Australia housing bubble

[Syndrome]

Bring on another rate rise tomorrow!

[zilo]

Please almighty god give us at least a 50 basis point increase tomorrow...

So we can be like the rest of the planet.

[blueoval]

https://7news.com.au/business/financ...onth-c-9960390

Australian mortgage holders have been hit with fresh financial pain following the Reserve Bank of Australia’s tenth consecutive cash rate hike.

[Yellow_Festiva]

They really need to start looking at other ways to control spending.

I wonder how much of the actual adult population has a mortgage?

[Polyal]

Originally Posted by Yellow_Festiva

They really need to start looking at other ways to control spending.

I wonder how much of the actual adult population has a mortgage?

How else do you do it, efficiently?

[Peter B - CV8]

Originally Posted by Polyal

How else do you do it, efficiently?

GST??? Shares the pain fairly evenly amongst the community.

[anobserver]

Originally Posted by Peter B - CV8

GST??? Shares the pain fairly evenly amongst the community.

Unless you're young, poor, or on a fixed income.

[GO FURTHER]

Originally Posted by Polyal

How else do you do it, efficiently?

Instead of the RBA raising interest rates, the government could increase or lower the rate of compulsory superannuation contributions on a month-to-month basis.

So if at the moment the Superannuation Guarantee rate is 10.5%, next month it could be 0.25% higher or 10.75%, and so on.

There is no reason why we couldn't use compulsory super contributions to meet short-term macroeconomic stabilisation objectives, as an alternative tool.

When economic policy requires tightening, the requirement to contribute to superannuation could be increased.

This would mean, consumers would have less to spend in their take-home pay in high inflationary times and would help curb spending.

The big advantage though would be that the money taken out would still be yours, and earning interest, which you get back when you retire, versus increased mortgage rates which is just a "financial rent" paid to the big banks you will never see again.

The big banks getting richer... Or more for the average Joe in retirement, which might be better?

You may say, "Well, not everyone gets compulsory super deducted from their wages, so that won't work"...But by the same token, not everyone has a mortgage either.

There is no alternative Inflationary tool (just like increasing interest rates) that fits all or affects everyone equally.

The above idea was floated in Australia some decades ago by economists as an alternative to raising official interest rates.

[T3rminator]

Statement from RBA. A bit confused with the bolded bit.......are they effectively saying they don't know if these 10 rates increase will have an impact on inflation, so they are just going to keep raising them anyway?

BTW, I think million dollar a year man will be giving a press conference tomorrow to explain the decision. Would be interested to hear what % of inflation is NOT demand driven.

https://www.rba.gov.au/media-release.../mr-23-07.html

At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 3.60 per cent. It also increased the interest rate on Exchange Settlement balances by 25 basis points to 3.50 per cent.

Global inflation remains very high. In headline terms it is moderating, although services price inflation remains elevated in many economies. It will be some time before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next.

The monthly CPI indicator suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia. Services price inflation remains high, with strong demand for some services over the summer. Rents are increasing at the fastest rate in some years, with vacancy rates low in many parts of the country. The central forecast is for inflation to decline this year and next, to be around 3 per cent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case.

Growth in the Australian economy has slowed, with GDP increasing by 0.5 per cent in the December quarter and 2.7 per cent over the year. Growth over the next couple of years is expected to be below trend. Household consumption growth has slowed due to the tighter financial conditions and the outlook for housing construction has softened. In contrast, the outlook for business investment remains positive, with many businesses operating at a very high level of capacity utilisation.

The labour market remains very tight, although conditions have eased a little. The unemployment rate remains at close to a 50-year low. Employment fell in January, but this partly reflects changing seasonal patterns in labour hiring. Many firms continue to experience difficulty hiring workers, although some report a recent easing in labour shortages. As economic growth slows, unemployment is expected to increase.

Wages growth is continuing to pick up in response to the tight labour market and higher inflation. At the aggregate level, wages growth is still consistent with the inflation target and recent data suggest a lower risk of a cycle in which prices and wages chase one another. The Board, however, remains alert to the risk of a prices-wages spiral, given the limited spare capacity in the economy and the historically low rate of unemployment. Accordingly, it will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms.

The Board recognises that monetary policy operates with a lag and that the full effect of the cumulative increase in interest rates is yet to be felt in mortgage payments. There is uncertainty around the timing and extent of the slowdown in household spending. Some households have substantial savings buffers, but others are experiencing a painful squeeze on their budgets due to higher interest rates and the increase in the cost of living. Household balance sheets are also being affected by the decline in housing prices. Another source of uncertainty is how the global economy responds to the large and rapid increase in interest rates around the world. These uncertainties mean that there are a range of potential scenarios for the Australian economy.

The Board’s priority is to return inflation to target. High inflation makes life difficult for people and damages the functioning of the economy. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment. The Board is seeking to return inflation to the 2–3 per cent target range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.

The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary. In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.

[T3rminator]

Originally Posted by Yellow_Festiva

They really need to start looking at other ways to control spending.

I wonder how much of the actual adult population has a mortgage?

I'm going to guess most boomers will have had their mortgages paid off, or close to being paid off. Capital was cheap. Any left holding on as investments will just pass the expenses onto renters.

Heard a suggestion to increase GST temporarily, that way it will hit actual spenders. Not sure what side effects that would have. On the plus side, the extra money taxed would stay within the public system.

[blueoval]

Originally Posted by T3rminator

I'm going to guess most boomers will have had their mortgages paid off, or close to being paid off. Capital was cheap. Any left holding on as investments will just pass the expenses onto renters.

Heard a suggestion to increase GST temporarily, that way it will hit actual spenders. Not sure what side effects that would have. On the plus side, the extra money taxed would stay within the public system.

If and a big IF, they do this, I doubt it will be temporary. Those in power will find it difficult to reduce such increase easily. A move like that will clean out any hangers on with small businesses and kill off the middle class (which I reckon is their aim).

[T3rminator]

Originally Posted by blueoval

If and a big IF, they do this, I doubt it will be temporary. Those in power will find it difficult to reduce such increase easily. A move like that will clean out any hangers on with small businesses and kill off the middle class (which I reckon is their aim).

True. But rate rises will kill off a lot of small independents anyhow. Its not just the mortgage holders who have their spending power taken away, its the renters as well. Average Joe who used to pay a bit of premium for his steak at his local butcher will now switch to the big supermarkets to get the cheaper deal. Mums and dads will start to order bits and pieces from Aliexpress rather than hopping out to the local store.

Possibly a way to get around the temptation to keep the tax to would be to call it something different, like an "inflationary tax". That way its visible, and as inflation hits its target, that tax gets removed.

[prydey]

Originally Posted by T3rminator

Possibly a way to get around the temptation to keep the tax to would be to call it something different, like an "inflationary tax". That way its visible, and as inflation hits its target, that tax gets removed.

You must be new here

[blueoval]

Originally Posted by T3rminator

True. But rate rises will kill off a lot of small independents anyhow. Its not just the mortgage holders who have their spending power taken away, its the renters as well. Average Joe who used to pay a bit of premium for his steak at his local butcher will now switch to the big supermarkets to get the cheaper deal. Mums and dads will start to order bits and pieces from Aliexpress rather than hopping out to the local store.

Possibly a way to get around the temptation to keep the tax to would be to call it something different, like an "inflationary tax". That way its visible, and as inflation hits its target, that tax gets removed.

I really don't reckon they will remove any tax if they implement such a thing, especially if it's proven effective. I like how you think though. In a perfect world with selfless people in power who actually want to do what's in the best interest of the people, it could work. However, I am as skeptical as they come when it comes to power hungry politicians and implementing "temporary taxes". It's not in their nature of letting go of a tax that actually is a good money spinner for them.

As for it effecting other mum and dad types out there, of course it will, it will affect all. This will eventually change the entire dynamic of middle and lower class people's spending habits to a point that there will no longer be a middle class but a class of citizens no longer making independent decisions, but solely dependent on the government income and infrastructure to it's fullest extent.

I'll be in the corner with my tin foil hat on now.

[anobserver]

Originally Posted by T3rminator

I'm going to guess most boomers will have had their mortgages paid off, or close to being paid off. Capital was cheap. Any left holding on as investments will just pass the expenses onto renters.
.

Not the original source, but quotes the data i recall from 2017.

https://www.themandarin.com.au/11001...ions-are-huge/

Data looked at age ranges from 1990 to 2015. It found -

"For homeowners aged 55 to 64 years, the proportion owing money on mortgages has tripled from 14% to 47%.

Among homeowners aged 45 to 54 years, it has doubled from 36 to 77%."

It gets worse:

"Meanwhile, the average mortgage debt-to-income ratio among those with mortgages has pretty much doubled across every home-owning age group.

In the 45-54 age group, the mortgage debt-to-income ratio has blown out from 82% to 169%.

For those aged 55-64, it has blown out from 72% to 132%."

And this was five or six years ago. Cant imagine it's miraculously changed since then.

[blueoval]

Originally Posted by anobserver

Not the original source, but quotes the data i recall from 2017.

https://www.themandarin.com.au/11001...ions-are-huge/

Data looked at age ranges from 1990 to 2015. It found -

"For homeowners aged 55 to 64 years, the proportion owing money on mortgages has tripled from 14% to 47%.

Among homeowners aged 45 to 54 years, it has doubled from 36 to 77%."

It gets worse:

"Meanwhile, the average mortgage debt-to-income ratio among those with mortgages has pretty much doubled across every home-owning age group.

In the 45-54 age group, the mortgage debt-to-income ratio has blown out from 82% to 169%.

For those aged 55-64, it has blown out from 72% to 132%."

And this was five or six years ago. Cant imagine it's miraculously changed since then.

They are frightening statistics for 2023 let alone 2017. One can imagine how much worse it actually is. Scary scary times

[anobserver]

Originally Posted by Yellow_Festiva

They really need to start looking at other ways to control spending.

I wonder how much of the actual adult population has a mortgage?

Cant recall the exact figures. Owners, buyers and renters used to be roughly split into thirds But the owned outright crowd has been shrinking over time.

The artificially low interest rates tempted one and all to trade up, because it was 'affordable'. So more people than ever in each age group held debt for longer, right up to and into retirement in some cases.

[DRU842]

This is RBA speak for 'its a blunt instrument but its all we have'. As noted in these threads, not everyone has a mortgage and not all mortgages are floating rate. Align that with rental contracts and the timing of interest rates effects are difficult to judge.

[Syndrome]

Originally Posted by DRU842

This is RBA speak for 'its a blunt instrument but its all we have'. As noted in these threads, not everyone has a mortgage and not all mortgages are floating rate. Align that with rental contracts and the timing of interest rates effects are difficult to judge.

Blunt instrument but they keep using it!

[Polyal]

Originally Posted by DRU842

This is RBA speak for 'its a blunt instrument but its all we have'. As noted in these threads, not everyone has a mortgage and not all mortgages are floating rate. Align that with rental contracts and the timing of interest rates effects are difficult to judge.

But the interest rate changes is done to effect business not just home owners. Thats why its generally effective as it should spread across all sectors.

Change the GST, nah not for me unless the budget is up to pooper that bad that we are unsustainable. The poor are already struggling.

Play with Super? Imagine the logistics in adjusting that make making sure its compliant.

Sorry for me rate changes are the way to go but there needs to be some market/sector policies adjusted to help. If there is a sector in trouble, then understand why and look for options

[buggerlugs]

A Current Affair and the likes of news.com.au will have another months worth of mileage now.............

[fordomatic]

It's been a moment without you, I'm surprised you share your secrets with everyone on here considering you are so rich

[T3rminator]

The rich generally have no issues sharing their "secrets"....if you ask....I find.

Most people just don't like the answer

Although, you generally always here about the wins, never the losses.

[blueoval]

Originally Posted by T3rminator

The rich generally have no issues sharing their "secrets"....if you ask....I find.

Most people just don't like the answer

Although, you generally always here about the wins, never the losses.

The losses are never easy to admit, but without the losses, you never learn to do better and make the necessary changes to succeed.

What I do is learn from others mistakes. That way you minimize your own mistakes and net more wins in the long run.

But that takes research, self assessment, commitment, a certain level of risk you are prepared to lose and walk away from. Most people don't have much to risk in the first place and this will mean it will be harder to change that situation, so there will be those who will naturally criticize at the idea of those who are in in a better position to improve net wealth.

These days though I have noticed the term "rich" has been applied to anyone in a better position than you are by those who don't have or made poor decisions in life. An unfair and annoying correlation.

To me, a rich person is someone who has their health, loving family, a roof over their head and food on the table.

Sorry for going OT

[fordomatic]

Originally Posted by T3rminator

The rich generally have no issues sharing their "secrets"....if you ask....I find.

Most people just don't like the answer

Although, you generally always here about the wins, never the losses.

Agree, with great risk, comes great reward, or great loss. It's all a gamble imo, just about trying to find the right balance for your own needs.

Rich don't get rich without taking chances. I do hate when those that choose to live in a comfortable bubble their whole lives (which is fine) whinge about people that earnt the same working amount but took risks and profited a lot from those risks.

Another interesting point is people whinging about those that earn a lot of money, lets say the 200-500k bracket. How many of those people are working 38 hour weeks? After working with those people I've not met a single one of them that works less than 50 hours a week. Most put in at least 60 hours. Unless inherited, you don't get money easily in most cases, it takes some sort of sacrifice.

Originally Posted by blueoval

These days though I have noticed the term "rich" has been applied to anyone in a better position than you are by those who don't have or made poor decisions in life. An unfair and annoying correlation.

To me, a rich person is someone who has their health, loving family, a roof over their head and food on the table.

Sorry for going OT

Edit, Only just saw your quote mate, I wrote the below before i saw it and I am on the same page.

I should also add, I don't see money as the be all and end all. I used the term above "rich" wrongly. For me it's all about striking a good balance. I've also noticed in my life that you can have all the money in the world but it doesn't buy happiness. Finding that balance of being comfortable and also happy with life is the key.

You can have all the cars, houses, gadgets you want. I look at my uncle, worth an absolute fortune. Lives in a 10 mil house but his wife left him after the kids grew up because he was always working and never home. Now he's retired and an alcoholic spending his days drowning in his poor life decisions.

[blueoval]

Originally Posted by fordomatic

Agree, with great risk, comes great reward, or great loss. It's all a gamble imo, just about trying to find the right balance for your own needs.

Rich don't get rich without taking chances. I do hate when those that choose to live in a comfortable bubble their whole lives (which is fine) whinge about people that earnt the same working amount but took risks and profited a lot from those risks.

Another interesting point is people whinging about those that earn a lot of money, lets say the 200-500k bracket. How many of those people are working 38 hour weeks? After working with those people I've not met a single one of them that works less than 50 hours a week. Most put in at least 60 hours. Unless inherited, you don't get money easily in most cases, it takes some sort of sacrifice.



Edit, Only just saw your quote mate, I wrote the below before i saw it and I am on the same page.

I should also add, I don't see money as the be all and end all. I used the term above "rich" wrongly. For me it's all about striking a good balance. I've also noticed in my life that you can have all the money in the world but it doesn't buy happiness. Finding that balance of being comfortable and also happy with life is the key.

You can have all the cars, houses, gadgets you want. I look at my uncle, worth an absolute fortune. Lives in a 10 mil house but his wife left him after the kids grew up because he was always working and never home. Now he's retired and an alcoholic spending his days drowning in his poor life decisions.

Hey no sweat mate. Wasn't pointing any fingers to anyone on here. I know its a general term that people use but find it's thrown as a blanket over people who prefer to grind or take risks in an attempt to pseudo-shame them.

Agree though that material wealth does not bring happiness. It's a sad state of mind in a capitalistic world. However, I am noticing a shift from living a simple life out of choice to living a simple life because we are pressured to, particularly with the cost of living being at the forefront of everyones minds. Those who were struggling before are now on the verge of poverty and choosing to eat vs choosing to have a roof over their head. That's the stone cold reality of where we are as a human race right at this precipice in time.

Ive also noticed those who took it to the extreme, buried their heads in work, built up a personal empire have no one meaningful to share it with. They sacrificed their family too much in pursuit of riches. Much like your uncle. There has to be a balance and the family unit is the core and needs to be protected no matter the ambition.

[asagaai]

Some very good posts here just right now.

I had discussions with a colleague a number of years ago whose husband died while still young, with bowel cancer. They were like the glamour power couple in my area. My colleague said that her husband was always planning and working towards being very wealthy and drove himself hard.

She said to me, in the end, that she and her husband had an epiphany, that all one really needs to be "happy" is a comfortable house, food, and the company of loved ones around you.

I have spoken to a number of more elderly, whose partner have died, and they also mirror this, saying all you need is a comfortable safe/ warm/cool place to live, and family and friends, everything else is piffle.

[Mulva]

Originally Posted by T3rminator

The rich generally have no issues sharing their "secrets"....if you ask....I find.

Most people just don't like the answer

Although, you generally always here about the wins, never the losses.

This is true, but not all wealthy people are the same.

There is also those that are wealthy but don't need to be asked or prompted to share their secrets; they will mention their wealth at every opportunity, even when weaving it into the discussion is so off-topic it seems completely random.

Then there are those that are wealthy but you would never know it as modesty means they choose not to disclose it, even when the opportunity is there.

And then there are those that bull**** about their wealth.

[Citroënbender]

No surprise really, I think Franco Cozzo’s description of “fiscal cosplay” was both apt - and in some cases, appropriately demeaning:

https://www.9news.com.au/national/cr...4-dc650cde1648

The Emperor has no clothes; furthermore he’s no Adonis.

I believe it’s why we still need to raise interest rates, people have to realise the Anna Sorokin method of “Fake it ‘til you make it” cannot be applied to household spending. Once genuine fiscal restraint starts to show, I’ll review my opinion.

[BENT_8]

Something tells me if they've turned to the credit card to get through week to week they wont be paying it off each month as that moneys gone on rent or mortgage increases.

As I said recently, upping interest rates wont slow spending as people are addicted to living life as they have for far too long, they'll just run up the cards till they can no longer and end up bankrupt.

Then the relationships will start breaking down as they blame each other for not being able to support the lifestyle they're use to.

Dig in people, its gonna get ugly.