Should we fret the household debt?

Judo Bank CEO Joseph Healy yesterday expressed concern about the “almost uncontrollable rise in household debt” across Australia. This was 180% of disposable income at the end of 2020, according to data from the Reserve Bank.

Healy is particularly concerned about the growth in mortgage lending, arguing that it is “foolhardy” to assume that interest rates will still be at an historic low in three years’ time:

“We see it in the housing market. It almost defies economic logic,” he said.

“The banks have been lending at six, seven, eight times disposable income, and loan-to-value ratios have been climbing up. Now this is in an economy that already, pre-COVID, had the second highest household debt ratio in the world”…

“To assume that a low interest rate environment is going to hold, three years plus from now, in an inflationary environment, is foolhardy.”

“So for me that’s one of the clouds on the horizon”.

Interestingly, the Bank for International Settlements (BIS) also released its global household debt statistics for the December quarter of 2020, which showed that Australia still has the second highest stock of household debt in the world when measured against the size of its economy, as measured by Gross Domestic Product (GDP).

As shown in the table below, Australia’s household debt-to-GDP ratio was 124% in Q4 2020, second only to Switzerland (133%):

Global household debt

Australia’s household debt was the second highest in the world when measured against GDP.

Moreover, the ratio of household debt to GDP across Australia has surged over the pandemic from 119% of GDP in Q1 2020 to 124% of GDP only three quarters later; albeit part of this reflects the sharp fall in Australia’s GDP in Q2:

Household debt to GDP across Anglosphere

Big lift in Australia’s household debt-to-GDP over 9 months to December 2020.

However, because mortgage rates have fallen to record lows, Australian household’s debt repayment burden – i.e. principal and interest repayments as a ratio of disposable income – collapsed to a 17 year low of 13.6% in Q4 2020, which is 4.0% below the June 2008 peak of 17.6%:

Debt repayments to household income

Australia’s household debt repayment burden has fallen to a 17 year low, courtesy of record low borrowing rates.

Mortgage rates fell further in early 2021. Australian households also continue to pay down existing loans at a furious pace, mostly offsetting strong growth in new mortgages.

Therefore, we should expect the debt repayment burden to fall further in future BIS reports.

Accordingly, Aussie households are sitting pretty despite the rise in household debt. Problems won’t arise until interest rates begin to rise.

Unconventional Economist
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Comments

  1. @ Tom and also someone else asked why is the AUST 3 bond yield jumped 25 bp overnight Friday

    Regardless if someone tries to give a valid answer ……it’s a major warning red flag of strain building in the system

    They’re playing games with the borrowing market ,,….experimenting with how they can scam and manipulate or entice you to borrow on unrealistic low interest rates

    We will see more of what ever coming up over the next few months

    And this household debt is off the charts …….Australian households are in such a vulnerable position moving into the financial crisis I expect to see start unfolding in later Q3, I think AUST will be one of the worst affected countries

    Gov bond yields will fall in the crisis *safe haven” buying but bank funding costs will soar…..we could see home loan interest rates blow out to possibly 7,8,9%

    Their solution will be to just “lower teh rates” but inflation will just keep on getting out of hand

    Anyway as a country we are going to pay a huge price for our debt burden, as a country we’ve borrowed against our kids future

    It’s just going to be an endless game of rising interest rates trying to chase down inflation over next several years, and the higher interest rates go

    I know it’s hard to see now because of what people have been used to, but it will be like the 1930s this decade, into the depression we are heading into next year 22, it’ll be years before people will want to borrow again.

    Saving will be back in fashion…….and you’ll get very good interest on your savings as the years go on

    • and the root cause of the australia debt explosion … an imposed long running mass immigration extravaganza.
      what a great big treacherous f#ck up it is.

    • boomengineeringMEMBER

      Bcnich
      Your comment the other day regarding Sydney house prices to fall more than elsewhere needs to be tempered with the knowledge that it’s always been over the top in prices. I remember 50 years ago wanting to buy a bottom of the ladder dump but got guzumpted. It was 4 times the price of outer suburbs of other capital citys. Equation was Syd double Central Coast and inner Perth etc, them being double outer suburbs of other cities e.g. Rockingham Safety Bay.
      That said things may be different now as then even in bad times in Sydney there was always plenty of high paying jobs. Now that manufacturing has gone things could have changed

      • Boom this could be so big, you may not even be able to get credit next year
        You make the call

        You won’t be able to pay cash most of that will be gone and forget about super ……a friend told me they are in low risk super and I said what’s that

        They said balanced …..equities bonds ……nothing will be low risk, and on super sites they call bonds low risk……most people in the financial industry really don’t understand much about risk ……bonds fixed income funds are going to be slaughtered over next 5 years……the last major bond bear market was into 1982 when Paul Volker ended rising interest rates
        No one really under 75 years old understands a bond bear market …..financial advisors in the 1970s will know

    • MathiasMEMBER

      You sure it wont tank the AUDUSD?

      Im thinking the Currencys cactus. Aussie Dollars wont be worth dogsh*t in the future.

      I agree with you on the debt. Australias Financial Management is a bit like watching a Laurel and Hardy video as everyone tries to kick everyone up the ass… passing the debt all around until finally someone ends up holding the bag lol.

      https://www.youtube.com/watch?v=l4qrj0RFDuw

      I posted this a few years ago but you know lol…

      https://gyazo.com/f6f4f377a21ade2263c4084ffdfc372b

      There is an unprecedented amount of ego in the system. Either the Boomers start dying like flys around 2028 or they’ll crash the economy before then. My guess is the economy wont last till 2028. Its kind of amusing, really.

      Australias hate for the young is so unprecedented that they’d rather tank all of Australia then see them have a single cent.

      I agree with you bcnich. Interest rates will collapse and that’ll bring down the AUDUSD. A lump of dogsh*t in your hand will be worth more then Australian Currency. It just wont be worth having.

      • McPaddyMEMBER

        Found myself wondering the other day. Will this contempt for the future of the next generation take hold as a norm in Australia (and worldwide) from now on? I believe (happy to be corrected) that before the boomers came into power, there was a general consensus that the aim was to leave one’s children better off. To “pay it forward” generation to generation. That norm (if it ever existed) has clearly been trashed by boomers (yes, “not all boomers”, I know – but those who are in power and a substantial additional silent, and not so silent, cohort as well). So is it up to the next generation to pick it back up? Can that actually happen, psychologically? I think not. Not till we have a very massive crisis that involves a humbling reset. The question is, which is the generation that will end up carrying the can?

        • my toranaMEMBER

          McPaddy, if there’s a kicked can to be then carried, the generation will be Generation X. Always has been, always will be the can carriers for the boomers.
          (yes, yes, Gen X politicians, Gen X house investors… but Gen X live in the shadow of the Boomers)

    • I’m wondering if we won’t just get another rainbow to hit us up the arse…AUD will absorb some shock, and China/combined others will cause a commodity surge again…

      Perhaps Oz will just underperform?

    • Jumping jack flash

      Interest rates won’t be an issue if they can kickstart inflation, I’m pretty sure that’s the new emergency. There’s about 8 trillion reasons why I think that in our upside-down banker’s playground we call an economy, where setting the price of debt magically governs everything.

      Now, we conduct a thought experiment. We completely forget for a moment that there is no risk whatsoever as long as the assets that the existing pile of debt is attached to hold their values and put forward the notion that for no good or rational reason interest rates can be arbitrarily set to any value.
      Just say the whole thing falls over and for some reason nobody is able to prevent banks from setting mortgage rates to 10%.

      This poses no problem at all.
      “What?!” you say. “Surely 10% interest rates will be the destruction of everything!!”

      No. Not if there is sufficient CPI, triggering sufficient wage inflation.

      When I was a kid I could buy a cooked and ready to eat meat pie for 80c from the school canteen, and sauce for around 5c. The last pie I bought from a bunch of imported slaves was around $5, and 35c for sauce. No significant extra value, just the price is higher due to inflation.

      I was happy to pay $5.35 and didn’t think twice about it because my income is sufficiently high so I don’t care. Back when I was a kid if someone was trying to sell a meat pie and sauce for $5.35, then good luck to them!

      It is no secret the world has run out of interest rates to cut. So what’s next? Well it is very simple: The other side of the interest rate “equation” is the symbiosis of CPI and wage inflation. We have had an anomalous low-inflation world for a couple of decades. The reason for this and the problems this caused are obvious.
      This is the reason for 8 trillion stimulus dollars. 8 trillion is unprecedented and bordering on insanity, but it takes a bit of a kickstart so the CPI can increase [before wages have a chance to catch up] and consumption can still occur.

      Unfortunately for us Scomo and Joshy-boy ballsed it up so we will probably get the CPI, but not much stimulus to cushion it. But on the other hand, fortunately everyone has a ton of savings to spend on CPI, right?

  2. boomengineeringMEMBER

    Many many years ago I did an analysis of big economic circle of high cost Sydney versus small economic circle of low cost other cities. It turned out little or no disposable income for the other cities. Although the lifestyle in all were dictated by position held in that locale.

  3. lowest principal and interest repayments in 17 years and still waaaay above anything US and Britain and even Canada has EVER been even when interest rates were 5/6% in 2007. Can you imagine the distortion that is causing on consumption spending?

    • Australia’s property decline will be one of the worst in the world & our economic downturn one of the world next year

      2022 is going to be a very painful year for all of us

      This crisis is so big…..possibly 50 to 100 x 08/09 that we will all be affected

      It doesn’t matter what your position in life, it’s everyone

      I want to be positive and I don’t want this to happen, I’m just expressing what I believe will happen

      You’ll see lots of red flags over next 3 months

      Our GDP could drop 20:to 30% over 2022

      There is nothing they can now do to change the outcime,we are so far past the point of no return now

      • AndynycMEMBER

        I am not so sure. I think the RBA and the other arms of the government have many, many more tricks up their sleeves. The main issue in the 30s was that the government wasn’t willing to step in and was allowing the market to sort it out.

        I am not so sure on some smashing event – and I lived through the GFC while I was in the states. I think something like a slow grinding misery for decades is more likely.

        • Andy you won’t have to wait long to see what I’m saying.
          The financial system is on the very very edge of collapse
          It’s be well before Xmas we see the meltdown
          If you experienced 08/09 in magnitude this will be more than 50 x bigger

          The global debt and derivatives are much higher now …..in 1000s trillions

        • Though BC is right about the facts I agree with Andy, we are now in a different system, one where governments will supply enough money to keep the machine functioning, we still have a long way to go & even then a crash is unlikely, more likely lost decades. The biggest threat is what the likes of Russia/China do when their economies falter, the impacts to other counties who are not aligned but a bit authoritarian & how the US responds, that is more likely to cause a crisis.

          • Jumping jack flash

            Won’t even need to if they can get the inflation happening.
            8 trillion is a fair stack of coin. They can go higher as well.

            When minimum wage is 6 figures, 7 figure debt will be a doddle.

          • Yes but tricky not to blow up debit holders, isn’t it, though using MMT … maybe.
            (and by MMT I don’t just mean printing money but the real full version of no unemployment etc)

        • You better do a CPR course too, many will need to be resuscitated

          Throw an a CPI course as well that’s essential, not many know what inflation is

          • Love your comments bc, though for my mood I find it better to just concentrate on Baby Sussex. But why will lots of people need to be resuscitated? By the general public and passers-by? Don’t the living envy the dead pretty quickly in these sorts of scenarios?

          • Bourki
            When the Brighton mums have their Porsche macan towed away, they’ll be collapsed in church street

  4. Another advantage of the USA over Australia is that Tesla self-driving works pretty reliably over there. A long commute becomes a lot more tolerable if your car is doing most of the highway and congested driving, and you’re basically chilling and listening to podcasts.

  5. 2022
    Economic depression
    Dealing with the aftermath of the greatest financial crisis ever
    Think worse strain COVID
    More extreme lockdowns
    Food shortages & rationing

    No guns this time but hardship equivalent to possibly combination of 1930/33, maybe war time feeling with lockdowns and curfews…..the list goes on

    Community will have to work together to help those in need

    There is a scene in SBS Years & Years that people with larger homes had to take in people

    2022 will be a very brutal year

      • When greed FOMO etc take over, no one will listen to any sense

        Firstly bond yields are falling now…..banks will probably lower rates again …..let’s see but this fall in yields will be a couple of months ……it might spur mortgage frenzy even more

        In H2 interest rates are going to rise considerably and medium long term interest rates are going much higher

        TP re that article

        Borrowers are being told that it’s very possible that interest rates are going from 2% to 6% but they think price’s longer term will rise faster than interest rate increases

        Now I’ve heard it all

        This is not going to end well

        • What about the disinflationary/deflationary impact of all that debt, after the initial debt pulse/s fade?

          I’m finding it hard to see little more than low interest rates forever, with inflationary pulses every year or so…

    • bcnich,

      I’m playing devils advocate here. I believe the Government will do EVERYTHING to make sure Houses doesn’t go below 1million dollars each. I’ve become a cynic.

      Here are few scenarios that I’ve been playing in my head:

      0) Synchronise money printing around the world…. again! – 2 years extension
      1) Government will open up the Superannuation flood gates. there’s 1 Trillion dollars in super that would pump the economy for another 2 years
      2) Another super low interest rate that extends for 5 years, pumping in another Trillion dollars.. that’s another 2 years..
      3) Aussie dollars to go down below 50 cents… food staples will still be cheap but petrol prices will be 2 dollars per litter (cutting off fuel excise),
      4) Tax cuts for anyone who is buying a home… or if you are rich
      5) Further funding cuts and/or selling off “non essential” services, like education, health and social services.

      I believe there is 10 or more years left in this “boom”. However, we’ll be handing over long term depression for our kids.

      • buttzilla rampage

        yeah I don’t see anything happening until 2023. Americans will make sure their LNP doggies continue to happyclap.
        also, BCN both of us know, this is when the S2 star is weakest (yes I know it has already begun to shed major velocity).

      • Sure Rodney
        But the RBA won’t have any say, and nothing they can do can stop what’s coming, it’s in the $10s trillions and it’s a world wide banking and derivatives crisis
        They would like to do all this, but it’s going to happen over weeks
        I have a few other reasons but I won’t say now….because all this rhetoric there is no inflation and no interest rate increases coming ……just wait until sept

        Don’t be fooled by the fall in bond yields it’s just a counter trend short covering……you’ll here all the big players inc MB say there is no inflation……just sit tight ……few things to play out….key is USD DXY if breaks under 89…..
        It’ll send commodities higher

        I believe we are in for another leg up in the commodity price bull run pushing iron ore to $300, it’ll be very hard for central banks to pile on the stimulus and money printing if inflation persists now

        Let’s see……I may be wrong ….few things to happen first

        I believe they will do what you are saying and more but it’ll be from the ashes

        It’s weeks away…..18 weeks give or take

  6. pfh007.comMEMBER

    “.. Accordingly, Aussie households are sitting pretty despite the rise in household debt. Problems won’t arise until interest rates begin to rise..”

    And all the shiny pennies are insisting that interest rates CANNOT rise because of all the household debt.

    They insist that this is true even though economic activity over the last 30 years has relied on steadily cutting interest rates and a Chinese export boom.

    It just doesn’t make sense.

    The current model of expanding debt (by cutting rates) to stimulate economic activity is fundamentally broken and this will become obvious to even the most deluded as economic activity starts stagnating again, just as it always does once the sugar hit of a private debt expansion passes. Any reduction in Chinese demand for our exports will only amplify the effect.

    What happens next?

    Politicians will be forced to resort to methods of stimulating economic activity that do not involve expanding private debt as interest rates will have bottomed and without extra income further capacity to borrow, by the credit worthy, will be limited.

    The methods are likely to be an expansion of public debt and / or allowing the general public to operate central bank accounts and thereby allowing a debt less monetary expansion.

    And when that happens they will realise how popular they can be when economic activity is vigorous and unemployment low.

    At that point inflation and interest rates are likely to rise.

    Keep an eye out for dissipation of the current private debt expansion sugar hit.

    Josh will start looking even more sweaty than usual.

    • FUDINTHENUDMEMBER

      “And all the shiny pennies are insisting that interest rates CANNOT rise because of all the household debt.”

      I love the cognitive dissonance required for folks to hold this idea. As if banks/regulators/international equity/credit agencies really give a sh1t if yer average Aussie household (or the puny Australian economy for that matter) gets taken to the cleaners.

    • MichaelMEMBER

      “Problems won’t arise until interest rates begin to rise.”

      Problems won’t arise until the sharks find their way through the shark nets.

    • “Politicians will be forced to resort to methods of stimulating economic activity that do not involve expanding private debt”

      Why? I would have thought 40 year mortgages and a turbocharged TFF, neither of which would be particularly controversial, would be more than enough to keep private sector debt growing for a good while yet. Am i missing something?

      • pfh007.comMEMBER

        Sure they may resort to even more desperate measures to persuade people to sign up to debt contracts but it becomes difficult to sign up older debt serfs to 40 year mortgages….although those with big brass spheres may gamble on enough capital gains before they hit retirement age to make it worthwhile.

        Even a turbo charged TFF with a strong word on the banks to lower mortgage rates closer to the event horizon of zero is unlikely to offer much relief to the debt peddling monetary model.

        It doesn’t take much to frighten the horses when leverage starts to get scrape the international space station.

      • You cannot use the TFF willy nilly if global interest rates are rising, the world would see it as currency manipulation if they issue 3yr TFF debt at 0.1% while global interest rates are rising.

    • Jumping jack flash

      “Politicians will be forced to resort to methods of stimulating economic activity that do not involve expanding private debt as interest rates will have bottomed and without extra income further capacity to borrow, by the credit worthy, will be limited.”

      No.

      Its far simpler than that. They’ll just inflate.

      • pfh007.comMEMBER

        “..Its far simpler than that. They’ll just inflate…”

        They might like the sound of that but there is a big difference between the theory of inflating away debt and actually doing it.

        Just listen to what Morrison and the LNP are saying …… they are NOT talking about national wage cases or increasing all awards by 10%.

        They want to open borders to labour, allow fake students to work more and get those backpackers back as fast as possible.

        If they are not prepared to even inflate wages there will be no inflation….other than asset prices of course.

        That is what the Liberals are on about.

        Inflating asset prices with bank credit while holding down CPI inflation by crunching wages.

        Sure it doesn’t make sense as there must be a limit to asset price pumping unless the incomes of the debt serfs rise to support higher levels of debt but since when have the Liberal Party felt bound by common sense?

        The politicians in the 1970s were not trying to inflate away debt when they lost their nerve and wage prices spirals got out of control. I cannot see any politician actually trying to achieve a wage price spiral now.

        So that just leaves expanding public debt or direct monetisation of government expenditure.

        We can be fairly sure that the Liberals will be reluctant to do the latter and even Morrison is going to find it hard to justify blowing the budget year after year.

        MyRBA offers a wage out of the problem but most people struggle to understand the implications of ending the bank monopoly of central bank deposits so it is hard to see any politician giving it a go.

          • Jumping jack flash

            Because CPI hasn’t hit yet.
            What company is going to trim profits to pay their people more? Very few.

            We need a truckload of CPI to budge wages.

        • Jumping jack flash

          “Just listen to what Morrison and the LNP are saying …… they are NOT talking about national wage cases or increasing all awards by 10%.”

          That’s because Scomo and his band of merry people are fools and have no idea what they’re doing, or what’s going on.

  7. I can hear a lot of anger towards central bank policy, they have destroyed the financial system, but what I say is coming, is not good for any of us, our families etc. they aren’t aware of the damage they have done. It’ll become very apparent to everyone

    I don’t talk much about astrology anymore, I keep to myself, but I wrote in dec last year, the great conjunction, dec 2020 year, Saturn met Jupiter at zero degrees in Aquarius, in Kabbalah, and other spiritual astrology teachings we have entered the true age of Aquarius, it’s an 800 year cycle. You can’t get any closer to zero degrees

    This period we are entering is about the truth being revealed, if you maybe think of your own recent experiences, truth is starting to come out in everything. It’s energetic

    Aquarius although is the water bearer is an air sign, it’s impossible to hide in air,,,,

    All truth is going to be revealed, if you are hiding deep secrets they are going to be revealed

    The water bearer delivers the truth

    There is a lot more …….in Kaballah they talk about an unsustainable system we are living in, the current system is crumbling. ……..

    The mega rich can’t hide their wealth, and they don’t need it, wealth is going to be distributed in a much fairer and equitable way

    These aren’t saying a crisis will happen at a certain time but you can look deeper with other astrological events……..

    These larger trends help me make my view …….anyway each to their own

    The crisis we face in H2 is going to reverse the wealth inequality that’s built up over decades

    You’ll see more

    I’m happy to write a little more from time to time, I understand the ones who criticise this have closed minds, they will be left behind as we move forward

    You need to keep an open mind to everything

    Big big changes on a societal level

    Next year we start building a new system …….something more fairer but it’s going to be a lot of pain to get to the other side

  8. F#ck being in second place Aussies are winners
    We bid until we win the auction, that’s our Auction strategy and we’re sticking to it.
    My parents learned this lesson the hard way, they bid within their means and as a consequence never succeed in winning any auctions so we were raised in sub standard rental housing and I attended 5 schools, I won’t put my family through that!
    I know that losing an Auction has far greater consequences then winning, so lesson learned we’re winners, and with that in mind Fark being in second place we need to win this Household debt race. We need to gap the other countries and show them our strength and our confidence. They need to know it is useless to bid against us, we know no fear Aussies are winners when it comes to accumulating debt.

  9. buttzilla rampage

    “The banks have been lending at sixteen, seventeen, eighteen times disposable income, and loan-to-value ratios have been climbing up. Now this is in an economy that already, pre-COVID, has the highest household debt ratio in the world”…
    there fixed.

  10. Mike Herman TroutMEMBER

    Sitting pretty… more like Humpty Dumpty I reckon. Going to be interesting to see how this plays out. I haven’t been able to bring myself to be part of the frenzy to be honest. It looks crazy to me. But maybe I’m the crazy one. I look at these Aussie auctions where people have buyers advocates, with multiple bidders sending prices sky high and then the “winner” is the one with the most debt. Haha. Looks like losing to me. It’s like that dodgy horse bloke Bill Vlahos. Paid like 5 million bucks for Black Caviar’s little brother. Everyone was shaking his head saying well done. I was thinking, gee what an error. And it was. Anyway, good luck to anyone getting involved…. Aussie, Aussie Aussie and all that….

    • I am with you. It is something I have been struggling with for a while. We own property, but we also rent our PPR. Lots of people act rich, but when I do the maths on their probable net worth it mostly seems to be debt, rather than genuine wealth. I know I sleep much better at night not having a high six figure mortgage on floating interest rates and massive leases on two pricey cars. But even so. It’s difficult to know what is the best path forward. I am smart enough to know I might have made a very expensive mistake and be wrong!

      • Really it’s just Game Theory 101
        Rule No.1 is that the game must go on, there are no time outs, no stoppages, no injury time and no extra time.
        Rule No.2 references Rule1 in that none of the participants can really ever exit the game, once you join you’re in it for life.
        Rule No.3 relates to Rule2 in that because you can’t “time the market” your market sentiment must always remain very positive.
        Rule no 4 is the the game is self modifying and modifies itself in such a manner as to result in maximum positive sentiment (otherwise we would risk ending the game which is a clear violation of Rule 1)
        Simple rules with a guaranteed outcome, I just hope that our lenders also understand the Rules.

  11. I read an article that a real estate agent said everyone is pulling money out of the bank to buy a house why get 0% but there will be no money in the bank left to lend to people to buy the house
    I can’t believe these morons are in charge

    Just wait for the blame game, I can already see it

    • Overheard at pub in country NSW “lot of people buying houses they don’t really want because they don’t think they’ll afford one next year”. Fomo nation wide.

    • If a buyer pulls his money from his bank account to buy a house, that same amount just moves to the seller’s bank account (possibly with the same bank), so no money ‘disappears’ at all with such a transaction. Bank ‘money’ (an account balance amount) only disappears when someone pays off his loan.

      • Jumping jack flash

        Correct!
        And if the debt doesn’t contribute to expanding production and increasing sales revenue that can be used to cover at least the interest of the debt, i.e it is nonproductive debt, the interest causes the debt to actually be deflationary.

        (All things being equal the debt principal can be extracted back out of the economy and repay the debt for zero sum.)

        The act of creating the debt and adding it to the pile of money already in the economy, in an economy that produces very little other than debt, is inflatio.. ahem.. growth, so paying it back is actually very, very bad.

        Ideally what must be done is the debt is constantly rolled over, growing each time at a rate that covers the interest payments of the last pile of debt, and a little bit extra for growth.

      • Ok hadn’t thought that
        Guess, if you pull money out to the stock market does it just go to bank again?
        Either way, moving into risky investments can’t be good

    • brett sensman

      The bank doesn’t NEED money to lend, they create it, fractional reserve and all that, plus the RBA just prints up as much as they want to lend to the banks,

    • blacktwin997MEMBER

      That can’t be right – i thought farmers were saying that they had no pool of exploitable backpacker foreigner student picker labour and that fresh produce prices would keep going up? Good on that guy who bought two avos at the bargain basement price for lunch though.

    • Mining BoganMEMBER

      Authorities need to import bears…kodiaks if possible…to release into the wild around these areas. That’ll get these deadbeats moved on real quick.

  12. Anders Andersen

    “Accordingly, Aussie households are sitting pretty despite the rise in household debt. Problems won’t arise until interest rates begin to rise.”

    Isn’t that what he said??

    “To assume that a low interest rate environment is going to hold, three years plus from now, in an inflationary environment, is foolhardy.”

    “So for me that’s one of the clouds on the horizon”.

    • Jumping jack flash

      The counter argument is that in an inflationary environment, if the inflation is at the correct rate, interest rates don’t need to be low because everyone’s incomes will rise at the correct rate to account for the extra interest.

      Consider this: It is only because we’ve had 10 years of low inflation that interest rates needed to be cut so low. (Wait… WHAT!?)

      And the reason why we had such low inflation was because everyone thought we had to, because if we had high inflation interest rates would rise, and that would destroy everything.

      Well, 8 trillion stimulus dollars should cushion the transition between low inflation and higher inflation, and hopefully counter any and all interest rate rises as a result. Central banks have indicated they will look through [a lot of] inflation before they decide to move. But then again 2007 proved that only one or a few banks need to blink and its all over.

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