mowgli wrote:

nah I didn't read it carefully enough re. owned outright bit. Yeah there can't be that many out there.

Now would be the time to increase the supply of housing in a big way. Higher rates making it harder to lever up (for investors) and greater supply = suppression of prices.

But who are we all kidding... wages wages wages is the elephant in the room and no big 'N' or small 'n' (neoliberal) supports wages increases relative to inflation.

How big you talking? forecasts of 235,000 new arrivals pa (that figure reported recently as undercooked for this year anyway) will negate any supply of new homes Australia can reasonably build to help suppress prices.

Tradies will be the limiting factor, materials too.
What do we build per year? Is it something like 80,000?

yep - sounds about right VJ.

https://theconversation.com/building-more-houses-quickly-is-harder-than…

flollo wrote:

Ironically, the first thing that came to mind with this $1m tax thing is that I would buy more leveraged assets to decrease the liability. So it could be a double-edged sword and turbocharge negative gearing. I'm not sure, I would need to break this idea down into details and spend more time on it to come to a conclusion.

By leveraged I assume you mean mortgaged? In that case you wouldn't qualify for the additional tax, but you would be getting burnt big time with the interest rate hikes currently underway. Also I don't really follow why a new tax that wouldn't apply to you (being more leveraged/mortgaged) would entice you to buy more investment properties? Or do you mean if you owned your principal place of residence as it was valued at over $1m you would then go and buy (mortgage) an investment property to avoid the new tax? Unfortunately under the above scenario because you outright own one property greater than $1m, then you would incur the new tax irrespective of how many other investment properties you bought/mortgaged. In other words, my proposal is not a total of your assets/liabilities. It's more about what are your assets and if you have assets (house) owned outright more than $1m, then your income tax is higher. Actually just realised perhaps you're saying that by having a higher income tax then you're able to get a greater negative gearing on the investment property? Is this what you're saying? If so, then the negative gearing amount is only based on your "normal" income tax bracket and NOT the additional asset assessed tax increase. Make sense?

Some really good discussion in here.

Just quickly, the RBA considers leading, coincident and lagging indicators in their decision making, as well as fairly sophisticated mathematical/econometric models.

Most of the criticism the RBA has been receiving of late is unfounded and based on misunderstanding.

Thanks gsco, that's good to know. Re. the models that's what one would expect and hope to see. I guess it all comes down to the weightings they're putting on the model variables.

Re. the model inputs, it's a shame then that this isn't discussed. Though perhaps that's by design? Expectations being able to drive behaviour almost as well as actual changes in system parameters, and all that jazz...

Has anyone here ever actually read the RBA's minutes? Be fascinating to see what the spread on opinions are and how they ultimately work through that to arrive at the decisions they do.

Here's the last section of the most recent December 6 RBA minutes. Behind this "discussion" is actual economic modelling. But the minutes give the impression that they're sitting around drinking beer, eating pizza, possibly pulling a few cones, and coming up with some magical cash rate figure based on witchcraft and astrology...

RBA minutes wrote:

Considerations for monetary policy

In considering the policy decision, members began by noting that inflation in Australia remained too high. That was largely attributable to global factors, but strong domestic demand relative to the ability of the economy to meet that demand was also playing a role. While the easing in the monthly pace of inflation had been welcome, the monthly indicator was still new and needed to be interpreted with caution, and some further strengthening in inflation was expected in coming months. However, a sustained decline in inflation was expected in 2023, as global supply-side issues continue to be resolved, the recent declines in commodity prices work their way through to consumer prices and growth in demand slows. Medium-term inflation expectations remained well anchored, both in Australia and abroad, reflecting expectations that central banks would do what was needed to reduce inflation. Members noted that it was important that this remained the case.

The Australian economy was continuing to grow solidly. Economic growth was, however, expected to moderate over the following year as the global economy slowed, the bounce-back in spending on services ran its course and growth in household consumption slowed in response to tighter financial conditions.

Members observed that the labour market remained very tight. The unemployment rate remained at its lowest level in nearly 50 years, and job vacancies and ads remained high. Wages growth had continued to pick up from the low rates of recent years and information from the Bank’s liaison indicated that it was expected to pick up further. Members discussed the upside risk to wages growth, which stemmed largely from the tight labour market and high inflation.

The Board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate.

The arguments for a 50 basis point increase stemmed from the fact that inflation remained too high and the economy continued to operate with excess demand. Some other economies had earlier been in a similar situation to Australia and had subsequently seen wages growth pick up strongly, which risked high inflation becoming entrenched. In these cases, returning inflation to target was likely to involve a period of very weak demand, and possibly a recession. Australia was not yet in such a situation, but the inflation mindset was shifting, with firms more willing to put up prices than a year earlier and upside risks to wages growth potentially building. Moreover, the cash rate was not yet at a high level historically and, if the Board ultimately needed to move to a more restrictive policy stance, it would take some time for this to dampen demand. These factors supported an argument for taking more pre-emptive action.

The arguments for a 25 basis point increase also recognised the need to bring demand and supply in the economy more into balance, but acknowledged that there had already been a significant cumulative increase in interest rates and that the full effects of this adjustment would take time to occur. Moreover, it was possible that the policy changes might be transmitted to the economy more slowly than usual, given the higher share of mortgages taken out with fixed interest rates, households’ large savings buffers and a summer holiday season without social restrictions for the first time in several years. Nevertheless, the policy changes would begin to have more of an effect through the course of 2023.

In addition, members noted that the share of household income being spent on required mortgage payments would reach around its previous highest level in late 2023, based on the market path for the cash rate and the effect of existing fixed-rate mortgages rolling off onto higher rates over the course of the following year. Furthermore, real incomes had been declining and housing prices and sales volumes had also fallen. Together, these factors were expected to weigh on consumption in the year ahead, while global demand was also likely to weaken. An easing of demand pressures in the economy and the ongoing resolution of supply-side problems could be expected to alleviate the risks of a price-wage spiral, particularly given that medium-term inflation expectations remained well anchored.

Finally, the arguments for no change in the cash rate placed further emphasis on the lagged effects of the large policy adjustment to date, and the value in proceeding cautiously in an uncertain environment. However, members noted that the Bank’s most recent forecasts had indicated that, even with further increases in the cash rate as incorporated into the November forecasts, inflation was expected to take several years to return to the target range. Incoming information had not warranted a reassessment of that broad outlook. Moreover, members noted that no other central bank had yet paused.

Members acknowledged that there were arguments in favour of each of these courses of action. They concluded that the case to increase the cash rate by 25 basis points at the present meeting was the strongest one. A further increase in the cash rate was likely to be necessary to achieve a more sustainable balance of demand and supply, but there had already been a material increase in the cash rate in a short period of time and there were lags in the operation of policy. Members also noted the importance of acting consistently, and that shifting to either larger increases or pausing at this point with no clear impetus from the incoming data would create uncertainty about the Board’s reaction function.

The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set path. Members noted that the size and timing of future interest rate increases would continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.

Members noted that there was considerable uncertainty about the outlook. While household spending was expected to slow over the period ahead, the timing and extent of this slowdown was uncertain. Another source of uncertainty was the outlook for the global economy, which had deteriorated. The Board would also continue to play close attention to the price-setting behaviour of firms and the evolution of labour costs, given the importance of avoiding a price-wage spiral. The Board is seeking to keep the economy on an even keel as it returns inflation to target, but these uncertainties mean that there are a range of potential scenarios. Members agreed that the path to achieving the needed decline in inflation and achieving a soft landing for the economy remained a narrow one.

Recognising this uncertainty, members noted that a range of options for the cash rate could be considered again at upcoming meetings in 2023. The Board did not rule out returning to larger increases if the situation warranted. Conversely, the Board is prepared to keep the cash rate unchanged for a period while it assesses the state of the economy and the inflation outlook.

Members emphasised that the Board’s priority is to re-establish low inflation and return inflation to the 2 to 3 per cent target range over time. High inflation damages the economy and makes life more difficult for people. The substantial cumulative increase in interest rates since May has been necessary to ensure that the current period of high inflation is only temporary. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.

follow up article on the money laundering and property:

https://www.abc.net.au/news/2023-02-03/afp-money-laundering-bust-highli…

Inflation shock to shoppers:

https://www.news.com.au/lifestyle/real-life/news-life/why-your-supermar…

RBA tomorrow.

found more boomer spending:

https://www.drive.com.au/news/new-car-transaction-prices-hit-record-hig…

paying in cash and moving to 3 car households, average transaction price up over 40% in last decade, budget buyers being removed from new car market

velocityjohnno wrote:

found more boomer spending:

https://www.drive.com.au/news/new-car-transaction-prices-hit-record-hig…

paying in cash and moving to 3 car households, average transaction price up over 40% in last decade, budget buyers being removed from new car market

not sure where I saw it, and cannot remember the numbers...

but did anyone see that column graph for savings throughout the pandemic?

it had the generations and their savings

and the 'boomers' column was at least 4 or 5 times larger than the next closest generation

big big arse blue column for boomers, with every other generation barely scraping off the x axis

still lotsa money to burn, for some...

velocityjohnno wrote:

found more boomer spending:

https://www.drive.com.au/news/new-car-transaction-prices-hit-record-hig…

paying in cash and moving to 3 car households, average transaction price up over 40% in last decade, budget buyers being removed from new car market

I could currently sell my 18 month old new car with nearly 40,000km on it for more than what I paid for it 18 mths ago. Unbelievable and unheard of!!!

40’000 on the clock? Drug dealer.

velocityjohnno wrote:

found more boomer spending:

https://www.drive.com.au/news/new-car-transaction-prices-hit-record-hig…

paying in cash and moving to 3 car households, average transaction price up over 40% in last decade, budget buyers being removed from new car market

Supply and demand. Shortly the supply of boomers should be diminishing so the demand for high end European cars will follow suit leading to an oversupply of fairly new low mileage cheap prestige cars on the market. So there is hope for the rest of us plebs to own a Jaguar F-Pace one day.

You and me both gary lining up for the F-Pace. Very difficult to find SUV wagon that handles with full time AWD and a torque converter gearbox at a reasonable price nowadays. Most 'AWD'are impostors with a haldex.

Edit: F-Pace is also all-aluminium, perfect for not rusting as a surf wagon over 20 years by the ocean.

And Don, I'd collected Aussie Muscle before covid... whoa.

Actually, near new cars going for more than what they were new occurred in the early 1970s. A magazine test of an XY GS 302 mentioned that 2nd hand it could be sold for more than new. Recently GS Fairmonts from this era have had asks north of $200K on carsales!! Insane.

garyg1412 wrote:

velocityjohnno wrote:

found more boomer spending:

https://www.drive.com.au/news/new-car-transaction-prices-hit-record-hig…

paying in cash and moving to 3 car households, average transaction price up over 40% in last decade, budget buyers being removed from new car market

Supply and demand. Shortly the supply of boomers should be diminishing so the demand for high end European cars will follow suit leading to an oversupply of fairly new low mileage cheap prestige cars on the market. So there is hope for the rest of us plebs to own a Jaguar F-Pace one day.

Not sure I agree with your analysis here.

The top 3 selling vehicles in AU in Januray were:
Ford Ranger
Toyota Hilux
Tesla

Now - I dont see many boomers buying the first 2. Pretty much a family car and Gen Z car these days

By the way - the hugest profit margins earned by the manufacturers are exactly those 3 models (Tesla being the largest profit margin).

gsco wrote:

Here's the last section of the most recent December 6 RBA minutes. Behind this "discussion" is actual economic modelling. But the minutes give the impression that they're sitting around drinking beer, eating pizza, possibly pulling a few cones, and coming up with some magical cash rate figure based on witchcraft and astrology...

Ha ha ha. True. It's also true that much of the actual economic modelling is behind the curve, way behind the curve. They are using data that is old when it comes out to feed into models that are just that, models, to project into a future some 3 to 12 months ahead.

Seriously, witchcraft and astrology would be as valuable. Psychology, particularly the psychology of crowds would be a more appropriate tool to use in these discussions. Why no psychologists on the RBA? Well that would be because it is a moribund and outdated institution where elite groupthink is the only input.

Someone once wrote a quotable phrase, something like setting interest rates was like driving while only looking through the rear view mirror.

For mine they should stop raising interest rates right now. Jawboning - which they also use as a form of policy implementation is fine as far as it goes. Talk up future interest rate rises all you like fellas, but stop actually raising the rates.

The circumstances we are seeing have no real equivalence in our economic history. Huge mortgage debt and quite a lot of it loaded into fixed rate loans which will expire in the near future. The rate rises of the last 6-8 months haven't even hit yet!

Has GFC undertones to it, but it won't be the banks that go under here. Here it's the individuals that go under.

batfink wrote:

gsco wrote:

Here's the last section of the most recent December 6 RBA minutes. Behind this "discussion" is actual economic modelling. But the minutes give the impression that they're sitting around drinking beer, eating pizza, possibly pulling a few cones, and coming up with some magical cash rate figure based on witchcraft and astrology...

Seriously, witchcraft and astrology would be as valuable. Psychology, particularly the psychology of crowds would be a more appropriate tool to use in these discussions. Why no psychologists on the RBA? Well that would be because it is a moribund and outdated institution where elite groupthink is the only input.

It's called behavioral economics. You would expect that some behavioral economists are providing input to the decision-making but I don't know if that's actually the case.

https://en.wikipedia.org/wiki/Behavioral_economics

Well the reality is we live in an economic policy paradigm commonly called inflation targeting, in which monetary policy is the main tool to manage fluctuations in inflation, employment, growth, etc.

In this context and under its mandate, the RBA has been doing a very good job - you can't fault it, even though doing so is now a spectator sport.

Batfink I don't quite share your skepticism for economic models and forecasting.
Out of interest, Box C: What Explains Recent Inflation Forecast Errors? from the November statement of monetary policy is pertinent.

The RBA has significant depth on its team (and I went to uni with some people who work there), in particular a large number of economics and finance PhDs from the best universities in the world, and people with significant policy and private sector experience. It's not possible to do a PhD in these universities without studying a course or two in behavioural economics.

Regarding setting monetary policy, it's the role of the Economic Analysis Department within the Economic Group to "monitor and forecast economic trends and provide monetary policy advice to the Reserve Bank Board.". The assistant governor, head and deputy heads of this department can be found here.

I think a lot of people are simply upset that interest rates have increased in order to manage inflation, so they're trying to find every and any reason possible to discredit the RBA and the inflation targeting paradigm. We've been in a long-term (like 30yr) down trend in interest rates, and a lot of people got used to this, benefited from it (particularly in terms of asset prices) and don't want it to end.

An interesting article by Olivier Blanchard, an economist quoted in an above article by Alan Kohler. Blanchard believes the low interest rate environment is not over just yet:

Secular stagnation is not over. A short essay on a really important issue for the future. https://t.co/qaoLy87xOc

— Olivier Blanchard (@ojblanchard1) January 24, 2023

Batfink nails it.
Those who mostly benefited from those low interest rate trends are least affected from the interest rate rise. The people who are most upset or vulnerable are (or should be) those at the bottom of the pyramid. The “inflation targeting monetary policy” is a pretty shit tool isn’t it. It’s a Emperor's New Clothes scenario if there ever was one. Pretty sure VJ called that out ages ago. Its all they got. It doesn’t work except from the turd pile up. It’s unfair given the recent historical circumstances. And it kinda shows up what a overpaid bunch of pinstripes who get paid the big bucks are. pretend psychoanalysts who monitor data for bullshit jobs. 100% agree about the government (lack of) responsibility in setting monetary & taxation policy. They bear the ultimate responsibility. But to defend the RBA given the circumstances is a cop out. Remember Lowe’s commentary on industry consultation re wage increases. No data. Just feelz. $1M clams pa for feelz. Its like you say gsco "witchcraft and astrology" for private school oldboys.

I think that's all good. Questioning the inflation targeting regime, and the overall neoliberal ideology, and asking who bears the most cost of increasing interest rates and how effective interest rates are as a tool to combat inflation, is totally valid and should be done. I see the Australia Institute is going pretty hard on it, eg:

"We've got $250B worth of tax cuts heading our way, and they won't go to [low income earners].

"People earning over $180k a year will get the biggest tax cuts. So we could do that or we could make childcare and medicine and public transport cheaper for everybody" @RDNS_TAI #9ACA

— Australia Institute (@TheAusInstitute) February 7, 2023

"Interest rate rises are a very blunt instrument, and we know that a lot of inflation is being driven by company profits rising essentially. But it's workers who are really being asked to make the sacrifice here."

- @ebony_bennett, Deputy Director at @TheAusInstitute #auspol pic.twitter.com/iC30MmFywb

— Australia Institute (@TheAusInstitute) July 27, 2022

But doing this is a completely different thing to questioning or criticising the conduct and capability of the RBA. They're acting in accordance with their mandate, and are doing a very good job in the circumstances.

A very good job? 9 interest rate rises in a row based on circle jerk convos with industry leaders (profiting from ala causing the inflation charge)after assuring all the kids that shit be cool. Nahh. That’s a cop out.

seeds wrote:

40’000 on the clock? Drug dealer.

Well actually it's close to 2 years old and has 38,800km if you want all the details. I drive from Brisbane to Nth NSW quite a lot

only thing I can say is venting at and bashing the RBA is pointing the finger at the wrong thing and deflecting away from the real issues.

gsco wrote:

only thing I can say is venting at and bashing the RBA is pointing the finger at the wrong thing and deflecting away from the real issues.

Have to agree with this statement.

Inflation at 7.8%, Cash Rate at 3.35%

Record car prices, record price for a bagel sandwich, cup of joe is over $5 (wtf) and its cheaper for me to buy a wetsuit from the uk and have it shipped here than buy one locally (faster too !!).

There's more interest rate rises coming. So much focus on mortgage holders -taking out mortgage debt is a choice not an obligation.

As an aside - in general governments love inflation - it wipes away public debt and increases their revenue as prices inflate so does the tax take (eg. GST increases)

monkeyboy wrote:

gsco wrote:

only thing I can say is venting at and bashing the RBA is pointing the finger at the wrong thing and deflecting away from the real issues.

As an aside - in general governments love inflation - it wipes away public debt and increases their revenue as prices inflate so does the tax take (eg. GST increases)

Yes, this one is not talked about enough.

Dream conditions for budget repair for the Govt.

High terms of trade.

Commodities down, but still high and AUD in the sweet spot.

monkeyboy wrote:

As an aside - in general governments love inflation - it wipes away public debt and increases their revenue as prices inflate so does the tax take (eg. GST increases)

I’m not so sure they do as the only lever RBA has it to reduce demand (ie spending) hence volume of sales is likely to go down as inflation increases (well that’s what the RBA tries to achieve anyway). Remembering also GST doesn’t apply to essential foods.

Also note that as inflation continues to remain high then we inch one step closer to a recession potentially a global recession. This will also mean demand for Australia’s commodities goes down meaning again less royalties for the government. Hence I’m not convinced governments like inflation (particularly high inflation) at all.

When it comes to interest rates they're not even where they were during that 2011/2012 period. I remember those years very well due to some personal reasons. The economy was nowhere near as strong as it is now and the hike post-GFC was more due to the commodity prices. Considering how strong the demand is now I can see them going up by another 1%-2% without any hesitation. Now, is that a good thing or a bad thing...I don't know, time will tell.

Aus Yield curve, only inversion seems to by 1Y2Y and 1Y5Y, you be judge of how nice the curve is:

https://www.worldgovernmentbonds.com/country/australia/

US Yield curve, yeah, um, sound the collision bell or something:

https://www.worldgovernmentbonds.com/country/united-states/

and

ODL (other deposit liabilities) at banks just updated -$159bil for the week, now -3.81% YoY. This went negative YoY% back in Oct. '22, which leads monthly M2, which went negative -1.32% last month, and will continue to follow ODL lower. @DiMartinoBooth #DRLacyHunt #Deflation pic.twitter.com/ReUm5hclep

— Randy Woodward (@TheBondFreak) February 3, 2023

But flollo you're not allowed to state facts anymore, how dare you...!

Nowadays you're only allowed to relentlessly spam and echo a tirade of information warfare and abuse at the RBA, accusing it of being an oppressive, evil champion of neoliberalism and the wealthy elite, of intentionally aiming at causing a recession and entrenching inequality, disadvantage, poverty and suffering, and at bringing the average Aussie battler and all of working class society to its knees, begging for mercy.

You're meant to be arguing that the cause of inflation is excessive profits of greedy corporations, supply side shocks (cost push inflation), and wealthy property investors and baby boomers on a mission to destroy the plebs and serfs. You're meant to be arguing that pent up demand and spending due to a couple decades of ultra low global interest rates and quantitative easing, and due to massive and out-of-control govt covid stimulus globally, actually have nothing to do with it. And anyway, back in mid to late 2021, how on earth did the RBA not forecast that Russia would invade Ukraine and cause an energy price shock - like how stupid and useless can they be...what idiots...sack them all!

You're meant to ignore the fact that the RBA has teams of economic and econometric modellers advising on monetary policy and who actually have a model-based factual, objective, quantitative view of economic and financial conditions when providing their advice. Supposedly these people don't exist, or at least the models they use are no better than tarot cards and palm reading.

You're meant to be arguing that the RBA has no idea about what it's doing, that it's all useless idiots sitting around making stuff up and guessing, and therefore needs an overhaul, starting with everyone being fired, particularly the governor himself. You're meant to be on a witch-hunt and backing a full blown enquiry of the RBA with the intention of completely dismantling it due to its absolute failure in economic policy and management in every way possible over the past 30 years of the inflation targeting era...

You're in fact meant to be blaming all of Australia's economic, cost of living, housing affordability, social, Indigenous Australia, etc...you name it...problems on the RBA. Get onboard...

You're certainly not meant to be pointing out the obvious that the recent increases in interest rates are simply bringing them back more into line with historical levels, and they're still historically relatively low.

That's just plain not woke.

I'd argue that currently they haven't raised as high as they should have raised. They currently look like underdoing it while big inflation data keeps on being reported. They also look like underdoing it when compared to to other CBs.

They will have to go hard once wage increases start kicking in. But they also believe Australia is immune from the rest of the world due to our success (relative) during the GFC.

gsco wrote:

But flollo you're not allowed to state facts anymore, how dare you...!

Nowadays you're only allowed to relentlessly spam and echo a tirade of information warfare and abuse at the RBA, accusing it of being an oppressive, evil champion of neoliberalism and the wealthy elite, of intentionally aiming at causing a recession and entrenching inequality, disadvantage, poverty and suffering, and at bringing the average Aussie battler and all of working class society to its knees, begging for mercy.

You're meant to be arguing that the cause of inflation is excessive profits of greedy corporations, supply side shocks (cost push inflation), and wealthy property investors and baby boomers on a mission to destroy the plebs and serfs. You're meant to be arguing that pent up demand and spending due to a couple decades of ultra low global interest rates and quantitative easing, and due to massive and out-of-control govt covid stimulus globally, actually have nothing to do with it. And anyway, back in mid to late 2021, how on earth did the RBA not forecast that Russia would invade Ukraine and cause an energy price shock - like how stupid and useless can they be...what idiots...sack them all!

You're meant to ignore the fact that the RBA has teams of economic and econometric modellers advising on monetary policy and who actually have a model-based factual, objective, quantitative view of economic and financial conditions when providing their advice. Supposedly these people don't exist, or at least the models they use are no better than tarot cards and palm reading.

You're meant to be arguing that the RBA has no idea about what it's doing, that it's all useless idiots sitting around making stuff up and guessing, and therefore needs an overhaul, starting with everyone being fired, particularly the governor himself. You're meant to be on a witch-hunt and backing a full blown enquiry of the RBA with the intention of completely dismantling it due to its absolute failure in economic policy and management in every way possible over the past 30 years of the inflation targeting era...

You're in fact meant to be blaming all of Australia's economic, cost of living, housing affordability, social, Indigenous Australia, etc...you name it...problems on the RBA. Get onboard...

You're certainly not meant to be pointing out the obvious that the recent increases in interest rates are simply bringing them back more into line with historical levels, and they're still historically relatively low.

That's just plain not woke.

haha. feel better mate?

Nice rates graph gsco. Short memories, or the result of a huge number of people taking a first mortgage in the past few years, and not used to any other cycle. We’re well below where rates topped out just before gfc, and actually not far off the lowest rates during the height of the gfc. I had a mortgage during all of it, and don’t really recall the 2012 max. Maybe we were ok with rate fluctuations, until we weren’t? Definitely the amount loaned has exploded, but we can’t ignore macro forces

Ps I definitely recall the rate cuts during the gfc. I remember whole percent cuts at one point. Was completely alien to me. Now we’ve seen the other side

What a time it was.

If you think about it - nobody with a mortgage between circa 2012 and 2021 ever saw a rate rise. Definitely a rude awakening. Someone must take the blame!

reckon most will sleep tight knowing that since 2012 average Australian property prices have risen more than 80%.

Alright, what do we reckon about the next few months? Any more rate increases?

My money was (i.e., still is) on a 0.25% increase in Feb, more to send a signal than anything else, and then they'll hold for at least two months, possibly as far as EOFY, to wait for the effects of the rises to fully play out, including seeing what happens as people rollover from low fixed rates onto much higher variables, building approvals data (see if still trending down) and to see if stronger trends in business investment and unemployment play out. I think if the recession signals in the US and EU get stronger that'll also dampen their eagerness to increase rates further and adopt a more overt wait & see approach. Of course, they'll add caveats to the effect of "we're still prepared to raise rates a lot and often if need be", just to quash any ideas that rates will come down.

Don't forget the big banks get a decent chunk of their funding from offshore sources in USD, so Fed raises are impacting rates to some extent and I'm yet to see this covered anywhere.

Is gsco a shill for the RBA? Maybe. Just kidding mate. Yes, the Aust. Institute and you are right, there's a lot of hate for the RBA happening and some of it is probably better directed elsewhere. They are just fulfilling their mandate which they are legally required to do; they'd lose their jobs if otherwise and the next lot to come in would pick up right where they left off. There are other things govts. can easily do to ameliorate some of this. The LNG price controls are one that blows my mind given we oscillate between #1 and #3 exporter in the world, with the vast, vast, vast majority of what's produced being exported, and yet we don't put a cap on local prices to keep our own economy strong/stable. Generally speaking, privatisation of "utilities/essential services" has been a terrible deal for the Joe/Jane/Zym Public; energy, transport (including roads/tunnels/bridges), health and education (incl. childcare) all fall under that bucket.

MG all hinges on wage growth data IMO. If this starts to get out of control then RBA will be forced to show their hand and raise quickly and swiftly. Because if the wage growth spirals out of control then this is very hard to reign back in unlike the supply and demand affect they’re trying to balance now.

Why would wage growth spiral out of control Don?

https://www.macrobusiness.com.au/2023/02/property-council-mass-immigrat…

"The Property Council has released a new report, entitled A Stark Reality, which admits that the bipartisan ‘Big Australia’ mass immigration policy has well and truly overrun Australia’s housing supply, resulting in reduced living standards for Australians:"

When these guys call it, you know it's a big issue. Gotta slow it. Too much of this going on:

https://www.abc.net.au/news/2023-02-08/rental-crisis-living-in-a-tent-t…

Don the wages bit, it's happening, check direction of chart

https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/w…

AndyM wrote:

Why would wage growth spiral out of control Don?

Everyone demands a payrise to cover the cost of living/inflation. Unemployment at record lows means employee is in the bargaining seat to demand a payrise or walk. Employer sh1t scared they can't find anyone to replace, hence they pay the demanding pay rise.

VJ's link above shows this well.

"Jobs paid under individual arrangements strongest contributor to wages growth.

Compared to last year, a higher proportion of private sector jobs recorded a wage movement. This was driven by jobs covered by individual arrangement that recorded larger rises as businesses paid increases based on end of financial year wage and salary reviews or interim increases as a retention strategy."

Yeah maybe in certain sectors but generally speaking it seems like regardless of whether an employer is struggling to find workers or not, basic wages aren't shifting.
Not as far as I can see anyway.
And now we're talking about anything up to 300k immigrants and students being brought in per annum.
If it's the business lobby's wet dream it can't be good for wages.
I see (generally speaking) a continued suppression of wages).
It's built in to policy.
Does the idea of spiralling wages represent one half of a two-speed economy?

Engineers and tech bros big increase- everyone else, stagnant.

freeride76 wrote:

Engineers and tech bros big increase- everyone else, stagnant.

exactly!

the 3 tiered society rolls on...

its more like 4 or 5 tiers, but you get what I mean...

what's worse is, these increases disproportionately push up the average, giving the impression the government's doing alright

while at the same time putting pressure on inflation, which puts pressure on interest rates, which puts pressure on...

not the people who got the pay rises!

and round and round it goes...

freeride76 wrote:

Engineers and tech bros big increase- everyone else, stagnant.

Nah there’s plenty more than that. Anyone with a skill (doesn’t have to be tertiary), especially if it’s suited to the aus econ has garnered and will continue to garner increased pay. Even our new residents will expect more than they used to - cos the cost of shelter, food, entertainment etc etc is higher than it was before. If they don’t tame inflation soon, wage spiral is a real continuing risk.

I recall Sydney workers used to get more for the same job as their interstate counterparts, because it cost more to live in that city. Now it’s dear everywhere. And if the average punters’ weekly costs went up due to IR increases - they have 2 choices - limit spend or earn more. Which would be the preferred option in this day and age?

If anything, the IT workers (and even engineers) may have taken stagnant pay in order to move to regions and work remotely. Until interest rates went up, of course…

freeride76 wrote:

Engineers and tech bros big increase- everyone else, stagnant.

Not this engineer!!