Is Australia's 30-year run without a full-blown recession about to end? | 7.30
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- Опубликовано: 26 фев 2023
- Rising interest rates and unemployment won't be far from the minds of those who lived through Australia's last major recession in the 1990s. But in 2023, with a debt-laden nation paying off homes many bought at record high prices, rising rates mean a new type of misery. Australia's housing market has completely changed the nature of our economy. And as Alan Kohler reports, many of the old economic rules may no longer apply.
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And lets be clear, not every Australian has a mortgage. High inflation affects more people than high interest rates.
People either pay a mortgage or rent. Both are affected by inflation.
High interest rates results in less builds which results in high inflation for renters.
Less build equals more capital growth for investors, so investors get richer even if the struggle with payments short term, whilst renters get rekt with insane rent and getting priced out of the market.
We have a housing crisis and the high interest directly effects supply growth..
@devinslice capital growth only exists on sale. Estimated capital growth is dependent on similar sales being used for valuation. Interest rate rises reduce potential customers, and it reduces the amount available to offer by potential customers, meaning housing price increases are reduced as the market contracts to meet the demand.
The main restriction on supply growth is available land. Very significant areas were tied up by developers in the 90s and 00s as land banks. Combine this with councils becoming more aware of dwindling native space and an increase desire of residents to preserve that dwindling space has resulted in councils releasing less land for development.
Personally, I think people are mad to trust the market or the stability of builders at this point.
Interest rates are going up another 2% over the next two years. It'll teach three generations about the reality of conservative economic policy.
@@huntster4000 At the same time we are accepting record levels of new arrivals, who compete for rents and housing. It is a mess.
@@tomcustard
Exactly.. the only way you can benefit from this is being an asset ( real estate ) holder.
Everyone else gets screwed hard..
The RBA should be criticised for dropping rates to effectively zero, not increasing them. People who maxed out their borrowings during record low interest rates and unemployment also need to take responsibility for their actions, as that helped to fuel the housing boom and make housing even more unaffordable.
agreed. but rba wasn't alone, fed ecb bank of china, etc, all did the same
the people who chased the housing mania at 0% deserve it.
@@dehaka3764 get rid of negative gearing
Let's not forget that the primary factor in inflation is record profits of large companies. It won't do any good raising interest rates if consumer demand is not the cause.
@@russe19642 that would be a good start. But unless we address supply, demand will cancel out most of the gains.
When global central banks start unwinding their balance sheets the show really starts.
Is there anything like proof recession stock? I am 58 years and would like help in managing my retirement portfolio which is currently $1.25M...down from a high of $1.67M…
It really is a delicate season now, so you can do little or nothing on your own. Hence I will suggest you get yourself a professional that can provide you with entry and exit points on the securities you focus on.
ohhhh poor you ... what's the use of being the richest guy in the graveyard
Market is down still, I've been looking up strategies and apparently both bull and bear market condition provides equal avenue to accrue massive gains, and a news article particularly mentioned a 54 year old that made $180k in 5weeks, how do I learn these strategies, my portfolio has been stagnant for months.
Find stocks with market-beating yields and shares that at least keep pace with the market for a long term. For a successful long-term strategy I recommend you seek the guidance a broker or financial advisor
@@andreasleonard0 Very true , I diversified my $400K portfolio across multiple market with the aid of an investment advisor, I have been able to generate over $900k in net profit across high dividend yield stocks, ETF and bonds in few months
@@vivianecardoso0 Glad to have stumbled on this conversation. Please can you leave the info of your investment advisor here? I’m in dire need for one.
It's run by ISABEL LINDA DUERI, who I learned about and got in touch with thanks to a CNBC interview. Since then, it has served as the point of entry and departure for the games we have emphasized. A search on the internet can be done if tracking is necessary
@@vivianecardoso0 Thank you for this amazing tip. I just looked the name up, wrote her explaining my financial market goals and scheduled a call
It was pretty obvious 3 years ago that these borrowers would be tomorrow’s cannon fodder.
The RBA isn’t solely responsible - 30 years of poor policy, irresponsible lending, a complicit corporate media and public financial illiteracy have only added fuel to this fire.
Ok boomer
Kicking the can down the street and looks like the abc and co are calling for the can to be kicked further
Very true.
@@russe19642 envy?
@@walterbo7687 of not being a boomer? Hardly
It is amazing that 4% interest rates are seen as ruinous. Historically 4% is a very cheap interest rate. Borrowers should anticipate when securing a loan that an extremely low initial interest rate may not be sustained.
I couldn't agree more. I'd always assumed they could well increase to between 10-20%. As such, I only desired to purchase a house worth half that of what many peers were purchasing. Sure it was in a "poor" area, but having a roof vs non doesn't look so bad now!
@@DavidS-wm9ud If you borrow $1M, which is way below the median price for a house in Sydney, a 20% rate means $17k monthly repayment. At 20% most people could not even afford a 1bdr appartment in Sydney…
@@James-ig3ri but they are so live within your means and stop gendering people James
@@romainp4318these people don’t understand how insane 10-20% actually is.
@@romainp4318 but at 20% rates, property prices would drop.
get rid of negative gearing and regulate AirbBnb in residential areas
Aussie base rate is 3.55%. In the US it’s 4.5%, UK 4.0%. This is not an Australian issue. We are emerging from an era of historically low interest rates and QE and this has resulted in a global house price bubble. The same issues of generational inequity, working poor, food banks etc are also the same
Yeah, true, it’s kinda weird how this was described in total isolation from global context… other than a very brief mention of energy prices
Throw in that The boomers have 50% of the capital. Which will take a while before that pass on to the next generation.
(Heard the stat, that the USA stock market is 50% boomers)
No one's blaming Biden and US govt for the economic collapse. As if it's Australia's own fault.
No one's blaming Biden and US govt for the economic collapse. As if it's Australia's own fault.
Printing money brings inflation, that what happened around the world during the last 15 years.
QE lasted too long, money Printing wasn't used to boost the real economy.
Australian interest rate average is around 7%, why they kept them down for so long and just kept printing money is beyond me. What did they think would happen?
LOL... What makes you think they were thinking?
Mate, this is Australia. No one is personally accountable. Government is always to blame for our bad decisions.
@@JM-hn7ju Not like the Government is responsible for seting the legislative and structual basis for all market conditions....yeah, clearly can't be the, specificallay previous, Government's fault.
@@soulsurvivor8293 yep because interest rates sitting at historic lows was totally never going to cause inflation and that was never going to cause rates to rise. Everyone is a victim without any capacity to have the foresight that the party would end.
People took on the risk, these are the consequences when it's realised.
Countries have used mortgages on land to create and stimulate economies for hundreds of years. Read Fiat inflation in France.
If done correctly. It can sort of work, what it definitely does is buy time.
I started buying property 25 years ago , I was fortunate to buy when things were so cheap. I think from memory interest rates were in the 8% range. Since then rates have continued to go down , with one of my loans being as low as 1.99% only 2 years ago . I believe it is all an illusion from what I've experienced since my time in the market from 1998. Its basic maths when interest rates go down we can afford more , but we then accumulate a much bigger debt, which gives us a sense of more wealth due to higher asset prices. What we don't realize is one day this higher debt needs to be paid back . We were probably better off keeping interest rates at around a rough figure of 6% so property didn't rise to unsustainable levels , which would then keep property prices lower and more manageable ????
"What we don't realise is that one day this debt needs to be paid back". Oh you knew alright, but let something get the better of you:
GREED
why does australias collective poor have to foot the bill for successive neolibral governments passing on debt? There's two types of rule for those in this country.
ok boomer.
Was bound to happen. All the people who bought homes in covid at astranomical prices and fuelled the housing prices to rise are all now going to suffer from their decisions. How they didn't see this coming has me baffled.
people still need to live
The reserve bank governor gave those people the green light to pay to much for those properties. He should not have told them
That interest rates will be on hold until 2024. There will be no recession, there is full employment. Home owners can access their
Super to pay their mortgage if they are having difficulty. The excessive house prices are here to stay thanks to scarcity of housing.
There will be no housing crash or decline.
@@davidaustrian9455 Some of them withdrew the only super they had to buy in the first place.
Your comment is brutal but true. People are in denial about the upcoming housing crash too. It's just a place to sleep. Sell the thing while you can and cut your losses before the financial devistation. I live in a regional area, all the covid refugees are heading back to the cities and the rental market is being flooded with overpriced rentals. Sooner or later the greedy landlords will have to sell. Buy back in after the crash. People have too much emotional attachment to their houses.
Economics isn’t compulsory in school… clearly haha
When you take a step back and look at it, life is a strange and lovely experience. Working with a financial expert may genuinely set you up for success in life. I'm glad I was able to contact my coach, Rodger Michael Karl, earlier this year since, while others were complaining about the downturn, I was busy cashing out from my portfolio, eventually making over six figures in the first quarter alone....
Rodger Michael Karl really seem to know his stuff. I found his online-page, read through his resume, educational background, qualifications and it was really impressive. I left him a note and booked a call session with him...
_Rodger Michael Karl's strategy has been helping a lot of traders/ holders out there, with his program I was able to recover my losses from the crash so swiftly...
Having the requisite strategy to pull off profit in this market is one thing and having access to the exclusive market information is that isn't disclosed to the public is another, that's why the pros are killing it this period.....
Yall scammers aren't fooling anyone
funny how my comments gets removed, but nothing happens to scammers like your Rodger. hey rodger.
Get rid of negative gearing
Don't ever quote me the unemployment rate, permanent jobs have been reduced significantly and if a person has 3 casuals jobs to survive, then some how to the Government that means 3 people have work. It's misleading and those that use it are either ignorant or a manipulator
All because businesses don't want to pay for sick leave and annual leave.
The government have failed Australia in every way. Housing,hospitals,electricity supply,juvenile crime,superannuation,immigration 300,000 this year,allowing subdivision’s on flood plains,allowing people to borrow more than they can afford,2% deposit,interfering in the housing sector. The list goes on and on,yet every politician and ex PM are doing just fine,perks,pensions.
I'm with you on hospitals, but the rest is self harm.
If you think politicians get paid a lot, check ABC directors and executors. Michelle Guthrie walked away with $1.64m.
the liberal governments? absolutely and doing squat about climate change
The previous government poured fuel on the fire of inflation
Yet try tax the Rich’s super tax dodging or even mention abolishing the long overdue to be abolished Capital Gains & Negative gearing so Aussies can afford a home now & in the future Murdoch puppets & all of you come out with your pitchforks… what can be done in capitalism 🤷♂️ it has no way to change.
People seem to forget this has nothing to do with inflation and all to do with housing affordability. The housing market NEEDS to completely plummet. We have countless individuals who could barely afford a property living in "million dollar mansions", paid for by "free money" from banks. To many have bought properties and "investments" that they couldn't afford, but insisted on going ahead with. Hard to feel sorry for those who haven't exercised a little prudence.
As for inflation, that was highly predictable during the pandemics printing mania! I fail to see how that was a "surprise" to anyone?!
Key lesson here is don't bite off more than one can chew. Stop paying too much for houses, let the market collapse to an affordable threshold and ban foreign investment in low end housing except for new builds.
The cost of capital will never be this cheap again. If house prices drop by 50%, they still won't be cheap.
where? if the average price in sydney drops 50%, i will sell my soul to the devil to buy houses. if the eastern suburb drops 50%, it's still a massive bubble.
it depends on where. average price need to drop to 2019 bottom levels to be fair price.
Put it this way when the average Australian can no longer afford to go into debt, you’ve got serious problems.
Those that think super low interests rates were anything but terrible idea or even remotely sustainable are simply dreaming.
Expecting others to effectively lend you their money for free was always going to come unstuck, and this policy hideously inflated property values.
The reality check has arrived.
Interest rate rises are not to blame for our housing crisis, it's the absurd cost of housing that has skyrocketed over the last 20 years
Blame negative gearing. The clown in the video borrowing 480k to live under high voltage power lines. What does nsw have that Vic doesn't? What does Vic have that SA doesn't?
I hate to say it, because it's darned near illegal. Immigration is really to blame.
There is very nearly 30% more people in Australia, today, than there was in 2003.
There aren't 30% more houses and there certainly isn't another couple of large cities either. I said it. I'll stand by it.
You are right, but in contrast, it's the low interest rates that created the high demand due more people being able to afford to get into the market, and this demand created surging prices. It's basic business, high demand = the ability to sell for more, whilst the inverse of of this, low demand = lowering of prices. Negative gearing also contributed to this demand as more families were able to get low interest loans for investment properties, thus creating more demand and escalating prices. One of the reasons rental prices have gone up dramatically is that majority of these investment loans were at variable rates and as the payments for these investment homes increased, the investor increased prices to accomodate the extra cost of servicing their loans. And yes, before you say it, a higher demand for rental properties over supply did contribute, but also the move by many investors into the short-term rental market (AirBNB etc) also played it's part. Overall though, I think we will see a strong correction over the next 2 years abide at the cost of those who believed that interest rates would never go up. Like Paul Keating once said, it's the recession we have to have.
@@davidbrayshaw3529 yes that’s right tax paying immigration has put a squeeze on the property market due to demand. Who’s benefiting from that demand, the policy makers. Do you hear anything in the media about housing infrastructure expansion. No. Our MP’s and their developer mates have billion dollar property portfolios to preserve. Join the dots yet?
@@RD-wg2nt It was a trick first used by the Howard Government to keep the GDP out of recessive territory in order to avoid nasty newspaper headlines. Property developers and investors weren't the only winners.
But in the mean time, per capita GDP fell, and nobody blinked and eyelid.
Of course, successive governments of both varieties learned from Howard
and have felt no shame in adhering to his government's practices, despite the cost to Australia's younger generations, amongst other things.
If the RBA had put rates up 12-18 months earlier there would not of been skyrocketing house prices and home buyers would not have needed borrow so much and they wouldn’t be in this mess.
Instead of trying to predict and prognosticate whether or not we’re going into a recession and precisely when it’s going to happen, a better strategy is simply having a portfolio that’s well prepared for any eventually, that’s how some folks' been averaging 150K every 7week these past 4months according to Bloomberg.
That’s crazy, I’m just doing everything wrong with my portfolio
@Jake Farmers The US-Stock Market had been on it’s longest bull-run in history, so the mass hysteria and panic is relatable considering we’re not accustomed to such troubled markets, but there are avenues lurking around if you know where to look I’ve netted over $850k in the past 10months
@@agathariley9176 You are right! I diversified my $500K portfolio across various market with the guidance of an investment coach, I have been able to generate a little bit above $1m in net profit across high dividend yield stocks, ETF and equity during this red season in the market But the truth is that you cannot do that without a tested trading strategy
@@anthonymilner1088 Mind sharing info on the adviser who assisted you? been saving for pension since age 18 - company scheme. along the way I hit higher tax, so I added to my company pension with a SIPP (tax benefits) I'm 46 now and would love to grow my finance more aggressively, there are a few cars I still wish to drive, a few mega holidays, etc.
@@philipcooper1636 I invest across the top markets but not by myself though. I follow the guidelines of "Donna Di Lanni". you might have heard of her. I can correctly say she's worth her salt as an in'vestment advisor as her diversification skills is top-notch, I say this because I see that in her, results as my portfolio grows by averages of 20 to 3O% every month, unlike I can say for my IRA which has just been trudging along. my portfolio just mirrors what she places and not just on some particular industries of my choosing. she gave me that financial freedom I needed.
Not one mention the unrelenting stimulus to keep kicking the can down the road
Exactly. The abc were all for the stimulus packages whilst berating those who spoke up against them
It's a ponzy scheme no one wants to wake up from mate. Is the cricket on ?
Goverments dont cause inflation and over spending some proxy war in ukraine does.... 🤪is what they want you to believe.
Oh, and the program never mentioned "Negative Gearing".
This is unfortunately what has to happen the economy is over leveraged and has become speculative and growth based rather than based on value creation a productivity we need reduction in asset prices for things to become affordable again and we need a shift towards rewarding value production rather than rewarding risk taking and people with a lot of money to throw into housing.
You're asking a lot from irrational impulsive monkeys :P
I think these monkeys are more happy to eat the bananas without knowing where it came from.
The Howard Government made the investment in property Highly rewarding for little to no risk for the wealthy.
With decades of minuscule risk and ever increaeimg payouts, why wouldn't the maket naturally be saturated with the people who just wanted a home to live in being saddled with all the expense and debt.
I wouldn't push the onus of their misfortune upon them so readily.
Unless they played the same game as the big Property Investment and Development company's did.
Unless they tried to flip invimestment properties on the cheap, for overly increased annual profits from sales with a halved Capital Gains tax. While abusing Negative Gearing in offseting their own tax returns with the "loses" over the year they sat on the investment property.
Yeah, I will happily laugh at them making the choice to try to play the same game as the wealthy investment firms.
Absolutely agree. I'll be moving back to Australia with my family this year, after 20 years away. With our entire life savings will be swallowed up buying a modest 3 bedder, but if prices were not so ridiculous, we'd probably have enough capital to start a small business and employ a couple of people. At our age, we want the security of a home for our family, so will choose that - but imagine if our nations wealth was going into productive small and medium sized businesses rather than inflated asset prices.
@@naiyomotion Exactly right. Various pundits want to complain that our wages are too high to compete internationally but if we didn’t have such high housing costs we would be able to pay a lot less in wages and still have the same living standards.
@@soulsurvivor8293 Howard: The Gift That Keeps Giving. Hasn't he been quiet lately? His policies on housing have come home to roost and not only that, they are sharing a nest with his governments wholesale sell off of Australia's gas reserves with no domestic supply or price guaranteed.
He should be tried and hanged for treason.
And before all you "righties" get into me, I voted for him in 1996. Never again. Never again a Liberal government.
The Labour Party tried to address some of the problems with the housing market e.g. negative gearing at the 2019 election but the Australian public got sucked in by Coalition scare tactics and voted against reform .
Interest rates will directly effect asset prices. If you’re over leveraged. You are overloaded. You made a mistake. Interest rates going up helps savings. The very reason rates going up is because people are spending so much money.
Its a double edge sword. And of course, the ones complaining are the ones that are losing.
I have friends who have >$500k mortgage and still go out each week to bar and restaurants, like no tomorrow. It's like a watching a train wreck slowly unfold. Go out to the city on a Friday/Saturday night and ask yourself where is the recession? I'm not surprised that the RBA are still increasing interest rates.
It only helps savings if the banks pass on the rate rise to savings customers. Not many do, even if they do it's only a fraction of it.
Meanwhile they are only too happy to pass the rate rise, in full, on to borrowers.
So you're partially correct.
It's a profits driven rate rise, predominantly the profits of the larger company's and corperations.
Almost everything else generally has no meaningful impact on the rate or inflation in this instance, at least by comparison of contributing factors.
No rates are going up because the printed too much money to allow everyone to spend.
Not one politician has come out with a strong statement saying "STOP SPENDING MONEY, families could lose their homes and we have already had terrible home loss in floods and fires"! "Oh and by the way, your grandchildren will still be paying off our budget deficit in 50 years, so don't strike for pay rises either"! NO leadership!! 😡
@@jenniferharrison8915 Disagree with the pay rise section. If the government inflated everything. They have to pay for it. Australia has a shocking record in regards to wages to inflation. Pay rises are inflation. The labour price inflated just like anything else.
At the end of the day, if you can't work, or you can't eat, or you can't pay your rent, then you're in a bad way. I'm on a pension, I can afford my rent, I don't need to work, but I can't afford to eat. There are others who are working, and eating but can't afford their rent. If you can't meet these three basic things, which so many cant, then it's a recession!
true, but also we have corporations earn record breaking levels of profit and paying little to no tax on it.
People need to learn a housing loan is a commitment to pay it over 25-30 years. If they dont have buffers to manage interest rate changes over that period then they are to blame. Imagine how difficult it is for people who could not buy a home and have been renting for decades just because others have been chasing house price increases for the past 20 years.
On the other side of the coin raising interest rates means finally getting a return on savings.
ridiculous....why should everyone pay more for groceries so that these people can own a property in an area that they can't afford??????????
There are two ways of thinking:
1) rates are so low and I can borrow heaps; get the house and think it's mine (when it's not) and it'll be okay because I can sell for more than I purchased for because houses go up, or;
2) borrow a million dollars which is that many more times my income that if the proverbial hits the fan I'll be really hard up for cash flow and just won't work.
I went with option two. Doesn't seem that many others did. You all were so smug about rates at 0.1 and buying up anything with debt - all debt, that no, I don't feel sorry for you, and it's not the RBA's fault - your name is on the contract because you signed it.
It's the corporate greed to blame. They made billions in profits this year
Not this time, it's consumer greed, I'm afraid.
The unfair thing is not all home owners are effected. People who now own there homes and are cashed up will still spend. Extremely unfair and cruel tactics. No body needs to own multiple rentals it is just greed and the Younger Generation will now pay the price. Some people should be ashamed.
Negative gearing is another contributor for pushing up property prices. Investment property owners don't care if their property is vacant or if the rental price goes up, due to the tax
write-off provided by negative gearing. Prior to the introduction of negative gearing, the investment property owner, needed to be mindful of the rental price and property maintenance to
ensure the property wasn't vacant thereby applying a downward pressure. Negative gearing is doing the opposite, encouraging multiple property ownership, upward rental pricing and property
vacancies. Who cares what the purchase price is, so long as you get your tax write off. I suspect a bubble is about to burst. Also why the heck did we privatise our energy market to a cartel.
Has negative gearing really pushed property prices up? I'm not so sure. And as far as your average investor being able to leave a property vacant due to negative gearing tax breaks, I'm not so sure about that, either. The average income of those claiming finance expenses on an investment property is around the $80,000 mark, still well inside the 32.5% marginal rate and not the sought of income that screams "I don't care if my property's vacant". And just because it is a tax right off doesn't mean you're not sticking your hand in your pocket, you're just getting a "discount" of about1/3 on average. You're still handing out wads of your hard earned pay.
And the reality is, about 95% of property investors only own their primary residence and one investment property, not multiples.
I don't benefit from negative gearing. My wife and I looked into purchasing an investment property, and short of big (and I mean BIG) capital gains, it looked like a bit of a mug's game, tax incentives or otherwise. Our accountant and financial advisor were more than happy to share their client's experiences which supported our findings.
All this talk of negative gearing ignores the big problem that Australia faces which is supply and demand.
And by the way, privatising our utilities was the stupidest thing that we ever let our politicians do.
😆
@ozmaniac49 Australia's electricity generation was owned by the states
and was sold off by mainly Liberal governments, starting with Jeff Kennett
in Victoria.
And it was John Howard's government that brokered the deals with foreign entities, including subsidiaries of the CCP, to harvest and export Australian natural gas. And his government did so without guaranteeing domestic supply or price.
Gillard reluctantly signed off on the deal as it is convention to honour prior government's contractual obligations.
I remember this particularly well as I was working in an industry at the time that was dependent on natural gas.
So you might want to ask John Howard, rather than Julia Gillard what he was thinking at the time. While you're at it, ask him about the $100+billion dollars worth of state assets which his government slowly but surely
sold off over an 11 year period.
NZer here.
I'm very confident that Australia will get through the "choppy economic seas". Australia is a big country with great people and huge resources and it has historically been quite conservative in its economic policies (which has served it very well).
That's what is needed now. Cuts in wasteful government spending (and here in NZ too) and reduction in debt if possible.
Pause on our government's regular pay rises and stopping their wasteful spending would go a very long way, but our government is also very selfish and doesn't do what it's core should be..... putting it's citizens first.
I'm sure it's no different for our brothers and sisters across the ditch.
Maybe its time for Australia to enter slow decline. Prime time may be over.
So, those in tough situations rough it out while our smart government closely studies how to reduce superannuation tax breaks for the 1% of the population who have over Au$3 million in superannuation. Of course, this way no one notices global markets promptly dropping the Aussie Dollar about 3c to 66-7 cents (US). Australia has for decades punished those who work hard to gain expensive qualifications that increase national productivity e.g., STEM degrees, nursing degrees, doctor/nurse specialisations, computing, accounting etc. by taxing the living daylights out of them …and rewarded those who choose an easy school-leaving career pushing reports in a government office, or a subsidised apprenticeship in a low productivity trade like tiling, plumbing, roofing or concrete-ing with tax breaks, family assistance and paying them the same as qualified specialists. One consequence is that in most Federal or State government offices you’ll find illiterate, dull and entitled school leavers who are paid the same as their STEM graduate colleagues. The other consequence is that skilled Aussies move overseas for high paying jobs and a lifestyle that justifies the effort expended in obtaining an expensive tertiary qualification. And let’s not wallow in a discussion on how university is ‘free’ in Oz or how universal healthcare is free. Graduates will explain the HECS shackles that bind them for years to their educational choice which finally got them to a highly taxed job where they were (mis)managed by some uneducated goof off. And unless you’re nearly dead you don’t get any ‘free & universal’ healthcare - you spend years on some waiting list instead …just like the Canadians do. I’m permanently moving to the US with my girlfriend - very fortunate to have those options - but then we went through hardship to ensure we had no debts from university - no HECS, and never availed any kind of student or unemployment welfare. She’s an ICU nurse with experience from 3 countries, and I’m a technology manager with experience in 4 countries/markets - and we want our kids to have a good education and solid career options. Earning Au$200,000+ together here doesn’t really cut it - and if you haven’t lived and worked elsewhere that perspective would be hard to understand. Well worth considering why more than a million Aussies -usually the well qualified ones, but also labourers, actors, singers and truck drivers - permanently live and work outside Australia. Australia needs incoming expats/immigrants to pay taxes to support our $100-a-week shopper and our pensioners because many expats as well as born-and-bred Aussies leave for greener pastures. Way to go, Australia 🇦🇺 let’s celebrate mediocrity, ingrain low productivity, ferociously preserve our simple economy, steal/encroach more sacred Aboriginal land to mine, and chase out all the intelligent people - that’s the Aussie way.
And when interest rates were tanking before the pandemic no one was complaining even though it fuelled a housing bubble contributing to this household debt problem. All the RBA was trying to do then was stimulate the economy off the poor fiscal policy from the former government. The bank regs around lending were also relaxed not helping with this either. Blindly blaming the RBA is idiotic.
true, I think its human nature to blame the most competent
Spot on. The blame for this lies solely with multiple governments (both LNP and Labor) and the banking sector. If the banking system hadn't been so heavily deregulated and banks were legally required to assess a customers ability to repay based on an interest rate of 10% then the vast majority of Australians would be a lot better off.
This problem has been a multi decade issue from both sides of politics. Both sides are guilty
The mentality of home ownership, especially when it comes to being the avenue for building wealth is such cancer for society.
Man if you bought a house in the last 2 years, I'm sorry but that was a silly idea, we've been warned about the housing bubble for years, I understand the advantages in having your own house but you have to weigh up the risks. No freakin way would I buy a house, not sure if I could live with the Anxiety and now it begins, the inevitable
It’s just a cycle bro, if it drops it will go back up in time👍
Cycle of real estate unfortunately.
Thanks LNP for knowing we don't need an NBN or houses or a future.
Single dad single income borrows 480 grand had no idea rates could go up more then once
Yeah. What was he expecting? That his rates would stay the same rate for the next 20 years? They were always going to go up. It was a question on when not if.
Don't know his situation but with so many looking for accommodation would there be nobody suitable to board at his place?
@@chrisruss9861 single dad with kids? It's hard just keeping a close eye on them let alone some random..
The fact that he ONLY had to borrow 480K is simply mind blowing. Thanks to RBA rates been too low, someone coming along just 4 to 5 years later, now has to borrow 700 to 800K for the same house!
Saved and struggled so long to buy a house. Bought a very modest one. Now this.
I'm in the same boat. When the gov kept adding incentives and the rba said no rate rises for 3 years we really had no choice, how can you get ahead when you get nothing on the bank and house to up like crazy?
You can’t blame the RBA for doing their job.. The govt spending like drunken sailors & letting the housing market sail away with generous incentives & tax breaks is to blame. Unless that market crashes & Australians don’t stop spending money they don’t have the hurt .. hurt is only just beginning.
Amen to that. The government has made one hell of a mess with the housing market.
If old mate as he says has a ‘decent income’ he should be able to afford under 3k a month in mortgage repayments 🤔
Diana was spot on………there are other ways to control inflation other then interest rates………control the disgusting price gouging by businesses, especially large corporates (including Governments that are no better) who control our standard of living…….
But I mean she didn't exactly explain how she would do it 😂😂
and stopping corporations dodging tax at record levels
For a time Australian Households were able to borrow money at a rate similar to or lower than the US government to buy a house, I had noted at the time that one of those numbers were wrong, either mortgage rates were too low, or the Treasury yields were too high. But that is esoteric. In that, there is the greatest inequality, the inequality in cognitive perspective.
This has been a train wreck waiting to happen. The extremely ineffective CGT policy, where we have ended up with a shortage in housing and over inflated asset values and massive personal debt. The interest rate policy has not worked in conjunction with fiscal policy. The federal tax system, monetary policy and fiscal policy all need a re-think.
The LNP push for privatisation and Labor laziness around reform has created this disaster.
Housing is a warped, mutated mess in Australia. Your house, is a place you sleep, keep your shit and weirdly is an appreciating asset….
Please Aussies you can't have a 1% interest rate when inflation at 7+. Please understand. Also, it's happening in all western countries. Please spend carefully.
The damage is already done. Between the RBA mismanagement of interest rates and the Government's policy of spruiking the residential property market and flooding the country with migrants to keep wages low and rental properties full...and not to mention local councils not wanting to plan for and accommodate growing populations.
The real pain is yet to come.
Indeed, and who's side is the government on? They're on my side!!!!
Apparently (according to Scott Morrison).
And now Labor with crazy levels of migration, even when they know we have a housing crisis.
What did we do to deserve this?
The government should be implementing a windfall profits tax legislation and not just rely on the RBA punishing it's citizens
So true. Unfortunately it is the politicians mates whom are the CEOs of these companies so they don't wanna f@$k over their mates.
Almost like not Nationalising our Resources and halving Capital Gains were very, very bad ideas.
Exactly, and use that money to provide assistance to people doing it tough.
The RBA is NOT punishing people. They are doing their job, you just don't understand the system. That's ok, but you should do some research so that you don't post silly comments that make you look foolish. The current interest rates are AVERAGE, NOT high.
So true! It's widely accepted that the inflation is being driven by greedy businesses increasing their margins. Interest rate increases can't deter consumer spending when most people already can only afford to buy essentials. The RB situation is the classic case of when all you have is a hammer every problem becomes a nail.
It was different back in 1973 too when inflation had increased to 8% after 23 years of economic growth. Two years later it was 15% and the wage/price spiral was established leading to another two decades of stagflation.
This is what'll happen if the DON'T raise rates.
To paraphrase Keating, the coming recession is the recession we have to have. The economy is overcooked and the longer we try to avoid a recession then the worst it will be in the long run.
Spot on, I love realists!!
but cant they just stimulate it more with more magic QE? and forget about the long term effects?
Recessions shouldn't be a "thing" in this day and age. They were a product of the laissez faire capitalist economic system that has long been abandoned. Post Keynesian economic practices should mean that we no longer have recessions. Poor governance is the only acceptable reason for a recession now. Poor governance was the only reason that high school dropout Keating gifted the Australian economy with the disaster that he did.
easy to say when ya not gonna lose your home.
A recession in the current state will massively increase the structural inequality that throttles growth by impoverishing a younger aspirational class - so the older richer demographics can increase their property portfolios.
@@CautiousKieran Not only increase property portfolios, but employ virtual slave labour to maintain and improve them, just like in Keating's recession.
If it's not a recession, it's definitely a depression.
Nobody forces you to take a large loan and own larger houses and then complain about your monthly payments.
People should not complain about high interest rates, if they do not Increase then inflation will only get worse. Short term pain for long term gain.
The media and government are pointing the finger at the rba cos if they didn't people would be pointing the finger at them. Just remember who forced people to stay home on stimulus payments
Exactly.
Yep thats the difference between recession and depression, depression is where you loose your job.
I live in my car in Jindabyne NSW snowy mountains and I even work full time. It’s not easy at all especially in winter as it snows I only have a small car a lancer. Australia 🇦🇺 definitely not the lucky country.
Printed half the circulating supply of fiat in the past 3 years. What did they expect
So, when the rates were so low and homes were off the chart there was nothing to be done, but now the system isn't working. YOU CANT HAVE IT BOTH WAYS!
No mention of corporate greed as to why everything is costing more?
I have been a Property Valuer for 30 years I have been very worried about the over inflated property market for over a decade, in my opinion their currently is a huge imbalance, too much of the family resources is going into mortgage payments and rent, I bought my house 25 years ago, (lucky me) how are my teenagers going to get into the market.
ok boomer
@@thedownunderverselol, boomers are in their 60’s and 70’s. This guy has teenage kids so my guess is he’s in his 50’s, which is Gen X. He’s rightfully pointing out that inflated housing prices might suit people who own property but for the generation yet to buy into it, it poses a massive problem. I, too wonder how my teenage children will afford to move out of home. Dropping house prices will hurt property owners, but might allow the next generation into the market. It’s a double edged sword.
@@ssiarxox5077 fortunately, it’s an easy fix. Stop Chinese from buying everything. Tax investment properties heavily (and incentivise investment in productive businesses). Interest rates are not the main problem.
@@thedownunderverse chineses investment in housing only makes up 2% of all investment. the largest issue of why housing prices are so high is because of Negative Gearing and John howard's Capital Gains Tax cuts along with the fact that corporations are recording the highest profit ever but paying some of the lowest tax in the country. The libs management has led us here and sadly too many people will now see things getting worse under Albo and blame labor, putting the libs back in and allowing things to escalate even further.
@@metakarukenshi No doubt that plays a part, but I think the 2% figure is waaayyy off. More like 20+. It’s really a massive issue. I’ve been to 5 auctions this past two weekends and mainland Chinese bought all 5 (!!). There are property-buying “tours”, with tour buses, with Chinese writing on them - it’s a holiday for them to come here and buy a house.
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Get rid of Negative gearing and Capital Gains tax cuts.
Further, energy and commodity prices are at near/ below pre covid levels and have been for sometime. So Diana is really just repeated the transitory argument, well after it is clear most of this inflation is not. A credit to her economic insights...
This inflation is due to the demand boost that occurs when you stuff >50% of GDP in untargeted fiscal stimulus along with the easiest monetary conditions we will likely ever see.
Isn’t it interesting that every time we get a Labor government, we suddenly get a bad case of inflation? And I’m not saying it’s Labor’s fault, I’m saying the reserve bank has a lot to answer for. They are the ones manipulating our economy. Isn’t it time we sacked them all at the reserve bank and invented a better system? Who’s to say there aren’t people in there who have conflicts of interest?
History repeats itself. Recessions on a graph look pretty obvious unless you're actively ignoring it
Mortgage holders accessing food banks? that is a disgrace. They are society's rich. I can't afford a mortgage, I don't beg off food banks. Disgraceful and greedy.
Don't kid yourself. It doesn't matter whether or not it's your landlord banging on the door or the bank, if you don't have what you owe, you're toast.
@@davidbrayshaw3529 Mortage holders are sitting on a sellable asset that many of us can never own. It makes a big difference. Plus Interest rates are still nowhere near the historical average. They should be able to pay.
@@davidk6264 I get what you're saying but it's still a struggle for many, just the same. And the economics of selling a house because you can't afford groceries needs to be considered well and truly before making that decision. And then you need to be able to find somewhere to live.
My wife and I own our own house, now. But I will promise you that we faced some pretty tough times getting to this point. No, we never took
charity, but there were a few occasions when we were "starting out" that we only had small change to our name, I kid you not. I've put lawnmower petrol in the car to get me to work before, we were that poor. It was a $1500 car, too. That was in 2001, for reference's sake.
Just because someone has managed to save up enough money to put a deposit on a house doesn't mean that they're necessarily much better off than someone else. What it does mean, is that they've got a heck of a lot more to lose if they can't make their financial commitments.
God, I'm glad those days are behind us.
I'm a landlord who has several properties on mortgage and for rent at the moment. Let me tell you how the interest rate hike affects me and my tenants. First, the interest rate hike only narrows my profit for the moment. Pain? A little bit, but I don't suffer. What I do is raise the rent to cover the additional cost. Who is going to suffer? My poor tenants who are honest workers and students who cannot afford their own homes. The hike will just kill their hope to save money for a home that they can call their own. Thus, they rely on us even more and work for us even harder. Who is going to benefit from this? It is people like me in the long run. People, especially the young ones, will have to rent because they can never afford a home. What about landlords of commercial properties? They do the same - raise the rent. All additional cost eventually will be bourne by the consumers and businesses. Hence, higher inflation and interest rate like a vicious cycle. This is how capitalism works, folks. Those who make money will continue to make money regardless of the interest rate hike. It is the poor mass who have to pay the price. Does the RBA care? I don't think they do because they represent us and they work for us - the Capital. They are chosen for the job because they follow orders in the best interest of the Capital. I have to say - the Liberals ensure we make money, and the Labours ensure we continue to make money. Seriously, I love Australia because I'm a capitalist and I'm a winner.
Well that's depressing
A recession was here 3 years ago and its turning into a depression.
It's a loan with a fixed then variable rate typical for Australia? I wouldn't own a home if it had anything other than a 30 year fixed.
Yes, 5 years is the maximum term for fixed rate. Then you can go variable or fix again at the current rate.
@@KimPham525 OMG, that's strange. You're then betting on only low rates. With all the other reasons we can become homeless. That should change.
Negative gearing, get rid of it
And a final comment, do not conflate the suffering that renters are facing at the moment, due to a tight rental market and rising inflation with interest rates rising.
Indeed, rising interest rates will make housing more affordable to renters as prices adjust downwards. While also providing meaningful return on their savings for a deposit.
What about covering the additional rental demand our federal government is persuing (increasing net overseas migration) at a time when our public services are the least equipped to deal with it. Or is that off script for the ABC?
Rising interest rates will slaughter renters. It's all well and good if you've got the deposit saved to put down on a "cheap" domicile (and you can afford the repayments!)
And, yes, you are very much going off script in mentioning immigration. Australia's population has grown by more than a third in the last 25 years.
The problem is that there aren't 33% more houses, roads, rail lines, schools...
But let's just blame negative gearing, the RBA and the banks. Feel better?
Be good to have governance.
If the purpose of a Government is to insure that a minimum wage covers living expenses, then the solution is to prevent unsolicited rate rises from destroying "the economy" of real participants in what is called democracy, (for whom?).
Time to reset the Australian housing market. Housing should be where you live, not an investment tool.
Abolish negative gearing for housing property. Australian housing can only be owned by Australian citizens or legal entities 100% owned by Australian citizens.
Those that no longer meet the criteria will have 12 months to sell the property themselves before being resumed by the government and sold at auction.
Another thought would be that mortgage holders for a principal place of residence [PPR] who have paid for mortgage insurance can enter into a "voluntary administration" arrangement as an alternative to bankruptcy to handover control of the PPR back to the lender. A condition/penalty would be that this failed borrower would be unable to borrow for a PPR for a minimum of 12 months.
excellent analysis. the only real answer is to replace all taxes with a land (all natural resources) tax... the henry george arguement of old.
Crazy how things can change in 12 months. The blame should go to the rba and gov for their policies during covid
just make sure you blame the right government, seen too many people blame all of this of Labor and Albo. when it was the libs that left us with a trillion in debt
There was a comment by someone in government or the public service, years ago, and they basically boasted that "We can control inflation and interest rates! The interest rates of the 90's will never happen again!" Upon hearing that, my thoughts were that needed to be in the Fiction section of the local library!
On determining what test rate to use for affording payments, several factors should be engaged: 1) Repayments not to be more than 27.5% of the larger of the two incomes in the household.
2) Assumption that interest rates are 10%.
3) Loan to be paid off over 30 years; or, must be paid out by the time the older of the borrowers reach 60.
By the application of these 3 guidelines, this now means that people have to save, and save hard to get onto the ladder, but, by reducing the capacity to borrow, this should reduce the prices that are being paid for housing. If there are two incomes in the household, that will allow for either: greater spending within the economy; or, saving of money by the household; or, payment of surplus funds towards the mortgage. By having an age limit of 60 years, this will allow those that had the mortgage to either retire, or keep working to further fund their retirement.
One final question that needs to be asked: Years ago, one could get a mortgage at a fixed rate, for the life of the loan. What has changed in the financial industry? I suspect the lenders are still getting fixed rates when they go to the money markets to get their money, so why are they hammering the mortgage holders with higher rates?
You'll find that banks don't "go on the money markets to get their money", they lend money they don't really have in the hopes that 1) the majority of customers won't withdraw most of their funds, and 2) they can recoup most of the loan amount before things get so tight as to cause hardship within the internal money flow.
Economic investigator Frank G Melbourne Australia 🇦🇺 still watching this very informative content cheers Frank
Sadly a lot of Australians are financially illiterate. They do not have a working budget and are financially sleep walking. Also they do not stress test personal scenarios. Hard lesson for people to learn but an important one.
Ultimately inflation is the enemy of the rich not the enemy of the poor
How can you blame the RBA for raising interest rates when they have no other tools to curb inflation caused by the housing market and corporate greed? What needs to happen is reform of housing legislation. Scrap the capital gains tax and negative gearing and implement a nationwide vacancy tax for empty properties. It's not the RBA's fault. They've been backed into a corner by a public that doesn't understand whilst property owners are actively increasing rents and contributing to a bubble that was bound to burst
Sorry ABC but this reporting is tone deaf to all the working class Australians who have no choice but to rent. They'll be slogged with rent increases to bare the brunt of these peoples mortgages going up which is a real kick in the teeth after 9 years of stagnant wages. Landlords are scum and i feel no sympathy for anyone who entered into a housing market when a recession has been looming for years. it's just fiscally irresponsible
Such a rich country what a shame
Free money ,high immigration ,tax breaks for property investors and this is what you get... they still want 100s of thousands of ppl to immigrate to Melbourne and Sydney... amazing
My grandparents migrated here and just the old man worked without a degree, a welder on big projects my grandmother never worked they raised 4 kids and lived a normal life now couples struggle on 2 wages in today's Australia. They owned there own house and lived a normal life.
This inflation is the end of an era of reckless government spending and rba's 2% inflation for the last 50 years making the middle class pooer.
Everyone needs to stop beating on the rba there sole job is currency control. Inflation at 8% for more than 2 years compounding will completely ruin buisness. Interesting times ahead. Having no economy only artificially inflated house being the main driver in the economy might bite us in the bum.
Misleading. Real interest rates are negative. You must compare the apparent rate with inflation. On housing, once again the mighty big elephant in the room is not mentioned. Yes, the same elephant that you will find in Australia comparable countries with the same result.
People keep crying about the RBA being mean by putting up rates. But if they read the news they would know that this is not unique to Australia and it's a global trend in advanced economies. The RBA isn't picking on you because it's a big meanie
Thanks Alan- legend
I just can’t fathom that people didn’t see this coming.
It's the same way that I can't see the sarcasm in visual written text.
It's the same way that I can't see the sarcasm in visual written text ;) :P
I don't think inflation is a mistake. Best way to cheapen all that debt governments took on is through inflation. And who exactly gets all this interest we are paying... It's just another a tax..
Thanks for the ABC. Trust them to make a balanced and informative piece about something that affects so many Australians. I learned something but I'm still confused.
I would not belive anything that comes out the mouth of someone that works at AMP, just look at their share price over the last 23 years. One more interest rate rise? Are you cooked there is at least 3 more..
Accountants and economists (good ones) are very hard to find.
Example is the reserve bank CEO saying that rates will not rise until 2024.
To the guy feeling pain of owning a home worried about paying rent, wanting the RBA to see his pain. Welcome to the real world mate.
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For surviving the current recession and high inflation, I think short-term trading is better than long-term trading. Despite the higher risks involved, isn't the current market also risky? Most persons who employ these techniques have considerable financial success.
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Her name is “Vivian Carol Gioia can't divulge much. Most likely, the internet should have her basic info, you can research if you like
I just Googled her name and her website came up right away. It looks interesting so far. I'm going to send a mail to her and let you know how it goes.Thanks for sharing truly!
3:00: Goodness me, Mark borrowed 480K? This is the precise reason why rates need to rise. People in Brisbane are now having to borrow 700 to 800K just to get into a basic house!
480k would be a dream for many! And Mark is not even a boomer!
I believe key commodity prices and specific economic supply pressures are causing inflation, (actually pushing up prices) high electricity, gas, petrol prices, (effected mostly by the futures market) plus supply pressures, hence supermarket prices are inflated, plus goods purchased on eBay and other items, ie cars, machinery, building materials, specialist industrial equipment. Our economy is not raging ahead with demand growing at 10% pa the economic growth is actually modest. Interest rates should be only one tool (be used sparingly) fiscal Govt policy, govt intervention and temporary reduction of high electricity, gas, petrol prices would help reduce inflation in my opinion.
Kudos for leaving the comments section open you cowards
No one even mentions energy and peak oil. EROI (energy returned on energy invested) was over 100 to 1 in the 50s. It is now 16 to 1. As fossil fuels become more expensive to get and renewables with a low EROI come on line some countries will do it tough whilst other countries will experience famine.
I mean solar has an eroi of about 20, so we have pretty much hit a floor on eroi due to the move to renewables. Not as good as the boom, but not a huge issue.
Cheap energy equals productivity and high standards of living. I used to live in a country that controlled its own energy production. It was called Australia.
@@varno problem is that solar is intermittent. Unless we are willing to move to a 'use it when it is available' model, you need to include storage as well.
Once that is done, things start to look quite a bit worse.
Wow. The ABC doing 'something' for middle Australia
single income earner like myself are feeling the pain . I feel you
Why is everyone blaming the RBA? The RBA is raising interest rate because of inflation and this inflation is global; not just within Australia. Why global inflation? The global trade is US dollars dominated and the US has been printing TRILLIONS of dollars, which causes goods to have inflated prices. Why US prints so much money? Well that's the only way for the US to service their gigantic debt. Basically the US is servicing their debt by robbing every country who needs to have the US dollar as reserve currency (or issue debt in US dollars) and everyone who holds the US dollar. The good news is that many nations around the world are de-dollarizing. The bad news is that Australia is still not waking up to the fact that it needs to join the world's effort to de-dollarize and stop siding with the US. De-dollarization will take many years and the world will continue to be bullied by US dollar hegemony for some time. God bless the world.