Let this be a lesson to all those that read the market's expectations as gospel. Markets are highly reactive on a short term basis, whereas central banks are not, especially when inflation is running rampant.
The only way to ensure inflationary expectations don't get out of control is to show a strong hand.
If you think the stance taken by central banks is a good predictor what did you think when the RBA were saying they didn't expect to raise rates till 2024 in 2020/2021?
I don't think that was a great prediction.
1) The RBAs expectations and what happens in a market that they have to react to, are two different things. They always qualify their predictions with caveats. Saying things like "Assuming market stability..." or "Should trade levels increase the RBA...".
2) The impacts of COVID and global supply shortages were a greater unknown in 2020.
3) All markets react to global context, a major war destabilizing major world players has since occurred.
4) Australia is fairly financially healthy, and the main reason rates are high is to create a buffer should the s**t hit the fan in a more serous way.
I don't think it will, I think we'll see rates drop between 2024 - 2026... So it's really a question of do you want your medicine now and get it over with, or later when things might be worse.
Maybe if Russia leaves Ukraine and global tensions calm down, and Swiss banking stabilises - things will improve sooner... But I don't think that's likely for a year or two.
One is a predictor of the economy which they have no control over how it plays out.
The other is the stance of how they will react which they have complete control over.
As they say, Dont fight the Fed
So if Lowe predicts there will be an interest rate rise but inflation data comes out very low, then he should raise it anyway?
Seems regardless of what he predicts, what they end up doing will always be dependent or a reaction to the recent data.
Central bankers everywhere are hawkish due to the need to correct mistakes they made by implementing ultra loose monetary policy.
Would you say interbank futures are good predictor of rate rises?
It is also true to say that hindsight makes it easy to say that.
What frustrates me a lot about this type of debate is that it's been clear for the past 50 years that economic projections are hopelessly inaccurate. Time after time Treasuries and central banks and academics get it wrong even six months out. The various blogs around regularly show graphics of economic predictions vs actual...which invariably show that those predictions have failed.
If people haven't worked this out by now, and treat the official predictions as if they were gospel, all I can say is: "Good grief!"
Honestly. Can anyone say they should give weight to RBA predictions? Or Treasury, or academic and bank economists? Because if anyone does, I'd ask them to go through the various predictions over the past ten years and compare the times these predictions were right...vs the times they were wrong. Betting on the pokies would give a better return.
Folks. Don't ask why central banks, treasuries, economists can't predict accurately. It's obvious that they can't. Being so obviously wrong so often for so long, ask yourself, why am I listening to them at all, because they sure AF don't know.
I understand they say they are talking hawkish, but I think they know they've overcooked rate increases and if they can find a reason to pivot they'll take it the same as they changed their minds based on the data in 2021 in the other direction.
I think the interbank futures are about as good of a predictor as you can get but I've been critical of people betting the farm on them like staying out of the market because they seem to be indicating further rises.
It's too easy to look at examples of the futures being wrong like late 2018 when it was pricing in rate increases and in 2019 it started pricing in the cuts which came, or in 2021 it was pricing in no rate increases and then rapidly started pricing in the raises which also came.
I disagree.
Not sure why there are so many posts on this thread about 'jawboning'. This isnt prepandemic/pandemic times. Jawboning doesnt work - what works is actual rate rises - of which we have had 10 back-to-back. If that falls within your definition of jawboning than so be it..
Inflation is still way too high. Interest rate rises will continue until inflation comes down into the required band. With the caveat that a recession may reduce inflation without the need to continue rate rises.
Interbank futures have substantial limitations - but yeah many use them as a prediction tool - you do you..
Following your logic that jawboning doesn't work and all that matters is action, does that mean that if the RBA pauses next month they are no longer hawkish about inflation?
How could you possibly say they've overcooked
Unemployment at 3.5% and no recession in sight, lmao, no overcooking.
If we had unemployment at 7% and were in a recession then you might be able to make that argument.
There shouldn't be a requirement to have a vow of celibacy from investing in property or having debt to have an opinion on the subject.
I think that someone who invests in property and puts real money on the line at least demonstrates a conviction of their opinion.
As I just responded to /u/arcadefiery I don't think I have much of a bias as we have \~55% LVR right now and everything not offset is fixed in the low 2% range till November 2025, so I don't really have any levels of stress and am making more money than ever with these rent increases.
I think it's better for me if they go harder with rates and tank the economy to get inflation into the target band as I have 2.5 years till I roll off fixed and I would be all but assured that I don't roll off into an environment where they are battling inflation, instead they are likely to be trying to stimulate the economy with lower rates.
No probs. Truly - best of luck to you.
My point is those with debt on this sub always argue that rate rises aren't really that necessary, inflation isnt caused by loose monetary policy etc. Why? Well - its pretty bloody obvious..
I agree that inflation is pushed by loose monetary policy. Particularly asset inflation which isn't well captured in the RBA's inflation measurements.
The question is whether the government actually cares that much about the problem. Ideally they would, but asset price inflation and people living well in the short term is what they care about as that wins votes.
I think we are in a rigged game, I don't love the fact that it is that way but I'm not going to try to fight it so I make my investment decisions accordingly rather than investing in an idealistic way which represents how things should be.
It's kinda weird though
Like I hold property debt. Currently not a lot. But about to sink another $800k
If you are an investor you WANT HIGHER RATES. We get a 47% discount on rates. So it benefits us in a relative sense. Plus having high rates + recession makes houses CHEAP.
I cannot understand why any investor would not want higher rates. The higher, the more it benefits those of us with sound fundamentals.
A 45% discount on higher expenses is still a higher expense.
55% of $120 interest is more than 55% of $100 interest. There is no benefit to higher rates as far as operating expenses and cashflow goes.
…I can’t believe I explained that.
There are lots of benefits to higher rates, principally:
- Shares/property are cheaper
- Goods/services are cheaper
- Businesses and other assets are cheaper
If you are in a strong income/cash position it's a lot easier to buy during a recession.
Simple percentage equations dumbfound >80% of people I’ve found.
You can just about gather how intelligent/worldly thinking someone is if they make a comment about rent and interest rate rises needing to be equal, and can’t understand why they’re not and/or they don’t work overtime because they get taxed more then they make. Usually said with very little glimmer behind their eyes.
The RBA are forecasting CPI to come down to 3.5% and trimmed mean to be 3.25% by mid-2025 based on a cash rate expectation peak of 3.75% by 2H 2023 (from surveys and market pricing) which we are nearly at now. This was taken before the events which have happened in the US so I assume the rate expectations would be less today.
Unemployment is expected to be 4% at that time too based on the same assumptions.
[https://www.rba.gov.au/publications/smp/2023/feb/economic-outlook.html](https://www.rba.gov.au/publications/smp/2023/feb/economic-outlook.html)
I believe they have a slightly higher tolerance for inflation than the target should it mean not sacrificing the economy. They can't overtly say that though. The reason for this is they spent years under the inflation target having to stimulate, why wreck the economy and then have to harder pumping it up again later?
Feel free to dismiss as property bull hopium, though I don't think I have much of a bias as we have \~55% LVR right now and everything not offset is fixed in the low 2% range till November 2025, so I don't really have any levels of stress and am making more money than ever with these rent increases.
I think it's better for me if they go harder with rates and tank the economy to get inflation into the target band as I have 2.5 years till I roll off fixed and I would be all but assured that I don't roll off into an environment where they are battling inflation, instead they are likely to be trying to stimulate the economy with lower rates.
I understand what you want and I can see the benefits of the government doing this to get inflation into the target bracket. I just don't think they will do it.
You must be in some way bullish on property as you already own multiple properties and aren't selling so you must see the long term upside.
Agree they are unlikely to do it.
I am bullish in the sense that I think buying up as much land as possible will ultimately pay dividends. Solely through rent. Not capital gains. I want austerity and recession.
A quick flick through you and belugatimes post history and it quickly dawns that these are the types of posters that were quick to say "But Lowe never said that about forward guidance during the pandemic".
Funny how you take the other side when it suits.
All in all my point remains valid - if you want to look for the most probable prediction you look to the Fed.
Good luck pushing back against that..
I would say we should have a balanced information diet.
I do think that the most 'accurate' non-central bank source for hike directions will be the yield curve, as it's the collective wisdom of the market. (We've seen nearly all 'expert' economists get their forecasts miss.)
Imo, It's the same basis to buying a ETF over active fund manager for longer term outcomes.
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That said, market pricing vs central bank isnt 1:1, obviously.
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The central banks are also an authority, who can do whatever they want. But in the last few years, their credibility has been challenged with things like the whole 'transitory' period, as well as the insane overreaction during 2020 like the 3yr TFF.
Knowing that leveraging their credibility to jawbone is a large tool in their toolkit... they'd be highly motivated here to reasset their authority and conviction, even if that means overcorrecting in their response to make it undoubtedly clear.
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Personally, when I see this, I would say they're fallible, open to a bias, are stubborn to new data, refusing to capitulate to market demands sometimes (eg, The stupid RBA drama when the 2/3yr bond broke back in sept 2021).
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So going forward, what could this mean? well, they're trying to salvage their reputation, willing to ignore red flag data, refusing to listen to the market.
So yeah, they could break the market in the short term and then instantly pivot which they've also done multiple times in the last 3 years. I feel like thats probably the most likely outcome more than anything else based on their behaviour.
Edit: also remember when commbank said rates would stop at 2.35%? or when RBA said they wouldn't hike til 2024? or when inflation was transitory? or when they said they wanted WPI to be high but now they want it to be less than CPI?... imo, just take in the information and synthesise it as best as we can whilst removing our biases to an 'idealistic/utopia' world. I've found that its best to look at it as a cold/unempathetic machine with cogs that spin predictably without emotion
Predictions are notoriously difficult mate, particularly about the future.
And they were talking about what they were seeing and using extensive previous experience of how slowly such conditions typically have changed.
Anyone who over-committed then to the extent of feeling pain now would still be in trouble if things hadn't moved until 2024.
Appears that market was pricing for ~50/50 on a 50bps hike going into today's hike for the ECB.
https://www.reuters.com/markets/europe/how-high-will-you-go-five-questions-ecb-2023-03-13/
Markets also suffer from wishful thinking. I agree with Blackrock. We are now in a new regime.
https://www.blackrock.com/corporate/literature/whitepaper/bii-global-outlook-2023.pdf
I'm still predicting a 25bps rise in April then a hold for 2 months, then probably another 25bps in August.
*Predicting this shit is stupid. Don't listen to me folks.
Being the responsible person I am I’m taking this as fact and will make my own individual financial decisions from a nameless redditor opinion.
If things go bad I’m blaming you mate
They can't stop until inflation is crushed. If they put on the brakes too early, inflation will roar even louder. And they would have to hike rates even higher.
I agree. If CBs do pause at next meeting - which I concede is a real possibility - this will come back to bite them.
Why? Inflation hasn't 'magically' disappeared.
No doubt property bulls will declare victory - but it will be a 'George Bush May 1, 2003' flavoured victory..
I don't know about England, but here it's not particularly investors crying out. Investors get a 47% discount on the headline rate. Owner occupiers don't. And the headlines are mostly about owner occupiers/the "vulnerable" suffering from rate rises.
Regardless, it's people with debt wanting to share the pain of higher cost of capital with everyone else. If they don't want to pay interest, then deleverage and reduce debt. Easy really.
Frankfurt | The European Central Bank raised interest rates by 0.5 of a percentage point on Thursday, as promised, ignoring financial market chaos and calls by investors to dial back policy tightening at least until sentiment stabilises.
The ECB has been raising rates at its fastest pace on record, but a rout in global markets since the collapse of Silicon Valley Bank (SVB) in the United States last week had threatened to upend those plans at the last moment.
In line with its often-repeated guidance, the central bank for the 20 countries that share the euro lifted its deposit rate to 3 per cent, the highest level since late 2008, as inflation is seen overshooting its 2 per cent target through 2025.
“Inflation is projected to remain too high for too long,” ECB president Christine Lagarde told a news conference, reading from the statement agreed by the bank’s policymakers.
Global crisis aside, I think libertarian dreams of deregulation leave little means left other than the carrot and stick of central bank adjustments like rate rises ect... Which produces a volatile market compared to the stability and relative calm of more government regulation over the finance sector.
Especially in places like Switzerland, known for their banking secrecy and reputation as a war time sanctuary for questionable wealth.
Little wonder Frankfurt is going strong on rates still. Good on them.
More workers with more money will not necessarily help inflation. The problem we are having here, taming inflation, is that rate rises affect the older wealthier cohort less than in the past and the younger cohort more.
Older people working for longer before pensions would exacerbate those kinds of demographics, even if experienced workers bring productivity improvement.
Saying that, the riots themselves probably help to keep demand down, but may exacerbate supply of they spread.😆
More people actually working means more productive output. People not working raise inflation by requiring resources but not producing any output to cover that - all of their productive life beforehand has to cover the shortfall
True - I guess I meant “useful” output, not productive output. Not sure what your typo is mean to be, but people consuming without producing does indeed lead to inflation.
Less employment means less demand.
So, to expand, these pensioners accessing their super go from earning money to drawing down on their retirement savings. Their budget usually decreases. If they continue working for an extra year or two, they have more money. As in cash received, more in super and no draw downs.
Your assumption is that less people working produces less gadgets. That’s not necessarily true, but it can be.
Economies are complex. It would also vary with the overall employment rate. Currently inflation is more supply side than demand led, but it’s always a bit of both and the mismatch that matters, not the overall number.
Jesus, the market could also probably have predicted that Clinton was going to win in 2016. The "market" are just people like you and me basing predictions on hope.
I love reading this sub and the cheering of higher interest rates as some sort of punishment and validating personal biases. It's basically the modern day school yard. Just because you might not have a mortgage, a recession and/or higher interest rates are going to impact you and someone you know. Don't be a jerk and be humble.
For every greedy investor, there is a family who just wanted a roof over their heads without invasive inspections or the threat of eviction every 6/12 months.
Excessively loose monetary policy has created massive speculative bubbles (aka. "the everything bubble"), has been a huge driver in increasing levels of inequality, and arguably has also reduced levels of innovation as capital chases easy returns in non-productive assets. The rich have benefitted massively from CB interventions while the poor have gotten poorer. In Australia, people with assets - mostly housing - have benefitted extraordinarily. Those with more assets have benefitted more. This is not a healthy outcome.
A return to sensible monetary policy **should** be cheered.
Ppl that are having a seizure over morality in this thread are incredibly selfish.
How ironic that they are accusing those that think a recession is necessary are the selfish ones.
I guess those with the hypocritical moral compass are feeling the pinch of rate rises. This is a good thing - working as intended.
A recession is the **realization** of unproductive investments. The actual problem occurs during the investment phase that led up to the recession.
Let me give you an example:
Two people build factories. One of them produces something useful - say blenders. The other produces something totally useless - say posters of Garfield NFTs. In a period of loose monetary policy both of these can stay operational for an extended period of time. The latter can be producing posters, stocking up inventory, raising capital from investors to expand operations etc... Loose monetary policy let's you continue operating even though you can't justify your cost of capital (there has been troves written on so called 'Zombie companies' and their prevalance in both the Australian and global economy).
...Until eventually it can't be sustained anymore. Maybe that happens because of a recession or maybe it just happens because investors realize this was a bad business model. A recession, though, accelerates this realization, and the result is that companies will go under, and a whole lot of people will lose their jobs. Investors get caught up in this and stop investing in other businesses until they work out how much moeny they can recover, which causes flow-on effects to other industries. Aggregate demand declines due to the increase in unemployment etc. But the problem actually occurred when you were building the factory and growing it, **not** during the recession.
This is an extreme and silly example, but it's not dissimilar from what happens during a business-cycle recession. The economic loss of a recession occurs **prior** to the actual recession - what's happening during a recession is that the losses are being realized and being allocated across the economy. There are some great books on this topic e.g., Michael Pettis's "The great rebalancing".
Point being - the damage has already been done. We can try to minimize the fallout but we can't avoid paying the price eventually. One day someone's going to realize that the Garfield NFT posters are actually worthless.
I'm confused, because I think recessions are not good, I'm whinging? Lol. What actions do you suggest? Seriously I would like to know? So you're saying recessions are necessary and that I should take some sort of action? You're making zero sense.
The ignorance in your paragraph is mind boggling.
Have you not ever heard of a defensive portfolio?
How about reducing debt?
There are so many actions that are possible to take to prepare for a recession - but all you can do is carry on like a pork chop and make ignorant posts on reddit..
For the past decade, lowering interest rates has drove the housing market into a frenzy. Loads of us were left behind, whilst the landlords screeched “interest only goes down idiots!”. Especially during Covid. We got priced out of living. Now these people begin to suffer and they cry “wow I can’t believe you’re not humble”, as they crank up the rent to cover their short sightedness.
Honest question, did people really claim interest rates only go down?
People who said that, yeah for sure, they are foolish.
But I’ve never heard anyone in my entire life say that.
I heard it often, and from my landlord. Perhaps more so in NZ during the 2014-2021 boom.
They were no doubt being glib and weren't expected to be taken so literally.
I'm not saying everyone thought that, nor every property investor/home owner. So how is that a strawman?
Because by far the most common opinion on interest rates over the lest few years, is that they're at record lows and will have to go up at some point.
So one landlord saying something as stupid as interest rates can only go down, is a weak version of the argument. It matters little what one idiot said, when everybody else was saying something different. You phrased it as 'landlords are saying..'
I should have known someone on Reddit would have to run in, cheeks slapping, to be as pedantic as possible.
Next time I'll correlate everyone's opinions on future interest rates. And I didn't say it was just one landlord. I debated with one person on Reddit who put forward a compelling argument that rates do only go down, [on a long enough time scale](https://www.visualcapitalist.com/wp-content/uploads/2020/02/interest-rates-decline-boe.jpg).
And my point to the comment wasn't a landlord vs renter rhetoric. I was pointing out the hubris of being shocked that those disenfranchised by rate cuts are being told to be humble to others regarding rate rises.
Everyone with a property was indeed cheering for negative rates during the pandemic if possible? Why wouldn't they? Sometimes they try to will and bark things to existence. Like some "The Secret" belief.
I agree. There were people in my opinion believing rates would go negative, due to their selfish hope. Usually hoping for recession conditions despite rates being near zero during the pandemic.
> “interest only goes down idiots!”
This is in your head
>Now these people begin to suffer and they cry “wow I can’t believe you’re not humble”, as they crank up the rent to cover their short sightedness.
This is also just fantasy, and a complete misunderstanding of how rent prices are set.
Edit: Downvote me all you like, but landlords raise rent based on supply and demand, not interest rates. This has been discussed and pointed out ad infinitum on here and elsewhere. And if you prefer to get angry and self riotous against fictional garbage, you're welcome to but it's ultimately pointless.
There is definitely lording over the peasants who don't own property that they will just pass on the mortgage increases as rent rises. Doesn't mean it's true, but it's definitely something people have been saying since 2021 and the significant rental increases began.
The significant rental increases have happened because there is a housing crisis, and vacancy rates are around 1%. If that wasn't the case, landlords wouldn't able to pass on the rates. I don't like landlords as much as anyone on reddit, but it's just completely incorrect to say that rates have anything to do with rents.
>…as they crank up the rent to cover their shortsightedness.
…and that’s not strawmanning, anyway. If I said “throwawayragdoll hates kittens, don’t listen to him” that would be strawmanning.
"Strawman - misrepresenting someone's argument to make it easier to attack". You're arguing against an imaginary point.
This really is inane. Yet I did not say buying a property in the last decade is short sighted. And I don't think that. And if you still think that I think that, I'm explicitly telling you I do not think that. I don't know how I can be any clearer. Enjoy your weekend.
As someone with a mortgage and a business with outstanding debt, I cheer rate rises as I know it's necessary. If inflation doesn't get under control quickly, there will be more rises and for longer. I think they have already dawdled too much.
No matter what they do, people will get hurt. At this point stability is less important than minimising pain for those that can least afford it. Coming out of covid, there is always going to be some volatility.
Uncertainty about future rises will affect small businesses more than big business as they operate more in the service economy.
Interest rate rises aren't to be celebrated or derided; people who are financially (economically) literate understand why they might be necessary in a highly inflationary environment.
People who understand reality might validly feel vindicated after they've been dismissed and condescended to by ignorant people for a while.
Edit:
Sigh, if you're talking about people like u/ThrowawayRagdoll401 though, then I got nothing. Their view is basically the other side of the ignorance I referred to above.
Generally interest rate rises are to be celebrated. A high interest environment provides more relative advantages to those who manage their money wisely; affords fewer opportunities for speculation; and keeps economic reins nice and tight. People who are financially literate will usually benefit in a relative sense from having a tight economic environment.
I actually agree with you. I'm was pointing out them being told to be humble will be met with incredulity.
Cheers for throwing me under the bus though. *Sigh*.
Even if I agree, it's a counterproductive (or at least an unproductive) stance to take, especially by contributing to the divisive discourse on social media.
"I was right for the reasons I said" is fine.
"Ha ha sucked in" not so much.
Plus as you point out, property owners suffering from high mortgage repayments isn't all the rate rises are causing - rents are going through the roof too. These rate rises aren't really good for anyone in the immediate term, they're just an unfortunate necessity so that the economy remains sustainable in the long run.
At the start of COVID I said at work that the housing bubble was finally going to burst, without knowing the full extent the RBA, banks and government would go to. Meanwhile, all my work colleagues bought new Landcruiser’s and caravans. I was mocked when property prices went astronomical and they rubbed buying their beachside investment property in my face…
At first they said the RBA couldn’t raise rates, now they are squealing as each 25bps rise gets announced. I remember saying that the debt has to be paid back… Now it looks like it’s time for those same people to eat some humble pie.
I've been saying that since 2010ish. And if you look, apparently property prices are already recovering. Whether that's a real recovery or a dead cat is anyone's guess.
Nothing has changed structurally yet so I fail to see how a recovery will take place? Maybe 6 or so months ago I noticed my local market saw a slight up tick in sales when sentiment around rate rises improved but then it went back down again. Time will tell I suppose…
Look, I've been on that side of the argument for a decade. All I can say is - things haven't really structurally recovered *since the GFC* and that's had zero relationship to property prices so.......
Personally I still think there's a massive cliff coming. But it seems like Governments have been able to print money through it so far. This high inflation environment is new though, and it's one thing you can't solve by printing money anymore.
Post GFC rates continually declined to near zero… Post COVID rates have increased and haven’t stopped. My point is unless rates start going down or lending rules are relaxed then there’s not going to be any huge recovery in property prices today.
If you don’t have a mortgage chances are you’re renting… and you can see how that’s turning out… and then if you’re living at home with mum and dad then lol…
Alternatively if youre in the minority of a paid off house you’re probably not on reddit
Actually renting has worked out very well for me. I know that it is shocking to hear this in Australia - but property is only one of many asset classes that you can invest in..
> a recession and/or higher interest rates are going to impact you and someone you know.
A recession can have both positive and negative impacts. It's like a forest fire. Clears dead wood. Silly to think that raising interest rates doesn't have clear positive effects.
Not cheering it as a punishment, am cheering that they're not just going to let inflation pop off like the market seems to want them to. This seems like the weirdest take to me. Created the straw man about punishment and personal bias to then bowl it over.
You're one of those people who's employment cannot possibly be affected by a recession hey
It's amazing how many doomsayers think they have recession proof jobs
Did you ever think that maybe you're overpriced..?
Pete - havent heard from you in awhile. Good to see you are still slinging the 'doomsdayer' term around!
I've heard that as soon as you apply this label to anyone you disagree with you erode their credibility - well played..
Yeah I've found the less I start pointless conversations with broken clocks the more enjoyable life is
https://imgur.com/V9gwT3N
You cannot erode what doesn't exist.
You doing well at dragging this down to your level
What's the point of you engaging me here? Remember where I said pointless? Last chance to say something of value
While I know my job is recession proof, even if I get fired from my job I still have enough cash to live my regular lifestyle for at least 5 years. I also have a recession proof side hustle because my side hustle is what people usually use when there is an economic downturn. I am hella prepared. So bring on the recession!
The people who won't need it are the tens / hundreds of thousands of people who will lose their jobs in a major recession - and who then will likely remain unemployed for a while.
But you'll be OK, right? Everyone else can just eat cake?
A slow down is possible without recession. A major recession will be horrible for a lot of people - I really don't know why some people are cheering for one.
Apparently, its not ok to think that a recession is healthy part of any economic cycle.
If you want to argue the morality of it - why dont you consider this: ultra low monetary policy has driven inequality to the highest levels we have ever seen.
Ive counted at least a half-dozen - don't 'cheer' for a recession posts on this thread alone.
Recessions are a completely necessary part of the cycle - needed to purge out the inefficient and non-productive parts of the economy. Without this we face things like a 'lost decade'..
You keep going down a straw man route of morality. That isn't the point here.
The commenter above used the word 'glorious'. That is gross. That the sentiment that a number of these comments are attacking.
I agree that downturns / recessions are normal - and in some cases are even healthy longer term. I actually agree with you more than you might think.
Calmly and rationally pointing out that recessions are inevitable/somewhat normal is one thing.
But actively cheering for one and calling it 'glorious' deserves criticism. They are clearly only thinking of themselves.
Mate, when interest rates were at near 0% were you complaining? I'm sure you weren't but I was complaining. Saying 0% interest rates are glorious is okay because now millions can "afford" debt at a cheap cost? I love the rate hikes because it gives the financially responsible a chance at the Australian dream. The idiots who kept accumulating debt during 0% rates drove prices up and up essentially pushed the financially responsible who knew they couldn't afford the repayments at higher rates out of the market.
So yes, its fantastically 100% glorious rates are going up. Every one of those people who went to view their their dream house/land but walked away sad because they knew that rising rates would crush them, can finally own a home. And the idiots who used the 5% deposit scheme at 0% interests on a combined 120k salary can finally sell their house for cheap and go rent (like they should be). And when they have enough money saved up and have a decent income, they can go buy a house
You seem to think there’s only two people in the world; the boomer underwater with 8 properties rent hiking, and the person waiting to buy their first home.
Everyone who saved their pennies for a decade through rate cuts only to finally buy, should’ve stayed renting in the housing crisis, right? How dare they get sick of moving every 6 months?
I see where you're coming from. But I think there's one key flaw in your thought process:
The generally richer people who took advantage of stupid/unsustainable low rates are the people who will - generally - be able to weather a major recession the best. Not all - but a lot.
It is the poorer people who will generally be on the front line of job losses in the event of a major recession. Many of whom don't have have homes and who have had no involvement in the low low rates of the past.
But they will be the ones to suffer the most - because they won't have a job.
So yeah, as satisfying as a correction will be in some areas - I think the reality is that there will be a shit load of collateral damage if a serious reccesion was to hit. Well outside of the target area you are thinking of.
That is kind of my whole point here.
So many ppl are playing the morality card atm as a response to rising rates.
Where was the outrage when highly irresponsible ultra loose monetary policy was being implemented?
I called out covid and all the subsequent actions taken. I’ve locked my HL in @2.99% until 2027 and I have more cash in the bank than what my HL is.
I called it out, took action, increased my super from the covid dip. But I’m not barracking for people to suffer, even if it’s from their own decisions.
"But I’m not barracking for people to suffer"
I like how you are happy to take the high road on morality when rates are being raised to normal levels.
No outrage when asset bubbles were being formed though..
If you check my history, I’ve actually replied to “let’s use something other that interest rates to fix inflation” posts. And stated that interest rates deflate or pop bubbles and encourage the reduction of debt on balance sheets. It also encourages savings and re-evaluates risk/return reward ratio in the markets.
No. These comments are a direct reply to the user above cheerleading for a recession. That shows an amazing lack of empathy.
'Glorious'. 'I am hoping we enter reccession'.
Raising rates are necessary. We all know that. But his line of commenting is a bit gross.
Mabey a stupid question but where does all this extra money go to ?
The banks right ? And then bank executives ?
Im guessing here, but is it just some tax on this extra money for mortgages that goes to the government and in turn helps our economy?
Isn't it well established by this point that central banks and governments can bail out banks by means that are 'totally not bailouts', so why would banking sector turmoil deter central banks from hiking rates further? If anything they'll have to hike rates harder now, to counteract the new inflationary measures that are about to be implemented to bailout banks.
The ECB is responsible for setting monetary policy in the Eurozone, which includes setting interest rates. When the ECB raises interest rates, it makes it more expensive for banks to borrow money from the central bank, which in turn can lead to higher interest rates for consumers and businesses.
As expected , they literally told you they would. Stop fooling for the market hype people ! They are going higher
Let this be a lesson to all those that read the market's expectations as gospel. Markets are highly reactive on a short term basis, whereas central banks are not, especially when inflation is running rampant. The only way to ensure inflationary expectations don't get out of control is to show a strong hand.
The word you’re looking for is reactive. A reactionary is someone who is stuck in their ways, slow to adapt, highly conservative/anti-progress etc..
Reactionary seems to be so widely misused that I wouldn't be surprised if the meaning were officially updated at some point.
For example, the chief of police of Malibu. Real reactionary
The most influential predictor of rate rises is the stance taken by central banks - at the moment it is decidely hawkish - could not agree more..
If you think the stance taken by central banks is a good predictor what did you think when the RBA were saying they didn't expect to raise rates till 2024 in 2020/2021? I don't think that was a great prediction.
1) The RBAs expectations and what happens in a market that they have to react to, are two different things. They always qualify their predictions with caveats. Saying things like "Assuming market stability..." or "Should trade levels increase the RBA...". 2) The impacts of COVID and global supply shortages were a greater unknown in 2020. 3) All markets react to global context, a major war destabilizing major world players has since occurred. 4) Australia is fairly financially healthy, and the main reason rates are high is to create a buffer should the s**t hit the fan in a more serous way. I don't think it will, I think we'll see rates drop between 2024 - 2026... So it's really a question of do you want your medicine now and get it over with, or later when things might be worse. Maybe if Russia leaves Ukraine and global tensions calm down, and Swiss banking stabilises - things will improve sooner... But I don't think that's likely for a year or two.
One is a predictor of the economy which they have no control over how it plays out. The other is the stance of how they will react which they have complete control over. As they say, Dont fight the Fed
So… not an influential predictor of rare roses (“rate rises”, I’m leaving that) at all. A reactor.
So if Lowe predicts there will be an interest rate rise but inflation data comes out very low, then he should raise it anyway? Seems regardless of what he predicts, what they end up doing will always be dependent or a reaction to the recent data.
Right, so they are not good predictors. And neither are the markets. It’s all very unpredictable, except in hindsight. Economics101.
Central bankers everywhere are hawkish due to the need to correct mistakes they made by implementing ultra loose monetary policy. Would you say interbank futures are good predictor of rate rises?
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Central bankers have admitted it was a mistake - they admitted that they held rates too low for too long..
It is also true to say that hindsight makes it easy to say that. What frustrates me a lot about this type of debate is that it's been clear for the past 50 years that economic projections are hopelessly inaccurate. Time after time Treasuries and central banks and academics get it wrong even six months out. The various blogs around regularly show graphics of economic predictions vs actual...which invariably show that those predictions have failed. If people haven't worked this out by now, and treat the official predictions as if they were gospel, all I can say is: "Good grief!" Honestly. Can anyone say they should give weight to RBA predictions? Or Treasury, or academic and bank economists? Because if anyone does, I'd ask them to go through the various predictions over the past ten years and compare the times these predictions were right...vs the times they were wrong. Betting on the pokies would give a better return. Folks. Don't ask why central banks, treasuries, economists can't predict accurately. It's obvious that they can't. Being so obviously wrong so often for so long, ask yourself, why am I listening to them at all, because they sure AF don't know.
I understand they say they are talking hawkish, but I think they know they've overcooked rate increases and if they can find a reason to pivot they'll take it the same as they changed their minds based on the data in 2021 in the other direction. I think the interbank futures are about as good of a predictor as you can get but I've been critical of people betting the farm on them like staying out of the market because they seem to be indicating further rises. It's too easy to look at examples of the futures being wrong like late 2018 when it was pricing in rate increases and in 2019 it started pricing in the cuts which came, or in 2021 it was pricing in no rate increases and then rapidly started pricing in the raises which also came.
I disagree. Not sure why there are so many posts on this thread about 'jawboning'. This isnt prepandemic/pandemic times. Jawboning doesnt work - what works is actual rate rises - of which we have had 10 back-to-back. If that falls within your definition of jawboning than so be it.. Inflation is still way too high. Interest rate rises will continue until inflation comes down into the required band. With the caveat that a recession may reduce inflation without the need to continue rate rises. Interbank futures have substantial limitations - but yeah many use them as a prediction tool - you do you..
Following your logic that jawboning doesn't work and all that matters is action, does that mean that if the RBA pauses next month they are no longer hawkish about inflation?
If they pause - then yes - many would call this a doveish decision.
How could you possibly say they've overcooked Unemployment at 3.5% and no recession in sight, lmao, no overcooking. If we had unemployment at 7% and were in a recession then you might be able to make that argument.
As always - a quick flick through belugas post history and you see how much property debt they hold. Every. Farking. Time.
There shouldn't be a requirement to have a vow of celibacy from investing in property or having debt to have an opinion on the subject. I think that someone who invests in property and puts real money on the line at least demonstrates a conviction of their opinion. As I just responded to /u/arcadefiery I don't think I have much of a bias as we have \~55% LVR right now and everything not offset is fixed in the low 2% range till November 2025, so I don't really have any levels of stress and am making more money than ever with these rent increases. I think it's better for me if they go harder with rates and tank the economy to get inflation into the target band as I have 2.5 years till I roll off fixed and I would be all but assured that I don't roll off into an environment where they are battling inflation, instead they are likely to be trying to stimulate the economy with lower rates.
No probs. Truly - best of luck to you. My point is those with debt on this sub always argue that rate rises aren't really that necessary, inflation isnt caused by loose monetary policy etc. Why? Well - its pretty bloody obvious..
I agree that inflation is pushed by loose monetary policy. Particularly asset inflation which isn't well captured in the RBA's inflation measurements. The question is whether the government actually cares that much about the problem. Ideally they would, but asset price inflation and people living well in the short term is what they care about as that wins votes. I think we are in a rigged game, I don't love the fact that it is that way but I'm not going to try to fight it so I make my investment decisions accordingly rather than investing in an idealistic way which represents how things should be.
It's kinda weird though Like I hold property debt. Currently not a lot. But about to sink another $800k If you are an investor you WANT HIGHER RATES. We get a 47% discount on rates. So it benefits us in a relative sense. Plus having high rates + recession makes houses CHEAP. I cannot understand why any investor would not want higher rates. The higher, the more it benefits those of us with sound fundamentals.
A 45% discount on higher expenses is still a higher expense. 55% of $120 interest is more than 55% of $100 interest. There is no benefit to higher rates as far as operating expenses and cashflow goes. …I can’t believe I explained that.
There are lots of benefits to higher rates, principally: - Shares/property are cheaper - Goods/services are cheaper - Businesses and other assets are cheaper If you are in a strong income/cash position it's a lot easier to buy during a recession.
Simple percentage equations dumbfound >80% of people I’ve found. You can just about gather how intelligent/worldly thinking someone is if they make a comment about rent and interest rate rises needing to be equal, and can’t understand why they’re not and/or they don’t work overtime because they get taxed more then they make. Usually said with very little glimmer behind their eyes.
A lot of property investors do not invest based on sounds fundamentals though..
Yep. And they need to be bankrupted. Hard. Same as anyone else who bought in based on dodgy figures.
Some of us don't need to accumulate more properties so lower rates are a benefit.
So you’re chasing a recession to enter the property market, or?
The RBA are forecasting CPI to come down to 3.5% and trimmed mean to be 3.25% by mid-2025 based on a cash rate expectation peak of 3.75% by 2H 2023 (from surveys and market pricing) which we are nearly at now. This was taken before the events which have happened in the US so I assume the rate expectations would be less today. Unemployment is expected to be 4% at that time too based on the same assumptions. [https://www.rba.gov.au/publications/smp/2023/feb/economic-outlook.html](https://www.rba.gov.au/publications/smp/2023/feb/economic-outlook.html) I believe they have a slightly higher tolerance for inflation than the target should it mean not sacrificing the economy. They can't overtly say that though. The reason for this is they spent years under the inflation target having to stimulate, why wreck the economy and then have to harder pumping it up again later? Feel free to dismiss as property bull hopium, though I don't think I have much of a bias as we have \~55% LVR right now and everything not offset is fixed in the low 2% range till November 2025, so I don't really have any levels of stress and am making more money than ever with these rent increases. I think it's better for me if they go harder with rates and tank the economy to get inflation into the target band as I have 2.5 years till I roll off fixed and I would be all but assured that I don't roll off into an environment where they are battling inflation, instead they are likely to be trying to stimulate the economy with lower rates.
UE at 4% is way too low We need to hike into recession and sacrifice the economy I'm not a property bull btw, I want cheap properties so I can buy in.
I understand what you want and I can see the benefits of the government doing this to get inflation into the target bracket. I just don't think they will do it. You must be in some way bullish on property as you already own multiple properties and aren't selling so you must see the long term upside.
Agree they are unlikely to do it. I am bullish in the sense that I think buying up as much land as possible will ultimately pay dividends. Solely through rent. Not capital gains. I want austerity and recession.
I think you are missing their obvious point.
A quick flick through you and belugatimes post history and it quickly dawns that these are the types of posters that were quick to say "But Lowe never said that about forward guidance during the pandemic". Funny how you take the other side when it suits. All in all my point remains valid - if you want to look for the most probable prediction you look to the Fed. Good luck pushing back against that..
I would say we should have a balanced information diet. I do think that the most 'accurate' non-central bank source for hike directions will be the yield curve, as it's the collective wisdom of the market. (We've seen nearly all 'expert' economists get their forecasts miss.) Imo, It's the same basis to buying a ETF over active fund manager for longer term outcomes. - That said, market pricing vs central bank isnt 1:1, obviously. - The central banks are also an authority, who can do whatever they want. But in the last few years, their credibility has been challenged with things like the whole 'transitory' period, as well as the insane overreaction during 2020 like the 3yr TFF. Knowing that leveraging their credibility to jawbone is a large tool in their toolkit... they'd be highly motivated here to reasset their authority and conviction, even if that means overcorrecting in their response to make it undoubtedly clear. - Personally, when I see this, I would say they're fallible, open to a bias, are stubborn to new data, refusing to capitulate to market demands sometimes (eg, The stupid RBA drama when the 2/3yr bond broke back in sept 2021). - So going forward, what could this mean? well, they're trying to salvage their reputation, willing to ignore red flag data, refusing to listen to the market. So yeah, they could break the market in the short term and then instantly pivot which they've also done multiple times in the last 3 years. I feel like thats probably the most likely outcome more than anything else based on their behaviour.
Edit: also remember when commbank said rates would stop at 2.35%? or when RBA said they wouldn't hike til 2024? or when inflation was transitory? or when they said they wanted WPI to be high but now they want it to be less than CPI?... imo, just take in the information and synthesise it as best as we can whilst removing our biases to an 'idealistic/utopia' world. I've found that its best to look at it as a cold/unempathetic machine with cogs that spin predictably without emotion
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If you want to fight the Fed - go ahead.. Has absolutely zero to do with 'narratives'..
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And the US fed have likely given up entirely already. The money printer has just turned on.
Predictions are notoriously difficult mate, particularly about the future. And they were talking about what they were seeing and using extensive previous experience of how slowly such conditions typically have changed. Anyone who over-committed then to the extent of feeling pain now would still be in trouble if things hadn't moved until 2024.
Need more hawk :)
Not really. Jawboning is a thing.
Yes 10 rate rises in a row amounts to 'jawboning'..
The "stance" includes statements and rhetoric.
Appears that market was pricing for ~50/50 on a 50bps hike going into today's hike for the ECB. https://www.reuters.com/markets/europe/how-high-will-you-go-five-questions-ecb-2023-03-13/
Markets also suffer from wishful thinking. I agree with Blackrock. We are now in a new regime. https://www.blackrock.com/corporate/literature/whitepaper/bii-global-outlook-2023.pdf
I'm still predicting a 25bps rise in April then a hold for 2 months, then probably another 25bps in August. *Predicting this shit is stupid. Don't listen to me folks.
Being the responsible person I am I’m taking this as fact and will make my own individual financial decisions from a nameless redditor opinion. If things go bad I’m blaming you mate
> *Predicting this shit is stupid. Don't listen to me folks. Can't believe this keeps needing to be said in this sub
They can't stop until inflation is crushed. If they put on the brakes too early, inflation will roar even louder. And they would have to hike rates even higher.
I agree. If CBs do pause at next meeting - which I concede is a real possibility - this will come back to bite them. Why? Inflation hasn't 'magically' disappeared. No doubt property bulls will declare victory - but it will be a 'George Bush May 1, 2003' flavoured victory..
Ummm, property bulls have already declared victory. Have you seen TBD lately? The guy’s gloating is insufferable.
Makes it funnier when shit gets real..
Good. Nice to see the ECB not pandering to investors wanting everyone to share their pain when their investments go awry
I don't know about England, but here it's not particularly investors crying out. Investors get a 47% discount on the headline rate. Owner occupiers don't. And the headlines are mostly about owner occupiers/the "vulnerable" suffering from rate rises.
RBA != ECB Quite different economies.
Regardless, it's people with debt wanting to share the pain of higher cost of capital with everyone else. If they don't want to pay interest, then deleverage and reduce debt. Easy really.
ECB is European Central Bank. Anyone on the Euro basically. Not England, who are neither in the currency union or the union since Brexit.
Frankfurt | The European Central Bank raised interest rates by 0.5 of a percentage point on Thursday, as promised, ignoring financial market chaos and calls by investors to dial back policy tightening at least until sentiment stabilises. The ECB has been raising rates at its fastest pace on record, but a rout in global markets since the collapse of Silicon Valley Bank (SVB) in the United States last week had threatened to upend those plans at the last moment. In line with its often-repeated guidance, the central bank for the 20 countries that share the euro lifted its deposit rate to 3 per cent, the highest level since late 2008, as inflation is seen overshooting its 2 per cent target through 2025. “Inflation is projected to remain too high for too long,” ECB president Christine Lagarde told a news conference, reading from the statement agreed by the bank’s policymakers.
Global crisis aside, I think libertarian dreams of deregulation leave little means left other than the carrot and stick of central bank adjustments like rate rises ect... Which produces a volatile market compared to the stability and relative calm of more government regulation over the finance sector. Especially in places like Switzerland, known for their banking secrecy and reputation as a war time sanctuary for questionable wealth. Little wonder Frankfurt is going strong on rates still. Good on them.
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More workers with more money will not necessarily help inflation. The problem we are having here, taming inflation, is that rate rises affect the older wealthier cohort less than in the past and the younger cohort more. Older people working for longer before pensions would exacerbate those kinds of demographics, even if experienced workers bring productivity improvement. Saying that, the riots themselves probably help to keep demand down, but may exacerbate supply of they spread.😆
More people actually working means more productive output. People not working raise inflation by requiring resources but not producing any output to cover that - all of their productive life beforehand has to cover the shortfall
People working improves output, not productive output People not working does not produce inflation, quite the opposite.
True - I guess I meant “useful” output, not productive output. Not sure what your typo is mean to be, but people consuming without producing does indeed lead to inflation.
Fixed. Less employment reduces inflation, not caused it.
How do you figure that? Less employment means fewer goods/services produced, but some consumption is still created (pensions, welfare, savings etc)
Less employment means less demand. So, to expand, these pensioners accessing their super go from earning money to drawing down on their retirement savings. Their budget usually decreases. If they continue working for an extra year or two, they have more money. As in cash received, more in super and no draw downs. Your assumption is that less people working produces less gadgets. That’s not necessarily true, but it can be. Economies are complex. It would also vary with the overall employment rate. Currently inflation is more supply side than demand led, but it’s always a bit of both and the mismatch that matters, not the overall number.
Didn't the market predict a 0% chance of a 50bps hike?
Jesus, the market could also probably have predicted that Clinton was going to win in 2016. The "market" are just people like you and me basing predictions on hope.
Context is needed. They we're at 3% before this decision. They are way way way behind the Fed and the RBA, and EU inflation is way higher than ours.
To be expected when they left interest rates too low for too long.
It will come… it will come… in due course…
We need the homer with the 2 buttons meme with 'Break the banking system' and 'stop rampant inflation'
Hear that LOWE!! That is how you do it. 0.5 increase in April!
I love reading this sub and the cheering of higher interest rates as some sort of punishment and validating personal biases. It's basically the modern day school yard. Just because you might not have a mortgage, a recession and/or higher interest rates are going to impact you and someone you know. Don't be a jerk and be humble.
For every greedy investor, there is a family who just wanted a roof over their heads without invasive inspections or the threat of eviction every 6/12 months.
Excessively loose monetary policy has created massive speculative bubbles (aka. "the everything bubble"), has been a huge driver in increasing levels of inequality, and arguably has also reduced levels of innovation as capital chases easy returns in non-productive assets. The rich have benefitted massively from CB interventions while the poor have gotten poorer. In Australia, people with assets - mostly housing - have benefitted extraordinarily. Those with more assets have benefitted more. This is not a healthy outcome. A return to sensible monetary policy **should** be cheered.
Ppl that are having a seizure over morality in this thread are incredibly selfish. How ironic that they are accusing those that think a recession is necessary are the selfish ones. I guess those with the hypocritical moral compass are feeling the pinch of rate rises. This is a good thing - working as intended.
How old were you when in 1991? Live through a recession and tell me again it's necessary. They're not much fun.
A recession is the **realization** of unproductive investments. The actual problem occurs during the investment phase that led up to the recession. Let me give you an example: Two people build factories. One of them produces something useful - say blenders. The other produces something totally useless - say posters of Garfield NFTs. In a period of loose monetary policy both of these can stay operational for an extended period of time. The latter can be producing posters, stocking up inventory, raising capital from investors to expand operations etc... Loose monetary policy let's you continue operating even though you can't justify your cost of capital (there has been troves written on so called 'Zombie companies' and their prevalance in both the Australian and global economy). ...Until eventually it can't be sustained anymore. Maybe that happens because of a recession or maybe it just happens because investors realize this was a bad business model. A recession, though, accelerates this realization, and the result is that companies will go under, and a whole lot of people will lose their jobs. Investors get caught up in this and stop investing in other businesses until they work out how much moeny they can recover, which causes flow-on effects to other industries. Aggregate demand declines due to the increase in unemployment etc. But the problem actually occurred when you were building the factory and growing it, **not** during the recession. This is an extreme and silly example, but it's not dissimilar from what happens during a business-cycle recession. The economic loss of a recession occurs **prior** to the actual recession - what's happening during a recession is that the losses are being realized and being allocated across the economy. There are some great books on this topic e.g., Michael Pettis's "The great rebalancing". Point being - the damage has already been done. We can try to minimize the fallout but we can't avoid paying the price eventually. One day someone's going to realize that the Garfield NFT posters are actually worthless.
Instead of whinging and carrying on about how you don't like recessions - why dont you take some action?
I'm confused, because I think recessions are not good, I'm whinging? Lol. What actions do you suggest? Seriously I would like to know? So you're saying recessions are necessary and that I should take some sort of action? You're making zero sense.
The ignorance in your paragraph is mind boggling. Have you not ever heard of a defensive portfolio? How about reducing debt? There are so many actions that are possible to take to prepare for a recession - but all you can do is carry on like a pork chop and make ignorant posts on reddit..
You need to relax a bit.
For the past decade, lowering interest rates has drove the housing market into a frenzy. Loads of us were left behind, whilst the landlords screeched “interest only goes down idiots!”. Especially during Covid. We got priced out of living. Now these people begin to suffer and they cry “wow I can’t believe you’re not humble”, as they crank up the rent to cover their short sightedness.
Honest question, did people really claim interest rates only go down? People who said that, yeah for sure, they are foolish. But I’ve never heard anyone in my entire life say that.
They’re strawmanning.
I heard it often, and from my landlord. Perhaps more so in NZ during the 2014-2021 boom. They were no doubt being glib and weren't expected to be taken so literally. I'm not saying everyone thought that, nor every property investor/home owner. So how is that a strawman?
Because by far the most common opinion on interest rates over the lest few years, is that they're at record lows and will have to go up at some point. So one landlord saying something as stupid as interest rates can only go down, is a weak version of the argument. It matters little what one idiot said, when everybody else was saying something different. You phrased it as 'landlords are saying..'
I should have known someone on Reddit would have to run in, cheeks slapping, to be as pedantic as possible. Next time I'll correlate everyone's opinions on future interest rates. And I didn't say it was just one landlord. I debated with one person on Reddit who put forward a compelling argument that rates do only go down, [on a long enough time scale](https://www.visualcapitalist.com/wp-content/uploads/2020/02/interest-rates-decline-boe.jpg). And my point to the comment wasn't a landlord vs renter rhetoric. I was pointing out the hubris of being shocked that those disenfranchised by rate cuts are being told to be humble to others regarding rate rises.
Everyone with a property was indeed cheering for negative rates during the pandemic if possible? Why wouldn't they? Sometimes they try to will and bark things to existence. Like some "The Secret" belief.
Hoping for rates to go down is different to believing they will only ever go down
I agree. There were people in my opinion believing rates would go negative, due to their selfish hope. Usually hoping for recession conditions despite rates being near zero during the pandemic.
> “interest only goes down idiots!” This is in your head >Now these people begin to suffer and they cry “wow I can’t believe you’re not humble”, as they crank up the rent to cover their short sightedness. This is also just fantasy, and a complete misunderstanding of how rent prices are set. Edit: Downvote me all you like, but landlords raise rent based on supply and demand, not interest rates. This has been discussed and pointed out ad infinitum on here and elsewhere. And if you prefer to get angry and self riotous against fictional garbage, you're welcome to but it's ultimately pointless.
There is definitely lording over the peasants who don't own property that they will just pass on the mortgage increases as rent rises. Doesn't mean it's true, but it's definitely something people have been saying since 2021 and the significant rental increases began.
The significant rental increases have happened because there is a housing crisis, and vacancy rates are around 1%. If that wasn't the case, landlords wouldn't able to pass on the rates. I don't like landlords as much as anyone on reddit, but it's just completely incorrect to say that rates have anything to do with rents.
I am very aware of that. But some people are taking solace in being able to bully those who might otherwise not know better, out of spite.
Bought property in the last decade = short sightedness? The vast majority have done very well, one way or another.
I didn't say that. Don't strawman me.
>…as they crank up the rent to cover their shortsightedness. …and that’s not strawmanning, anyway. If I said “throwawayragdoll hates kittens, don’t listen to him” that would be strawmanning.
That's not "Bought property in the last decade = short sightednes", is it?
This is inane. Read your comment again. Or not. I don’t care.
"Strawman - misrepresenting someone's argument to make it easier to attack". You're arguing against an imaginary point. This really is inane. Yet I did not say buying a property in the last decade is short sighted. And I don't think that. And if you still think that I think that, I'm explicitly telling you I do not think that. I don't know how I can be any clearer. Enjoy your weekend.
Wouldn't that be an [ad hominem](https://www.pesec.no/24-most-common-logical-fallacies/) logical fallacy?
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Same. Same; supply and demand.
So we shouldn't celebrate something that is good for us, because it is bad for others?? So no one can celebrate a change in interest rates?? Weird.
As someone with a mortgage and a business with outstanding debt, I cheer rate rises as I know it's necessary. If inflation doesn't get under control quickly, there will be more rises and for longer. I think they have already dawdled too much. No matter what they do, people will get hurt. At this point stability is less important than minimising pain for those that can least afford it. Coming out of covid, there is always going to be some volatility. Uncertainty about future rises will affect small businesses more than big business as they operate more in the service economy.
High rent, low pay…already used to it. We now just welcome those with a mortgage to the pain club.
Interest rate rises aren't to be celebrated or derided; people who are financially (economically) literate understand why they might be necessary in a highly inflationary environment. People who understand reality might validly feel vindicated after they've been dismissed and condescended to by ignorant people for a while. Edit: Sigh, if you're talking about people like u/ThrowawayRagdoll401 though, then I got nothing. Their view is basically the other side of the ignorance I referred to above.
Generally interest rate rises are to be celebrated. A high interest environment provides more relative advantages to those who manage their money wisely; affords fewer opportunities for speculation; and keeps economic reins nice and tight. People who are financially literate will usually benefit in a relative sense from having a tight economic environment.
I actually agree with you. I'm was pointing out them being told to be humble will be met with incredulity. Cheers for throwing me under the bus though. *Sigh*.
Even if I agree, it's a counterproductive (or at least an unproductive) stance to take, especially by contributing to the divisive discourse on social media. "I was right for the reasons I said" is fine. "Ha ha sucked in" not so much. Plus as you point out, property owners suffering from high mortgage repayments isn't all the rate rises are causing - rents are going through the roof too. These rate rises aren't really good for anyone in the immediate term, they're just an unfortunate necessity so that the economy remains sustainable in the long run.
Have to get inflation under control. It's the correct policy. An entrenched wage price spiral would be ruinous for everyone.
Prolonged high inflation affects us all.
At the start of COVID I said at work that the housing bubble was finally going to burst, without knowing the full extent the RBA, banks and government would go to. Meanwhile, all my work colleagues bought new Landcruiser’s and caravans. I was mocked when property prices went astronomical and they rubbed buying their beachside investment property in my face… At first they said the RBA couldn’t raise rates, now they are squealing as each 25bps rise gets announced. I remember saying that the debt has to be paid back… Now it looks like it’s time for those same people to eat some humble pie.
I've been saying that since 2010ish. And if you look, apparently property prices are already recovering. Whether that's a real recovery or a dead cat is anyone's guess.
Nothing has changed structurally yet so I fail to see how a recovery will take place? Maybe 6 or so months ago I noticed my local market saw a slight up tick in sales when sentiment around rate rises improved but then it went back down again. Time will tell I suppose…
Look, I've been on that side of the argument for a decade. All I can say is - things haven't really structurally recovered *since the GFC* and that's had zero relationship to property prices so....... Personally I still think there's a massive cliff coming. But it seems like Governments have been able to print money through it so far. This high inflation environment is new though, and it's one thing you can't solve by printing money anymore.
Post GFC rates continually declined to near zero… Post COVID rates have increased and haven’t stopped. My point is unless rates start going down or lending rules are relaxed then there’s not going to be any huge recovery in property prices today.
If you don’t have a mortgage chances are you’re renting… and you can see how that’s turning out… and then if you’re living at home with mum and dad then lol… Alternatively if youre in the minority of a paid off house you’re probably not on reddit
Actually renting has worked out very well for me. I know that it is shocking to hear this in Australia - but property is only one of many asset classes that you can invest in..
I think you’d be in the minority would you agree? Rental market has been bonkers !!
> a recession and/or higher interest rates are going to impact you and someone you know. A recession can have both positive and negative impacts. It's like a forest fire. Clears dead wood. Silly to think that raising interest rates doesn't have clear positive effects.
Not cheering it as a punishment, am cheering that they're not just going to let inflation pop off like the market seems to want them to. This seems like the weirdest take to me. Created the straw man about punishment and personal bias to then bowl it over.
I just want houses to be affordable :)
Haha, makes me laugh the article claiming that rates are going to be on hold next month
This is glorious. Lets hope this continues.
It’s necessary. But I wouldn’t call it glorious. This is more pain for a lot of people.
I am hoping we enter a recession. We need it. Everything is too over priced
You're one of those people who's employment cannot possibly be affected by a recession hey It's amazing how many doomsayers think they have recession proof jobs Did you ever think that maybe you're overpriced..?
Bringing down inflation is painful but there is something worse; bringing down even higher rates of inflation in the future if you don't do it now.
Pete - havent heard from you in awhile. Good to see you are still slinging the 'doomsdayer' term around! I've heard that as soon as you apply this label to anyone you disagree with you erode their credibility - well played..
Yeah I've found the less I start pointless conversations with broken clocks the more enjoyable life is https://imgur.com/V9gwT3N You cannot erode what doesn't exist.
You are killing it with your well thought out replies - top shelf buddy!
Glass houses kiddo.
Not only can you sling doomsdayer lines at will - you've also got the classic 'no you' in your arsenal.
You doing well at dragging this down to your level What's the point of you engaging me here? Remember where I said pointless? Last chance to say something of value
/u/Nik-x come here and confirm you're a tenured teacher or a medical professional mate. Otherwise you're just really bad at macroeconomics.
People that have no plan in place for a recession are the ones that are 'just really bad at macroeconomics'.
Plan for recession? Sure. Plan for a full-scale capital collapse? That's also bad macroeconomics.
Explain why I am bad at macroeconomics?
While I know my job is recession proof, even if I get fired from my job I still have enough cash to live my regular lifestyle for at least 5 years. I also have a recession proof side hustle because my side hustle is what people usually use when there is an economic downturn. I am hella prepared. So bring on the recession!
Aren't you a public servant?
The people who won't need it are the tens / hundreds of thousands of people who will lose their jobs in a major recession - and who then will likely remain unemployed for a while. But you'll be OK, right? Everyone else can just eat cake? A slow down is possible without recession. A major recession will be horrible for a lot of people - I really don't know why some people are cheering for one.
Apparently, its not ok to think that a recession is healthy part of any economic cycle. If you want to argue the morality of it - why dont you consider this: ultra low monetary policy has driven inequality to the highest levels we have ever seen. Ive counted at least a half-dozen - don't 'cheer' for a recession posts on this thread alone. Recessions are a completely necessary part of the cycle - needed to purge out the inefficient and non-productive parts of the economy. Without this we face things like a 'lost decade'..
You keep going down a straw man route of morality. That isn't the point here. The commenter above used the word 'glorious'. That is gross. That the sentiment that a number of these comments are attacking. I agree that downturns / recessions are normal - and in some cases are even healthy longer term. I actually agree with you more than you might think. Calmly and rationally pointing out that recessions are inevitable/somewhat normal is one thing. But actively cheering for one and calling it 'glorious' deserves criticism. They are clearly only thinking of themselves.
Mate, when interest rates were at near 0% were you complaining? I'm sure you weren't but I was complaining. Saying 0% interest rates are glorious is okay because now millions can "afford" debt at a cheap cost? I love the rate hikes because it gives the financially responsible a chance at the Australian dream. The idiots who kept accumulating debt during 0% rates drove prices up and up essentially pushed the financially responsible who knew they couldn't afford the repayments at higher rates out of the market. So yes, its fantastically 100% glorious rates are going up. Every one of those people who went to view their their dream house/land but walked away sad because they knew that rising rates would crush them, can finally own a home. And the idiots who used the 5% deposit scheme at 0% interests on a combined 120k salary can finally sell their house for cheap and go rent (like they should be). And when they have enough money saved up and have a decent income, they can go buy a house
You seem to think there’s only two people in the world; the boomer underwater with 8 properties rent hiking, and the person waiting to buy their first home. Everyone who saved their pennies for a decade through rate cuts only to finally buy, should’ve stayed renting in the housing crisis, right? How dare they get sick of moving every 6 months?
I see where you're coming from. But I think there's one key flaw in your thought process: The generally richer people who took advantage of stupid/unsustainable low rates are the people who will - generally - be able to weather a major recession the best. Not all - but a lot. It is the poorer people who will generally be on the front line of job losses in the event of a major recession. Many of whom don't have have homes and who have had no involvement in the low low rates of the past. But they will be the ones to suffer the most - because they won't have a job. So yeah, as satisfying as a correction will be in some areas - I think the reality is that there will be a shit load of collateral damage if a serious reccesion was to hit. Well outside of the target area you are thinking of. That is kind of my whole point here.
"clearly only thinking of themselves." As were all the folks FOMOing in at low rates to buy up property.
Well said. I hate idiots who basically want 0% interest rates, everything to be ultra cheap and take 3 vacations a year.
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They are a public servant, look at post history.
Why does this matter?
A recession would make lots of thing unaffordable for many people.
Not if you are prepared
> for many people
So many ppl are playing the morality card atm as a response to rising rates. Where was the outrage when highly irresponsible ultra loose monetary policy was being implemented?
I called out covid and all the subsequent actions taken. I’ve locked my HL in @2.99% until 2027 and I have more cash in the bank than what my HL is. I called it out, took action, increased my super from the covid dip. But I’m not barracking for people to suffer, even if it’s from their own decisions.
Can I ask what bank you locked in that rate with?
Ubank. This was back in Dec2021 though.
"But I’m not barracking for people to suffer" I like how you are happy to take the high road on morality when rates are being raised to normal levels. No outrage when asset bubbles were being formed though..
If you check my history, I’ve actually replied to “let’s use something other that interest rates to fix inflation” posts. And stated that interest rates deflate or pop bubbles and encourage the reduction of debt on balance sheets. It also encourages savings and re-evaluates risk/return reward ratio in the markets.
No. These comments are a direct reply to the user above cheerleading for a recession. That shows an amazing lack of empathy. 'Glorious'. 'I am hoping we enter reccession'. Raising rates are necessary. We all know that. But his line of commenting is a bit gross.
It's spoken like someone renting in a share house earning 60k thinking it'll make a difference.
Your response reads like you are a debt holder learning for the first time that investment carries risk..
Mabey a stupid question but where does all this extra money go to ? The banks right ? And then bank executives ? Im guessing here, but is it just some tax on this extra money for mortgages that goes to the government and in turn helps our economy?
Isn't it well established by this point that central banks and governments can bail out banks by means that are 'totally not bailouts', so why would banking sector turmoil deter central banks from hiking rates further? If anything they'll have to hike rates harder now, to counteract the new inflationary measures that are about to be implemented to bailout banks.
The ECB is responsible for setting monetary policy in the Eurozone, which includes setting interest rates. When the ECB raises interest rates, it makes it more expensive for banks to borrow money from the central bank, which in turn can lead to higher interest rates for consumers and businesses.
US dollar will crash if the Fed pauses now.
Poor banky banky awww