The news tonight quoted economists saying that the RBA will lift rates 4x this year, and soon Australian’s will be paying double digital interest rates.
The Recession We Had To Have Mk 2 is around the corner.
Consider that when interest rates last peaked, housing was that much more affordable. The place I spent my teen years in Sydney in cost my folks $120,000 in 1987, the sold it for something like $250,000 in 1994. The same house today would be worth something like $1-1.2million
Even if we look at more humble property, average house prices vary from $300k-$600k in the capital cities, most people with mortgages will owe on average 70-80% on that. Recent figures I read suggested that the average mortgage in Australia was now $305,000 or similar. 1 or 2% on top of what they’re now paying is hundreds a month, even 3 figures a week. People will bleed, people will lose.
The solution: not entrenching RBA independence as Rudd has done, the RBA are to blame here. Take it off them. So what if inflation is slightly above 3%, we can sustain 4-5% fairly reasonably. The RBA is going to destroy middle Australia, and as much as the economic conditions are mostly the Howard Governments fault, Rudd is the guy who can fix this, and he’s not going to.
a good time to be a nett saver rather than a nett borrower…
… feel sorry for the families that are having a tough time.
Having been through greater than double digit interest rates before, you must factor in the unknowns.
Nick
I was lucky to have not have had to deal with this before, but I can still remember my parents bough to their financial knees with a mortgage and more notably a business loan that hit over 20%. It’s why I always voted Liberal till I was 30, I’ll never forget what happened.
I couldn’t imagine living in a country where politicians controlled the interest rates again. That’s a terrifying thought. Rudd or Howard. Neither is responsible enough.
Charlie
true, but they’ve created a monster by staying away. The RBA has as its just about only goal “keep inflation at 2-3%,” not “lets not create a new recession with recessive monetary policy,” and herein lies the problem. The RBA must increase interest rates to bring inflation to within the acceptable band, but in doing so they’re going to kill the economy because inflation isn’t being caused by internal forces primarily, inflation is running high due to external forces, and the flow on affect here.
It wasn’t the RBA’s fault that everyone went out and got unmanageable loans. That was the banks fault for dishing out so much cheap, poorly-regulated debt. They need to tighten up the lending rules.