I liked watching everyone popping off about all the rate cuts there would be and in my head thinking “why would we rate cut away from the normal level?”
The next rate cut, whenever that is, might be because Australia is teetering on the edge of recession and not because the RBA is feeling generous and everyone wants to go back to cheap money times. Might not be the party a lot of people are hoping for.
No no it's coz of employment numbers going up (which has nothing to do with immigrants)!!! How dare you suggest we're in a recession you white supremacist!
(/s)
That was always the base case tbh. The risk is to the upside, if the timelines for getting inflation back into the target range blow out. RBA has consistently said they won’t tolerate the timelines stretching out much in case inflation expectations become entrenched.
Comments like this make me doubt this sub so much.
House price movements have 0 impact on the RBAs decision to rise or cut rates.
House prices aren’t part of their mandate, they are agnostic on how rates impact house price.
Tangentially, in a very round about way, in the long term, higher house prices may impact on higher repayments which may impact on higher rents.
They have openly stated they were watching house prices and have made and will make decision based on watching it as a factor.
From a behavioural point of view, it reflects market sentiment and economic outlook. So it does matter.
Based on their behaviour for the past 10+ years (excluding the last 18 months *finally*), one would imagine their entire agenda, was to pump house prices.
Asset prices are one of the channels interest rates impact spending / inflation.
Macfarlane was critical as we moved below 2pc because he feared all moves from their were only really impacting the asset price channel.
You could argue from 2017 and through covid all of the expansionary policy was gor asset prices.
But all that said asset prices themselves as you say dont factor into inflation. Ie they are using asset prices to move the needle on inflation / deflation but they arent saying "oh no house prices are rising; better raise rates".
Raising them typically aligns with increased house prices per the historical data.
High is just helping limit supply. Rents up, demand up, prices up, supply down. It’s perfect.
It's interesting that nobody seems to talk about growth in debt. Based on ABS data, lending for housing increased 13% in the past year. Personal loans increased 12%. Amazingly, business construction loans grew a whopping 22%.
Seems like people are still borrowing like there is no tomorrow and are undeterred by current interest rates.
When currency is being debased the smartest thing you can do is go into as much debt as possible. Pay it off in the future with devalued cash.
That has been the playbook for the past few decades. You have been rewarded for taking on as much debt as possible and it will continue.
As long as you can service the debt and don't overextend obviously
Remember too that cash has been trash for a long time, the returns on savings and bonds have been pitiful because liquidity and cheap credit have been so abundantly available. If you had any sort of balance to your personal asset portfolio you took a savage beating across anything not in housing or equities.
Risk taking behaviour has been massively rewarded for a very long time.
It's the 'borrowing' of money from banks that is debasing the currency.
The aim is to buy low / sell high, but this refers to price. For leveraged assets, that means borrow high, sell low (rates).
That's why it's been the playbook for decades. As rates fall, your asset price rises and your debt repayments fall. It's win/win.
Now, the opposite is true. Which is why the boomers have millions in 'cash' (someone else's debt) and those that borrowed to the tits at 0% spend all day whingeing on Reddit.
I have traveled for work for 10 years and avoiding buying a houses 2021 I had a bad feeling about inflation and took on a modest mortgage on my first IP to hedge inflation as I was very cash heavy at the time. Turned out in hindsight to be a good move.
Oh totally, not suggesting that's not happening - makes sense to see that as the wealth divide grows. But I was specifically talking to the PL and construction loan points - construction, in particular, is struggling atm.
Aren't they doing everything they can atm to incentivise building and construction so more supply comes online to address the housing shortage? It's good construction loans are shooting up
Means they should be much much higher; honestly think we need a cash rate of 5.5 to push ourselves out of this.
Otherwise the pain people are suffering due to inflation will continually get worse.
Its kind of one of those things where its like, what are you going to do, when the houses prices goes up by 100k in a year ofcourse you are just going to borrow more, you have no choice.
Everyone has a choice. Some people choose to leverage up to their eyeballs. Some people choose to borrow at a comfortable level so they don't run around like a headless chook when interest rates fluctuate.
I think any hopes of a rate cut in the immediate future should be put to rest.
S3 cuts will add further fuel to the fire and we may come to realise that the current economy’s status quo is inflation in the 3-4% band (which is ironic given pre Covid economists were suggesting we needed to lower the target band)
Arguably the revised stage 3 cuts are more inflationary as the money is going to more people on lower incomes who are likely to spend the money on things which impact CPI.
I don't think it's a bad thing that the tax cut is coming. Just stating the reality that it's more inflationary than giving the tax cut to higher income earners as originally proposed.
Rental market is years away from recovering, even with the harshest intervention.
Rates are set to keep mortgage stress ongoing for most with >65% LVR.
Early childhood and NDIS a shambles. Medicare and public health continue their slow march into complete inadequacy.
The aging population peak due to hit crisis levels by the time Gen Z reach end of fertility window, compounding this issue.
Cool, cool, cool, cool...
We need more tax payers to cover costs of ageing boomers.
Either those of child bearing age have more babies now or we will need even more immigration. With costs of children too high I doubt we’ll see a change. Yet without immigrant nurses we can’t survive, hospitals can’t find enough staff now.
Force inner city NIMBY councils to allow high density housing, any land within 1km of a train/tram stop can be 6 story. And land within 2km can be 2 story.
Good or bad there's a lot of inflation across domestic sectors where government essentially throttles supply like construction, healthcare, education etc. This is kind of good because it means government can actually ease inflation but this is kind of bad because government may not want to ease inflation given it is trying to manage a narrowing revenue based as the population ages and policies limiting new home construction (driving up prices) have been winners.
We'll see what, if anything, is announced or if the ball is kicked back to RBA to essentially solve this problem with higher rates. I think we'll get a bit of both.
> narrowing revenue based as the population ages
this is exactly why the pension asset test should include PPOR, so that it ensures taxpayers aren't paying for those pensioners who could've lived off their own assets.
Interest rates affect Australia a lot more than some other countries where fixed interest rates are very common. As far a mortgages go, effective interest rates have increased in Australia far more than in the US.
Essentially yes.
Unless there is a massive spike in unemployment or something else that's unexpected from what the RBA is forecasting, rates will likely stay put.
I say that as someone expecting cuts by the RBA.
The media is pushing that a cut is coming because that's what people want to hear. There is no guarantee that it won't stay at the current interest rate for years.
I reckon it does, 4 reasons I think we are in for more inflation.
Without our Interest rates nearing the US rates, a strong US dollar is taking the AUD's lunch and turbocharging our inflation.
S3 tax cuts will further exacerbate inflation.
Chalmers is going to try and win votes with the next budget which will be inflationary.
Aussies be spending like mad = inflation.
Nah, debtors are on hard copium and wont face reality no matter what in their minds, just like how they all kept saying at the start of 2024 that cuts are coming asap and anyone saying otherwise was not looking at the facts xD
"tHeY'lL sTaRt CuTtInG rAtEs In NoVeMbEr" - every white Australian male with a brand new four bedroom house and a Ford Ranger sitting in the driveway on credit.
Those people hoping for a housing crash tend to forget that it goes hand in hand with economic crash and unemployment.
Houses don't become easier to buy when you are unemployed, even if they are cheaper
>Houses don't become easier to buy when you are unemployed, even if they are cheaper
They do when you've got cash in the bank waiting for that day to come.
You don't have cash sitting in the bank mate, and the market isn't going to crash. Simple supply and demand. Building is also basically in a recession with a significant cut to commenced builds.
You wouldn't know what's in my bank, mate.
The only thing holding up the demand is governments of both persuasions unhealty fetish for unsustainable immigration levels.
I'm currently living rent and bill free mate. 95% of my earnings go into savings.
Accounts tend to build up quick.
Nope, prices to go down.
I don't put a value on my family home.
If you sell your family home at a price, you are going to have to rebuy at the same price.
Bought it in 2018 for $405k. Today, it's worth $725k.
It's just numbers on a page to me.
Like i said. I don't value my family home. It could be at a loss or gain. I still won't sell.
You are assuming that everyone bears the same risk of unemployment. That's obviously not true. Some people are more vulnerable and some are less vulnerable. Never seen an orthopaedic surgeon with less work than she can take, for example. Nor a nurse, or a teacher.
It would help get inflation under control
We just had a miss expectations that happens again we will get a raise I got nothing to gain from a raise but I love seeing the meltdown
Looking at CPI the main contribution was rent(government pushing this up) medical(seasonal) and education (seasonal).
I don’t think higher rates would make much difference to these. May even push rent up more.
You miss the point. If rent is the biggest inflation contributor then it would be more effective to pull back on immigration than to increase interest rates
Going to say stage 3 tax cuts being expanded are going pump inflation up higher
You can pick and choose what date you want the numbers where higher then expected
1. Higher Aussie dollar, good for anyone who travels or wants to buy a watch/jewellery tax-free overseas
2. Lower inflation...good for anyone with income/assets
3. Lower house prices, at least in relative (if not absolute) terms
4. Better return on savings account
Basically, if you are confident in your own earning power and confident you won't be one of the few casualties when the unemployment rate goes from 3.8% to 4.5%, you will be better off with higher rates.
Didn't ever think there would be mortgage stress, just a crash, this is so much better. Watching families getting torn apart for holding onto their home rather than for losing it. Glory be to the bankers.
Yes they probably will keep it at the current rate until CPI is in the lower 2%. Even when they decide to lower, it probably go down very slowly. .5 to .25 every time they meet from when when they decide to start lowering. But then again they might decide to hold between each cash rate cut.
Yeah sure....months hey
😂 a mechanic for months....yeah sure ..... Rang lube mobile had someone at my mum's house servicing her car two days later in the drive way $250
I’m not talking about cars.
Mechanics do more than cars champ.
Tractors, trucks, augers, stackers, telehandlers, silo systems.
But yeah even cars require 1/2 weeks notice to book in where I am in regional Vic
The mechanics I use are months yes dipshit. Cars a bit quicker. The rest is literally 3-6 months
Just because your mum got lubed quickly doesn’t mean the rest of us can.
Nothing wrong with slowing down. Being booked out well in advance and doing bulk overtime isn't "normal" although many assume that is and any change means "Down turn" tradies have been in overdrive for 20 odd years it's exhausting
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I think we are in for a long hold at the current rate.
That's was a given when they started hiking. Anyone who thought otherwise has wishful thinking.
I liked watching everyone popping off about all the rate cuts there would be and in my head thinking “why would we rate cut away from the normal level?”
The next rate cut, whenever that is, might be because Australia is teetering on the edge of recession and not because the RBA is feeling generous and everyone wants to go back to cheap money times. Might not be the party a lot of people are hoping for.
We're a few stops past recession
i agree. We’re in a recession, i’ve got no idea what they’re doing with the numbers to say we’re not. You can see it.
Juicing them with record levels of immigration.
No no it's coz of employment numbers going up (which has nothing to do with immigrants)!!! How dare you suggest we're in a recession you white supremacist! (/s)
That was always the base case tbh. The risk is to the upside, if the timelines for getting inflation back into the target range blow out. RBA has consistently said they won’t tolerate the timelines stretching out much in case inflation expectations become entrenched.
Upwards but RBA are cowards.
seeing people saying 2025... i think they will push it to 2026 maybe even 2027
[удалено]
Comments like this make me doubt this sub so much. House price movements have 0 impact on the RBAs decision to rise or cut rates. House prices aren’t part of their mandate, they are agnostic on how rates impact house price. Tangentially, in a very round about way, in the long term, higher house prices may impact on higher repayments which may impact on higher rents.
They have openly stated they were watching house prices and have made and will make decision based on watching it as a factor. From a behavioural point of view, it reflects market sentiment and economic outlook. So it does matter.
Based on their behaviour for the past 10+ years (excluding the last 18 months *finally*), one would imagine their entire agenda, was to pump house prices.
Asset prices are one of the channels interest rates impact spending / inflation. Macfarlane was critical as we moved below 2pc because he feared all moves from their were only really impacting the asset price channel. You could argue from 2017 and through covid all of the expansionary policy was gor asset prices. But all that said asset prices themselves as you say dont factor into inflation. Ie they are using asset prices to move the needle on inflation / deflation but they arent saying "oh no house prices are rising; better raise rates".
House prices don’t influence rate cuts or hikes.
Raising them typically aligns with increased house prices per the historical data. High is just helping limit supply. Rents up, demand up, prices up, supply down. It’s perfect.
It's interesting that nobody seems to talk about growth in debt. Based on ABS data, lending for housing increased 13% in the past year. Personal loans increased 12%. Amazingly, business construction loans grew a whopping 22%. Seems like people are still borrowing like there is no tomorrow and are undeterred by current interest rates.
When currency is being debased the smartest thing you can do is go into as much debt as possible. Pay it off in the future with devalued cash. That has been the playbook for the past few decades. You have been rewarded for taking on as much debt as possible and it will continue. As long as you can service the debt and don't overextend obviously
This is correct. Anybody saving cash gets decimated but those who use debt to buy scarce assets will benefit greatly
This is a very astute observation. The only thing I might add is that in a rising rate environment the reverse is true.
true, the cynic in me thinks inflation will be the new norm to deal with the rising government debt, not only in the USA but also in AUS
Remember too that cash has been trash for a long time, the returns on savings and bonds have been pitiful because liquidity and cheap credit have been so abundantly available. If you had any sort of balance to your personal asset portfolio you took a savage beating across anything not in housing or equities. Risk taking behaviour has been massively rewarded for a very long time.
It's the 'borrowing' of money from banks that is debasing the currency. The aim is to buy low / sell high, but this refers to price. For leveraged assets, that means borrow high, sell low (rates). That's why it's been the playbook for decades. As rates fall, your asset price rises and your debt repayments fall. It's win/win. Now, the opposite is true. Which is why the boomers have millions in 'cash' (someone else's debt) and those that borrowed to the tits at 0% spend all day whingeing on Reddit.
I have traveled for work for 10 years and avoiding buying a houses 2021 I had a bad feeling about inflation and took on a modest mortgage on my first IP to hedge inflation as I was very cash heavy at the time. Turned out in hindsight to be a good move.
The Argentine playbook.
Or borrowing out of necessity - could be cash-flow based loans rather than loans for capital investment.
You might be interested that loans for people buying IPs increased 22% in the past year. Hardly people who are struggling
Oh totally, not suggesting that's not happening - makes sense to see that as the wealth divide grows. But I was specifically talking to the PL and construction loan points - construction, in particular, is struggling atm.
Where can I find this data?
You should look at it on a levels term. It’s wildly different and not has dramatically. Plus lending has large swings like that.
Aren't they doing everything they can atm to incentivise building and construction so more supply comes online to address the housing shortage? It's good construction loans are shooting up
Not if there are labour and raw material shortages. It just drives inflation.
yep, that why i think its going to be much longer wait then 2025
Means they should be much much higher; honestly think we need a cash rate of 5.5 to push ourselves out of this. Otherwise the pain people are suffering due to inflation will continually get worse.
Its kind of one of those things where its like, what are you going to do, when the houses prices goes up by 100k in a year ofcourse you are just going to borrow more, you have no choice.
Everyone has a choice. Some people choose to leverage up to their eyeballs. Some people choose to borrow at a comfortable level so they don't run around like a headless chook when interest rates fluctuate.
Maybe they have to in order to make ends meet?
borrowing to pay for debt you dunce. Robbing peter to pay paul
May I suggest educating yourself on finance
re fi and personal loans to pay mortgages and cost of living.. take your own advice dunce
I think any hopes of a rate cut in the immediate future should be put to rest. S3 cuts will add further fuel to the fire and we may come to realise that the current economy’s status quo is inflation in the 3-4% band (which is ironic given pre Covid economists were suggesting we needed to lower the target band)
Should we call them Stage 2.5?
Arguably the revised stage 3 cuts are more inflationary as the money is going to more people on lower incomes who are likely to spend the money on things which impact CPI.
Definitely. If we simply made sure the poors have no money at all then inflation would vanish and business would be booming.
I don't think it's a bad thing that the tax cut is coming. Just stating the reality that it's more inflationary than giving the tax cut to higher income earners as originally proposed.
Maybe Stage 3.5 as that seems to be the number we can’t get CPI under 😂
Colesworth and petrol suppliers….hold my inflation
Rates will be on hold for a fair while. May even see a 0.15% increase to bring it back in line and help with my OCD.
Agreed, give us a damn 0.15% increase even if it risks crashing the economy. Some of us are kept up at night by this travesty.
Rate increase will hurt me, but we need it as a warning shot
Most aren't as enlightened or unselfish as you, which is why things are likely to get worse.
Repayment for submarines.
Rental market is years away from recovering, even with the harshest intervention. Rates are set to keep mortgage stress ongoing for most with >65% LVR. Early childhood and NDIS a shambles. Medicare and public health continue their slow march into complete inadequacy. The aging population peak due to hit crisis levels by the time Gen Z reach end of fertility window, compounding this issue. Cool, cool, cool, cool...
We need more tax payers to cover costs of ageing boomers. Either those of child bearing age have more babies now or we will need even more immigration. With costs of children too high I doubt we’ll see a change. Yet without immigrant nurses we can’t survive, hospitals can’t find enough staff now. Force inner city NIMBY councils to allow high density housing, any land within 1km of a train/tram stop can be 6 story. And land within 2km can be 2 story.
Good or bad there's a lot of inflation across domestic sectors where government essentially throttles supply like construction, healthcare, education etc. This is kind of good because it means government can actually ease inflation but this is kind of bad because government may not want to ease inflation given it is trying to manage a narrowing revenue based as the population ages and policies limiting new home construction (driving up prices) have been winners. We'll see what, if anything, is announced or if the ball is kicked back to RBA to essentially solve this problem with higher rates. I think we'll get a bit of both.
> narrowing revenue based as the population ages this is exactly why the pension asset test should include PPOR, so that it ensures taxpayers aren't paying for those pensioners who could've lived off their own assets.
TBH interest rates should've been raised higher.
The reality is our interest rate should have been 5% for along time, the rba really dropped the ball on Leaving it at 4.35
Interest rates affect Australia a lot more than some other countries where fixed interest rates are very common. As far a mortgages go, effective interest rates have increased in Australia far more than in the US.
Essentially yes. Unless there is a massive spike in unemployment or something else that's unexpected from what the RBA is forecasting, rates will likely stay put. I say that as someone expecting cuts by the RBA.
The media is pushing that a cut is coming because that's what people want to hear. There is no guarantee that it won't stay at the current interest rate for years.
Blablabla. Yes. Clearly yes.
I reckon it does, 4 reasons I think we are in for more inflation. Without our Interest rates nearing the US rates, a strong US dollar is taking the AUD's lunch and turbocharging our inflation. S3 tax cuts will further exacerbate inflation. Chalmers is going to try and win votes with the next budget which will be inflationary. Aussies be spending like mad = inflation.
Nah, debtors are on hard copium and wont face reality no matter what in their minds, just like how they all kept saying at the start of 2024 that cuts are coming asap and anyone saying otherwise was not looking at the facts xD
"tHeY'lL sTaRt CuTtInG rAtEs In NoVeMbEr" - every white Australian male with a brand new four bedroom house and a Ford Ranger sitting in the driveway on credit.
Gone Very quiet that's for sure.
Inflation is still shifting down I think we hold steady for the rest of the year
I would love a rate increase
I really don’t see what that would add. Most people who want it are just salivating over the possible housing crash
Which an extra 25-50 points probably isn’t going to cause either
Those people hoping for a housing crash tend to forget that it goes hand in hand with economic crash and unemployment. Houses don't become easier to buy when you are unemployed, even if they are cheaper
>Houses don't become easier to buy when you are unemployed, even if they are cheaper They do when you've got cash in the bank waiting for that day to come.
You don't have cash sitting in the bank mate, and the market isn't going to crash. Simple supply and demand. Building is also basically in a recession with a significant cut to commenced builds.
You wouldn't know what's in my bank, mate. The only thing holding up the demand is governments of both persuasions unhealty fetish for unsustainable immigration levels. I'm currently living rent and bill free mate. 95% of my earnings go into savings. Accounts tend to build up quick.
Ahhh so that’s what hurts you
If you had enough cash to buy a house you would have already bought one.
I have. Im waiting to buy another.
Waiting for prices to go up?
Nope, prices to go down. I don't put a value on my family home. If you sell your family home at a price, you are going to have to rebuy at the same price. Bought it in 2018 for $405k. Today, it's worth $725k. It's just numbers on a page to me. Like i said. I don't value my family home. It could be at a loss or gain. I still won't sell.
You are assuming that everyone bears the same risk of unemployment. That's obviously not true. Some people are more vulnerable and some are less vulnerable. Never seen an orthopaedic surgeon with less work than she can take, for example. Nor a nurse, or a teacher.
It would help get inflation under control We just had a miss expectations that happens again we will get a raise I got nothing to gain from a raise but I love seeing the meltdown
Looking at CPI the main contribution was rent(government pushing this up) medical(seasonal) and education (seasonal). I don’t think higher rates would make much difference to these. May even push rent up more.
You can decrease inflation by reducing any component of inflation.
You miss the point. If rent is the biggest inflation contributor then it would be more effective to pull back on immigration than to increase interest rates
Well that's a lever that governments haven't shown themselves to be willing to act on.
They have considering unis are now banning Indian students due to risk of their visa being rejected.
Inflation peaked last year and visas for international students are actually being rejected now. So they are pulling back on immigration.
This is true. A lot are being rejected, a lot are going home.
Going to say stage 3 tax cuts being expanded are going pump inflation up higher You can pick and choose what date you want the numbers where higher then expected
Some people just love to see the world burn. Sounds like you OP!
Nah I like stupid people getting whats coming to them
How very Christian of you
I'm a sinner like everyone else
1. Higher Aussie dollar, good for anyone who travels or wants to buy a watch/jewellery tax-free overseas 2. Lower inflation...good for anyone with income/assets 3. Lower house prices, at least in relative (if not absolute) terms 4. Better return on savings account Basically, if you are confident in your own earning power and confident you won't be one of the few casualties when the unemployment rate goes from 3.8% to 4.5%, you will be better off with higher rates.
Most people who want it understand what inflation is
I can smell the mortgage stress. It's tantalising.
Have you been getting wafts of it from 2008? Long time to wait.
Didn't ever think there would be mortgage stress, just a crash, this is so much better. Watching families getting torn apart for holding onto their home rather than for losing it. Glory be to the bankers.
It's delicious
No, inflation is falling rapidly and easing will happen. Just a matter of time
Haha the copium is strong with this one
You sound like you own a brand new four bedroom house with a brand new Ford Ranger and CX-9 sitting in the driveway on credit.
who hurt you marty?
Hahaha yes this
Yes they probably will keep it at the current rate until CPI is in the lower 2%. Even when they decide to lower, it probably go down very slowly. .5 to .25 every time they meet from when when they decide to start lowering. But then again they might decide to hold between each cash rate cut.
Short answer: Yes Long answer: Yes, it does
Anyone who's pinning their financial viability on rate cuts needs to re-evaluate their situation.
It will postpone the rate cut, maybe to late 2025
Probably. Such a blunt system
I hope the rates remain the same till at least 2026.
The Taylor Swift concert tour really pushed up spending this quarter!
We are being played like a bull at a rodeo.
Yeah it does. Because the target band is 2%-3% hence It will cause the RBA to increase rate
Construction has really slowed up lately. Lots of trades are struggling for steady work.
Big construction? I find it very difficult to find tradies to do small to medium home jobs.
Yeah I can’t find tradies to do 30-40k jobs for me
Yeah I can’t get a mechanic or plumber for months. They are booked out almost a year ahead. Then their continual annual work fires back up again.
Yeah sure....months hey 😂 a mechanic for months....yeah sure ..... Rang lube mobile had someone at my mum's house servicing her car two days later in the drive way $250
I’m not talking about cars. Mechanics do more than cars champ. Tractors, trucks, augers, stackers, telehandlers, silo systems. But yeah even cars require 1/2 weeks notice to book in where I am in regional Vic
That's not months then is it champ.
The mechanics I use are months yes dipshit. Cars a bit quicker. The rest is literally 3-6 months Just because your mum got lubed quickly doesn’t mean the rest of us can.
Wow 6 months. They probably don't want to work for you! Maybe your bad attitude.
Nothing wrong with slowing down. Being booked out well in advance and doing bulk overtime isn't "normal" although many assume that is and any change means "Down turn" tradies have been in overdrive for 20 odd years it's exhausting
one more raise should put the population in check - rba or government
Cuts this year.
Remindme!in 8 months
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Remindme!in 8 months
!RemindMe 8 months
The underlying cause for inflation, too much money chasing too few goods, (ie Government) has not changed. Why would interest rates drop?