Trixy

No Australia is not in fear of recession because Rudd inherited a strong economy, right?

I would be perfectly happy for interest rates to go down here. I personally would be less concerned about repossession. Funny that. I suspect it's more likely people are going to lose their homes when rates go into double figures..hello mortgagee sales. As for inflation I hope the banks who are charging me more for my loan don't go spending it! Couldn't have that now.

Trixy

Do you pay a mortgage because you sound like the pain of regulating Australia's rising inflation doesn't hit your pocket. I so love economic scenarios that don't literally hit home. I wonder why we don't live in perfect economic bliss if the answers are so blantantly obvious?

Trixy

Oh yes Commonwealth Bank customers can go to a smaller lender and if they wait until November won't have to pay the fees.. so we're promised. Gee November so close.. not.

bcworld

Rudd inherited an economy with a very high growth rate, that's great, but there were also issues. Capacity constraints i.e. skill shortages and inflation being the big problems. The purpose of monetary policy is to try and ensure bust doesn't follow boom....leave things unchecked and that's exactly what will happen.

Amazulu

I don't have a mortgage, so higher interest rates are good for me. But I work in mining and am part of the boom in it. My income is rising sharply, interest rates are going up and I have no debts. Times have never been better for me and my family. Maybe it is a case of 'I'm alright Jack' but there it is.

You should be blaming the people and companies of WA for a big part of this IR scenario. It's the boom here, and to a lesser degree in Qld, that is causing a lot of this inflation and is responsible for the 2-speed economy we have in Australia.

Trixy

I hear about this skill shortage but don't see it. Is it a myth? It sounds like electioneering to me. Prime Minister Rudd inherited single figure interest rates, Prime Minister Howard inherited 17% interest rates. Even with this crippling 'skill' shortage, unemployment is at record lows. The plebs must be happy, just not the invisible skilled market. The only flaw to Costello's budgets is that he left us with too much money, lol! I think it will take a Labour government to fix that.. only Labour can burn up a surplus and play victim at the same time.

Swerv-o

But if the country heads into a recession, then (usually) one of the upshots is greater unemployment as businesses go to the wall. So we head into a recession, interest rates drop, but you lose your job, so your ability to pay is still limited, and you lose your house in that way.

Interestingly, another mechanism for controlling inflation would be an increase in the GST. This would hurt everybody, homeowners or renters alike, but would not impact on business.

My concern is that when inflation is unable to be controlled by interest rate rises (as we are seeing at the moment) it usually means that the country is at the very zenith of the boom period. And we all know what follows a boom... It may be different in Australia, given that the country has a very unique set of economic factors - small population, high employment and resource driven growth potential. We may end up seeing a two phase economy develop, where the internal economy of the country heads into recession, because of the effect of high interest rates, yet the export portion continues to grow.

Interesting times lie ahead.


S

Trixy

Bring it on, I'm all for the preaching economic elite (read people who don't pay a mortgage or rent) to join me in my life's worth (read regulate Australia's inflation rates).

Amazulu

Agree about the GST - or VAT, depending on where you are. I personally think GST should be higher and income tax lower. It would mean the tax burden was more evenly spread and inflation could be controlled in a better way. It's a very political tax in Australia though and is too much of a hot potoato.

Trixy

God I knew you didn't have a mortgage! How else could you promote rates to go up if you weren't paying the price yourself? It's easy to talk ecomomic scenarios when they mean nothing to you personally. Really I wish people like you suffered too. I know that sounds mean but you should be paying out like I do, didn't you know it's the Australian way?

bcworld

I'm starting to think you are having a laugh now......why do you think unemployment is so low? Because there are 10,000s of unfilled positions with no suitable candidates to fill them. In order to attract staff companies are having to offer ever increasing wages => INFLATION! Doubtless this will not have been your experience, I'm sure you will have received a 98% salary cut since Rudd came into office............

Trixy

You're reverting back to debating by leveling personal criticisms again. I guess you must be losing. Very unreasonable. I never asked do you have a mortgage?

Swerv-o

I don't think you can reasonably say that. Maybe he's already done his part? Maybe he's already had a mortgage, and had to endure manifold rate rises in past economic crises? Maybe he just had a little bit more financial prudence than you?

When I was looking to buy a house last year, my (Aussie) mate was really keen for me to max myself out on a huge mortgage. He kept saying that the capital growth of the house will outweigh any increases in interest payments. Well, that's all very well until you can't afford to keep the repayments up.

I have noticed that there does seem to be a trend here to buy as much as you can possibly afford, in the hope that the capital increase will eventually overtake the loan. I don't think this is prudent financial planning. People need to think about what they can afford in the interim instead of only focussing on the what they may be able to sell the place for in 3 years time.

Had I followed my friend's advice, I would no doubt be living on the streets now. Glad I didn't.


S

Trixy

Oh and BTW do you know how unemployment figures are gathered? I participated in the process last year. You are asked by the Bureau of Statistics over a period of 8 months if you are looking for work, the statistics are based on the *labour* market. Job vacancies are not unemployment statistics. They are plain old job vacancies, so crititique those for what they are and not attribute them to unemployment stats which is based on the worker.

Trixy

I'm sure he can speak for himself if any of that is the case but I'm referring to the here and now. To the current interest rate's pain.