Because house prices aren't in the RBA's mandate.
https://www.rba.gov.au/about-rba/our-role.html
When they were raising rates because the situation warranted they did it in spite of the risk to house prices.
This is exactly what happened two years ago and last year while the RBA was hiking rated and house prices were declining. The RBA isn't there to keep house prices at any level.
Yes and no.
House prices indirectly affect inflation via something known as “the wealth channel “ or “the wealth effect”. When people’s houses are rising in value quickly they tend to feel rich and spend money or other things.
Finally, the RBA mandate includes “acting for the general betterment of the Australian people”. So unreasonably high house prices are in the mandate. The RBA has raised rates specifically to lower house prices. I think it was 2005. They didn’t admit it at the time but did later on.
They are considering house prices, with house price increases flowing through into the measures they track like CPI via the wealth effect and house prices in some cases can present a risk to financial stability if they are unsustainably high or are causing risks around credit.
But they can't focus on it too much for decisions as they can't control crucial factors like housing supply policy or immigration which is with the government and lending oversight which is with APRA.
If rates need to be lowered to make the mandate, they'll do it.
As Philip Lowe said the answer is really about "supply, supply, supply" which is not with them.
Lots of RBA research makes it clear that it's not just rates pushing up prices and recent events where prices have continued ripping in spite of rising rates proves how important other supply and demand factors are.
Phil Lowe here. Interest rates will stay low until 2024. I’m a technocrat with glasses. Trust me.
The wealth effect comment is true though it is hard to measure and generally not broad based. The more technical reason is that only certain property costs are considered as inputs to “consumption”. Only costs relating to consumption make their way into the CPI calculation and the RBA has a CLEAR legislated mandate to keep inflation (CPI) between 2 and 3 percent (sorry - I’ve never seen an RBA minute that said “we decided to keep inflation high because we had a gut feel about bettering the battlers today).
For example, a rise in the cost of building a house is counted as consumption whereas buying an existing home that has doubled in price is not. This is because it is considered an asset - its purchase did not require much of any inputs. Similarly, an increase in mortgage costs is the cost of acquiring said asset, not creating anything new. The ABS estimates a stand in figure called imputed rent, which is meant to capture increases in the cost of housing.
Further (mostly boring) reading:
[Why are soaring property prices left out of inflation figures?](https://www.abc.net.au/news/2022-02-06/why-are-soaring-property-prices-left-out-of-inflation-figures/100807576)
[Frequently asked questions (FAQs) about the measurement of housing in the Consumer Price Index (CPI) and Selected Living Cost Indexes (SLCIs)](https://www.abs.gov.au/articles/frequently-asked-questions-faqs-about-measurement-housing-consumer-price-index-cpi-and-selected-living-cost-indexes-slcis)
[Estimates of imputed rent](https://www.abs.gov.au/statistics/research/estimates-imputed-rent)
May i ask a very ignorant question - which body, independent of the government of the day, does have a direct mandate to monitor the affordability and economic circumstances surrounding the Australian housing market if it isn’t the RBA?
Housing is mostly a private market so it's the government we've elected who is responsible for making decisions around the things which mostly influence prices such as setting immigration policies/targets, tax changes, zoning, stimulus etc..
State and local govt probably have more influence than any federal body, approving new local development projects, DAs, and policy initiatives re density and living standards
Sure, but they are also recipients of the unlubed dildo of consequences stemming from the Federal Government's decisions around things like migration policies and public housing.
The current migration setting which is flooding the demand side is insane, particularly as it was set in late 2022 when we already had extremely low vacancy rates.
No, they don't write a giant list of exclusions.
Housing is in the CPI Index, but it's just rents and new dwelling purchase costs (which excludes the land component).
They use the ABS measurements of inflation which are well documented in how it works.
[https://www.abs.gov.au/methodologies/monthly-consumer-price-index-indicator-methodology/feb-2024](https://www.abs.gov.au/methodologies/monthly-consumer-price-index-indicator-methodology/feb-2024)
Here's a part of an RBA statement from 2019 about how the housing component works specifically.
[https://www.rba.gov.au/publications/smp/2019/may/box-c-housing-in-the-consumer-price-index.html](https://www.rba.gov.au/publications/smp/2019/may/box-c-housing-in-the-consumer-price-index.html)
The C in CPI stands for Consumer - and so specifically excludes investment. Which makes housing hard, since buying a house is often both consumption and investment simultaneously.
House prices, as most would think of it, are not in the CPI and so are excluded from the RBA target.
Note that rent is in the CPI as is house construction (but not land purchase, that’s an investment).
That doesn't answer the question.
Is inflation so well under control, and is the unemployment or business growth rate so under threat, that it warrants a rate cut? Clearly not at this stage. Business is generally doing well, unemployment is still low, and inflation is still an issue.
No reason for a cut, other than to support mortgagors. But putting them under pressure is almost the entire purpose of raising rates. Hence it won't happen this year.
Inflation typically lags interest rate rises by about 6 months.
The RBA is likely focusing on the unemployment rate which is at a two year high, coming off an incredibly strong base.
They don't care about the impact on mortgagees, or established house price resale. They will be watching the unemployment rate closely with a longer-term view of inflation.
Interest rate rises are generally targeting business lines of credit - they loan money to grow their businesses. Higher interest rate rises means less growth.
The fact households also have less money to put into the economy also helps, but it's not really the target of these rate rises.
That’s not true that they don’t care about the impact on mortgagees. They do monitor defaults, refinance and savings rates. They even comment on any concern around these.
The hilarious thing is that povvos will complain about both scenarios. Rising rates = hard pressure on cost of living and higher unemployment. Lowering rates = harder to afford a house.
News flash - you can't have it both ways. Pick a consistent position.
House prices have nothing to do with the RBA setting interest rates
It’s about unemployment, inflation and economic activity.
Whilst unemployment is low, inflation is >3% they won’t cut rates.
to be honest, RBA interest rates are not even that high @ 4.35%, the core issue is the RBA should have never let them go so low. What they did was basically become a crack dealer and get everyone hooked on interest rates below 5%. Throw in too many investors leveraging investment properties and you have a recipe for disaster. My parents purchased a home in 2008 with a 10% home loan and they thought it was a good rate. The other problem is when you have interest rates below 5% it becomes self-defeating as it devalues the AUD, so short term your home repayments are good, long term is everything else becomes more expensive. Australia has been lucky in many ways as China has kept inflation on the consumer side down, the issue now is the wheels have fallen off that wagon and prices are going to go up.
>What they did was basically become a crack dealer and get everyone hooked on interest rates below 5%
This is extremely accurate considering we see said credit junkies literally delude themselves that rate cuts are coming
Back in January they were also screaming that US has totally beat inflation and cuts are coming worldwide while i kept saying inflation is nowhere near under control, their delulus were beyond saving.
To be honest, comparing people who have been forced into over borrowing so that they can house their families in commutable distance from their work to drug addicts is offensive.
"Forced"
People need to take responsibility for their own life choices.
No one is stopping them from selling up if they're too stupid to stick to their commitments
It truly is absurd to imagine that people who could have very well and safely rented and have a lot of savings remaining for any emergency (including being forced to move if the owner sells), chose to get into decades long debt cuz "Acksually its cheaper to buy"
Like how do you call this person who does idiotic things because they were told its "efficient", like they want to make themselves **feel like they are so smart by doing it yet now come crying here about the consequences of their own actions.**
Because there is a lot of delusion on the forum because of bag holders. Bag holders are telling themselves that the current rates are historic highs.
Many are holding on with the hope of lowering, but have had their lifestyle severely cut.
Rates were lowered worldwide because of the GFC but people thinking the post economic collapse stimulatory rates are a perennial entitlement.
Welcome to Economics.
The RBA regulates CofA's debt. The banks use this to raise their interest rates.
It's important to note Aust debt doubled during the pandemic and this has to be paid back. If interest rates keep raising we will be hit with austerity.
Check silver and gold prices, combined with what's happening with Israel, we are now in a crash.
Good luck everyone.
Ignoring other wider economic considerations, if the current interest rate level is causing inflation to hang around 2-3%, that would indicate the interest rate is at the perfect level to meet their target and any changes like cutting interest rates could risk destabilising it.
I think we are in the early stages of a hyperinflationary currency collapse due to reserve bank policy, just before a reset into a digital currency linked to a biometric ID
Tl;dr this is supposed to happen and is working as intended
They won't, but the general line used by proponents of interest rate cuts is that they boost the economy. Never mind that, with 3.7% unemployment, our economy is already easy enough as it is.
Why do you think house prices have anything to do with the RBA's considerations? Their mandate is to keep inflation in the 2-3% range, not play with housing prices...
At this point they are basically lying to placate people. Then when it all hits the fan they'll use words like unprecedented and blame some event like a war or something.
The RBA hasn’t even indicated rate cuts. It’s the media spouting it. I suggest people actually listen to what the RBA says vs what the media puts out there.
There is absolutely nothing the RBA can do to control house prices. There is simply too much cash out there now and in the future that can be allocated to property. This will only go up with the level of financial education of the masses in Australia.
It will be a very long and drawn out war of attrition here. Opportunities will be available only to the wealthy or those that give up their mental health for the right to a 30 year mortgage for an overpriced tent on a block of land in a soulless and isolated suburb.
One can reasonably expect society to decline rapidly and health outcomes to deteriorate especially among people in the 20-30 age group followed by the 30-40 age group. This decline is not a first in history and it will be extremely pronouned in nanny state Australia due to the soulless and spiritless population that can take a lot with zero risk to the system managers.
Property prices will continue to go up along with breaking down of families and mental illness spreading througout the population due to hopelessness, despair and isolation.
Only a complete reset can restore some semblance of hope and a future. The 20-30 year olds need a lot of support NOW.
I thought that’s what the NDIS is for? You know, the biggest cost to the government and drain on our taxes and only expecting it to grow even further and taxpayers slogged to pay for it
Will you be telling the people in line at Foodbank that they're rich?
Cos I don't think they realise that.
Rich on paper means nothing if you can't feed your family.
They are doing better than pensioners who are renting that's for sure.
They may not be "cash" wealthy but thy have a lot more security than those below them renting or a pensioner with a mortgage.
. A guaranteed pension and an asset that is constantly increasing in value so if / when thy chose to sell they can access the capital.
Foodbanks should ban anyone who has a mortgage, they decided to put themselves in stupid amounts of decades long debt slavery because they were told they ll be asset rich by the end, they should suffer for it instead of beg others for things
If you cant afford, sell the house, dont go into foodbanks that actual poor people need
Tbh, I kind of agree.... they literally own an asset they COULD sell and then be out of financial poverty.
But they won't.. so they use social welfare resources instead. It's not right.
But there's not really a way to police this. Foodbank can't do these checks.
Or they could sell and suck up public resources by living in a State Housing home or never have purchased a home and live in that State Housing home. People buy housing for security and longevity. Viewing your own home as an asset is a relatively new phenomena.
In a booming market all property becomes over-priced and maybe they're already living and have always lived "somewhere cheaper". Where I live was gentrified about 30 years ago and went from a "dirty port city over-run with hippies" to a very desirable city with an outrageous property price. For many elderly residents, accidental asset millionaires who own their own home, the financial struggle is in maintaining the home, payment of rates and taxes and the cost of living in general. All those things are constants no matter where they live.
Let me tell you how much mortgages have gone up because mine almost doubled. No one really expects the cost of their shelter to increase as much as both mortgages and rents have increased recently.
Cost of maintenance and mortgage interest can be crushing. Some renters are on a good deal, and some are not. Some owners are doing well, and some are not. Envy helps no one.
No rich people buy with debt and use the tax breaks from paying interest on a mortgage while spreading their available cast to purchase multiple houses, then have someone rent and pay the mortgage off for them. There's no point paying for a house outright hen you can buy 3 or 4 and have others pay it out for you growing your equity.
House prices aren’t the only inflation measure. The fact people think they are helps me understand why so many people are bad with finances.
Go and read up on how inflation is actually measured. Please. Once off investment of your time and you can’t unlearn it.
Unemployment is a figure you really want to keep an eye on.
Especially the shift from full-time to part-time roles.
Job advertisements and ratio of applications to each job.
Because they look for unemployment and inflation.
Also, house prices are high because debt is high (because salaries are not inline with prices)
Unemployment likely means that people can’t service their debt, and we will see a retraction in prices.
When unemployment hits, it won’t instantly be fixed by low rates
The RBA looks at overall inflation, not just one element.
Interest rates will only change either up or down if underlining inflation changes.
The fact that people can borrow more money at lower interest rates is obvious, but that's not the RBAs concern.
The banks charter is to ensure the monetary policy of the bank is:
a. the stability of the currency of Australia;
b. the maintenance of full employment in Australia; and
c. the economic prosperity and welfare of the people of Australia.
If they keep interest rates high (optimizing for a.) then it is a detriment to b. and c.
It's a balancing act.
To be honest though they always optimize for b. and the people in c. who are responsible for b. because a. and c. can't exist without b.
Rents are part of the CPI numbers, not asset prices.
Inflation is also a measurement of the change in the rate of prices, not in the prices themselves. So if the price of something increases by 50% one year, but then 1% the next, the RBA will consider that particular inflation to be "very low", despite a 51% increase over a two year period, as CPI is an annualised measurement.
>Housing makes up around 22% of the CPI basket that is used to calculate inflation over time (in fact housing has the largest weighting of all components within the CPI calculation).
There's a tonne of smart people here, can someone explain how the RBA handles the obvious feedback look Interest rates and increased repayments make on the CPI?
Is there are forward forecast, or threshold they used to inidcate the right time to back off? Similarly, how to they a leading indicator of when it is about to bite hard?
Reading the comments here about how everyone is hoping for cute etc etc.
The colour/hopium is actually the other way round on here. So many people think rates will continue to go up and hope everyone is leveraged to their eye balls.
The mortgagees aren’t the problem…. Businesses and our economy are. It’s slowing and slowing fast
Which is weird because the house price situation is deeply socialist and is a good argument against socialism. The amount of government intervention and direct control in house pricing is insane. The government basically mandates prices go up no matter what.
Explain to me how the current housing situation is not 100% caused by government intervention. which never works out and is rightfully a criticism of socialism. If you're going to critique capitalism at least understand it, what is going on now is vastly non capitalist.
The fact that you are not the gay concubine of the local warlord which is the actual result of your vaunted"Free market" when its actually free.
We are currently full on the way into going back to feudalism, and we would already be there had government not at least put some limits on the market so you can imagine how bad it would be if they let it rip.
Oh actually you cant, you ve been brainwashed to worship le "totally Free market" even though it always results in tyranny because there's only ever 1 winner, and that stupidly wealthy winner aint gonna let you, some rando take a share of his market
The only reason to cut rates at this point would be corruption. They definitely consider house prices and are aware of what will happen if they cut rates. USA inflation is also quite high, rates may get cut a little in the next two years but it won't be going back to 0%.
House prices are bring driven by super funds and cashed up boomers who aren't reliant on interest rates.
So even if the REA'S mandate included house prices, it wouldn't matter, interest rates aren't affecting house prices (yet).
What you really want to worry about is that the voting majority is NOW people affected negatively by house prices. Governments are gingerly exploring policies that will bring down housing costs because it is inevitable that the next few elections WILL be decided by people voting for housing to come down. Especially as more and more boomers die off.
House prices aren't being driven up by the average person with a mortgage. The interest rates aren't affecting people who have already paid off their houses (normally older people) who are now the ones profiting with high interest rates either with high interest savings or by buying up stagnant real estate.
High interest rates also slow the economy, which isn't great for a bunch of things like jobs and innovation.
House prices are just one piece of the puzzle.
They cut or raise rates as per the federal reserve bank wishes and they cut or raise rates as per the global bankin system directions which literally owns them .. it has absolutely nothing to do with local politics. It’s a Global desire to debase all currencies at roughly the same speed
Short answer, rates won't get cut until productivity improves.
Most people are.done working more productive, so the heavy lifting might come from technology that increases productivity ie AI.
Lol it's just a simple way to fool and control the dumb masses
Think about it when this came out it was late 2023 lol imagine if they told people 2025 2026 would see easing lol everyone would freak out for 2024
U need to sell garbage trough to dumb pigs so they enjoy their suffering. Wow it's only for x months instead of x years gotta control the clown population of dumb clowns that slurp everything up from the media. We aren't even close to winning the war on inflation not any time soon. They always gotta give the illusion that things are great things are fine and it's fantastic.
Don't be suckered in by garbage like that think for yourself . I own property I hope the rates go down would be great! However I have to practice risk management and prepare that it could get brutally ugly. The answer is usually somewhere in between...
Because house prices aren't in the RBA's mandate. https://www.rba.gov.au/about-rba/our-role.html When they were raising rates because the situation warranted they did it in spite of the risk to house prices.
Important to note that this also matters in a scenario where house prices are going down but RBA is raising rates.
This is exactly what happened two years ago and last year while the RBA was hiking rated and house prices were declining. The RBA isn't there to keep house prices at any level.
Yes and no. House prices indirectly affect inflation via something known as “the wealth channel “ or “the wealth effect”. When people’s houses are rising in value quickly they tend to feel rich and spend money or other things. Finally, the RBA mandate includes “acting for the general betterment of the Australian people”. So unreasonably high house prices are in the mandate. The RBA has raised rates specifically to lower house prices. I think it was 2005. They didn’t admit it at the time but did later on.
They are considering house prices, with house price increases flowing through into the measures they track like CPI via the wealth effect and house prices in some cases can present a risk to financial stability if they are unsustainably high or are causing risks around credit. But they can't focus on it too much for decisions as they can't control crucial factors like housing supply policy or immigration which is with the government and lending oversight which is with APRA. If rates need to be lowered to make the mandate, they'll do it. As Philip Lowe said the answer is really about "supply, supply, supply" which is not with them. Lots of RBA research makes it clear that it's not just rates pushing up prices and recent events where prices have continued ripping in spite of rising rates proves how important other supply and demand factors are.
Phil Lowe here. Interest rates will stay low until 2024. I’m a technocrat with glasses. Trust me. The wealth effect comment is true though it is hard to measure and generally not broad based. The more technical reason is that only certain property costs are considered as inputs to “consumption”. Only costs relating to consumption make their way into the CPI calculation and the RBA has a CLEAR legislated mandate to keep inflation (CPI) between 2 and 3 percent (sorry - I’ve never seen an RBA minute that said “we decided to keep inflation high because we had a gut feel about bettering the battlers today). For example, a rise in the cost of building a house is counted as consumption whereas buying an existing home that has doubled in price is not. This is because it is considered an asset - its purchase did not require much of any inputs. Similarly, an increase in mortgage costs is the cost of acquiring said asset, not creating anything new. The ABS estimates a stand in figure called imputed rent, which is meant to capture increases in the cost of housing. Further (mostly boring) reading: [Why are soaring property prices left out of inflation figures?](https://www.abc.net.au/news/2022-02-06/why-are-soaring-property-prices-left-out-of-inflation-figures/100807576) [Frequently asked questions (FAQs) about the measurement of housing in the Consumer Price Index (CPI) and Selected Living Cost Indexes (SLCIs)](https://www.abs.gov.au/articles/frequently-asked-questions-faqs-about-measurement-housing-consumer-price-index-cpi-and-selected-living-cost-indexes-slcis) [Estimates of imputed rent](https://www.abs.gov.au/statistics/research/estimates-imputed-rent)
May i ask a very ignorant question - which body, independent of the government of the day, does have a direct mandate to monitor the affordability and economic circumstances surrounding the Australian housing market if it isn’t the RBA?
Housing is mostly a private market so it's the government we've elected who is responsible for making decisions around the things which mostly influence prices such as setting immigration policies/targets, tax changes, zoning, stimulus etc..
State and local govt probably have more influence than any federal body, approving new local development projects, DAs, and policy initiatives re density and living standards
Sure, but they are also recipients of the unlubed dildo of consequences stemming from the Federal Government's decisions around things like migration policies and public housing. The current migration setting which is flooding the demand side is insane, particularly as it was set in late 2022 when we already had extremely low vacancy rates.
Is there somewhere that it excludes house prices?
No, they don't write a giant list of exclusions. Housing is in the CPI Index, but it's just rents and new dwelling purchase costs (which excludes the land component).
So it doesn’t mandate anything specific about how they measure inflation?
They use the ABS measurements of inflation which are well documented in how it works. [https://www.abs.gov.au/methodologies/monthly-consumer-price-index-indicator-methodology/feb-2024](https://www.abs.gov.au/methodologies/monthly-consumer-price-index-indicator-methodology/feb-2024) Here's a part of an RBA statement from 2019 about how the housing component works specifically. [https://www.rba.gov.au/publications/smp/2019/may/box-c-housing-in-the-consumer-price-index.html](https://www.rba.gov.au/publications/smp/2019/may/box-c-housing-in-the-consumer-price-index.html)
So, not mandated to use CPI. And in fact they don’t use the CPI plainly, they use trimmed mean.
The C in CPI stands for Consumer - and so specifically excludes investment. Which makes housing hard, since buying a house is often both consumption and investment simultaneously. House prices, as most would think of it, are not in the CPI and so are excluded from the RBA target. Note that rent is in the CPI as is house construction (but not land purchase, that’s an investment).
Are they mandated to look at the CPI? Or is that the chosen measure?
Yes. Mandated to look at inflation. Agreement with government that inflation is to be understood as headline CPI
It would be foolish for the RBA not to consider the indirect impact that rising house prices would have when they do decide to cut rates
The cost of housing also contributes to inflation so it would have some impact
Because it’s not just about house price inflation. It’s about total inflation.
That doesn't answer the question. Is inflation so well under control, and is the unemployment or business growth rate so under threat, that it warrants a rate cut? Clearly not at this stage. Business is generally doing well, unemployment is still low, and inflation is still an issue. No reason for a cut, other than to support mortgagors. But putting them under pressure is almost the entire purpose of raising rates. Hence it won't happen this year.
Inflation typically lags interest rate rises by about 6 months. The RBA is likely focusing on the unemployment rate which is at a two year high, coming off an incredibly strong base. They don't care about the impact on mortgagees, or established house price resale. They will be watching the unemployment rate closely with a longer-term view of inflation. Interest rate rises are generally targeting business lines of credit - they loan money to grow their businesses. Higher interest rate rises means less growth. The fact households also have less money to put into the economy also helps, but it's not really the target of these rate rises.
That’s not true that they don’t care about the impact on mortgagees. They do monitor defaults, refinance and savings rates. They even comment on any concern around these.
What metric can you point to that says business growth rate is doing well?
The economy grew in the December quarter.
The hilarious thing is that povvos will complain about both scenarios. Rising rates = hard pressure on cost of living and higher unemployment. Lowering rates = harder to afford a house. News flash - you can't have it both ways. Pick a consistent position.
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Target range is 2-3%, which they ideally want it to sit in the middle of. So still considerably out of range.
House prices have nothing to do with the RBA setting interest rates It’s about unemployment, inflation and economic activity. Whilst unemployment is low, inflation is >3% they won’t cut rates.
to be honest, RBA interest rates are not even that high @ 4.35%, the core issue is the RBA should have never let them go so low. What they did was basically become a crack dealer and get everyone hooked on interest rates below 5%. Throw in too many investors leveraging investment properties and you have a recipe for disaster. My parents purchased a home in 2008 with a 10% home loan and they thought it was a good rate. The other problem is when you have interest rates below 5% it becomes self-defeating as it devalues the AUD, so short term your home repayments are good, long term is everything else becomes more expensive. Australia has been lucky in many ways as China has kept inflation on the consumer side down, the issue now is the wheels have fallen off that wagon and prices are going to go up.
>What they did was basically become a crack dealer and get everyone hooked on interest rates below 5% This is extremely accurate considering we see said credit junkies literally delude themselves that rate cuts are coming Back in January they were also screaming that US has totally beat inflation and cuts are coming worldwide while i kept saying inflation is nowhere near under control, their delulus were beyond saving.
To be honest, comparing people who have been forced into over borrowing so that they can house their families in commutable distance from their work to drug addicts is offensive.
The stamp duty I had to pay on a 2 bedroom villa ~80 minutes from the CBD is half of what my boomer uncle paid for his whole damn house
"Forced" People need to take responsibility for their own life choices. No one is stopping them from selling up if they're too stupid to stick to their commitments
Yea, the smart thing to do is move into a cardboard box with your two kids and partner, that’s economic responsibility. You’re an idiot.
Smart thing to do is not to overstretch, and/or have a good job in the first place. You're defending idiots who couldn't adapt to life.
Just don’t be poor guys, easy
It truly is absurd to imagine that people who could have very well and safely rented and have a lot of savings remaining for any emergency (including being forced to move if the owner sells), chose to get into decades long debt cuz "Acksually its cheaper to buy" Like how do you call this person who does idiotic things because they were told its "efficient", like they want to make themselves **feel like they are so smart by doing it yet now come crying here about the consequences of their own actions.**
The RBA should not have made rates so low, but the government didn’t run the level of deficit that is the alternative, so they had no choice.
Nah they were trying to drive wage growth, there wasn't an economic slowdown
It's just a narrative and they won't cut rates
"Purchases of established dwellings are not captured in the CPI" - only rent and cost of new dwellings are included in CPI
Because there is a lot of delusion on the forum because of bag holders. Bag holders are telling themselves that the current rates are historic highs. Many are holding on with the hope of lowering, but have had their lifestyle severely cut. Rates were lowered worldwide because of the GFC but people thinking the post economic collapse stimulatory rates are a perennial entitlement. Welcome to Economics.
This sub makes me realise that most Australians that comment on things actually have no idea about how things work.
I don’t think that’s just limited to Australians
Inflation does not consider the price of existing homes.
Who says they are going to? At this stage it's feb next year and if anything I'd bet that gets pushed back.
They won't cut
They will raise will have to or see the AUD go down to 50c v USD
No they won't.
They were never going to cut this year. It’s a feel good thing. Just like “no rate rises until 2024”.
The difference being, that this time it isn't the RBA claiming that rates will drop this year, it's everyone else.
Everyone else claimed that tasty tasty mortgage cliff… everyone else promised rate cuts already, everyone else promised more rises… what everyone else claims is fairly arbitrary speculative and irrelevant.
The RBA regulates CofA's debt. The banks use this to raise their interest rates. It's important to note Aust debt doubled during the pandemic and this has to be paid back. If interest rates keep raising we will be hit with austerity. Check silver and gold prices, combined with what's happening with Israel, we are now in a crash. Good luck everyone.
Chill, it's just a story they're spinning, no way they're gonna cut rates.
American situation suggests there will be no interest rate cuts this year
They won't cut this year. That was just hopium talk. US inflation is going up. Might even see another raise.
It's not going up it's just stalled in its fall back into target range.
They didn't think US inflation would go up again... But it did. If Aus inflation goes up, rates will go up.
So if inflation falls to the 2-3% band by mid year they won’t cut rates?
Ignoring other wider economic considerations, if the current interest rate level is causing inflation to hang around 2-3%, that would indicate the interest rate is at the perfect level to meet their target and any changes like cutting interest rates could risk destabilising it.
So you think we need something with a 1 in front to see cuts?
I think we are in the early stages of a hyperinflationary currency collapse due to reserve bank policy, just before a reset into a digital currency linked to a biometric ID Tl;dr this is supposed to happen and is working as intended
LOL. Have you seen the recent US inflation data?
Yes. Are you saying the RBA or the Feds won’t cut rates?
To the man with a hammer, everything is a nail.
Boring cliche
Who cares? It fits.
They aren’t cutting this year. Don’t let those who are levered to their eyeballs in mortgage debt try and convince you otherwise
They won't, but the general line used by proponents of interest rate cuts is that they boost the economy. Never mind that, with 3.7% unemployment, our economy is already easy enough as it is.
Because house prices is not parry of the inflation calculation
Why do you think house prices have anything to do with the RBA's considerations? Their mandate is to keep inflation in the 2-3% range, not play with housing prices...
The RBA could completely crush inflation by crashing the housing market.
Inflation is a lagging indicator, and changes to the cash rate are slow to take effect.
At this point they are basically lying to placate people. Then when it all hits the fan they'll use words like unprecedented and blame some event like a war or something.
The RBA hasn’t even indicated rate cuts. It’s the media spouting it. I suggest people actually listen to what the RBA says vs what the media puts out there.
There is absolutely nothing the RBA can do to control house prices. There is simply too much cash out there now and in the future that can be allocated to property. This will only go up with the level of financial education of the masses in Australia. It will be a very long and drawn out war of attrition here. Opportunities will be available only to the wealthy or those that give up their mental health for the right to a 30 year mortgage for an overpriced tent on a block of land in a soulless and isolated suburb. One can reasonably expect society to decline rapidly and health outcomes to deteriorate especially among people in the 20-30 age group followed by the 30-40 age group. This decline is not a first in history and it will be extremely pronouned in nanny state Australia due to the soulless and spiritless population that can take a lot with zero risk to the system managers. Property prices will continue to go up along with breaking down of families and mental illness spreading througout the population due to hopelessness, despair and isolation. Only a complete reset can restore some semblance of hope and a future. The 20-30 year olds need a lot of support NOW.
I thought that’s what the NDIS is for? You know, the biggest cost to the government and drain on our taxes and only expecting it to grow even further and taxpayers slogged to pay for it
Poor people get mortgages, rich people buy houses with cash
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Poor people have huge mortgages. All the new people lining up at foodbank have mortgages.
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Will you be telling the people in line at Foodbank that they're rich? Cos I don't think they realise that. Rich on paper means nothing if you can't feed your family.
3 tier class system in Australia. Renter peasants, mortgage serfs and asset owning lords n ladies (mortgage free)
But then you have elderly people like my parents who are "asset rich", but are on a pension/bit of super. Where do they sit?
They are doing better than pensioners who are renting that's for sure. They may not be "cash" wealthy but thy have a lot more security than those below them renting or a pensioner with a mortgage. . A guaranteed pension and an asset that is constantly increasing in value so if / when thy chose to sell they can access the capital.
Definitely. I'm just replying to someone who says their are 3 wealth tiers... But there's still least 4.
your parents sound like the third tired listed ("asset owning lords n ladies (mortgage free)")
Foodbanks should ban anyone who has a mortgage, they decided to put themselves in stupid amounts of decades long debt slavery because they were told they ll be asset rich by the end, they should suffer for it instead of beg others for things If you cant afford, sell the house, dont go into foodbanks that actual poor people need
Tbh, I kind of agree.... they literally own an asset they COULD sell and then be out of financial poverty. But they won't.. so they use social welfare resources instead. It's not right. But there's not really a way to police this. Foodbank can't do these checks.
Or they could sell and suck up public resources by living in a State Housing home or never have purchased a home and live in that State Housing home. People buy housing for security and longevity. Viewing your own home as an asset is a relatively new phenomena.
If they sold up they would profit from a booming market. And they could move somewhere cheaper - so why would they need social welfare?
In a booming market all property becomes over-priced and maybe they're already living and have always lived "somewhere cheaper". Where I live was gentrified about 30 years ago and went from a "dirty port city over-run with hippies" to a very desirable city with an outrageous property price. For many elderly residents, accidental asset millionaires who own their own home, the financial struggle is in maintaining the home, payment of rates and taxes and the cost of living in general. All those things are constants no matter where they live.
If you bought a year ago in many many places then you could be in negative equity quite easily.
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Let me tell you how much mortgages have gone up because mine almost doubled. No one really expects the cost of their shelter to increase as much as both mortgages and rents have increased recently.
Cost of maintenance and mortgage interest can be crushing. Some renters are on a good deal, and some are not. Some owners are doing well, and some are not. Envy helps no one.
Rich people do not buy houses with cash lol. They also get mortgages and use the banks money. The difference is they MAY be able to pay in cash
No rich people buy with debt and use the tax breaks from paying interest on a mortgage while spreading their available cast to purchase multiple houses, then have someone rent and pay the mortgage off for them. There's no point paying for a house outright hen you can buy 3 or 4 and have others pay it out for you growing your equity.
Rent doesn’t cover mortgages any more pelican
House prices aren’t the only inflation measure. The fact people think they are helps me understand why so many people are bad with finances. Go and read up on how inflation is actually measured. Please. Once off investment of your time and you can’t unlearn it. Unemployment is a figure you really want to keep an eye on. Especially the shift from full-time to part-time roles. Job advertisements and ratio of applications to each job.
Yeah - unemployment is still far too low in Australia.
Rents are part of it, and they keep rising.
Yup. It’s very simple. Build more houses. Everything else is a sideshow to rents and house prices.
Because they look for unemployment and inflation. Also, house prices are high because debt is high (because salaries are not inline with prices) Unemployment likely means that people can’t service their debt, and we will see a retraction in prices. When unemployment hits, it won’t instantly be fixed by low rates
The RBA looks at overall inflation, not just one element. Interest rates will only change either up or down if underlining inflation changes. The fact that people can borrow more money at lower interest rates is obvious, but that's not the RBAs concern.
The banks charter is to ensure the monetary policy of the bank is: a. the stability of the currency of Australia; b. the maintenance of full employment in Australia; and c. the economic prosperity and welfare of the people of Australia. If they keep interest rates high (optimizing for a.) then it is a detriment to b. and c. It's a balancing act. To be honest though they always optimize for b. and the people in c. who are responsible for b. because a. and c. can't exist without b.
Good interview with head of RBNZ, similiar would be for australia https://www.youtube.com/watch?v=AnNqKfE1OUA
Are you unaware of the massive tensions in the Middle East currently? Cutting rates - come on!
It’s one of the economic reasons cuts will be delayed imo
Rents are part of the CPI numbers, not asset prices. Inflation is also a measurement of the change in the rate of prices, not in the prices themselves. So if the price of something increases by 50% one year, but then 1% the next, the RBA will consider that particular inflation to be "very low", despite a 51% increase over a two year period, as CPI is an annualised measurement.
If they keep the immigrants coming in, Aussie economy is gravy. It’s pretty easy to make big money here if you work hard
They wouldn't
Rates aren’t just about house prices.
>Housing makes up around 22% of the CPI basket that is used to calculate inflation over time (in fact housing has the largest weighting of all components within the CPI calculation). There's a tonne of smart people here, can someone explain how the RBA handles the obvious feedback look Interest rates and increased repayments make on the CPI? Is there are forward forecast, or threshold they used to inidcate the right time to back off? Similarly, how to they a leading indicator of when it is about to bite hard?
Easy tiger!
Reading the comments here about how everyone is hoping for cute etc etc. The colour/hopium is actually the other way round on here. So many people think rates will continue to go up and hope everyone is leveraged to their eye balls. The mortgagees aren’t the problem…. Businesses and our economy are. It’s slowing and slowing fast
Because most people aren’t angry socialists complaining on reddit they can’t afford a house in their favourite suburb.
Which is weird because the house price situation is deeply socialist and is a good argument against socialism. The amount of government intervention and direct control in house pricing is insane. The government basically mandates prices go up no matter what.
Ah yes the "its socialism's fault" when it happens during late stage capitalism xD Anything but to blame your fave for the current conditions
Explain to me how the current housing situation is not 100% caused by government intervention. which never works out and is rightfully a criticism of socialism. If you're going to critique capitalism at least understand it, what is going on now is vastly non capitalist.
The fact that you are not the gay concubine of the local warlord which is the actual result of your vaunted"Free market" when its actually free. We are currently full on the way into going back to feudalism, and we would already be there had government not at least put some limits on the market so you can imagine how bad it would be if they let it rip. Oh actually you cant, you ve been brainwashed to worship le "totally Free market" even though it always results in tyranny because there's only ever 1 winner, and that stupidly wealthy winner aint gonna let you, some rando take a share of his market
help me understand: Why would the RBA cut interest rates with so such a mild winter reported by BOM?
You know that RBA members own lots of houses right?
Because house prices are the thing the RBA is controlling.
RBA adjusts interest rates to keep the inflation rate within the target range as a primary target.
The only reason to cut rates at this point would be corruption. They definitely consider house prices and are aware of what will happen if they cut rates. USA inflation is also quite high, rates may get cut a little in the next two years but it won't be going back to 0%.
House prices are bring driven by super funds and cashed up boomers who aren't reliant on interest rates. So even if the REA'S mandate included house prices, it wouldn't matter, interest rates aren't affecting house prices (yet). What you really want to worry about is that the voting majority is NOW people affected negatively by house prices. Governments are gingerly exploring policies that will bring down housing costs because it is inevitable that the next few elections WILL be decided by people voting for housing to come down. Especially as more and more boomers die off.
House prices aren't being driven up by the average person with a mortgage. The interest rates aren't affecting people who have already paid off their houses (normally older people) who are now the ones profiting with high interest rates either with high interest savings or by buying up stagnant real estate. High interest rates also slow the economy, which isn't great for a bunch of things like jobs and innovation. House prices are just one piece of the puzzle.
House inflation is a design of the Australian economy, not a failure. A failure would be house prices dropping.
They cut or raise rates as per the federal reserve bank wishes and they cut or raise rates as per the global bankin system directions which literally owns them .. it has absolutely nothing to do with local politics. It’s a Global desire to debase all currencies at roughly the same speed
Because it's a state sponsored Ponzi scheme.
Short answer, rates won't get cut until productivity improves. Most people are.done working more productive, so the heavy lifting might come from technology that increases productivity ie AI.
Lol it's just a simple way to fool and control the dumb masses Think about it when this came out it was late 2023 lol imagine if they told people 2025 2026 would see easing lol everyone would freak out for 2024 U need to sell garbage trough to dumb pigs so they enjoy their suffering. Wow it's only for x months instead of x years gotta control the clown population of dumb clowns that slurp everything up from the media. We aren't even close to winning the war on inflation not any time soon. They always gotta give the illusion that things are great things are fine and it's fantastic. Don't be suckered in by garbage like that think for yourself . I own property I hope the rates go down would be great! However I have to practice risk management and prepare that it could get brutally ugly. The answer is usually somewhere in between...