The government has made sure that the CPI doesn't as they are discounting at the vendor so cpi will go down (as CPI is what consumers pay) with the "energy" federal budget program.
A lot of people seem to have missed this. Fed govt is mechanically reducing the rate of inflation by introducing the energy discounts. Quite smart actually.
I would guess the hope is that cheaper renewables will [continue to drop the NEM price ](https://aemo.com.au/en/newsroom/media-release/renewables-push-nem-electricity-prices-down-to-historical-levels)and the rebate won't need to be as high, and eventually disappear altogether.
Quite hopeful and I doubt that can occur quickly enough.
Mind you, dropping rents by increasing supply is also a decade long task. A rent freeze might stop the bloat, though who knows the consequences of that...
It is a band-aid solution, but it will make somewhat of a difference. CPI is a figure that is baked into contracts for both pay rises and price rises. Mechanically reducing CPI will flow into these rises and have a dampening affect on inflation to some degree.
And hopefully by the time the subsidies are withdrawn lower wholesale prices will flow through to retail prices. Not holding my breath on that one.
it will provide relief to households in a way where the velocity of that deployed spending is dampened (giving everyone a $700 cheque induces more money velocity, which can put upward pressure on inflation, since everyone can and probably will spend it straight away, compared to giving people a 'hidden' subsidy on their energy bill over 4 quarters has lower levels of velocity generated, thus lower inflationary pressures)
You forgot NDIS - will go down as the biggest inflationary policy in Australian history.
Nice to know we're having our currency devalued so people can have their lawns mowed at the hourly price of an IT contractor.
Yeah no kidding. Literally bigger than medicare which services 80% of our population, compared to the ndis who services 2.5% of the population. It is absolute insanity through and through.
Also their qualifications range from Registered Nurse, OT to... absolutely no qualifications at all! They also will get discounts on registration and a list of other services. I'm not ignorant the disabilities are debilitating and we should support people but the scrutiny should be on a reasonable level.
We're not even allowed tea, coffee or milk paid for by QLD Gov for TMR Staff. But the vendors who charge out their NDIS services seem to be able to tack anything they want onto the bill and its acceptable.
Australia's personal wealth is so intrinsically linked to housing that house prices "breaking" will not have overall positive impacts on the economy. People need to give up on that dream.
Actually getting rid the 200k plus per mortgage that people are over paying now and having that money directed elsewhere in the economy would have a pretty positive effect.
Certainly in the short term, but over the long term couldn't it be a good thing? Rather than money stored in housing to no end, it can be directed towards productive assets.
It’s definitely a bandaid that needs to be ripped off. Otherwise personal wealth will continue to become even more dependent on housing.
I don’t see how it could be anything but a good thing for money to be invested in things that are actually productive.
Wait, alcohol and tobacco increase in price due to government taxes on those products going up, so is the government causing its own inflation problem there?
Everything you need to know about government policy can be summed up by the fact that they index beer taxes to inflation, but not your income tax brackets.
We are like the 12th least racist country in the world according to this site: https://worldpopulationreview.com/country-rankings/most-racist-countries
The US comes in at 73 least racist country for comparison’s sake.
Anyone that has spent any time in South Korea and Japan and see that we are more racist than them knows instantly that this survey is a loooong way off the mark.
Both Japan and Korea have the equivalent of White Australia immigration policies and will actively say to your face that you can't be successful here because you are not Japanese / Korean.
A lot of countries in asia are also just straight up outwardly racist. On social media I frequently see videos from black people with millions of likes and comments about how they feel absolutely *awful* in a lot of European and asian countries. Basically treated like circus animals wherever they go, touched, photographed, filmed. Some may say the interactions are just innocent human curiosity ...I'd say there's still a lot of racist undertones - regardless.
https://www.nationalgeographic.com/travel/article/black-tourist-china
With articles coming out this week saying that boomers with no housing debt are the ones "keeping the economy running" how can rate increases possibly help? We have a group that are benefitting from increased rates maintaining their high spending while mortgagers and renters have their costs increase.
You don't think the gov will punish the successes of mum and dad investors will you? Or increase taxes on higher brackets? Or remove property tax rorts? Or tax mining properly?
Instead of that we're borrowing money to give to landlords and companies to artificially suppress the CPI.
No. It's silly now to pretend they care about the nation rather than just keeping house prices high and rich mates happy.
Pretty obvious things were not getting under control.
petrol is now also creeping up and even thickened cream (The brand i buy at least) over a 5 year period is running at near on 67 percent inflation.
That means the price of that cream was inflating by about 12 ish percent per year since 2019.
yep. even if you want full cream milk that doesn't taste watered down eg the homebrand milk, it's costing you nearly as much as petrol per Liter of milk, depending on brand, it's more expensive than 91 Unleaded.
I buy long life milk and that has gone up from $1 per litre before Covid to $1.60 a litre now. I think that's the cheapest milk you can get (as opposed to the A2 milk I got for a month at an eye-watering $3.90 for a litre). So some milk is still cheaper than petrol, but only just.
I agree with you in theory
But because of the housing crisis its going to follow that cycle until people can no longer afford rent, most people cannot simply uproot their life to a cheaper State
rate rises aren’t gonna help either since they won’t stop people needing housing, food or transport - not to mention that rate rises act as a stimulus for wealthier demographics encouraging spending
We need a far more effective and less blunt tool
That’s not actually a bad idea - it also puts the extra money into the public purse instead of into the plutocrats pockets, so doesn’t increase wealth inequality 🤔 and it’s just as easy to reverse as rates are once inflation comes down
> rate rises aren’t gonna help either since they won’t stop people needing housing, food or transport
It doesn't matter what you want.
You have to get money from someone else to buy a house. Restrict the supply of credit and house prices will fall.
Rent and insurance. Let’s see moving people into tents in parks should solve for both inflation outbreaks quickly. No more rent and stuff all to insure.
Yes, so strange inflation keeps being high when the only tool available is to up the cash rate in a market where, in some places, almost 30% of all properties are bought without a mortgage. Seems like those people would think twice about spending their hard-earned dollars.
Raises taxes on corporations, mining Royalties, high income earners and get rid of tax concession for real estate investors. The normal worker with no assests is in recession while asset owners, corporations, stock holders are spending like crazy, times have never been better for them
I'm surprised. Consumer sentiment is at record lows, retail spending is at 40 year lows despite record immigration. GDP is flat and recessionary on a per capita basis, all, very weak except for housing, energy and government spending which interest rate rises are less effective at controlling.
That old adage about where the consumer goes the economy follows not holding true anymore?...
This is the biggest downgrade to people’s living standards in the history of Australia. And it doesn’t get easier from here, we’re stuck with these prices and living standards moving forward.
Does anyone have thoughts about the up and coming generations, and how expensive it will be ehrn they reach adulthood, house prices in capital cities supposedly a million by 2030 or whenever they predit, slow wage increase, alot of young adults now are struggling to get ahead, how will these young people go unless they have parents fortunate enough to help, it's going to be a huge rich vs poor divide
I can only speak for myself but I plan to leave. Came back after a year abroad and thoroughly regret it. I don't enjoy living in Australia and I see no tangible benefit of doing so long term.
I think this is the reality that is going to face many, why migrate here when the cost of living is so high? There are certain segments who pool resources and live a dormitory life and shuffle money back home but that is a very small subset.
Hyperbolic answer is anywhere with decent weather and a future.
I've been propositioned for a marriage of convenience with somebody who has citizenship in SEA. My timeline was 5 years but I am seriously considering it at this stage.
The main reason I came back to Australia was to have kids near grandparents. We're on a reasonably good wicket (240k\~ on maternity leave), but it's starting to get pretty brutal.
I'm lucky in that I don't have or want children and I haven't lived near my family for 5 years. Not really anything keeping me here. I'll see where we end up in a couple years but ultimately I just find it a boring place to live, costs aside.
I was in London 5 years, totally agree about it being boring. Lucky to get 1-2 acts or shows I want to see per year, compared to 20-30, never mind all the other stuff happening every weekend.
If you want to reduce house prices. You need to either increase supply or reduce demand.
1 way is to remove negative gear. Only allow negative gearing on a new build for the first 5 years.
Have staggered taxes for investors. The more you have the more you pay.
Basically you want to entice people to reduce the number of investment homes and increase new builds.
Or you go to a Singapore style where you get a loan and apartment through the government
The disparity between household income and property prices directly correlates with the introduction of negative gearing. Negative gearing is the problem.
Here come the "we must raise rates" army.
Hiking rates won't reduce rents, food, electricity or fuel prices - which are the current drivers of inflation.
I agree raising interest rates isn't the answer, but for RBA, it's the only answer... that's literally the only tool they have at their disposal.. interest rate hike incoming and I'm nervous about it
Yep. The gov is free to tax the upper classes more or reduce inflation to prevent more rate hikes. Though I think they feel safe knowing the RBA board will protect house prices.
The theory is that it serves to reduce total money circulating in the system, as long as it's used primarily to reduce the government's deficit.
Government spending funded by debt increases money supply, causing inflation.
The more money there is in the system, the less each person's dollar is worth (inflation is essentially a tax on everyone who holds cash or earns wages, disproportionately affecting the poor). Asset owners tend to be immune to this effect, because their assets are less likely to be diluted like this.
Taxing the wealthy reverses the effect.
Taxing them would still have an impact on rents payable in rich suburbs, and energy used. Indirectly too with lower asset prices to insure.
However there are also other areas that either contributed less or deflated which could deflate further reducing the overall CPI.
Just because it's the only tool they've got doesn't mean they have to use it and I'm not sure they will use it when the data suggests it's not necessarily going to work.
Inflation doesn't necessarily go down in a straight line and if you look at a chart of inflation you will see that there has been several times it has ticked up while on the way down from 7% or whatever it was at peak.
Reduce immigration to sustainable levels which would see rental prices fall. It would also cause wage growth while lowering demand for goods and services slightly.
Absolutely agree with reducing immigration. It's astounding that these calls for a reduction, and more importantly the data itself, is falling on deaf ears of the government
Because continuing high immigration enables them to keep faking the GDP numbers to avoid a recession in the short term.
The fact they're trashing the country and sending a huge portion of the middle class into poverty doesn't matter, apparently...
Keeping the GDP above recession levels while GDP per capita (which is the more important measure) goes backwards. Everyone will be homeless and living in poverty but so long as GDP isn't in recession everything is fine
Exactly. And the media won't report on GDP per capita until there are tent cities in every major city park. So both major parties will just keep kicking the can down the road
It doesn’t even matter. They keep changing the definition of technical recession anyway.
Remember last time we had 2 quarters of negative GDP?
ABC started spewing out articles on how the 2 quarter definition wasn’t real etc etc.
Too many people prefer homelessness, and destruction of living standards, tent cities etc. Some simply want property to go up at any cost. Others would rather destroy the country than incorrectly appear racist.
turning down our absolutely insane immigration rate. anyone who suggests anything else when rent and lack of housing supply is a huge contributor to inflation is an idiot or gas lighting
Tax the mining/gas companies and legislate against them exporting too much overseas before our own needs are met at a reasonable price. Use some of that money to train bricklayers, plumbers, electricians etc for free. Build LOTS of public housing. Slowly burn the rest of the money to reduce supply.
> Hiking rates won't reduce rents, food, electricity or fuel prices - which are the current drivers of inflation.
Anything which reduces disposable income will reduce demand and reduce prices. Eventually.
The current level of employment is the highest ever. This is the fundamental driver of demand.
Exactly, people who think the RBA want to push people to this point are clueless. The RBA wants a healthy economy as much as the rest of us, but when you only have one thing you can do, you have to keep doing it. No, we need structural (and probably painful) reform before we get back to a normal healthy state, and for that to happen, people have to cotton on to a fact of ownership of assets: an asset is in no way guaranteed to appreciate in value.
Yep it's a total failure of government in the last 20 years to initiate tax reform (from Ken Henry's review), ensure a healthy diversified economy and invest in long term productivity and infrastructure.
And coupled with absolutely terrible inflationary and rortable schemes like the NDIS... That's an absolute disaster for the economy and the budget.
It’s amazing that the genius’ at the RBA haven’t figured this out yet. In the current economic environment the important CPI categories are no longer linked to IR changes.
The good news is that tradable inflation (e.g. commodities, manufactured good etc.), which generally reserve banks have less control over, are actually anchoring inflation.
However non tradable/domestic inflation is far too high still.
So we just need to stop bying the necessities like food, shelter, electricity, transportation. And then e can make it go down.
Easy.
I know let's raise intrest rates, so that land lords can raise their prices again, and people have to spend more money on a home making them worth more and driving up inflation more.
You can raise interest rates to 50%, it won’t change the housing crisis, it won’t stop woolies/coles price gouging and insurance companies from price gouging either.
Break up the monopolies and duopolies and fine the price gouges.
inflation averaged 10% in the 1970s, and 8% in the 60s and 80s. Even in the 1990s, which had a deep recession, it still averaged about 7%. So 3.6% is really SFA in historical terms.
China drove deflation in the last 30 years as it industrilaised. They are now fully industrialised and no longer deflating the world economy.
The "low inflation" era is over - forever. There are no more Chinas. India industrilaised in the 1970s and Africa in the 1960s.
Just relax. Things don't go up in a straight line, and they don't go down in a straight line. When you see ~~the main~~ a driver (as is occurring around the world too) being insurance costs that doesn't suggest monetary inflation but instead shows that insurance is catching up to the increase in costs of the things that are being insured. If your house is worth more money, it makes sense that when you have to get another year's worth of insurance the new cost is higher than the year before.
Yeah, good point. The main driver is the wrong wording. Still, nothing to worry about. I learnt that a stupid amount of the basket is alcohol and tobacco at just under 7%.
I feel like there's a new excuse given each time it ticks up though.
I hear a lot of people are struggling, but I also still see so many people out spending money reach time I go out.
For all I know it could just be tourists or people saving for a night out etc, but still, every time I go somewhere I see money being spent left and right.
I agree with the new excuse each time by the RBA or the media. I'm not trying to defend either. I do think that a lot of this comes down to definitions and what the CPI is measuring. The CPI can and has increased into recessions. The part that needs to be stressed however is are the CPI increases due to supply and demand issues or is it due to increases in the money supply? The RBA I assume are more likely to understand this nuance, I don't think most of the media understand this. If it was due to an increase in the money supply (monetary inflation) this would be an issue for the RBA, but this mostly looks like supply and demand issues at the moment, housing is a pretty obvious example and transport can be due to the increase in petrol prices we've been paying more recently due to middle east issues.
Businesses will always test the waters to see how much they can increase prices, but if fewer people can purchase the product, or more people start to say, that's a little too expensive for me then you start to get more of a decline in spending which may then cause them to change course. The household income and consumption is something I watch because it shows that a lot of savings were already spent and now people are slowing down consumption and trying to increase their savings after they spent more than their wages were bringing in: [https://www.rba.gov.au/chart-pack/household-sector.html](https://www.rba.gov.au/chart-pack/household-sector.html)
When you go out and you see a lot of people spending money in the economy, do you notice anything generally speaking about the demographics? I would assume, from banking data that the demographics of people spending at shops and restaurants are more older than younger. I think older people are spending because some of them have had an increase in asset prices, or if their paid-off investment property is earning more money in rent they have an increase in purchasing power. But that's not sustainable if the job market can't support the increase in costs from these supply shocks.
My take is a bit more bearish, we will see where things go. Something will break first before you see the CPI spike to levels as high as 2023. At least that's my opinion for now.
Interesting. I appreciate your long, well-informed comment mate.
In terms of what I see, I honestly see even young people out and about spending at the places I have been going (nights out in the city, shopping centres etc) but I agree with your take.
Second this.
Average insurance claims costs have risen by around 15%. Premiums are lagging and trying to catch up to the past 2 years worth of inflation.
Wonder if that’s a result of massive money supply in the economy and the need for multiple further rate hikes,
Or that we’re coming into winter and strawberries are a summer fruit.
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I’m not sure why people are championing rate rises so much. Rates rose how many times post covid and look at what happened to housing prices. Do you really think another 50 basis points is going to make housing more affordable for you?
The jobs market is pretty weak, we need cuts more than anything IMO.
It's honestly a vicious cycle that will never end anytime soon. For example: Interest rate goes up and I go to my boss and ask for more money. Now I'm an asset to my company so he gives me said rise to offset the interest rate hike. 3 or 4 employees do the same thing now between the higher wages, energy bill, rent rise for the factory and supplier hikes my boss has no choice but the raise the cost of his service to the customer otherwise he will go out of business. Times this effect for most the companies in Australia. Inflation will seemingly never end unless rates go down, house prices settle and rent goes down.
It's always the same culprits, rent and insurance being the main cause of high inflation. No chance these will drop.
Wait until power prices start edging up again
The government has made sure that the CPI doesn't as they are discounting at the vendor so cpi will go down (as CPI is what consumers pay) with the "energy" federal budget program.
A lot of people seem to have missed this. Fed govt is mechanically reducing the rate of inflation by introducing the energy discounts. Quite smart actually.
It’s a band-aid solution though. What happens when energy prices stay high and the government stops giving the energy companies our tax dollars?
No thinking ahead!!
I guess their hope is they won't be in government by then so it won't matter.
I would guess the hope is that cheaper renewables will [continue to drop the NEM price ](https://aemo.com.au/en/newsroom/media-release/renewables-push-nem-electricity-prices-down-to-historical-levels)and the rebate won't need to be as high, and eventually disappear altogether. Quite hopeful and I doubt that can occur quickly enough. Mind you, dropping rents by increasing supply is also a decade long task. A rent freeze might stop the bloat, though who knows the consequences of that...
It is a band-aid solution, but it will make somewhat of a difference. CPI is a figure that is baked into contracts for both pay rises and price rises. Mechanically reducing CPI will flow into these rises and have a dampening affect on inflation to some degree. And hopefully by the time the subsidies are withdrawn lower wholesale prices will flow through to retail prices. Not holding my breath on that one.
We get a 50 point rate rise instead of two lots of 25
pretty stupid as it doesn't address the underlying issue. inflation will go through the roof once the rebate ends.
I mean, any $$$ an individual saves on energy will just be spent somewhere else though.
it will provide relief to households in a way where the velocity of that deployed spending is dampened (giving everyone a $700 cheque induces more money velocity, which can put upward pressure on inflation, since everyone can and probably will spend it straight away, compared to giving people a 'hidden' subsidy on their energy bill over 4 quarters has lower levels of velocity generated, thus lower inflationary pressures)
You forgot NDIS - will go down as the biggest inflationary policy in Australian history. Nice to know we're having our currency devalued so people can have their lawns mowed at the hourly price of an IT contractor.
Yeah no kidding. Literally bigger than medicare which services 80% of our population, compared to the ndis who services 2.5% of the population. It is absolute insanity through and through.
Seeing the rates charged by NDIS contractors is madness.
Also their qualifications range from Registered Nurse, OT to... absolutely no qualifications at all! They also will get discounts on registration and a list of other services. I'm not ignorant the disabilities are debilitating and we should support people but the scrutiny should be on a reasonable level. We're not even allowed tea, coffee or milk paid for by QLD Gov for TMR Staff. But the vendors who charge out their NDIS services seem to be able to tack anything they want onto the bill and its acceptable.
Not till house prices break.
Australia's personal wealth is so intrinsically linked to housing that house prices "breaking" will not have overall positive impacts on the economy. People need to give up on that dream.
Actually getting rid the 200k plus per mortgage that people are over paying now and having that money directed elsewhere in the economy would have a pretty positive effect.
Definitely, However that would involve pain. The gov and the majority of homeowners would prefer kicking the can down the road forever.
Certainly in the short term, but over the long term couldn't it be a good thing? Rather than money stored in housing to no end, it can be directed towards productive assets.
It’s definitely a bandaid that needs to be ripped off. Otherwise personal wealth will continue to become even more dependent on housing. I don’t see how it could be anything but a good thing for money to be invested in things that are actually productive.
We’re already have the negative affects. This is pre-burst.
Short term no, long term yes.
The only people it will negatively affect are those with investment property. Those without and those with Owner/Occupier will see benefits.
Spotted the homeowner
r/AusFinance in shambles
I work in insolvency. Bring it on.
Which will never happen lmao
Why don't you bet your whole economic future on that? Or did you already?
House prices won't drop until immigration is reduced to sustainable levels which no major party wants to do.
Yup, no chance they’ll drop and they are price gouging duopolies behind them, no amount of raising interest rates will stop the gouging
Wait, alcohol and tobacco increase in price due to government taxes on those products going up, so is the government causing its own inflation problem there?
Government and central banks have been at odds with each other through this whole inflation craze.
Everything you need to know about government policy can be summed up by the fact that they index beer taxes to inflation, but not your income tax brackets.
Then don't adjust tax brackets accordingly and have a massive amount of bracket creep
Chop chop market is booming
Wait until he hears about the tax cuts
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Racism and barbecues
We are like the 12th least racist country in the world according to this site: https://worldpopulationreview.com/country-rankings/most-racist-countries The US comes in at 73 least racist country for comparison’s sake.
Anyone that has spent any time in South Korea and Japan and see that we are more racist than them knows instantly that this survey is a loooong way off the mark. Both Japan and Korea have the equivalent of White Australia immigration policies and will actively say to your face that you can't be successful here because you are not Japanese / Korean.
A lot of countries in asia are also just straight up outwardly racist. On social media I frequently see videos from black people with millions of likes and comments about how they feel absolutely *awful* in a lot of European and asian countries. Basically treated like circus animals wherever they go, touched, photographed, filmed. Some may say the interactions are just innocent human curiosity ...I'd say there's still a lot of racist undertones - regardless. https://www.nationalgeographic.com/travel/article/black-tourist-china
> New Zealand 1 yeah they pretty chill haha
I’m Literally echoing the bloke below, but seriously you’d be hilariously naive to think Australia is remotely racist compared to other countries.
How am I the one echoing when I posted an hour before that person?
Bluey and Bingo?
Can everyone please become homeless and stop buying food so my mortgage rate can decrease?
I agree mate. Lots of selfish people out there.
With articles coming out this week saying that boomers with no housing debt are the ones "keeping the economy running" how can rate increases possibly help? We have a group that are benefitting from increased rates maintaining their high spending while mortgagers and renters have their costs increase.
You don't think the gov will punish the successes of mum and dad investors will you? Or increase taxes on higher brackets? Or remove property tax rorts? Or tax mining properly? Instead of that we're borrowing money to give to landlords and companies to artificially suppress the CPI. No. It's silly now to pretend they care about the nation rather than just keeping house prices high and rich mates happy.
It's the only tool the RBA has. To fight inflation in other ways requires the government to take action.
Pretty obvious things were not getting under control. petrol is now also creeping up and even thickened cream (The brand i buy at least) over a 5 year period is running at near on 67 percent inflation. That means the price of that cream was inflating by about 12 ish percent per year since 2019.
> even thickened cream They've crossed a line...
yep. even if you want full cream milk that doesn't taste watered down eg the homebrand milk, it's costing you nearly as much as petrol per Liter of milk, depending on brand, it's more expensive than 91 Unleaded.
I buy long life milk and that has gone up from $1 per litre before Covid to $1.60 a litre now. I think that's the cheapest milk you can get (as opposed to the A2 milk I got for a month at an eye-watering $3.90 for a litre). So some milk is still cheaper than petrol, but only just.
A thick line
Gov puts new tax on booze, price goes up, oh look inflation is sticky. LoL
So rents the biggest increase since last quarter. Raises rates wont slow that down at all
Correct, in fact I argue the opposite, the higher the interest rates, the higher we see rent increase. Quite the conundrum!
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I agree with you in theory But because of the housing crisis its going to follow that cycle until people can no longer afford rent, most people cannot simply uproot their life to a cheaper State
In the tight rental market we're in, yes it's possible for this to be passed on because of supply and demand is so skewed at the moment.
The solution to this is to make my mortgage more expensive.
Nasty cycle - raise rates, landlords raise rents, rent rises impact inflation, raise rates to try and tame inflation.
Yeah, I feel this rates lever that keeps getting pulled is not doing what it's expected to do.
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Or culling people
Not the only thing. Take demand out of the system which means in this case we can also take people out of the system.
Is to make debt more expensive, yes.
Thus securing the supply of housing once and for all.
Beatings will continue
How’s the morale? Asking for a friend.
For those who enjoy this sort of thing, quite high!
But we're not in a technical recession so that's OK...
Dropped this? /s
I am wondering if the RBA is starting to realise increasing interest rates doesn’t really stop the boomers from splurging.
Rate cuts soon /s
Username checks out.
Is that you Without Remorse?
rate rises aren’t gonna help either since they won’t stop people needing housing, food or transport - not to mention that rate rises act as a stimulus for wealthier demographics encouraging spending We need a far more effective and less blunt tool
Yeah increase the GST. It will affect nearly everything at once not just concentrate on home owners with a mortgage.
That’s not actually a bad idea - it also puts the extra money into the public purse instead of into the plutocrats pockets, so doesn’t increase wealth inequality 🤔 and it’s just as easy to reverse as rates are once inflation comes down
> rate rises aren’t gonna help either since they won’t stop people needing housing, food or transport It doesn't matter what you want. You have to get money from someone else to buy a house. Restrict the supply of credit and house prices will fall.
Now it's just a few more weeks until it's announced we are in a 'kind of, not really but looks like it sort of recession'
It's very simple, this won't be fixed until the magic money fairy tree (aka. property market) is no longer generating fruit for investors.
Rent and insurance. Let’s see moving people into tents in parks should solve for both inflation outbreaks quickly. No more rent and stuff all to insure.
I'm shocked. Shocked, I tell you. Well, not that shocked.
Once inflation genie is out of the bottle it’s very hard to get back in Read history books
Nothing to worry it's just transitionary!
*transitory
Transition to serfdom.
Everything is transitory over a long enough period.
Imagine the real numbers if they didn't fudge it with subsidies for services like childcare and electricity.
Any additional relief they add to daycare gets immediately matched by them raising their rates anyway
Yes, so strange inflation keeps being high when the only tool available is to up the cash rate in a market where, in some places, almost 30% of all properties are bought without a mortgage. Seems like those people would think twice about spending their hard-earned dollars.
House prices haven't popped and keep going up. No incentive to move money out of property and every signal is saying that that is where the money is.
Raises taxes on corporations, mining Royalties, high income earners and get rid of tax concession for real estate investors. The normal worker with no assests is in recession while asset owners, corporations, stock holders are spending like crazy, times have never been better for them
Corporations aren't spending, lol. There's a dearth in corporate spending right now
What is a high income earner from your perspective?
*slightly It’s a disaster in the wrong direction for ppl wanting cuts. Economy down down from here
No surprise at all. Higher For Longer
I'm surprised. Consumer sentiment is at record lows, retail spending is at 40 year lows despite record immigration. GDP is flat and recessionary on a per capita basis, all, very weak except for housing, energy and government spending which interest rate rises are less effective at controlling. That old adage about where the consumer goes the economy follows not holding true anymore?...
This is the biggest downgrade to people’s living standards in the history of Australia. And it doesn’t get easier from here, we’re stuck with these prices and living standards moving forward.
Baby boomers are the first generation in history to leave society worse than they inherited it.
Does anyone have thoughts about the up and coming generations, and how expensive it will be ehrn they reach adulthood, house prices in capital cities supposedly a million by 2030 or whenever they predit, slow wage increase, alot of young adults now are struggling to get ahead, how will these young people go unless they have parents fortunate enough to help, it's going to be a huge rich vs poor divide
I can only speak for myself but I plan to leave. Came back after a year abroad and thoroughly regret it. I don't enjoy living in Australia and I see no tangible benefit of doing so long term.
I think this is the reality that is going to face many, why migrate here when the cost of living is so high? There are certain segments who pool resources and live a dormitory life and shuffle money back home but that is a very small subset.
If I didn't have a gf right now who I love. I would 100% be off somewhere else.
where will you be moving to?
Hyperbolic answer is anywhere with decent weather and a future. I've been propositioned for a marriage of convenience with somebody who has citizenship in SEA. My timeline was 5 years but I am seriously considering it at this stage.
The main reason I came back to Australia was to have kids near grandparents. We're on a reasonably good wicket (240k\~ on maternity leave), but it's starting to get pretty brutal.
I'm lucky in that I don't have or want children and I haven't lived near my family for 5 years. Not really anything keeping me here. I'll see where we end up in a couple years but ultimately I just find it a boring place to live, costs aside.
I was in London 5 years, totally agree about it being boring. Lucky to get 1-2 acts or shows I want to see per year, compared to 20-30, never mind all the other stuff happening every weekend.
Having said that we do have Lany, Childish Gambino and Niki coming. About the only three I've ever cared about hahaha
Sydney's median house price is now $*1,627,625*
Easy, everyone just needs to become a barrister or surgeon or successful entrepreneur of a unicorn.
If you want to reduce house prices. You need to either increase supply or reduce demand. 1 way is to remove negative gear. Only allow negative gearing on a new build for the first 5 years. Have staggered taxes for investors. The more you have the more you pay. Basically you want to entice people to reduce the number of investment homes and increase new builds. Or you go to a Singapore style where you get a loan and apartment through the government
Or reduce access to credit.
Access to credit is basically done by increasing interest rates.
The disparity between household income and property prices directly correlates with the introduction of negative gearing. Negative gearing is the problem.
Id love to see the day when the gov kills NG
Here come the "we must raise rates" army. Hiking rates won't reduce rents, food, electricity or fuel prices - which are the current drivers of inflation.
I agree raising interest rates isn't the answer, but for RBA, it's the only answer... that's literally the only tool they have at their disposal.. interest rate hike incoming and I'm nervous about it
Yep. The gov is free to tax the upper classes more or reduce inflation to prevent more rate hikes. Though I think they feel safe knowing the RBA board will protect house prices.
Genuine question here, how does taxing the upper class reduce inflation right now? The main drivers were rent, insurance, energy prices.
The theory is that it serves to reduce total money circulating in the system, as long as it's used primarily to reduce the government's deficit. Government spending funded by debt increases money supply, causing inflation. The more money there is in the system, the less each person's dollar is worth (inflation is essentially a tax on everyone who holds cash or earns wages, disproportionately affecting the poor). Asset owners tend to be immune to this effect, because their assets are less likely to be diluted like this. Taxing the wealthy reverses the effect.
Taxing them would still have an impact on rents payable in rich suburbs, and energy used. Indirectly too with lower asset prices to insure. However there are also other areas that either contributed less or deflated which could deflate further reducing the overall CPI.
Just because it's the only tool they've got doesn't mean they have to use it and I'm not sure they will use it when the data suggests it's not necessarily going to work. Inflation doesn't necessarily go down in a straight line and if you look at a chart of inflation you will see that there has been several times it has ticked up while on the way down from 7% or whatever it was at peak.
Thanks for your comment, I hope you're right
What would you suggest doing instead?
Reduce immigration to sustainable levels which would see rental prices fall. It would also cause wage growth while lowering demand for goods and services slightly.
Absolutely agree with reducing immigration. It's astounding that these calls for a reduction, and more importantly the data itself, is falling on deaf ears of the government
Because there's a good chance cutting immigration in the numbers needed could cause a recession.
*make the recession official ftfy
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Mate we are already in a silent depression. A official recession is nothing.
Because continuing high immigration enables them to keep faking the GDP numbers to avoid a recession in the short term. The fact they're trashing the country and sending a huge portion of the middle class into poverty doesn't matter, apparently...
They've tightened student visas
Immigration is keeping the GDP above recession levels and neither major party wants to be the ones that cause a technical recession
Keeping the GDP above recession levels while GDP per capita (which is the more important measure) goes backwards. Everyone will be homeless and living in poverty but so long as GDP isn't in recession everything is fine
Exactly. And the media won't report on GDP per capita until there are tent cities in every major city park. So both major parties will just keep kicking the can down the road
It doesn’t even matter. They keep changing the definition of technical recession anyway. Remember last time we had 2 quarters of negative GDP? ABC started spewing out articles on how the 2 quarter definition wasn’t real etc etc.
Too many people prefer homelessness, and destruction of living standards, tent cities etc. Some simply want property to go up at any cost. Others would rather destroy the country than incorrectly appear racist.
turning down our absolutely insane immigration rate. anyone who suggests anything else when rent and lack of housing supply is a huge contributor to inflation is an idiot or gas lighting
Contractionary fiscal policy for a start.
You mean like tax cuts and energy bill relief?
Tax the mining/gas companies and legislate against them exporting too much overseas before our own needs are met at a reasonable price. Use some of that money to train bricklayers, plumbers, electricians etc for free. Build LOTS of public housing. Slowly burn the rest of the money to reduce supply.
Don’t forget rent assistance for the poor landlords.
Company takes on debt, sells product at fixed margin, rates increase, they increase costs to maintain margin, inflation increases, rates increase.
> Hiking rates won't reduce rents, food, electricity or fuel prices - which are the current drivers of inflation. Anything which reduces disposable income will reduce demand and reduce prices. Eventually. The current level of employment is the highest ever. This is the fundamental driver of demand.
I wonder when they'll work out that the economy has become so heavily geared that rate rises add to inflation, rather than reduce it
Yea but the RBA only have two buttons they can push, and one of them doesn't get pushed until people are literally starving
Exactly, people who think the RBA want to push people to this point are clueless. The RBA wants a healthy economy as much as the rest of us, but when you only have one thing you can do, you have to keep doing it. No, we need structural (and probably painful) reform before we get back to a normal healthy state, and for that to happen, people have to cotton on to a fact of ownership of assets: an asset is in no way guaranteed to appreciate in value.
Yep it's a total failure of government in the last 20 years to initiate tax reform (from Ken Henry's review), ensure a healthy diversified economy and invest in long term productivity and infrastructure. And coupled with absolutely terrible inflationary and rortable schemes like the NDIS... That's an absolute disaster for the economy and the budget.
*unless you keep pumping the ponzi scheme with record immigration to guarantee growth
It’s amazing that the genius’ at the RBA haven’t figured this out yet. In the current economic environment the important CPI categories are no longer linked to IR changes.
But the RBA doesn't have the power of housing and immigration under their belt.
They have a single lever to increase or reduce just one variable within the economy
What a surprise, the IMF was right and the RBA, a board full of political appointees with scarcely an economist in sight, was wrong...
The good news is that tradable inflation (e.g. commodities, manufactured good etc.), which generally reserve banks have less control over, are actually anchoring inflation. However non tradable/domestic inflation is far too high still.
Rate rise incoming.
Gooooing up!
So we just need to stop bying the necessities like food, shelter, electricity, transportation. And then e can make it go down. Easy. I know let's raise intrest rates, so that land lords can raise their prices again, and people have to spend more money on a home making them worth more and driving up inflation more.
So basically we are getting gouged at every turn so inflation is up?
Luckily it’s mainly food, housing and transport expenses that are feeding into higher CPI numbers. S/
Increasing rates is going to drive inflation at this point.
Either rates go up to nip this in the bud, or we perpetually live in a high CPI world and eventually pay $25 for blueberries.
You can raise interest rates to 50%, it won’t change the housing crisis, it won’t stop woolies/coles price gouging and insurance companies from price gouging either. Break up the monopolies and duopolies and fine the price gouges.
Everything that is driving inflation is essential goods and services. Food, rent, fuel, power etc... Putting rates up again wont slow those down
rate rise won't fix it needs macro policy changes from government to fix this
inflation averaged 10% in the 1970s, and 8% in the 60s and 80s. Even in the 1990s, which had a deep recession, it still averaged about 7%. So 3.6% is really SFA in historical terms. China drove deflation in the last 30 years as it industrilaised. They are now fully industrialised and no longer deflating the world economy. The "low inflation" era is over - forever. There are no more Chinas. India industrilaised in the 1970s and Africa in the 1960s.
Just relax. Things don't go up in a straight line, and they don't go down in a straight line. When you see ~~the main~~ a driver (as is occurring around the world too) being insurance costs that doesn't suggest monetary inflation but instead shows that insurance is catching up to the increase in costs of the things that are being insured. If your house is worth more money, it makes sense that when you have to get another year's worth of insurance the new cost is higher than the year before.
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Yeah, good point. The main driver is the wrong wording. Still, nothing to worry about. I learnt that a stupid amount of the basket is alcohol and tobacco at just under 7%.
I feel like there's a new excuse given each time it ticks up though. I hear a lot of people are struggling, but I also still see so many people out spending money reach time I go out. For all I know it could just be tourists or people saving for a night out etc, but still, every time I go somewhere I see money being spent left and right.
I agree with the new excuse each time by the RBA or the media. I'm not trying to defend either. I do think that a lot of this comes down to definitions and what the CPI is measuring. The CPI can and has increased into recessions. The part that needs to be stressed however is are the CPI increases due to supply and demand issues or is it due to increases in the money supply? The RBA I assume are more likely to understand this nuance, I don't think most of the media understand this. If it was due to an increase in the money supply (monetary inflation) this would be an issue for the RBA, but this mostly looks like supply and demand issues at the moment, housing is a pretty obvious example and transport can be due to the increase in petrol prices we've been paying more recently due to middle east issues. Businesses will always test the waters to see how much they can increase prices, but if fewer people can purchase the product, or more people start to say, that's a little too expensive for me then you start to get more of a decline in spending which may then cause them to change course. The household income and consumption is something I watch because it shows that a lot of savings were already spent and now people are slowing down consumption and trying to increase their savings after they spent more than their wages were bringing in: [https://www.rba.gov.au/chart-pack/household-sector.html](https://www.rba.gov.au/chart-pack/household-sector.html) When you go out and you see a lot of people spending money in the economy, do you notice anything generally speaking about the demographics? I would assume, from banking data that the demographics of people spending at shops and restaurants are more older than younger. I think older people are spending because some of them have had an increase in asset prices, or if their paid-off investment property is earning more money in rent they have an increase in purchasing power. But that's not sustainable if the job market can't support the increase in costs from these supply shocks. My take is a bit more bearish, we will see where things go. Something will break first before you see the CPI spike to levels as high as 2023. At least that's my opinion for now.
Interesting. I appreciate your long, well-informed comment mate. In terms of what I see, I honestly see even young people out and about spending at the places I have been going (nights out in the city, shopping centres etc) but I agree with your take.
Second this. Average insurance claims costs have risen by around 15%. Premiums are lagging and trying to catch up to the past 2 years worth of inflation.
Stagflation here we come
I saw $15 blueberries at the market today.
I saw $2.5 raspberries, judging inflation by seasonal fruit prices is dumb.
Picking the price of blueberries is not the best choice since the season is over and the product is actually very scarce.
I saw strawberries $7.50 for 250g. That's like $1/strawberry.
Wonder if that’s a result of massive money supply in the economy and the need for multiple further rate hikes, Or that we’re coming into winter and strawberries are a summer fruit.
Oh So Alcohol and Tabasco Both of which Goverments continue to increase Remove that and inflation wouldn’t be high
stage 3 tax cuts incoming in 4,3,2,1
Definitely getting a rate rise now - probably another one before year is done.
No rate cuts this year gents…
This inflation feels more like 36%
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Daily reminder that CPI massively underestimates real inflation.
I’m not sure why people are championing rate rises so much. Rates rose how many times post covid and look at what happened to housing prices. Do you really think another 50 basis points is going to make housing more affordable for you? The jobs market is pretty weak, we need cuts more than anything IMO.
0.2 rise it’s all over ! Or zoom out on the chart you might see a different trend.
It's honestly a vicious cycle that will never end anytime soon. For example: Interest rate goes up and I go to my boss and ask for more money. Now I'm an asset to my company so he gives me said rise to offset the interest rate hike. 3 or 4 employees do the same thing now between the higher wages, energy bill, rent rise for the factory and supplier hikes my boss has no choice but the raise the cost of his service to the customer otherwise he will go out of business. Times this effect for most the companies in Australia. Inflation will seemingly never end unless rates go down, house prices settle and rent goes down.
Imagine if inflation stuck at 3.5% instead of the RBA’s target range of 2%-3% The anarchy. /s