and narrow examples.

The domestic tax windfall you point out is just a reallocation of wealth. it doesnt positively improve an economys average wealth to have more tax. it takes from one group (the private sector) to give to another (governments). Now that private sector may be partially foriegn owned. In which case the increase tax does directly boost the average wealth of the domestic citizen. But the more the commodity sector is foreign owned the less the benefit to the domestic private sector of increased commodity profits. So it kinds of nets out to being basically an insignificant benefit if any benefit for the average citizen.

but the lower exchange rate results in governments to have to pay more on overseas debt repayments and reduces the purchasing power on both goods and overseas service for every single citizen.
 

Carn The Berries

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Yes wealth per capita is clearly higher with an appreciated exchange rate. Its not a simplification. Its true in all but the most extreme and narrow examples.

The domestic tax windfall you point out is just a reallocation of wealth. it doesnt positively improve an economys average wealth to have more tax. it takes from one group (the private sector) to give to another (governments). Now that private sector may be partially foriegn owned. In which case the increase tax does directly boost the average wealth of the domestic citizen. But the more the commodity sector is foreign owned the less the benefit to the domestic private sector of increased commodity profits. So it kinds of nets out to being basically an insignificant benefit if any benefit for the average citizen.

but the lower exchange rate results in governments to have to pay more on overseas debt repayments and reduces the purchasing power on both goods and overseas service for every single citizen.
How exactly is the export of goods to another country a transfer of wealth between the private and public sectors? It is a net increase in cashflow into the domestic economy?
 

Seeds

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How exactly is the export of goods to another country a transfer of wealth between the private and public sectors? It is a net increase in cashflow into the domestic economy?
You were talking about increasing taxation of those exports as a benefit. Thsts what i was referring to.

note that the amount of net exports a country has is not a function of the exchange rate. Th exchange rate adjusts so that the net export balance reflects the savings -investment gap. Lowering the exchange rate does not boost your net exports (as the exchange rate would simply snap back). Widening your savings to investment gap increases your net exports. This can be done by lowering investment (which is very bad for the future wealth of your economy) or increasing the savings rate.
 

Fyfe! The Musical

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The RBA can only do so much when the US Federal Reserve created money like crazy during covid and both Trump and Biden had big spending bills.
 

HurleyHepsHird

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Federal debt is not our problem guys.

its our ridiculously high net external debt that scares me.


japan has the highest federal debt in the world (by a very long way) but cash still floods into their economy during periods of rising risk aversion because their net external balance is in surplus.

its the net external balance that matters.

and australia has the highest net external debt out of nearly all developed economies.

its a bomb that will soon go off.
There are some absolute s**t talkers in this thread, you included.

Australia does not have the highest net external debt in the world. Not even close.

We sit outside the upper quartile for the OECD, somewhere between 12th and 10th depending on which years numbers you look at.

In terms of external debt per/capita and external debt as a % of GDP, Australia is even further down the list.

Honestly.
 

HurleyHepsHird

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Are you trying to claim profiteering is mostly practised by the commodities sector and not others? The economy is much bigger than just commodities producers.
The profiteering practiced by the commodities sector is the primary source of inflation, that is all that matters per this discussion.

There's nothing to argue about.
 

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