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

[Gralin]

I would suggest he means interest free or as good as, loans.

which we've not had in Australia, at least not available to the general public

He does make a decent point, if in rather a crude way.
Its having cheap money that has got us to the point where housing is unaffordable for many.

and yet housing prices are continuing to rise as interest rates go up
the reality is our housing market has been disconnected from reality for a long time and the fault of that sits squarely with successive governments who have pandered to developers and investors to make housing a commodity

billions in tax concessions every single year to investors, they have bet the economy on the housing ponzhi scheme

We got to the cheap money point because the credit bubble burst in the GFC and instead of taking the hit and reseting the board the governments and banks of the world reinflated the credit bubble with the biggest sugar hit of quantitive easing and low interest rates in the history of the world. Its long past being theoretical that there is no way the amount of debt sloshing around in the system can ever repaid and that if everyone called their notes in the world would be plunged into the greatest recession its ever seen.

i remember when they tightened lending regulations here to combat this

i also remember when the previous government wound that back during covid to "kick start the recovery"

Unfortunately when money gets that cheap to borrow the already and wanna be wealthy borrow huge amounts of it and speculate on assets, including housing which is why we have seen the growth we have.

but that is by design, and so is this, if the market crashes those wealthy borrowers will pick up more stock cheap, it will further concentrate wealth

sure there will be investors that lose out but they aren't the ones that are the largest problem, only the ones that are the face of the campaign against reform

As usual its the people just trying to get by who are suffering now that the time has come to pay the piper.

always is and that is also by design and old mate seems to think the people suffering are the ones that cause the problem

We are basically screwed over the long term. Everything survives now because people borrow for everything.
I'm just staggered at how much people I talk to in my work as a counsellor pay every month just to have a roof over their heads and a car and send kids to school and eat and pay bills.

everything is going up faster than wages, its rough

The amount some people spend on car repayments alone just makes my head explode. I drive a 12 year old car I paid cash for.

if you have needed to purchase a car in the past 3 years for any reason you've copped it badly
the second hand market has been out of control, people will make bad choices with cars for sure but we are also in a situation at the moment where if something goes wrong for you, you're ****ed, good luck getting a cheap reliable car for cash these days, they aren't out there if you even have the cash

I have no doubt there are far better ways to curb inflation than raising interest rates but I'm also fairly sure if hadn't had zero interest rates for so long we wouldn't be in the pickle we are with inflated assets prices.

last government put pressure on the RBA to not raise rates prior to the election, in that sense they should have started earlier

but, they are using an economic model for this that is out of date, and they are lying about what the problem is at that moment to justify doing what they are doing

it also points to another issue, RBA policy requires unemployment to be around 4.5% and government policy treats unemployed people like its their own fault they don't have work

 

[Kram]

Interest rate rises are a pretty blunt tool that has a long lag time before the effects really kick in.

 

[Nuggs Bunny]

I just don’t align with the whole “if you can’t afford your home, stiff s**t” mentality.

It's the double edged sword of taking a risk to improve your life - the most at risk group from interest rate rises are people who have purchased a property within the last 1-5 years and have low or no equity they can use to refinance. Overwhelmingly this is first home buyers. The same people who say renters deserve because they should have saved enough money to buy a house turn around and say people who default on their loan deserve it because they shouldn't have bought a house. You can't win, and we go to lengths to paint people as irresponsible instead of being compassionate for those doing all the right things.

 

[adogsfan5]

It's the double edged sword of taking a risk to improve your life - the most at risk group from interest rate rises are people who have purchased a property within the last 1-5 years and have low or no equity they can use to refinance. Overwhelmingly this is first home buyers. The same people who say renters deserve because they should have saved enough money to buy a house turn around and say people who default on their loan deserve it because they shouldn't have bought a house. You can't win, and we go to lengths to paint people as irresponsible instead of being compassionate for those doing all the right things.

I consider myself lucky that I earn a good wicket but it makes me sick to think there are families out there struggling to put a meal on the table. You’re spot on about the compassion part. I don’t think you can pick on someone for taking out a home loan just before covid, who are now struggling to afford it.

I really don’t like the world we are living in at the moment. The business profits etc are disgusting.

I know it’s not RBA related and it’s cost of living, but I don’t think I’ve left woolies recently and spent under $100 for a very basic shop for a couple plus one child. It’s staggering.

 

[greyhound punter]

It's the double edged sword of taking a risk to improve your life - the most at risk group from interest rate rises are people who have purchased a property within the last 1-5 years and have low or no equity they can use to refinance. Overwhelmingly this is first home buyers. The same people who say renters deserve because they should have saved enough money to buy a house turn around and say people who default on their loan deserve it because they shouldn't have bought a house. You can't win, and we go to lengths to paint people as irresponsible instead of being compassionate for those doing all the right things.

This is the problem as i see it - an entire economy is built on the flawed idea of "equity".

I can buy a futures contract for Corn, or a bundle of Apple shares - I can see exactly how much i need to pay in real time. After buying any of these securities, i can then immediately sell, with a click of a button. Before selling, i can more or less, see exactly what the market will pay me for my security. It is instantaneous.

Equity is a made up figure, to give people the illusion that they are managing risk. For example, one person may say, I have $500 000 dollars in equity, I am going to leverage that and buy another property, or borrow against it. They think it is safe - it isn't. Equity is no different to believing in the tooth fairy - if a market tanks - you may not be able to find a buyer at all. How much is your house worth if you can't find a buyer when you need to?

I think think it allows systemic risk to infiltrate the property market and the banking system. In my mind, it is so hard to accurately value the worth of the housing market - because when push comes to shove, you still need a counter-party to part with their cash to turn paper value into real cash. In a falling market - buyers may evaporate - where does that leave your equity then?

Nassim Taleb has written extensively on this type of thinking - crazy s**t can happen in finance - black swan events. There is no point winning 999/1000 if on the one time you lose, you are wiped out.

People have leveraged up to the hilt on the idea that the gov won't let housing fall - the idea being, get on the property ladder and then the price growth will offset any risk of excessive debts.

To me it is crazy.

 

[peetoo]

This is the problem as i see it - an entire economy is built on the flawed idea of "equity".

I can buy a futures contract for Corn, or a bundle of Apple shares - I can see exactly how much i need to pay in real time. After buying any of these securities, i can then immediately sell, with a click of a button. Before selling, i can more or less, see exactly what the market will pay me for my security. It is instantaneous.

Equity is a made up figure, to give people the illusion that they are managing risk. For example, one person may say, I have $500 000 dollars in equity, I am going to leverage that and buy another property, or borrow against it. They think it is safe - it isn't. Equity is no different to believing in the tooth fairy - if a market tanks - you may not be able to find a buyer at all. How much is your house worth if you can't find a buyer when you need to?

I think think it allows systemic risk to infiltrate the property market and the banking system. In my mind, it is so hard to accurately value the worth of the housing market - because when push comes to shove, you still need a counter-party to part with their cash to turn paper value into real cash. In a falling market - buyers may evaporate - where does that leave your equity then?

Nassim Taleb has written extensively on this type of thinking - crazy s**t can happen in finance - black swan events. There is no point winning 999/1000 if on the one time you lose, you are wiped out.

People have leveraged up to the hilt on the idea that the gov won't let housing fall - the idea being, get on the property ladder and then the price growth will offset any risk of excessive debts.

To me it is crazy.

That’s just one of the balls you need to keep in the air in buy to rent property. I often thought about it, but never did

 

[Demonic Ascent]

god they talk a lot of s**t

Statement by Michele Bullock, Governor: Monetary Policy Decision | Media Releases

At its meeting today, the Board decided to raise the cash rate target by 25 basis points to 4.35 per cent.

www.rba.gov.au

no mention of the actual drivers of inflation

keep talking about too many people having jobs

keep talking about nebulous services rising as the problem

oh and they managed to get a China could be to blame in as well, but yeah the two wars happening right now, nah

I really don't understand how interest rate rises are supposed to curb inflation. Basically what they are saying is the average family aren't allowed to have too much disposable cash and we can't have too many people in employment driving wages up. Yet mining/resource companies, banks etc are raking in their biggest ever profits. Feels like they're just outright admitting to us that the game is rigged.

 

[Gralin]

I really don't understand how interest rate rises are supposed to curb inflation. Basically what they are saying is the average family aren't allowed to have too much disposable cash and we can't have too many people in employment driving wages up. Yet mining/resource companies, banks etc are raking in they're biggest ever profits. Feels like they're just outright admitting to us that the game is rigged.

They are, but most of the media is also owned by the riggers so they help sell it

 

[Taylor]

The solution is that we need to match the personal taxation with the government spending again. That's the primary brake put on inflation usually. It's not interest rates, it's the 270 billion taken back out of the economy each year.

There's no reality where government spending drops to match the income tax mitigating the inflation it causes so it's going to have to be the other way.

Which is more politically damaging?

 

[Kram]

I really don't understand how interest rate rises are supposed to curb inflation.

Really?

 

[Demonic Ascent]

Really?

Yes. The excess money in the economy isn't in the pockets of mum and dad with 2.5 kids. Rate rises will not see energy prices decrease.

 

[nut]

The solution is that we need to match the personal taxation with the government spending again. That's the primary brake put on inflation usually. It's not interest rates, it's the 270 billion taken back out of the economy each year.

There's no reality where government spending drops to match the income tax mitigating the inflation it causes so it's going to have to be the other way.

Which is more politically damaging?

Exactly ….

If people could understand that tax cuts always … always benefit the mega rich… the corporations…the banks etc ..

Any relief that the average person gets from a tax cut gets eroded over time, through inflation and rises in housing etc..
Tax cuts leads to less services .. and a poorer community.

Then we complain that the government is s**t…

 

[Number37]

I really don't understand how interest rate rises are supposed to curb inflation. Basically what they are saying is the average family aren't allowed to have too much disposable cash and we can't have too many people in employment driving wages up. Yet mining/resource companies, banks etc are raking in their biggest ever profits. Feels like they're just outright admitting to us that the game is rigged.

The truth behind Australia's inflation

• As of the September quarter of 2022 (most recent data available), Australian businesses had increased prices by a total of $160 billion per year over and above their higher expenses for labour, taxes, and other inputs, and over and above new profits generated by growth in real economic output.
• Without the inclusion of those excess profits in final prices for Australian-made goods and services, inflation since the pandemic would have been much slower than was experienced in practice: an annual average of 2.7% per year, barely half of the 5.2% annual average actually recorded since end-2019.
• That pace of inflation would have fallen within the RBA’s target inflation band (equal to its 2.5% target plus-or-minus 0.5%). Even within the RBA’s own policy rule, therefore, current painful interest rate hikes would be unnecessary.

 

[Taylor]

Exactly ….

If people could understand that tax cuts always … always benefit the mega rich… the corporations…the banks etc ..

Any relief that the average person gets from a tax cut gets eroded over time, through inflation and rises in housing etc..
Tax cuts leads to less services .. and a poorer community.

Then we complain that the government is s**t…

You mustn't forget that the other side of the coin is that government spending is the driving cause of the inflation in the balance between government spending and income tax, the spending programs are either balanced with broader taxation to pull the money back out or everyone pays higher prices through inflation.

Given governments don't really have any intention to pay back debt, that a lot of the spending is just debt and that inflation reduces the debt in buying power terms - why would we think this isn't the plan all along??

 

[peetoo]

Businesses gouging customers to make up for lost revenue in pandemic/////for which the government handed them money for anyway.

 

[Harro59]

I can't see this latest hike having a huge effect. I mean yes inflation will slow over thr next few months but that is more about oil pricing stabilising and cheaper wholesale energy as is always the way through spring.

 

[peetoo]

Hairdressers and dentists are going to love this. Just keep quiet idiots

House prices back sky high as RBA governor warns of more rate pain to come — The Sydney Morning Herald

Michele Bullock has put home buyers and businesses on notice that further interest rate pain is on the way, saying inflation is homegrown.

apple.news

 

[Seeds]

Exactly ….

If people could understand that tax cuts always … always benefit the mega rich… the corporations…the banks etc ..

Any relief that the average person gets from a tax cut gets eroded over time, through inflation and rises in housing etc..
Tax cuts leads to less services .. and a poorer community.

Then we complain that the government is s**t…

The erosion from inflation of ones take home wage is even bigger if you dont have the tax cut is it not?

and yes people who pay higher tax rates get the biggest benefit when taxes are cut. it would be a problem if that wasnt the case.

ps. corporations and banks dont pay tax as they arent people. Only people pay tax. Taxes on corporations are actually taxes on the owners of the corporation. I.e. shareholders.

 

[Seeds]

Hairdressers and dentists are going to love this. Just keep quiet idiots

House prices back sky high as RBA governor warns of more rate pain to come — The Sydney Morning Herald

Michele Bullock has put home buyers and businesses on notice that further interest rate pain is on the way, saying inflation is homegrown.

apple.news

Didnt you just two posts earlier complain about businesses gouging consumers? Isnt she arguing thats what hairdressers and dentists are doing?

 

[Seeds]

I really don't understand how interest rate rises are supposed to curb inflation. Basically what they are saying is the average family aren't allowed to have too much disposable cash and we can't have too many people in employment driving wages up. Yet mining/resource companies, banks etc are raking in their biggest ever profits. Feels like they're just outright admitting to us that the game is rigged.

Mining resource companies suffer when interest rates rise too. They are heavy investors that borrow.

interest rates lower both household and business demand for goods which for a given supply lowers prices.

 

[Kram]

Hairdresser is one thing I've really noticed jack up the price every time you go in there, went from about $32 to $40 in a couple of years.

 

[Demonic Ascent]

Didnt you just two posts earlier complain about businesses gouging consumers? Isnt she arguing thats what hairdressers and dentists are doing?

She didn't mention Coles and Woolies though. Chicken s**t, it's easier to go after smaller independent businesses.

 

[Demonic Ascent]

Mining resource companies suffer when interest rates rise too. They are heavy investors that borrow.

interest rates lower both household and business demand for goods which for a given supply lowers prices.

Yet they're still making money hand over fist, go figure

 

[Demonic Ascent]

Hairdresser is one thing I've really noticed jack up the price every time you go in there, went from about $32 to $40 in a couple of years.

Its usually been $40 for me last 12 months or so, can be cheaper depending where I go but I walked into a barber a couple of weeks ago and walked out $50 lighter! Never mind what my wife pays which I actually can't fathom what women get charged for this stuff. I asked the barber how much for a kids haircut, $45!

 

[peetoo]

Didnt you just two posts earlier complain about businesses gouging consumers? Isnt she arguing thats what hairdressers and dentists are doing?

Sam article says people are butting off discretionary spending such as dentist and hairdressers.

Anyway if I’m hypocritical it rates 1 on a scale of 0 to rba. Housing is the keenest cost today, also making the country less competitive but they Jack up the cost anyway. Going without hair and teeth work is some way away from sleeping in a car.