Lunatic RBA drives Australia closer to recession with 0.5% rate rise

As widely forecast the Reserve Bank of Australia (RBA) has dealt another blow to mortgage holders, hiking the official cash rate (OCR) another 0.5%, taking it to 1.85%

Below is the official statement [my emphasis]:

At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 1.85 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.75 per cent.

The Board places a high priority on the return of inflation to the 2–3 per cent range over time, while keeping the economy on an even keel. The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments. The outlook for global economic growth has been downgraded due to pressures on real incomes from higher inflation, the tightening of monetary policy in most countries, Russia’s invasion of Ukraine and the COVID containment measures in China.

Inflation in Australia is the highest it has been since the early 1990s. In headline terms, inflation was 6.1 per cent over the year to the June quarter; in underlying terms it was 4.9 per cent. Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy. The floods this year are also affecting some prices.

Inflation is expected to peak later this year and then decline back towards the 2–3 per cent range. The expected moderation in inflation reflects the ongoing resolution of global supply-side problems, the stabilisation of commodity prices and the impact of rising interest rates. Medium-term inflation expectations remain well anchored, and it is important that this remains the case. The Bank’s central forecast is for CPI inflation to be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024.

The Australian economy is expected to continue to grow strongly this year, with the pace of growth then slowing. Employment is growing strongly, consumer spending has been resilient and an upswing in business investment is underway. National income is also being boosted by a rise in the terms of trade, which are at a record high. The Bank’s central forecast is for GDP growth of 3¼ per cent over 2022 and 1¾ per cent in each of the following two years.

The labour market remains tighter than it has been for many years. The unemployment rate declined further in June to 3.5 per cent, the lowest rate in almost 50 years. Job vacancies and job ads are both at very high levels and a further decline in unemployment is expected over the months ahead. Beyond that, some increase in unemployment is expected as economic growth slows. The Bank’s central forecast is for the unemployment rate to be around 4 per cent at the end of 2024. Our liaison program and business surveys continue to point to a lift in wages growth from the low rates of recent years as firms compete for staff in the tight labour market.

A key source of uncertainty continues to be the behaviour of household spending. Higher inflation and higher interest rates are putting pressure on household budgets. Consumer confidence has also fallen and housing prices are declining in some markets after the large increases in recent years. Working in the other direction, people are finding jobs and obtaining more hours of work. Many households have also built up large financial buffers and the saving rate remains higher than it was before the pandemic. The Board will be paying close attention to how these various factors balance out as it assesses the appropriate setting of monetary policy.

Today’s increase in interest rates is a further step in the normalisation of monetary conditions in Australia. The increase in interest rates over recent months has been required to bring inflation back to target and to create a more sustainable balance of demand and supply in the Australian economy. The Board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.

Australia’s inflationary pressures are still mostly imported, including via petrol prices and materials, or due to weather-related issues. Hence, goods accounted for 79% of the rise in the CPI over the June quarter:

Goods and services inflation

Goods driving Australia’s inflation.

The broadest gauge of domestic inflation – wages – remains soft, despite the tight labour market. The March quarter wage price index printed annual growth of only 2.35%, whereas the Q1 national accounts recorded only 2.2% growth in average compensation per employee.

Australia’s real unit labour cost (ULC), which according to the Australian Bureau of Statistics “are an indicator of the average cost of labour per unit of output produced in the economy” and “are a measure of the costs associated with the employment of labour, adjusted for labour productivity”, collapsed 6.3% below their pre-pandemic level in Q1:

Real unit labour costs

Australian wage costs are actually dis-inflationary.

The CBA’s wage tracker, which leads the ABS’ labour price index, also shows that wage growth remains sluggish:

CBA wage tracker

CBA: wage growth yet to accelerate.

Therefore, the evidence suggests the RBA is not facing a wage-price spiral and does not need to run hard against wages growth by aggressively hiking the cash rate. To the contrary, wages in Australia are disinflationary given the falling ULC.

Accordingly, there is little justification for the RBA to hike rates so aggressively to counter imported or weather-related (cost-push) inflation. Such a strategy will exacerbate cost-of-living pressure for households and hammer the economy without relieving the very forces driving the inflation problem in the first place.

Moreover, consumer confidence has never been so weak at the beginning of a rate tightening cycle, already tracking below the GFC at recessionary levels:

Australian consumer confidence

Australian consumer confidence is at recessionary levels.

The Lunatic RBA seems hell bent on steering the economy into an unnecessary recession. It will be the “recession we did not have to have”.

At least it has now turned data-dependent following the Fed so 50bps hikes may be over.

Unconventional Economist
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Comments

    • happy valleyMEMBER

      Raising the cash rate/interest rates is not going to fix the type of inflation we have, but Lowe seems hell bent on normalising interest rates before he walks out the RBA door in September 2023 for the last time, taking his multimillion dollar pension with him. And Lowe’s only legacies will be the greatest-ever housing price bubble and bust. Still, plenty of of cushy non-executive director roles await him.

          • I actually stopped caring about housing tbh. Everyone is all worried about the virtual signalling politics, I am exhausted by it all. It’s been 30 years of pure skulduggery behaviour and no one cared about the generations coming through. Plus my generation and the ones coming after, are all about the woke politics, so good luck to them. I pay 199$ per year to help the blokes at Macrobusiness out and hopefully they keep making an impact. The 650$ odd (tax deductible) I donate to the Smith Family every year hopefully helps the young girl I sponsor. Otherwise, I just don’t care any more.

            I’m single and childless. My 3 bedroom, 2.5 bathroom double car garage townhouse on a 180m2 block (no strata or body corp) with 8kw solar and battery that costs less then 4.5x my income is perfect for me.

            In the next two years I’ll rent my current place to my old man (reduced rent) because he’s going to be living below the poverty line when he retires and I will relocate to WA. I can work from anywhere in Australia so it’s a no brainer.

            The east coast of Australia is a block hole of corruption. WA is the lesser of the bunch.

          • Thanks for “I actually stopped caring about housing tbh.” comment.

            I see it. Expensive housing is a cancer to society.

          • Luke, your comment just below this one is really spot on.

            It HAS been 30 years of skullduggery and no one cared about the younger generations. We have two generations that have already suffered from worse housing than previous generations.

            The level of concern by the older to the younger was extremely low these last decades. I am gobsmacked by how the oldsters justify the smaller blocks, no backyards, longer commutes AND higher prices.

            It is good to see that you plan to help your father. There are many older people that are also being screwed by this unjust society (AKA economy, AKA market). An old person trying to rent on the pension is @#$%ed.

            I live in Sydney and I have recently noticed a few vehicles that most likely people are living out of. They might very well have jobs and simply can’t afford rent.

          • They printed too much money during covid. Come on how long is everyone going to talk around this simple fact and keep blaming Putin? Fed even came out and said it. Printed too much money, now Hoover it all back up. This will make it into economics textbooks one day about what not to do.

        • nineofclubsMEMBER

          What are the drivers of inflation in Australia?
          It’s not some sort of ‘wage spiral’ caused by a skills shortage or any of the other stories promoted by the ACCI.
          The drivers are the cost of fuel and housing, exacerbated by shortages of some food products following floods etc.
          Addressing inflation by just lifting interest rates is simplistic and shortsighted. Austerity; a core tenet of neo-classical economics. Take money out of the economy by hitting borrowers..
          A more effective response to inflation IMO would attack its specific causes.
          Curtail speculation in real estate. Make housing about homes, not assets in someone’s portfolio.
          End mass immigration for good.
          Gas reserves for domestic use.

          • Yeah, nah! Choices are these:
            Press this button and then go for an extended lunch
            OR
            Dismantle 30+ years of ideology, blow up the banks, screw each and every one of your political donors right up the jacksie

            Hmm … hard choices, but guess what, that’s why they’re paid millions!

          • The couses of inflation are the unprecidented global money printing, which peaked during Covid, the US increased money supply by the most since the second world war, Aus created over 380 billion out of thin air. The causes you are quoting are in fact symptons of money priniting, as the revered Milton Friedman said,”Inflation is always and everywhere a monetary phenomenon” Put up the rates and drain the money printing

      • Not true: raising rates can definitely fix the inflation or dampen the inflation level. That’s right, even though they don’t produce oil or food they can indeed reduce demand. Monetary policy acts symmetrically, whether it is to fix a low supply issue or a high demand issue: same same. Funny thing is I keep reading this argument everywhere in AFR and elsewhere but this is taught everywhere in economics schools.

        • I'll have anotherMEMBER

          Raising rates in the wrong country won’t fix it though mate.

          A huge chunk of our inflation is energy prices. Forcing reserve domestic gas supply and fixing the upper unit price will eliminate domestic inflation. This will avoid people loosing their jobs and shelter or being severely impacted by the incoming recession.

          The recession is a function of taking people’s money they would have otherwise spent. It’s entirely avoidable. That’s the point of the article.

          • I was just talking about his inflation statement: it’s plain wrong. I wasn’t saying this will or will not create a recession. Now yes about this recession… reducing demand may or may not create a recession: it’s a delicate balancing act decision to make between the two and thankfully not mine to make. A couple of months ago, I was under the impression that the US Fed would largely prefer having a recession over having excessive inflation: it proved to be right so far. Things move slowly, the FED is in pause now but it might not last long if inflation persists.

          • I'll have anotherMEMBER

            Yep. The fed, who can control the inflation via rates, are paused. The RBA, which can’t control it, is still raising rates.

            We can control inflation via regulatory changes to how our resources are used. Therefore we should. The RBA are irrelevant and will only create human suffering by their actions.

          • Energy shmenergy, seriously. Sorry, but that’s an asset pumper’s diversion, nothing less.

            We’ve got an inflationary outbreak because globally we’ve printed more in the last two years than since WW2. What did they think was going to happen?

            No local influences? Where you been since the start of Covid? The near doubling of house prices, the 7 grand poodles, 100 grand caravans and 200 grand landcruisers have nothing to do with extra money being in people’s pockets? Didn’t know we made poodles in gas fired ovens.

            Fact, since 1923, globally we’ve had 11 episodes of inflation greater than 3% and in practically every case it’s taken a recession to bring it back under 3%. If that’s the goal, higher rates and recession it’ll be. The alternative is more of the same over the last 20 years, bail everyone out at all costs, asset price bubbles, moribund economies and political landscapes. Oh, and a very agitated populace who can no longer afford to eat. Pick your poison.

          • I'll have anotherMEMBER

            Well wages, according to latest official ABS data, have gone down, not up.

            If the arse does fall out of the RE market with no economic activity to pick it back up, that’s just a bunch of people losing wealth. Apparently their wages aren’t going to pick up with all this local inflation you speak of.

            As far as getting a LandCruiser, it’s a minimum 12 month wait.

            People buying cruisers and poodles and caravans are boomers spending their savings. It’s not working families.

            Not sure what your argument is on energy. Fact is, energy is expensive and we can do something to change that.

        • nineofclubsMEMBER

          Maybe I wasn’t very clear. I accept that raising interest rates ‘can’ fix inflation. In the same way, amputating a leg can fix an ingrown toenail. My point is that in the current situation, where inflation is driven by a small number of very specific factors, raising interest rates is an imprecise and excessive approach to lowering inflation. A blunt instrument.
          A more targeted approach, one which attacked the actual drivers of inflation, could be at least as effective without the social harm that we’re already seeing from the sledgehammer-to-crack-a-nut approach of our neo-classical economic Brahmins

          .

        • happy valleyMEMBER

          The biggest bad policy being his own shockers of the last two years, closely followed by the mini-shockers of his predecessor, Captain Glenn – now esteemed chairman of the board of the shop who have the smartest people in the room (Macquarie – the billionaire factory)

          • The last 2 years barely register against the insane housing bubble, where our houses are “worth” 6x GDP. (USA is ~2x)

            Or the litany of other stupid shit that’s gone on too long in the name of kicking the can.

    • Ding long end bond yields are coming down
      Raising cash rate is good for the sharemarket
      Don’t look at OCR look at 10 yr gov bond
      RBA is just catching up

      Yield curve inversion is good for the sharemarkets

      There’s 150 more they’ll go above 3% or around

  1. They have to deal with this inflation in Aust = it’s peaking in the US but we have a while to go
    2 or 3 more 50bp

    There isn’t going to a recession

    Going to be a financial collapse & depression
    Say good bye to the banks
    They won’t make it through 2023
    And anyone who can’t see that needs to open there eyes

    And you all laughed at me at the start of last year when I said there were big int rate hikes

    Interest rates will come off very late this year as house prices crash & the banks go down

    But we are going to see a re run of the 1980s inflation & 17% plus int rares

    And don’t worry no one in main stream will tell you, they have no idea

        • happy valleyMEMBER

          But, but which of our unquestionably strong (LOL) banks will be the first to hit the wall? Or perhaps that question might be better put to Captain Wayne before he soon exits APRA early?

          • Westpac, always Westpac although the insane pandemic lending orgy at CBA could put it in the running.

        • AUD is heading to 80 & going much higher than that over many years
          We are in the early stages of a commodity price super boom

          Iron ore will be well over $500 this decade
          $300 in the next 12 months

          All you clowns laughed at me last year when I said fixed rates would touch 5% & we are btw 5 & 6.84% for most fixed rates

          Anyone on a variable rate will be paying 5% min soon

          And say good bye to house prices min 50% down by end of next year

          • if house prices are down 50%, then there will be an arbitrage opportunity buying them for scrap metal as iron ore prices will be $500

          • Coming robbing materials will be huge this decade
            Copper steel you name it
            Builders will have to guard the sites

            Big theft of copper now
            That’s going to be huge

          • House and holes
            What are you doing on here
            And your forecasts have been so bad I’m lol back at you

            To start with your int rate & inflation call ….. how bad was that

            And you said take my pills

            You are an absolute joke

            Iron ore negative & home loan rates negative

          • Interesting point on materials being robbed. Big problem on the rail network re copper. Also noted a large chain hardware operator inner SE of Melbourne no longer stacks its timber on outdoor racks as it’s suddenly prone to disappearing outside of store hours. Timber FFS!

          • You got inflation and interest rate pivot from central banks bang on. I have links saved away. Nov 23 2021 was the low and you called it near to the date.

        • You’ll be all eating your words the same as my interest call last year
          No one was even close to what I said

          Wait until Iron ore is 300

          I’m going to crown myself the IRON ORE KING

          • I changed a few forecasts after seeing how much money they printed
            You can update when changes occurred

            Not even Chris Joye saw interest rates rising this far

            I was the only one in Aust to say when they were 1.99 they’d be above 5%

            AUD did fall to 55c & now it’s heading to parity

            ASX is going to 10,000 & house are going to fall 50%

            I underestimated how stupid the RBA & Morrison gov would be

            I never thought those morons would reduce home loan int rates to 1.99 and say they’d be there for years

            I assumed some intelligence

          • let’s also note that it took the most absurd and illogical government interference in human history (lockdowns), plus a proxy war between russia and the US, to even get interest rates to 1.85%

            but maybe bcinch will get lucky and china will invade taiwan

          • Cheers for posting that, needs to happen everytime sun lord predicts the future lol.

            And yes sun lord, it didn’t happen because of can kicking but it still didn’t happen, you didn’t predict “these conditions will arise and this is what will happen to rates/prices if the govt/rba doesn’t can kick but they won’t so here’s what I actually predict”.

            YOU WERE WRONG. Wear it

      • Was that before shorting the housing and stock markets in 20 & 21 or after predicting we will need to buy houses with gold bars and/or barter only….?

        • BB you go buy a house now on this dip
          You’ll be buying a house with bullion in 5 years

          $100k of gold now will buy you a $1m priced home now in 4 or 5 years

          • Absolute BeachMEMBER

            I have no idea if your numbers are correct on weight of gold vrs purchasing power in relation to housing. However, there is strong evidence that fiat currencies are about to get properly tested.

          • ErmingtonPlumbingMEMBER

            How many pallets of Baked beans in ham sauce will I need in 4 or 5 years to buy another house?

    • 17% really? do you even know what the monthly interest amount would be on a 1 million $ mortgage at these levels? the Domain calculator won’t even allow you to put anything above 15.0% haha. Hear that: at just 15.0% that would mean a monthly payment of ~13k$ brother.

      • James get with the times
        Life isn’t a fairy tale
        Look back at history
        Go back & ask your parents & their friends what home loan rates were in 1989
        I worked as a money market trader 90 day BBSW was 19.75%

        Go read some economic history

      • Which tells you how insanely high house prices have gotten.
        If house prices were a part of the inflation figures the cash rate would have been higher for the last 20 years.

        • Amazing, isn’t it. One of the major contributors to cost of living and it isn’t included in what people consider inflation. It really is about velocity of money. Inflation magically turned into COL in the 70s.

    • Confusing words. Can you lay out your sequence of events?
      I read it as something like:
      1. Interest rates up another 1-1.5% over the next 6 months
      2. Then down again in last quarter as house prices drop and banks shares go with them
      3. However, little slowing in CPI increases (or maybe slowing followed by renewed rise?)
      5. ASX rises to 10000
      4. eventually RBA forced to hike interest rates again, and rapidly to 17%, in 2023 leading to more house price falls and then bank failures

      IMO this makes some sense over a longer tiemframe, but I can’t see RBA hitting 17% in 2023.

      • As OCR rises the long end bond yields are going to fall fast & sharemarkets will rise
        17% is years out when these morons keep printing money
        House prices are going to crash

        Watch the long end bonds look at Aust & US 10 year

        Don’t read the rubbish about the RBA watch the bond market

        • if im watching the bond market, the 10yr has been dropping for several months and is now down to 2.5%

          Are you therefore saying that 17% interest rates are more than 10 years away?

    • happy valleyMEMBER

      So, the ASX will go to 10,000 at the same time as you predict the banks which make up~25% of the main ASX indices hit the wall? So, what will compensate for that hit to the indices – miners to the moon?

      • Banks & miners are about to rise as bond yields are falling fast
        All equities are going to rise as bond yields fall

        As usual the RBA is the latest in the world

        Look at 07 they were raising rates when the rest of the world was cutting

        ASX 10000

    • Current US Inflation:9%
      FED target inflation:2%
      Unless you have a mother of all recessions so far inflation is not going into fall into FED’s target range.There is not goingcto be a pivot any time soon the markets are mad!

    • I actually think this is good for the ASX/big banks and the big end of town relative to international peers as long as IR’s don’t go too far.

      – Banks: Can get away with higher spreads/margins as loans rise but savings accounts don’t. This should compensate for the losses they will incur assuming the RBA doesn’t rise to cause a recession.

      – Inflation: More money supply means more inflation. Who has the pricing power to pass on the inflation and get the benefits? (Hint: It isn’t workers who will pay the inflation tax, someone must reap this tax and its usually govt and businesses). Ideally inflation wouldn’t be a tax if it was passed on evenly but it isn’t.

      – ASX Valuations: We typically have “show me what you got” syndrome when it comes to Aussie company valuations vs “potential” (i.e. we apply a higher discount rate to growth stocks than if they are listed elsewhere). I realised this being a tech person where even the worst ideas startup wise can become big overseas where Australian’s are very risk adverse and will typically only invest when it is already working and profitable (even then expecting much higher returns). The end effect you often see is that for the same revenue and profit an Australian company would be rated/lower market cap than otherwise making Australia an easy country to “buy out” and takeover companies in it raising money overseas. Going forward with higher IR’s this benefits companies that are CF driven rather than growth driven. This is many Australian oligopoly companies and super profit cash cows (big banks, supermarkets, mining) and penalizes things like tech, etc.

  2. Finance MessiahMEMBER

    If Lowe had any shred of integrity, he and the entire board would resign. Not only did they drop the ball with the cash rate and the mixed 2024 messaging, but they’ve also made some other mistakes, such as risky investments that haven’t paid off. Captain Philip of the RBA Titanic is still hellbent on driving the economy into the proverbial iceberg (and not the lettuce kind either).

    • happy valleyMEMBER

      Integrity? Integrity? You might have to explain that concept, together with those responsibility and accountability, to the almighty on the RBA Titanic Board.

  3. “Lunatic RBA drives Australia closer to recession with 0.5% rate rise”


    Well, I disagree – recession can be easily avoided … by changing its definition.

      • Yes, I think most of term are just blindly following, as if they do nobody can accuse them of failure, even if it is a failure. Especially Australia, we have options like pulling to trigger most other countries don’t have, we should have had a coordinated policy with government when there is a crisis like this.

  4. Personally, I would have preferred an increase of 65bps but 50 will do. The OCR is now 1.85%, still very low but we’re getting there… on our way to 4.00% hopefully. Now that would be a good ‘timid’ neutral level to test the waters considering inflation runs at ~6%.

    • happy valleyMEMBER

      So, the RBA is doing something sane to rectify the total insane and totally irresponsible things (zero cash rate, yield curve control (not), money printing, and constantly guiding no cash rate increase until 2024) it has done under Lowe’s watch in the last 2 years?

  5. let’s note that the RBA has not undone any quantitative easing

    In fact, there are so many reserves in the banking system that the only way they can meet the target rate is by paying interest on reserves

    So that’s an extra 1.85% added to reserves every year now (going to be 2.35%/yr next month)

    is this going to bring inflation down? or is this more free money for the banks while youse get screwed?

    why has the RBA not instead unwound its balance sheet? which would have the natural effect of increasing rates and lowering asset prices
    Why are they instead pursuing a new and untested extraordinary monetary policy of paying interest on reserves?

    inquiring minds want to know

    • happy valleyMEMBER

      But if they had to mark to market the Government bonds they bought yielding ~0.25% pa on cost, the RBA balance sheet might be in negative net worth, but the RBA will just hold the bonds to maturity – how good is suit- yourself accounting?

    • Jumping jack flash

      Because the inflation is actually imported, leveraged, stimulus money that’s presently sloshing all over the global economy.

      That stimulus needs to be taken out of the economy. And the way they seem to have decided to do it is by simply paying more interest.

      In a debt economy, interest is deflationary.

      • there are many who would disagree with you – orthodox economists have not not really had the best success rate over the last 30 years

        firstly, they handed out 500bn of free reserves
        then they started paying interest on them (never done before)

        then they jacked up the price of new credit to prevent investment in new production or efficiency

        none of those things sound deflationary to me

        another theory suggests that instead of asset prices falling, costs will simply rise as monopolies and shortages demand a return on their assets that exceeds the new free money rate
        and no one else can get loans to enter the market and provide competition or meet demand

        • Jumping jack flash

          What else can really explain what they’re doing, considering the structure of the global economy – basically an enormous pile of debt attached to assets that grew in value as the debt was attached, used for consumption, that grows as interest rates are cut, and their very recent and very strange actions that nobody seems to notice any more?

    • What’s wrong with you
      Listen you were always going to be wrong

      We are in a financial Ponzi scheme

      That’s starting to unravel

      There is an end point to all this

  6. They distorted the economy for so long (2010) with low rates, that we become a nation of speculators, borrowing and buying and selling to the next greenhorn mug that turns up. So while raising it now is possibly inappropriate for many, maybe it’s the reckoning we had to have. Perhaps if money had some value it could be deployed thoughtfully into businesses rather than just buying houses and renting them out. Guess we shall find out.

  7. You keep saying this is the recession we dont need to have.
    Whats your alternative?
    You never address that without raising rates the dollar will fall and imported inflation will be much higher.
    Wait for confirmed pay rises you say? Its not gonna happen with the bi partisan immigration policies.
    What has your much championed QE gained us as a country?
    How far can the housing magic pudding economy go without a reset?
    Did negative rates work gor Europe?

  8. Jumping jack flash

    Soaking up a global, incredibly suspicious, multi-trillion dollar stimulus dump by making everyone pay more interest?

    An interesting strategy, and of course only possible because the world is saturated in debt.

    But how do they expect to counter the inflation from the physical shortage of energy which is operating simultaneously to the inflation from the stimulus-induced demand spike that’s contributing to the inflation, exacerbated by the energy crisis? Well, i suppose they expect that after the economy collapses from the interest rates, the energy consumption is going to significantly reduce?

  9. “ The Australian economy is expected to continue to grow strongly this year, with the pace of growth then slowing”.

    I want to smoke what Captain Phil is smoking.

    It must be great stuff.

    • NelsonMuntzMEMBER

      “I know I said there wouldn’t be any more increases until 2024 but in the immortal words of Bob Dylan, ‘Things have changed,’ plus don’t get cross at me, I’m not the person who let you have a giant mortgage on some mouldy sh!tbox. If you want someone to sook to, go sook to the bank. See how that goes.”

      Gold.

      • Strange EconomicsMEMBER

        He essentially said – Go get a massive debt and push house prices – Interest rates will remain unchanged till 2024 *

        * Asterisk, lots of fine print I know you will ignore, but so you can’t blame me later.
        Speculation addicted Punters will read the headlines.

        • Naw … the way it goes is if someone rocks up to their property and asks for some shelter for the night or such and when asked what they have to offer and its gold they shoot them as a favor to the rest of humanity. Now if they have something useful or willing to provide skills/labour which helps the group then its a huge difference.

          Basically the survival of everyone on the property is gained by group effort and gold bugs are seen as selfish self centered people that can not be trusted because they are only in it for themselves.

  10. pfh007.comMEMBER

    It is wonderful that so many believe that an unemployment rate of 3.5% has generated NO bargaining power for workers. It isn’t true of course but don’t tell anyone as this means that the government can shut the borders and use fiscal policy to go hard for an unemployment rate of 2% without fear of adding to inflation.

    Unemployment in the range of 2% to 3.5% will provide excellent support while the air is let out of the asset price bubble.

    The only thing that should not be done is back off the interest rate stick while the monetary policy transmission model is so broken and dysfunctional that any loosening of monetary policy will just get the speculators out of their jim jams and squirting credit at the prices of our existing and very average housing stock.

    Now if there had been some reform of monetary policy regulation over the last 9 years so that bank credit creation was productive and not speculative….say by tilting the table in favouring of new housing constrution or new business investment…then a case might be made that monetary policy could help us get to 2% unemployment.

    But we know that is unbelievable – it would be like feeding high sugar donuts to a fat kid and being surprised that at the end of the process you just have an even fatter fat kid.

    So everything is looking peachy keen.

    1. Unemployment of 3.5% and falling and that is NOT contributing to inflation.

    2. Monetary policy that is taking a troll hammer to our bloated speculator driven residential asset prices.

    3. An opportunity for the Federal Governent to turn on some fiscal largess to get unemployment to 2% and do something that really needs doing like providing the funding for a bunch of servicing for new subdivisions for new home buyers across the country to help get the residential vacancy rate well above 4% as we KNOW that is the most effective way of generating affordable rents and helping the bloated house price down the stairs with a shove in the small of the back.

    4. Keep the border closed to all but genuinely high skilled workers who will be paid well over average weekly earnings.

    • On ABC radio this morning they were discussing skilled migration. There is a massive backlog of visas because Dept of Home Affairs can’t find low paid staff to process them. Massive lol.

      • pfh007.comMEMBER

        Freddy,

        Comedy doesn’t get any blacker than that!

        The complete lack of awareness at the ABC about the benefits of low unemployment has been jaw dropping.

        Anyone would think that full employment was a bad thing.

        I suppose for middle class folk used to paying peanuts for the ‘help’ it is shocking.

        • They did discuss reforming the pension rules to enable pensioners to fill these roles. i.e. the rule that says pension drops $1 for each $2 worth of additional income. But I would otherwise agree that ABC have tended to represent business rather than workers.

        • Strange EconomicsMEMBER

          Middle class folks paying 50K extra for kitchen renos are screaming, and 20$ more a night at restaurants, and no cheap cleaners.

          Lack of low wage workers is killing the lifestyle. Have to cook and clean and fix the house ourselves.

      • Strange EconomicsMEMBER

        They should import unskilled workers at low wages through LNP connected labour hire companies to process visas for … unskilled workers at low wages through LNP connected labour hire companies … for unskilled workers at low wages through LNP connected labour hire companies

  11. 1.85% interest rates isn’t aggressive tho. Inflation is 6%, so we’re still getting a negative yield on the cash in our savings accounts, which is a simulative policy that encourages spending. If they were serious they’d push the cash rate above the inflation rate, to incentivize saving by providing savers a positive return on their savings. Savers would win, spenders and debtors lose, crushing inflation.

  12. We need this recession as we need a complete reset. Asset prices are out of control. The RBA was a big part of that equation. It needs to bring this economy back to earth. If this crisis isn’t fixed, what will be the next one. Our kids leaving for places with better living standards? Count on it. The last 25 years have utterly ruined what was once a great country.

  13. Was following a Lloyd’s auction in Ballina this week for flood affected timber. Needed some 240×47 KD F27 beams and some lam posts

    Started cheap then I bailed with 5 mins to go because the prices were the same as retail for unaffected timber

    Wtaf

    • Yeah it’s all that money people have that supposedly can’t be used to service higher mortgage rates. Recession apparently or maybe high energy costs causing it? LOL.

  14. You keep plugging away at the ‘raising interest rates is bad’, ‘going into a recession is bad’ lines.
    Neither of these is true for the generations of people who have been scr*wed over for the lat 20 years.
    We need an economic reset and we need it now!

  15. I reprogrammed the SpruikBot to offer the ‘shoulder to cry on’ feature.
    It will whisper softly:
    House prices double every 7 seconds. Don’t talk us into recession. Australia economy strongest in the world you know …

  16. 2023HomelessMEMBER

    I love that the RBA told the young folk that rates won’t change, take out stupid loans, then jacked rates up. It’s a good series of life lessons:
    1. Do your own research
    2. Read some history
    3. Plan for the worst, enjoy the upside
    4. Never trust government
    5. Never ever trust boomers, they just want to fleece you.
    7. Never never ever trust someone named Phil (Kevin or Karen)
    8. House price growth is inverse to avocado on toast
    9. If something seems to good to be true, don’t buy 3.
    10. Caravans are cheaper in a recession, so there will be plenty of cheap and trendy tiny homes to move into.
    11. People who say it’s about about time in the market, not timing the market, are just trying to make you feel better.

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