RBA and the soft landing theory

We note the RBA has released the minutes of its RBA meeting today, and the news still is not good for the indebted.

In the central bank’s minutes of its October 5 board meeting, during which it surprised the market by keeping the official cash rate steady at 4.5 per cent, the RBA said members concluded that interest rates would “need to rise at some point if the economy evolved in line with the central scenario of a gradual tightening in resource utilisation, as this would most likely result in a gradual strengthening of inflation pressures.”

The timing of adjustment remained a matter of judgement, it said.

We are getting a bit doubtful whether that promised “adjustment” will actually occur. That is not to say that interest rates will not go up, we just aren’t sure whether the RBA will be the ones who manage it. As we have mentioned before the RBA has a track record of being pretty hopeless at predicting most things. It is becoming clear, well at least to us and our readers , that housing ( and its associated indebtedness ) is getting uglier by the day. The RBA have at least acknowledged the issue.

Members observed that falling house prices and high levels of household debt indicated that “the process of repairing household balance sheets would be protracted”.

Protracted ?? Meaning long ?? This is more “soft landing” theory. Australia has a massive debt driven government supported housing fetish and an associated debt binge totaling $US60K per person ( yes that includes the children ). That credit driven fantasy is now in rollover, and knowing full well the outcome for other nations in similar positions; all the RBA can say is “protracted”.

And that is why this blog is called Delusional Economics.

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