https://www.rba.gov.au/media-releases/2019/mr-19-18.html
https://abc.net.au/news/11270464
Expect most loan and saving accounts to drop by another 0.25% (slightly less or more respectively depending on how uptight they're feeling).
RBA slashes rates again to 1%
non-core promise on 02/07/2019 - 16:49
Last edited 02/07/2019 - 16:49
Last edited 02/07/2019 - 16:49
Related Stores
Comments
- 1
- 2
The outcome would be the same regardless of who has power in Canberra. We collectively have borrowed far too much money and stuffed it into housing. Now the bill is due and we're squealing.
2008: GFC to blame… Nah it’s all Labor’s fault
2019: Liberals to blame for poor economy… Nah its not the Government’s fault, people are to blame.
GFC to blame… Nah it’s all Labor’s fault
lol, never heard that. Who could blame an Australian government for a Global Financial Crisis?
@idonotknowwhy: The LNP blamed Labor for every action they took in response to the GFC. All the stimulus and deficit, and cited poor economic management as evidenced by falling interest rates. E.g https://www.abc.net.au/7.30/joe-hockey-says-rates-cut-reveal…
@Never Pay RRP: I thought global opinion was that Australia were one of the best countries to manage the GFC?
@Pedsy: You must have missed the outcome of the last election. Nono liberal party are the superior economic managers - didn't you hear?
@AlanHB: Which is hilarious, because in the last 20 years of modern Australia, our economy has always ranked higher globally under labor, and lost rank everytime the libs came in
Impossible to see how that could be, but if it were true it would be a great benefit for those living off savings/super.
Not really because inflation would be around the same levels as interest rates as well. Therefore purchasing is the same.
Not really because inflation would be around the same levels as interest rates as well.
Exactly. And higher inflation + interest rates, means more capital gains tax to pay (since the gain calculations don't factor in inflation).
I see the LNP propaganda machine has brainwashed you well, you good little LNP voter you.
Ah, yes, the time and time again proven superior Economic Managers Labor definitely would have that effect on the economy. Yes, yes yes yes.
Numpty.
What bullocks. Interest rates have been below 10% for many years now, including under a Labor government. I laugh at how everyone thinks Labor is such terrible economic managers, yet it was Labor that reformed the economy, freeing up the currency and removing barriers to trade in the late 20th century. It was labor that got us through the GFC economic crisis without a recession. The ONLY country in the developed world to do so. It was Swanny that twice was awarded best finance minister by the Economist, twice.
10% plus rates were back in the late 20th century. The world over had interest rates at this level back then. We also had low house prices and little debt. Low interest rates are being used to fuel borrow to spend and if you want to see where that ends up, take a look at Japan. Stagnant economy for 30 years now. We are at that point now. Everyone is so in debt there is no money to spend anymore. All our capital tied up in housing rather than productive assets. And half the population unable to afford to buy a little old house.
But hey, its all labor's fault right.
I wasn't even living in Australia back then but the view from the outside at the time was that it was the mining boom that got Australia through the GFC? Otherwise you'd have been in the brown stuff with the rest of us.
Lucky country indeed.
@Poolprouk: Mining boom? you mean like how the super rich got wealthier and we got miniscule % of what we should have got considering the natural resources belong to the public and not the super rich who own the mining corporations?
@lonewolf: A lot of our super funds own a big chunk in RIO & BHP I assume. I'd hardly say most of super holders "rich".
Given there is the 1% that genuinely need some of their money taken away from them for their own good. Otherwise I would say the rich bogey man is not actually that big of a target (because it is a very small population).
@lonewolf: My point was that the mining boom led to an influx of foreign $ into Australia. For sure it didn’t benefit all but i guess it balanced off some of the negative effects of the GFC that did impact the Australian economy.
We in the UK didn’t have that industry to fall back on and so we were in the brown stuff.
Without the mining boom, you’d have joined us. Whether Labour or the Coalition were in power.
@Poolprouk: Minimum boom lol. Listen to Ken Henry. “Go early, go hard and go households” and Rudd took advice and acted decisively. Australia felt almost no pain.
@Vote for Pedro: this exactly. Australia came out of the GFC with the strongest (Not largest) economy in the world and remained so until the LNP came back in to power.
The "Better then being under Labor" excuse can only be justified by those with dementia because it was only 10 years ago when Australia felt zero pain from the GFC under Labor. It's a weak, shit and uneducated opinion
It is the last part people don't get. They are all rent seekers. Buy houses, sit around waiting for it to go up. Create zero employment. Somehow gets rich. Problem is that ride is going to come to a grinding halt soon.
People don't understand the difference between good debt and bad debt. People will plead how investing in residential property is good. Well if you call a day of work for the plumber and electrician a year as job creation. Negative gearing is just people paying a $1 to saving 30c hoping it will pay off. I'd rather live 30 years okay than 30 years a slave to the bank.
Hawke Gov't definitely set Australia up for success. Libs GST simplified things. Then Rudd gouged the middle class so anyone earning over $100k was considered rich and stripped of all benefits. Low FBT on Novated Lease GONE, benefits for unvested shares as bonus, GONE, pretax food at place of work, gone, baby bonus, gone, Part A & B gone. I have struggled ever since. One income, 7 in the house. And liberals have pandered and never restored any of it. And going by the arguments in parliament, never will.
The GFC was a chance for the economy to feel pain, reset, let the weak parts die and for things to be modernised and become more efficient. By shouldering us from it, our economy didn't change with the times. And now our day will come. While others have already transformed.
@singingwolf: One income, 7 in the house…
The GFC was a chance for the economy to feel pain, reset, let the weak parts die….
According to actual facts the interest rates under the last Labor government went from above 6% to around 3%
But it's good that you can still blame Labor for everything despite the fact that they have not been in government for more than 6 years
Yay for Liberal government management.
Monetary policy is generally independent of government.
But spending is definitely not independent….
I believe spending might have a little to do with inflation, which i think also has a bit of a bearing on interest rates………
could be wrong…………
Yes, consumption (not spending, because you could be spending on real assets, which is investment not consumption) is definitely related to fiscal policy.
Whether the increase in consumption will lead to demand-pull inflation is hard to say because it depends on how the productive capacity has changed. If you're just simply handing out money to people, then yes, that will drive up inflation. If it's more obscure policies, you have to look at whether businesses are increasing output.
@p1 ama: Not wanting to get too deep into the abstract of Politics with a capital P…
I haven't seen any Government in the last 20 years that looks beyond the next election…………have you?
Liberals are too scared to make any meaningful fiscal policy, but Labor are spend spend spend, in the hope that it'll do something, anything, to allow them to retain their position.
something, anything, to allow them to retain their position.
So looking beyond the next election by definition?
Liberals are too scared to make any meaningful fiscal policy, but Labor are spend spend spend, in the hope that it'll do something, anything, to allow them to retain their position.
You've just bought into the hype and hysteria - this is definitely not true. Labor (as with the Liberals) have enacted some extremely important reforms that are central to what Australia looks like today - Medicare, affordable university, floating of the AUD, NBN, NDIS…etc. Liberal governments are just as guilty of splashing cash in the hope of winning elections (remember Costello's baby bonus?).
The whole idea of "Labor = spend spend spend" was really just popularised by Tony Abbott. If you go back and look at prior elections, this mantra was never at the centrepoint of any previous election campaign.
Except when Labor is in power
Monetary policy is not independent of government policy though. Have a look through the rba comments on wages for example and then the government policy
Under a Labor government we would have been at 1% a long time ago mate
I think it would rise under Labor. People and government aren't spending. If people say Labor would spend, then due to inflation, rates rise.
Thank you rba for devaluation of my saving in the bank. Best way to keep the value of my money is to save it. Meh! Something that you print everyday and and the cost of its creation is almost zero now. At the end we as people will end up paying for any financial crisis or a way to prevent it from happening with inflation low interest rates or high taxation.
Its economic suicide at its best.
I cant believe the stupidity of central bankers.Since when do you fix a huge debt problem with even more debt????
After all this is what the RBA is trying to encourage.Its like going to your bank and saying:
"Im struggling with repaying my loan and paying my bills. Can you reduce the interest and lend me more money?"
The answer of course would be NO!So people with over-extended borrowings will be able to afford to borrow even more but never be able to repay it, so it wont result in increased spending or inflation (yet again) for a very long time. Meanwhile those with savings are having thier income obliterated - hence same result as borrowers.
What a completely stuffed up financial world in which we live today.
Japan did this decades ago and they have been basket case ever since.
Like I say, how stupid are central bankers to walk the same path?The only reason the Aussie dollar hasnt collapsed against the USD and EURO is because the US and Europe are dong the same thing.
indeed but of course the economy is like this cause of bargain hunters killing the retail sector…
It's a bold strategy Cotton. Let's see if it pays off…
At least they're finally focusing on a strategy that supports saving and reducing debt…
/swhy save when rates are so low?
why not borrow more since interest rates are so low? money is so cheap, buy buy buy
Do you always talk in such outrageous platitudes?
"The only reason the Aussie dollar hasnt collapsed against the USD and EURO…."
The AUD was about $1.10 to the USD in 2011. In Jan this year it hit 67c and looks like dropping further. I agree with the rest of your assessment. The world is a basket case at the moment and not just financially.
Its like going to your bank and saying:
"Im struggling with repaying my loan and paying my bills. Can you reduce the interest and lend me more money?"
The answer of course would be NO!The idea is that reducing the by reducing interest and repayments, people will have more money to spend. If they spend on retail and services, that's good for the economy. The movement of money is what keeps the economy good. If the interest rate cut results in more money being spend on services and retail then it's working. The biggest problem is that the cuts will hardly be passed, and it's not enough to make a real difference. And it takes a long time for the savings to filter through.
Thats the idea - but the reality of it is that it gives people with multiple properties more leverage to negatively gear for another property, and thats what they cycle has been in recent years - instead of spending the money people (investors) are reinvesting it into property, inflating the price and going more into debt
People upvote your rant, but you're wrong on most levels:
- This is not an attempt to fix a debt problem.
- Spending by governments and consumers generally boosts an economy. Spending is how any economy recovers from a recession (we are not in recession but this is a tactic to avoid it).
- This is a macro economic issue, not micro. Your comparison to the bank lending more money is absurd and not a good comparison at all, in fact its completely wrong to compare the two.
- The Japan comparison is also absurd. Their economic conditions were fairly unique. The only similarity was low interest rates and high cost of housing but Japan had dozens of other factors that sent their economy into the wilderness through the 90s etc.
Basically your entire rant is incorrect (albeit popular with the masses in here). This sort of misinformation is not helpful.
If it's not an attempt to fix a debt problem, then why did they do it?
To stimulate the economy - yes! But why is the economy not already stimulated?
Because everyone is up to their eyeballs in debt and some have negative equity in their homes. So the underlying problem is debt and it's the reason why people aren't spending.
Also, why are you mentioning government spending? Cutting interest rates doesn't involves govt spending AFAIK. I'd much prefer the government stimulate the economy through spending on infrastructure, but this kind of thinking has gone out of style…
You are right. Reinflating property prices so people don't feel so bad spending their pay check and living month on month hoping they don't lose their jobs.
On jobs. The governments have it all wrong. Trying to get consumers out buying products made in China from shops that are staffed by minimum wage employees aren't going to help the economy. When people get educated and make higher than average pays in knowledge industries that are in demand overseas (making foreign income instead of sending it offshore) is how you get rich.
Cutting interest rate involves government spending, Government can issue cheaper bonds to spend on infrastructure. Why you only think about Housing market, it's business lending as well.
Well said. A lot of people who have very little idea about economics is giving their two cents which for most part is just factually incorrect.
https://www.afr.com/real-estate/residential/regulators-pushe…
"Assistant Treasurer Michael Sukkar will press financial regulators to review their restrictions on bank lending to help ease a credit squeeze and to "get credit flowing" to home borrowers."
Not only is the govt pushing for lower interest rates, they want to remove regulation so that more home loans can be approved.
Looks like the "rant" was bang on the money…
"Since when do you fix a huge debt problem with even more debt" That's exactly how you fix an economy headed for a recession. First mistake is to compare government with individuals, one of the first things you learn in Public Sector economics, people do not live forever governments do ( well maybe not forever but a hell of a lot longer than you and I ).
When an individual accrues debt they have a small window in which to pay it down, governments do not. And another big difference, governments can impose taxes if they require more money, individuals cannot.
Anyway, spend money to kick start the economy, create confidence and growth.
One of the main reasons that the dollar is still trading high is the record level of ore prices, creating a demand for the ozzie dollar. If that little boom busts, be prepared for some hard times.Crikey, if 70c is 'high' I'd hate to see what's coming next. :)
Wow…clueless comment.
You don’t “fix” a debt problem with more debt. That is simply like giving a drug addict more drugs. The bigger the tolerance for drugs, the more that is required to keep them functioning. Eventually the dose is so high they OD.
The real solution is rehab i.e a recession. It should have been allowed to happen a long time ago but of course no politician is going to want to be the one that says it needs to happen - they want to stay in power. Back in 2008/9 the banks should have been allowed to default. Instead we got bail outs, money printing and low interest rates which have led to a bubble in everything and poor underlying fundamental economic strength.
The day of reckoning is coming very soon and the hangover is going to make the Hangover movies look like a walk in the park.
After all this is what the RBA is trying to encourage.
Its economic suicide at its best.Or perhaps this is what (((they))) wanted, an independent economist ( Martin North ) was talking about this a few months back. The officials from RBA went to EU and has a big talk with banks about how to contain this housing-bubble-busting. The vid can be found on his channel.
IMHO, what the RBA is trying to do not only extend the debt bomb but also prolong the spillage. Either way it has been calculated, and the public will take a blow for it. No high top bankers go to jail in this country which is very WEIRD.
There is no soft-landing in housing bubble. Look at the past !
EDIT: Quantitative Easing already happened. The economic isnt stimulated when the big company is either firing people or closing down stores.
You're right!
Worst, those people with saving think oh interest is so low let's make money from other sources. Yeah stock market looks good… And then they got burn all saving lost ….
Agreed.
Low interest rates create bubbles
There is nothing wrong with a hot bubble bath once in a while.
Not when someone's fart bubble pops
Come on, Bitcoin is up again. Invest now!
Did you kill MrsBull ?
Yep the next 3.5 years is a wild bull runs. Then there will be another bear scares. Good choice MrBear
Bitcoin has been commandeered by AXA financial via blockstream. Bitcoin cash carries the torch onward for economic freedom for the world. I suggest hedging your bets on both.
Why would all savings get lost in the market? Assuming you are looking for similar vessel to a savings account, you'd be investing in an ETF which has pretty safe returns over time.
time to withdraw all your money from the bank and stash it in a little box underneath your bed …
Expect most loan and saving accounts to drop by another 0.25%
ha ha ha. i wonder what commbank is going to do with their "high interest" savings accounts already at a measly 0.30% pa
You pay them to save money.
eg negative interest rates in Japan
People are indebted up to their noses with mortgages. I remember I was watching the house price stampede in the past few years and thinking, how will people be able to afford anything other than paying the mortgage? It all started when the government opened the housing market to foreigners. That same year Canada closed theirs. Guess where all the foreign house purchasing money was diverted to…
@loropy9 - Can't speak for other states, but in Sydney around me since 2012 prices have doubled and barely dropped. Prices around me would need to drop sub 30%+ for places to fall under $1m and I really can't see that happening. I'm waiting for the so called "bubble to burst" but even if it does I doubt it would make a massive difference.
Bubble burst is not going to reduce the price of $1m property to $200k. It will still be marginal.
Its all a game to try prop up our so called world record growth rate of no recession in 27 years!
When times are starting to get bad, we drop the rates to encourage people to spend more
When times are good, we simply just keep rates on hold as we don't want the housing market to drop. Thus we never actually raise our rates.
This is a drug that we have all become addicted to and at some point we will have to bite the bullet and have a crash. It'll be a significant one a well since our tools for economic management have all but been eroded away.
Spot on. We are coming to the end of a 30 year cycle and people have no clue what’s coming.
All in for more jobs and growth.
This Jobson Growth gets trotted out every time, and I have no idea why he's supposed to be so important for the economy.
How are you preparing for this possibility?
Stock investment good idea atleast better then bank interest rate but make sure before invest check balance sheet and revenue and dividend.
Investing in shares is a no brainer.
Not only do lower rates encourage investment and growth, the expectation of growth causes growth.
A stock market bubble is guaranteed
Lol… until a black swan event triggers the collapse of the global economy and your share portfolio gets decimated overnight. But hey, buy the top.. sounds like a great idea
While your advice is perfectly sound, I know many well educated people who didn't invest in property 10 years ago, because we were in a bubble.
We are still in a bubble, no doubt, but as they say the market can remain irrational longer than you can remain solvent.
I used to try and pick tops and bottoms, and even taught myself technical analysis.
Experience has taught me to follow the crowds and make a modest return.
@greatlamp: It’s not so hard to make money when everything’s in a bull market, keeping it on the other hand is the difficult part.
Because when this thing crashes, people aren’t going to get the chance to get out. I’d rather have less gains on paper now and be in a position to profit from the inevitable collapse from this overextended bubble while everyone else is wondering where their retirement fund went (name checks out!)
Yes, we are still in a bubble as we have been since before the GFC where it just got reinflated, but the cracks are showing and becoming obvious. Not long now!
My (poor) understanding is that low interest rates are intended to spur investment into areas other than cash.
But liberal government policies have ripped out money from just about everything they could to "save money" and left any potential growth areas underfunded or simply crippled.If it's not mining, banking or construction we've lost the ability to do it, and those are all in a pretty awful state too.
So, where is the investment supposed to go? The easy housing money is clearly drying up and leaving us with less than we started with.
I'd love to invest (and work) in science or tech and see them grow in Aus and improve the country, but they are looking pretty crippled by R&D cuts, crap NBN, and 1984 surveillance.
Work opportunities are pretty dried up too, and the R&D companies I've been at have always felt like isolated bubbles, trying not to pop in a harsh environment.The only thing left seems to be gambling. And in a way that's just an extension of the same scummy bank practices and corner-cutting construction fueled housing bubble that have been squeezing citizens for every last dollar, without adding anything of value.
But the casino guys haven't rung us all completely dry yet, and don't have have any false pretense of good public image to care about. The only thing holding them back will be how far into bed politicians will go, but they've been cozy for a while.
Aristocrat Leisure, that's my stock tip
Or weed stocks (we'll need all the help we can get to get through the coming mess. :) )
That could be nice. Probably much better than trying to drink ourselves through it all at least, if only for the less aggressive king hits.
I'm not too familiar with it all, but I've heard that one of the big reasons it was outlawed in the first place was because hemp is a much more productive plant than cotton for clothes, paper etc. Can even be used for construction, as hempcrete.
I know there's hemp stuff around, but if it's no longer just for the hippies, there are areas where it could be beneficial other than recreational use. Which again, would be good for the economy.But for places that are resistant to forward-thinking, it serves as a pretty good scapegoat to distract from bigger problems, and an easy way for police to flex against citizens from time to time. Less offensive to search random people for "drugs" if they think that means pot, and not ice or heroin or something that they would be less accepting of.
Yes the invention of the hemp decorticator was a huge threat to Big cotton. But it was also a massive threat to the emerging pharmaceutical and oil industries as well. Not to mention the paper-pulp industry. The late Jack Herer has done a great job of documenting who was behind cannabis prohibition and why. Well worth a read for anyone interested in history.
Gambling probably a safe bet as state governments like their pokies cashflow
We are at a crossroads. Australia can either reform and become a high tech, high value economy or just keep the status quo to slowly decline over the next 30 years. RBA is sending a political message to the government to say "You must reform now"
Micro loans, lending money to all these people who can no longer afford the roof over their heads, is probably a good avenue.
How do you get your money back after you lend it to "people who can no longer afford the roof over their heads"?
lol you send debt collector to collect those roofs
Studying STEM is pointless unless you intend to emigrate to a country that practices research as well as applying that knowlege to practical applications (China, South Korea, Japan, Germany). There are no factories in Australia so there is no need to do tech research. Just housing, finance, medicine + aged care, middle men resellers, mining and farming.
The people will be able to borrow more than they can afford to pay for. The end result will be incurring huge debts as soon as there is a slight rate increase.
Luckily, since the royal commission, banks have tightened their lending criteria. I think the days of throwing out million dollar loans for people on low incomes are behind us mostly.
- 1
- 2
Guess the interest rate will drop to 0% by end of year. Yay for Liberal government management.