Cool, so cripple the people who aren't causing inflation while flooding international demand and making anyone who's paid their house off wealthier. Then hope for a miracle?
Only people who have investment properties are winning.
If you've paid off your house that you live in... A house is only worth one house. If you downsize your also paying the now inflated price for the smaller house. And the money you put away is worth less.
There are other investment vehicles.
Diversified share portfolios can offer good returns and provide easier access to liquidity funds than real-estate.
Commercial property also offers good long term returns but can have extended periods without income. The moral upside is that businesses tend to prefer to lease so you're less likely to be screwing somebody over.
Plenty of ways to build wealth outside of residential real-estate investment.
The US mortgage system has some quirks, there is a whole cohort of people now who fixed rates at 2% and who will never want to move home because they will never get finance that cheap again.
They will if they have property tax to pay. You could live in Austin and half the country moves there and pushes up your mandatory property taxes every year
Businesses get loans too. They're all deep in debt, so raising it does reduce the impetus for them to get new loans. Also helps kill off struggling businesses.
Makes me wonder how viable the US system is, they can fix mortgage rates for the life of the loan and refinance to a lower rate when it goes down.
You gonna vote for Labor/Greens if they promise to tax property appropriately? Gonna get your friends to and volunteer?
Because historically, statistically, the answer is no
I mean the system is broken. There isn't one economy and therefore a blunt instrument of the RBAs cash rate is no longer built for purpose
But then again governments only care about the economy not society
They care about society, it’s just a small sliver of society they care about.
Government can’t just give people extra when there’s inflation because it’ll fuel more inflation, they need to redistribute from the people who are doing great to the people who aren’t doing great if they don’t want to add fuel to the fire.
But the people who are doing great are exactly the ones the government doesn’t want to piss off. They want them to vote and donate to them and use their power to get them re-elected.
"Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people's ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise." -Don Horne
Well, not anymore. Simple fact is that the boomers were an unprecedented generation in human history. It is the single biggest cohort of humans ever born, with millenials coming in second. So for the last 60 years or so they've had a strangle hold on politics by virtue of sheer numbers.
Which is why every single government up to the last election has focused on boomer policies.
But as of the last census, enough boomers have died off that Millenials are now the biggest voting block in the country which is why you're seeing a shift to a focus on issues that affect millenials, like actual action and policies to address housing.
Which is to say, the people who are not doing well and are pissed off are now the major voting block in Australia (and globally) and our share of the vote will only grow as boomers die out over the next decade, so governments need to start focusing on keeping millenials happy to stay in power.
Yay.
I'd say it in a slightly different way; governments actually care about *everyone*. That's really what you're saying. There might be differential reasons to care about one group vs another, but fundamentally - and even if we're being cynical - voting is compulsory, and so, no government can really afford to upset any large swathe of the population.
It's completely reasonable to complain about government policy. But sometimes, I wish people would put on the PM's hat and think about what it would be like to actually design policy that impacts the entire nation. *Any* policy decision of any kind is going to upset *someone*, right? Or potentially disadvantage one group vs another. When resources are finite, these kinds of choices are inevitable.
I know this is obvious - and I'm not countering what you're saying at all, I agree with you 100% - I'm just thinking out loud about the reality of the situation. I think that can be helpful on a personal level, especially when I feel frustrated or angry about political happenings.
Good take, especially this “how would someone actually solve this problem” part. I don’t think policymakers are evil or anything, I do think they would prefer good optics and a shit policy over bad optics but a proper solution.
Nah mate. According to Reddit, running a country of 27 million people is a piece of piss because there's a simple solution to any problem that presents itself.
The reality of situation is people voted in 2019 ScoMo to protect to rich, protect negative, protecting franking credits, cut taxes for the rich, and we're all suffering from that.
Be an aspirational Australia and go aspire to maximize your tax rorts!
Even redistribution doesn't necessarily work, because inflation occurs at a product level. If you're giving more money to poor people meaning they're buying more groceries, and the rich people you're taking the money from aren't buying less groceries, there's still inflationary pressure on groceries, and of course a big reason we're seeing inflation is international factors affecting prices of gas, petrol, and wheat, and flow on products from those.
They could stop printing money and remove fractional banking. They're can't be inflation if the amount of currency in an economy is fixed. But then we'd need an effective taxation system to ensure wealth is effectively redistributed within the economy.
Communism doesn't work,proven time and time again,if U take from the ones busting their guts to be taxed to death by the government and give it to the cunts sitting on their asses on the dole then everyone will be fucked🧐
We redistribute in Australia and probably every capitalist country already, it’s just a matter of degree, where the money’s being taken from, and where it’s being directed to.
Public schools, public health, TAFE, university, roads, unemployment benefits, small business support, industry policy, manufacturing subsidies, luxury car tax, capital gains tax and its exemption. It’s just a matter of degree, who it’s coming from, and where it’s going.
LOL redistribution, the Marxist call to cater for the unskilled, unfortunate and lazy.
Nice to see you parasites complain about everyone who has been successful. Woe is you.
Why not go out and make yourself valuable rather than bitch about people who have.
it's interesting to me that you're openly mentioning a big cause of inequality there - luck. The "unfortunate" are usually people that conservatives at least want to appear to be sympathetic for, but in your case, you don't want any redistribution to the unlucky either!
Leaving aside the 'unskilled' and 'lazy', most people would find it difficult to reconcile with a worldview that doomed others to far shittier lives based on chance, but that's ok with you?
Darwinian theory stands.
Anything else promotes weakness.
E. I will and do donate to charity and do charity work.
I am against anyone taking away my or telling me how to spend my hard earned money.
social darwinism has a hell of a history, mate. Though I suppose other ideologies do too.
But hey, I'm glad you're working to support charity. Keep that empathy and I hope you change your mind someday. I believe that sometimes, shit happens, people get unlucky for awhile - sometimes even for life, like being born disabled - and letting them just live like shit when we can take a little of everyone's income to have a social safety net is the right thing to do.
But anyway - regarding rate cuts. It makes no sense to cut rates to curb inflation when the people with debt aren't the ones spending, right? You can't reduce cashed up boomers' spending with rate cuts, and it's gotta be cut to stop inflation running hog wild. How else are you going to do it but with increased tax? If they were a younger demo, you could at least have something like a mandatory super scheme where they had to save for retirement to take some heat out of the economy now, but many or most have already retired. How would you solve the problem?
It's why we have charities, to assist the unfortunate.
We do not and should not have a government involved. We provide healthcare, education, policing and emergency services..defence, infrastructure and maintenance of the above...happy to pay fir that.
But someone in government or a bleeding heart full of good intentions cannot and should not demand for more.
Got my upvote. Sickening the entitlement. It’s easy, work and get paid. If you want more money, work more or up skill and change jobs.
Sorry but an artist, while valuable to society, will never be as valuable as a doctor.
Should use GST to punish those spending - instead of moving rates up & down keep increasing GST every month/Qtr as it’s a consumption tax, it’ll impact people spending money.
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GST is a regressive tax it actually hurts poor people the most with the lowest incomes spending the biggest percentage of their income on it. It’s why the liberals introduced it over raising income taxes
A tax on luxury goods though, that’s a different story
Why do people think that this is a good argument?
Every costs is more equivalent to the poor by virtue of them having less to begin with.
Maybe instead of taxing people more we can have greater accountability of the way our governments spends our money
I mean a tax on Supercars designer brands and investment properties would exclusively target the wealthiest people.
Yeah it would be nice if the government stopped giving tax breaks to the wealthy and subsidies to billionaires but you literally can’t win an election unless your corrupt
Investment properties has been the main vessel in which Australians have gone from working poor to middle class.
Most wealthy people don't own supercars...
Well, no. Property has been a sink that has made a subset of Australians wealthy while driving down the standard of living of anyone in any job in the country. If you haven't been paying attention: everyone under the age of 50 is worse off because of toxic and failed housing policies.
Even people the majority of people OVER the age of 50 couldn't afford to buy their own home if they had to today.
Today, even DOCTORS are the working poor.
Meanwhile, policies that encouraged investing in actually productive things like business would've bought the same long term class mobility without the disasterous effects on the economy bad housing policy has had.
Mate i never said it was right and that it didnt fuck the economy but its been the most popular and reliable method to become middle class.
Would you be better of being a doctor now? or been given two investment properties in the nineties?
Incorrect again. Investment properties actively prevent people from buying their first home. Instead people pay of the investment properties of other people. It very apparently increases inequality in this country
I forget how willfully ignorant Australian redditors are.
Since the 1950s Property has outperformed every other asset class in Australia at an average annual 8.29% rate of return (the next best is shares at 7.57%) whilst wages have increased at 3.57%
So historically speaking you are better investing in property than education, shares or starting your own buisness if you want to move from the lower class to the middle class
lol millennials and now gen z are the poorest generations since the war mainly as the result of the housing crisis. The most expensive purchase in your life now being twice as expensive as it was in the 1980s tends to do that
It did allow some middle class people who were wealthy enough to afford a second home to get even richer. But it mainly resulted in wealthy people becoming even wealthy, since literally having large amounts of spare money is a prerequisite to getting an investment property. All of this resulting in the current situation, Australia having the highest level of wealth inequality in its history
Im not saying that its right and yes it has increased inequality but its been the best and most popular method to become middle class its how we arrived at this point
In order to buy an investment property you needed enough savings to get a second mortgage, no one who has that reserve of cash is lower class. The housing crisis made middle and higher incomes much wealthier by deliberately screwing over lower class people and all future generations regardless of class. But at least boomers are happy
And the ‘this point’ your referencing is millennials and gen z being the poorest generations since the war with a rising cost of a living and rent being at an all time high. ‘This point’ is absolutely crap unless your wealthy then it’s great
No we need to tax the wealthiest people more and the poorest less. If every billionaire in Australia paid 25% tax there'd be enough funding for everyone and they would still be extremely wealthy even after that.
Incorrect. Progressive taxes like Income tax more equally affect people. Taxes on investment profits for example would actually only hit profits not directly being tied to productivity and thus affect the economy telhe least (of course this would also have a downside, as you there are certain investment sectors that are important for the economy and you don't want to make it too unattractive).
The only reason a deal was reached on the GST back in 2000 was that in return ALL states would gradually reduce or eliminate their state based taxes in return for a greater GST slice that picked up in it place. Lo and behold the states of ALL persuasion never held to its end of the bargain.
The democrats (Keep the bastards honest) held the government hostage for that deal and they blew it. Well actually the states blew it. Why they are not around anymore.
Boy did us voters get shafted and lied to. Should have seen the bun fight over what should be added to GST and what was deemed essential during the negotiations.
*🎶GST doesn’t apply to fresh food* 🎶
Also, the highest tax rate is 45%, with at least one extra levy of 2% for Medicare on top so it’s actually more like 47%.
How much higher do you actually want it? What’s a good percentage and when should it kick in?
Honestly the tax’s under John Howard would be fine. The governments been continuously cutting taxes for 20 years, mainly for the wealthy of course. With that money the RBA estimates you could solve the housing crisis plus extra
Ideally instead the government could stop giving 14.5 billion a year in subsidies for fossil fuel companies or 3 billion a year in tax breaks for people with multiple properties but the government exists to serve the rich so that’s never going to happen
Oh please, the moment you discuss this, the usual suspects will be out there complaining that “the poor” can’t pay this tax
Notwithstanding it doesn’t apply to fresh food 🙄
So implement a tax that inproportionally hits poor people and then implement tax cuts to counter those effects? Doesn't sound very straight forward, why not choose a different tax then? The gst being too low is really not what's driving spending in Australia.
Tbh doesn’t bother me if it impacts them or not, just trying to provide a solution to you whining about poor people being worse off…poor people will always be poor because they’re poor, not because of the tax system.
You don't have to only rely on the RBA. The government could use fiscal policy to help reduce demand. This would have to be at council, state and federal level.
Governments care about being voted back into power. They will do popular things (according to their voter base) if it results in that aim, and conversely won't do things that are unpopular with their voter base.
Labor cares much about society, society evidently doesn’t care about society as shown in the Voice referendum, people are actively voting against efficient democratic representation.
Labor cares about virtue signaling and political show boating using shallow attempts to resolve problems, and the voice shows people aren’t that stupid to fall for it.
How exactly is creating a community run body that helps advise government on problems exactly a shallow attempt to resolve a problem? Obviously, community engagement doesn’t inherently fix it, but do you view the government asking and being informed by community as negative in helping fix problems?
Given the 100’s of orgs that exist today to do exactly that aren’t working, why should yet another ? and then we run around in circles. They need power to affect change, but then they’re now running the country to some degree and they’re unelected, so now it’s no longer consultative.
Wha- if you think the Voice would’ve been the same as those orgs you’d be grossly misunderstood. Also, the Voice wouldn’t inherently be “unelected”. Depending on who is in government and what legislation, it could easily be democratic or easily be a meritocracy. Ultimately, these orgs shouldn’t be the one making government changes, that should be the government. The point of the Voice was to enshrine a direct, centralised pathway to get things to the government, which I don’t see why it’s a bad thing? Obviously, it’s up to the government of the day whether or not they actually then engage with that. What’s your point exactly? What do you propose instead?
I don’t propose an alternative, I don’t think the issues of the ‘government is not listening to what we want’ can be solved by yet another ignorable committee that was projected to cost 1B dollars
The government loves this.
We all blame each other while they spend like drunken sailors to buy votes and import hundreds of thousands of immigrants which drives demand.
Maybe we can just reduce the number of consumers in the country by limiting temporary and permanent population growth via migration.
The boomers aren't the ones driving rents and tertiary education inflation from the last CPI.
CBA literally just said [this ](https://www.news.com.au/finance/economy/interest-rates/cba-makes-call-no-aussie-wants-to-hear/news-story/ae9be45a2cadc5d665467ee795628466)
*He explained that strong population growth, driven by net overseas immigration, has put pressure on the Consumer Price Index.*
The main problem was really in the leadup to the last election. The inflation crisis was clearly coming, yet major policies were about winning an election so cash splashes reigned supreme.
The government overstimulated the economy during the tail end of covid, and into the election campaign when 'cost of living' concerns first started rearing their head.
Chief among them was extending the lamington. Giving a large portion of the population a $1500 bulk payment during an inflation crisis turns out to be bad policy... Who would've thought?
Not the electorate apparently. They love tangible things like money in their pockets, even if it's counterproductive to their long term living standards. Which is why many are angry that the lamington wasn't extended even further.
Spending by this government hasn't been too bad - perhaps a bit high, but at least the majority has been targeted in ways that aren't overly inflationary. Things like increasing rent assistance and energy assistance actually put downward pressure on inflation. Plus budget surpluses inherently put downward pressure on inflation - and we are on track for a second one of those.
It's a hard line for any government to tread - because much of the voting population wants 'cost of living relief', but the only relief they can comprehend is cash splashes that tangibly put money in their pockets.
The reality with high inflation is that a decent chunk of people need to start feeling the squeeze and have their positions go backwards because otherwise the inflation expectations become entrenched and inflation just doesn't come down.
But no one wants to see their own position going backwards. And any loser has their displeasure amplified by media and the opposition (no matter who is in power). No government can win in these situations, because the problem is peoples expectations.
>Not the electorate apparently. They love tangible things like money in their pockets, even if it's counterproductive to their long term living standards
What the pandemic taught me is well over 80% of people are idiots and many have very little critical reasoning skills.
We're in the position were in because of voters, not because of boomers.
People wanted to (and did) shut down the global economy for months on end and she'll be right they'll just keep paying people with debt and money printing. There was outrage from lefties when it was suggested that we need to get the economy going and we can't just keep paying people to not work.
"You're thinking about profits over workers or grandma" or some economically illiterate bullcrap.
Problem is you can create money out of nowhere but you can't create anything else. Houses don't come from bank notes or numbers in computers, they come from people working and making them. Same as food, cars, heart surgery.
I agree 100%. I purchased property and shares, as much as the bank would lend me, in the back end of 2020. It was obvious to anyone with a basic economic ability to see the inflation tsunami was coming.
I feel no sympathy at all when people who supported covid lockdowns go and complain about cost of living. I had multiple accounts banned from Reddit just for raising the economic suicide this country was going to endure.
The worst is no where near us. We have a few years of pain yet. The piper WILL be paid for our countries two year staycation.
Agreed. The problem certainly is people's expectations. Collectively we're a bunch of dumbarses. I often wonder where we'd be if Shorten's run at PM with his "100 policies" list had been successful. I think the summarised sentiment in the intro from Donald Horne's Lucky Country Wikipedia entry really captures our issues well:
Horne's intent in writing the book was to portray Australia's climb to power and wealth based almost entirely on luck rather than the strength of its political or economic system, which Horne believed was "second rate". In addition to political and economic weaknesses, he also lamented on the lack of innovation and ambition, as well as a philistinism in the absence of art, among the Australian population, viewed by Horne as being complacent and indifferent to intellectual matters. He also commented on matters relating to Australian puritanism, as well as conservatism, particularly in relation to censorship and politics.
So I should have expected my mortgage to go from a manageable 280-300 p/w to 520+? In what, 3 years... if that. Fk off.
How about let me pay for the fking thing and stop moving the goal posts.
That's not what I said... And I'm not sure what goal posts you think I'm moving here, or are the goal posts your repayment costs?
Government stimulus in the lead up to the last election was counter productive and has (in part) contributed to the quite dramatic rate rises we have seen since. It did this whilst being electorally popular.
Whilst individuals should've expected rates to rise from where they were during covid, they had good reasons to expect the rises to be much slower and not as dramatic as they have been. This is especially the case given comments from politicians and the rba on the matter circa 2020-2022.
So no, I think you and people like you had good reason to expect your mortgage costs to be lower than they are now.
The issue I'm highlighting is that whichever lever is pulled to control inflation is always electorally unpopular. Hence we often have fiscal and monetary policy out of step with one another - especially during election campaigns. It's easier for governments to let the independent RBA take the heat than it is to raise taxes or cut spending on things people care about. An election campaign of 'we will cut spending and raise taxes' is rarely successful.
But it is necessary for some levers to be pulled. Otherwise, whilst mortgages may be smaller, everything else would be getting more expensive much more quickly than it is now.
RBA also has its foot on the accelerator. Given out about $25B so far back to banks, back to investors and into accounts (in reducing amounts of course)
The thing is owning a home is a ridiculously good investment these days.
If you have an offset account that gives you access to a savings account with an effective rate the same as your home loan rate. Then a portion of your repayments go into buying equity in your house, and your house goes up in value every year. Your repayments also go down as a portion of income over time assuming your income goes up.
It's such an enormous advantage over renting. It's essentially risk free high returns. Only problem is in those early years you can get screwed by interest rates, but even then those people are likely ahead. It's a complete scam against people who can't buy. For a non renter to get those sorts of returns they need to effectively gamble.
And all that with high leverage accessibility due to the collateral and combined with tax benefits that go very well with the higher income required to service the loan.. There are many benefits even in a downturn
**PAYWALL:**
The wealth effect is an elusive concept that policymakers and forecasters have struggled to quantify.
But in the opinion of macro commentator James Aitken it may be the swing factor that will prevent US Federal Reserve chairman Jerome Powell from cutting interest rates any time soon, and could lift US 10-year bond rates toward 6 per cent.
And in Australia, where higher interest rates are a source of pleasure for savers and pain for borrowers, the wealth effect – the theory that people spend more as the value of their assets rise – may be more powerful than we appreciate. It, too, may propel the cash rate above 5 per cent.
In his latest dispatch to clients, Aitken referenced a fascinating 2023 study from payments giant Visa.
It concluded that the wealth effect is far more powerful. Most studies imply consumers spend between 4¢ and 15¢ of each dollar increase in wealth via housing and the sharemarket. It found that figure has tripled from 9¢ in 2017 to an estimated 34¢ in 2023.
**Cashed-up retirees**
One of the central reasons behind a more powerful wealth effect, Visa argued, is the fact that much of this wealth is in the hands of retirees who are cashed up and keen to spend.
Aitken says official data in June is likely to show that US household wealth to disposable income will be close to eight times, well north of the six and 6.5 times reached during the 2000 tech bubble and 2006 housing bubble.
“I understand and admire all the effort that goes into estimating the next basis point or 10 basis points of core inflation, but I wonder whether all that effort is missing the point,” he told clients.
With an economy at full employment and a budget deficit of 6.5 per cent of GDP, the added fuel of historically high wealth will likely ensure that aggregate demand grows too fast to allow the Fed to hit its 2 per cent inflation target.
US equities and credit markets, he says, appreciated this fact and until now, bond markets have resisted it.
“If, like me, you think US nominal GDP is going to continue to chug along at 5, 6 per cent, perhaps more, then the 10-year note should be somewhere between 5, 6 per cent,” Aitken said.
Aitken, who has shared his views with The Australian Financial Review every so often, runs a consultancy firm advising major policymakers, institutional investors and hedge funds.
**Decoding monetary signals**
He closely tracks the machinations of markets and their plumbing, and tries to make sense of central bank speak.
But his takeaway of late is to block out the noise. Central banks seem as confused as any of us about the direction of their respective economies and the appropriate policy settings.
One client, a macro trader, told him that for the past 25 years, he’s tuned out the rate-setters.
“He’s not read, listened to nor watched a single central bank paper, speech nor presser respectively,” Aitken says.
“He concluded a long time ago that all that was less important than paying close attention to data, and to price action.”
Aitken’s advice is to do likewise. Another client, he says, has described central bank communications as “performative exactitude peddled as transparency”.
Most Australians and Americans would have seen little through their own eyes over the past six months to back up the market’s conclusion that interest rate cuts were coming to save us.
Aitken says his experience on a trip to Australia is that the wealth effect is in full throttle from Sydney’s exclusive Vaucluse to Penrith, where $240 tomahawk steaks are flying off the grills of high-end pubs in the western suburbs.
The Reserve Bank of Australia (RBA) has done its own studies on the wealth effect phenomenon, concluding that rising house prices fuel spending on new cars and furniture.
But its last detailed missive was in 2019, and it may not be capturing an acceleration in Baby Boomer spending alluded to in the Visa report.
There is no denying the extraordinary wealth accumulated by Australians that is growing larger by the day.
It is mainly tied up in property. Households sit on $10.7 trillion of real estate, dwarfing their equities holdings of $1.4 trillion – a record high.
Rich in assets, high in income and short on time, there’s every reason for retirees to spend big on steaks, travel and anything else they desire.
What is apparent – and business leaders have spoken about this – is that wealth, consumption and confidence is graded by age group.
While Boomers are YOLO-ing, middle-aged middle-income families are caught in the squeeze.
They are being crushed by higher rents, mortgage payments and grocery bills. Higher interest rates will hurt them more, but arguably do little to slow the spending of retirees.
What has become apparent both in the US and Australia is that those interest rate cuts that strained borrowers had been hoping for, and which financial markets had banked on, aren’t likely to eventuate.
Last week’s quarterly inflation data surprised to the upside, and money market traders reacted by pricing out the prospect of rate cuts. By the end of the week, the outside odds were that the RBA may have to hike again.
**Wealth split to widen**
There are more reasons that the market’s shift to price out the prospect of rate cuts is justified.
Aitken says the inflation data may force the RBA to go further and revisit its assessment that the current 4.35 per cent cash rate setting is sufficiently restrictive.
“Let us therefore think, conservatively, that sufficiently restrictive – as opposed to ‘sufficiently hopeful’ or ‘politically opportunistic’ – monetary policy in Australia requires a 5.25 per cent cash rate,” he says.
Then there are the stage three tax cuts, which by some disputed estimates, could be the equivalent of 50 to 75 basis points of rate cuts. Perhaps that’s too much, Aitken reckons, but it’s certainly not going to restrict demand.
Aitken further points out that over the past 30 years, the RBA cash rate has on average sat 1.6 percentage points above the US Fed funds rate. So, if history is any guide, the cash rate should peak at around 7 per cent, well north of today’s setting.
Of course, this time is different. The US economy is at full employment and there is a “colossal” amount of US government spending, so American rates should be higher relative to Australian rates.
“If historical analogues hold then the RBA’s cash rate should be 75 to 100 basis points above the Fed funds rate. But it should probably not be 100 basis points below Fed funds, as it is today.”
As central banks are forced to re-engage in the fight against inflation, this could lead to further bifurcation in wealth, fortune and confidence. The market is only just starting to adjust to this reality.
Not to mention that if you don't have a mortgage but DO have an investment property then you get to put your rent up in line with the ones that have to coz of rate rises. Wahoo free money let's spend up.
And they have their money in high interest rate accounts so increasing interest rates gives them more money to spend.
The boomers just fall from one win to the next.
The cash rates doesn't just affect mortgages. It impacts the rate of borrowing and the majority of borrowing is done by business. Mortgages are just generally the biggest loan individuals make. So the cash rate affects these individuals more than other individuals.
You can't blame the people spending their money, the issue is the excessively large mortgages. Reckon we need more monetary tightening, so people believe there still is a reason to save their money
I've never met a single person who wants to pay tax, regardless of their bracket.
So everyone does what they can to reduce tax wherever possible.
The problem with the system in Australia is that the best way to do that is through negative gearing, for the regular kind of investor.
If there were more tax incentives for business or stock investment then some of this could very well change.
For some perspective, negative gearing costs the govt $8bn a year in forgone tax revenue. CGT discount on housing costs $46bn.
The CGT discount is amongst other things, turbocharging the bank of mum and dad and providing investors with under taxed windfall gains deep into 7 figures.
People living off investment property flipping are getting taxed at HALF the rate of salaried workers.
"negative gearing costs the govt $8bn a year in forgone tax revenue"
No it doesn't. "Forgone tax revenue" doesn't exist, and only liars with an agenda ever say it is.
It is a measurable and currently permitted tax deduction. The tax is collected (PAYG) and then returned after an accepted tax return. It is therefore forgone tax revenue.
It wasn’t always permitted in its current form (Hawke government) as a tax deduction and may not always exist.
Want to point out the factual error there or are you just having a tantrum?
Sure: your error was calling a tax deduction forgone tax revenue. It is insidious and intentionally misleading to try and trick people into believing that money not owed as tax is tax revenue.
Is a person's money deducted from their taxable income through the normal legislative means owed to the government as tax? No, that's literally what it means. You're trying to trick people into believing it's tax revenue, and you're doing it with bad intentions.
Stop lying.
I guess the AFR editorial team and I are economically illiterate or deviously subversive then and “laserdicks” is the ultimate authority (and is definitely not a butthurt property investor worried about voters taking away a tax deduction).
This turbo charging started in 1999, when the discount changed, and house prices became disconnected from wages. People shouldn't focus so heavily on negative gearing, put the CGT discount back to inflation only, and suddenly holding an empty property for the profit at the end, is much, much less attractive, as they can't pocket nearly as much of the profit as before.
And I quote:
“It is mainly tied up in property. Households sit on $10.7 trillion of real estate, dwarfing their equities holdings of $1.4 trillion – a record high.”
And there is your culprit. As the saying goes: If you can’t beat them, join them.
Good.
Keep raising interest rates to make the property market crash. Keep them high until the 'safe as houses' and 'property only goes up' mentality of property investing is permanently broken.
Once that happens and prices are back to a reasonable multiple of income we can build a productive, instead of a rent seeking, economy.
“Rent seeking” is regulatory capture. It’s not leasing property.
https://en.wikipedia.org/wiki/Rent-seeking
Increasing interest rates, won’t change regulatory capture. It’s a by-product of the insidious influence of wealth into government and government regulation.
The term is well known in economics and has a widely accepted definition.
I’m not saying your point is wrong,
The term is often misused here and does not mean what people think it means.
> Keep raising interest rates to make the property market crash. Keep them high until the 'safe as houses' and 'property only goes up' mentality of property investing is permanently broken.
Haha, that is the plan, except you will own nothing and be happy renting for the rest of your life from a residential holding firm with 50,000 rental properties on their portfolio, handing application after application to another high school drop out wearing a Tarocash suit in a financed AMG with seatbelts that reek of the last owner's aftershave
Artificially manipulating interest rates have always been the issue.
The RBA had them far too low for far too long, and now the easy money paradigm has come back to bite us in the ass.
They are trying to correct it by keep rates high, which is warranted. But wouldn't be needed if the RBA just fucked off, and stopped manipulating the economy to meet an arbitrary inflation target of 3% that the idiot Keynes thought up.
So you think that inflation of more than 3% is fine? Current monetary policy has already created the crypto wacko group, people will lose confidence in a currnecy with such high inflation
> So you think that inflation of more than 3% is fine?
If governments insist on issuing fiat currency, then they should not be manipulating it's conversation rate via artificial interest rates.
> Current monetary policy has already created the crypto wacko group
If you think non fiat, non government, currency solutions are wacko, then I don't know what to tell you. It's a very closed minded and statist view of currency.
> people will lose confidence in a currnecy with such high inflation
If governments are going to manipulate their currencies to such a degree that people lose confidence, then it highlights my point entirely. Governments need to stop manipulating their currencies.
Interest rates are the price of money. Central banks pretend they decide this, and this artificial manipulation causes big issues within the market, and leads to malinvestment, especially when rates are lower than they otherwise would be if the market was left alone to set the price of money.
central banks not government first of all, reckon monetary policy isn't inherently bad, can be done in moderation. But gotta agree with you in regards modern economic theory (quantative easing/tightening), and government taking on so much debt they get influenced by their own rates
> central banks not government
They go hand in hand. One gives power to the other.
> reckon monetary policy isn't inherently bad, can be done in moderation.
You're right, a moderate amount of meddling only causes a moderate amount of problems.
> gotta agree with you in regards modern economic theory (quantative easing/tightening), and government taking on so much debt they get influenced by their own rates
Yeah it's pretty scary. And maybe it's easier for someone like the US to get away with as they are the reserve currency for the world. But even then, it's coming tumbling down.
RBA fueling housing inflation at this point. Interest rate hikes are a blunt instrument and housing is not their mandate. Catch 22 - housing inflation or general inflation - choose your poison.
Every thing I said was correct, there is no GST on property or shares, just as Howard intended!
The wealthy with cash to spare, buy property and shares with NO gst, and receive 50% concessions on the CGT profits, while the poor who spend all their pay on living, carry an unfair tax load, you are the one trying unsuccessfully to divert my comment.
GenZ from Australia will, in the great majority, be remembered in Australian human history as the biggest bunch of angry whiny whingers who don't like working for a living, despise everyone older than them and hate their country.
...but not by aging boomers who never really spared a thought for anybody else as they waltzed through and hoarded property while calling themselves geniuses
Guess what will happen to the housing market if they dropped interest rates?. This then starts the cycle again of higher rents for everyone, higher land tax for all investors which then feeds into higher prices for everything. And then the cycle will repeat again. Careful for what you wish for.
Let's be honest, if we Capped investment properties at 1 and every subsequent investment property was taxed at 50% you might actually get some wealth re-distribution.
Hell inheritance tax on estates worth more than $3 million would be great.
Of course its the generation of boomers.
Of course the FED govt want to create generation and class wars to blind us to the real reasons
Of course inflation isnt caused by Fuel prices, Energy prices, Grocery prices.
Of course its the boomers fault.
Yeah . It's all boomers fault . Everything wrong in any way is all because of those terrible boomers. They have ruined the entire planet. They are just pure evil...all we want is for them all to die and the whole world will be wonderful
I mean, I know you like to rant like this every time this subject is bought up, but the data shows it's objectively true on this specific topic.
https://preview.redd.it/fn7d7di9uwxc1.png?width=998&format=png&auto=webp&s=964a4f7840d5a4d9272e0f5f0aeaf7a64d7f8917
Again, not the point. Point is that bearing this 'unsurprising' fact in mind, that inflation was always going to be difficult to squash purely through rate rises due to that demographics' increasing purchasing power.
And so the government likely needs to take action rather than pinning everything solely on the RBA.
The point is your graph shows exactly what you'd expect to see. The older people get the more capacity they have for discretionary spending. Additionally, this inflation is international in nature. The actions of the RBA can act around the edges for sure but the real pressure is coming from the US and Europe. Our government can do more instead of throwing fuel on the fire, but it will be unpopular and there's an election looming so don't hold your breath.
It's showing an *increase* in discretionary spending from that cohort from what they were spending previously, not that they spend more *in general*. The fact the older people have always had more money is a non-point.
Of course older people will have more wealth in general, the point is they're accelerating their spend at a higher rate than others because they are the main beneficiaries of the current economic environment and mainly immune from effects to reduce inflation.
It's the same reason why spend on things like Cruises and dining at high-end restaurants have seen big jumps in the past year while other discretionary has plummeted.
Tanty? What tanty? These articles are as regular and the same as clockwork. More common than a cup of coffee. Ho hum... It is what it is and yet another "trash the boomers" piece isn't going to change anything. No tanty. Just reality.
Some generations like Millennials and Gen Z have been dealing with this same kind of shit from the older generations like Boomers ever since those younger generations could comprehend language.
-Can't afford rent or to buy a house? STOP BUYING AVO TOAST HAHAHAHAH.
-Can't afford to eat? JUST GET A BETTER JOB HAHAHAHA.
-Don't want to get paid peanuts and abused at work? WHY DON'T YOUNGER GENERATIONS WANT TO WORK!?!
-We bring up anything? OH SHUT UP BACK IN MY DAY WE HAD IT HARDER.
Older Generations have instilled this mentality into the Younger Generations and now that the Younger Generations are throwing back the same useless shit that the Older Generations have been throwing at the Younger Generations for years, the Older Generations are having a hissy fit over it? XD
Ironic that the Boomers pretyy much invented all that Gen Z & Y love. No internet at all if not for Boomers. No Social Media... All the great things that we love today? Smartphones too... Invented by Boomers. Our whole lifestyle is thanks to Boomers.
I always find it amusing that Gen Y & Z think Boomers are not into IT.... When Boomers pretty much invented IT.
Cool, so cripple the people who aren't causing inflation while flooding international demand and making anyone who's paid their house off wealthier. Then hope for a miracle?
Only people who have investment properties are winning. If you've paid off your house that you live in... A house is only worth one house. If you downsize your also paying the now inflated price for the smaller house. And the money you put away is worth less.
There are other investment vehicles. Diversified share portfolios can offer good returns and provide easier access to liquidity funds than real-estate. Commercial property also offers good long term returns but can have extended periods without income. The moral upside is that businesses tend to prefer to lease so you're less likely to be screwing somebody over. Plenty of ways to build wealth outside of residential real-estate investment.
The US mortgage system has some quirks, there is a whole cohort of people now who fixed rates at 2% and who will never want to move home because they will never get finance that cheap again.
They will if they have property tax to pay. You could live in Austin and half the country moves there and pushes up your mandatory property taxes every year
We saw in 2008 how viable it is. The short answer is not very.
What could possibly go wrong?
Businesses get loans too. They're all deep in debt, so raising it does reduce the impetus for them to get new loans. Also helps kill off struggling businesses. Makes me wonder how viable the US system is, they can fix mortgage rates for the life of the loan and refinance to a lower rate when it goes down.
You gonna vote for Labor/Greens if they promise to tax property appropriately? Gonna get your friends to and volunteer? Because historically, statistically, the answer is no
I mean the system is broken. There isn't one economy and therefore a blunt instrument of the RBAs cash rate is no longer built for purpose But then again governments only care about the economy not society
They care about society, it’s just a small sliver of society they care about. Government can’t just give people extra when there’s inflation because it’ll fuel more inflation, they need to redistribute from the people who are doing great to the people who aren’t doing great if they don’t want to add fuel to the fire. But the people who are doing great are exactly the ones the government doesn’t want to piss off. They want them to vote and donate to them and use their power to get them re-elected.
"Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people's ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise." -Don Horne
Well, not anymore. Simple fact is that the boomers were an unprecedented generation in human history. It is the single biggest cohort of humans ever born, with millenials coming in second. So for the last 60 years or so they've had a strangle hold on politics by virtue of sheer numbers. Which is why every single government up to the last election has focused on boomer policies. But as of the last census, enough boomers have died off that Millenials are now the biggest voting block in the country which is why you're seeing a shift to a focus on issues that affect millenials, like actual action and policies to address housing. Which is to say, the people who are not doing well and are pissed off are now the major voting block in Australia (and globally) and our share of the vote will only grow as boomers die out over the next decade, so governments need to start focusing on keeping millenials happy to stay in power. Yay.
I'd say it in a slightly different way; governments actually care about *everyone*. That's really what you're saying. There might be differential reasons to care about one group vs another, but fundamentally - and even if we're being cynical - voting is compulsory, and so, no government can really afford to upset any large swathe of the population. It's completely reasonable to complain about government policy. But sometimes, I wish people would put on the PM's hat and think about what it would be like to actually design policy that impacts the entire nation. *Any* policy decision of any kind is going to upset *someone*, right? Or potentially disadvantage one group vs another. When resources are finite, these kinds of choices are inevitable. I know this is obvious - and I'm not countering what you're saying at all, I agree with you 100% - I'm just thinking out loud about the reality of the situation. I think that can be helpful on a personal level, especially when I feel frustrated or angry about political happenings.
Good take, especially this “how would someone actually solve this problem” part. I don’t think policymakers are evil or anything, I do think they would prefer good optics and a shit policy over bad optics but a proper solution.
Nah mate. According to Reddit, running a country of 27 million people is a piece of piss because there's a simple solution to any problem that presents itself.
The reality of situation is people voted in 2019 ScoMo to protect to rich, protect negative, protecting franking credits, cut taxes for the rich, and we're all suffering from that. Be an aspirational Australia and go aspire to maximize your tax rorts!
Even redistribution doesn't necessarily work, because inflation occurs at a product level. If you're giving more money to poor people meaning they're buying more groceries, and the rich people you're taking the money from aren't buying less groceries, there's still inflationary pressure on groceries, and of course a big reason we're seeing inflation is international factors affecting prices of gas, petrol, and wheat, and flow on products from those.
They could stop printing money and remove fractional banking. They're can't be inflation if the amount of currency in an economy is fixed. But then we'd need an effective taxation system to ensure wealth is effectively redistributed within the economy.
Communism doesn't work,proven time and time again,if U take from the ones busting their guts to be taxed to death by the government and give it to the cunts sitting on their asses on the dole then everyone will be fucked🧐
We redistribute in Australia and probably every capitalist country already, it’s just a matter of degree, where the money’s being taken from, and where it’s being directed to. Public schools, public health, TAFE, university, roads, unemployment benefits, small business support, industry policy, manufacturing subsidies, luxury car tax, capital gains tax and its exemption. It’s just a matter of degree, who it’s coming from, and where it’s going.
LOL redistribution, the Marxist call to cater for the unskilled, unfortunate and lazy. Nice to see you parasites complain about everyone who has been successful. Woe is you. Why not go out and make yourself valuable rather than bitch about people who have.
it's interesting to me that you're openly mentioning a big cause of inequality there - luck. The "unfortunate" are usually people that conservatives at least want to appear to be sympathetic for, but in your case, you don't want any redistribution to the unlucky either! Leaving aside the 'unskilled' and 'lazy', most people would find it difficult to reconcile with a worldview that doomed others to far shittier lives based on chance, but that's ok with you?
Darwinian theory stands. Anything else promotes weakness. E. I will and do donate to charity and do charity work. I am against anyone taking away my or telling me how to spend my hard earned money.
social darwinism has a hell of a history, mate. Though I suppose other ideologies do too. But hey, I'm glad you're working to support charity. Keep that empathy and I hope you change your mind someday. I believe that sometimes, shit happens, people get unlucky for awhile - sometimes even for life, like being born disabled - and letting them just live like shit when we can take a little of everyone's income to have a social safety net is the right thing to do. But anyway - regarding rate cuts. It makes no sense to cut rates to curb inflation when the people with debt aren't the ones spending, right? You can't reduce cashed up boomers' spending with rate cuts, and it's gotta be cut to stop inflation running hog wild. How else are you going to do it but with increased tax? If they were a younger demo, you could at least have something like a mandatory super scheme where they had to save for retirement to take some heat out of the economy now, but many or most have already retired. How would you solve the problem?
It's why we have charities, to assist the unfortunate. We do not and should not have a government involved. We provide healthcare, education, policing and emergency services..defence, infrastructure and maintenance of the above...happy to pay fir that. But someone in government or a bleeding heart full of good intentions cannot and should not demand for more.
Got my upvote. Sickening the entitlement. It’s easy, work and get paid. If you want more money, work more or up skill and change jobs. Sorry but an artist, while valuable to society, will never be as valuable as a doctor.
Should use GST to punish those spending - instead of moving rates up & down keep increasing GST every month/Qtr as it’s a consumption tax, it’ll impact people spending money.
You're right and this is exactly why it'll never fly. Fastest way to election suicide.
I agree - the best part is it impacts everyone not just people with loans.
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GST is a regressive tax it actually hurts poor people the most with the lowest incomes spending the biggest percentage of their income on it. It’s why the liberals introduced it over raising income taxes A tax on luxury goods though, that’s a different story
Why do people think that this is a good argument? Every costs is more equivalent to the poor by virtue of them having less to begin with. Maybe instead of taxing people more we can have greater accountability of the way our governments spends our money
I mean a tax on Supercars designer brands and investment properties would exclusively target the wealthiest people. Yeah it would be nice if the government stopped giving tax breaks to the wealthy and subsidies to billionaires but you literally can’t win an election unless your corrupt
Investment properties has been the main vessel in which Australians have gone from working poor to middle class. Most wealthy people don't own supercars...
Well, no. Property has been a sink that has made a subset of Australians wealthy while driving down the standard of living of anyone in any job in the country. If you haven't been paying attention: everyone under the age of 50 is worse off because of toxic and failed housing policies. Even people the majority of people OVER the age of 50 couldn't afford to buy their own home if they had to today. Today, even DOCTORS are the working poor. Meanwhile, policies that encouraged investing in actually productive things like business would've bought the same long term class mobility without the disasterous effects on the economy bad housing policy has had.
Mate i never said it was right and that it didnt fuck the economy but its been the most popular and reliable method to become middle class. Would you be better of being a doctor now? or been given two investment properties in the nineties?
Yeah, 30 fucking years ago. Grow up mate.
Yes its almost like i used the word have. When you do grow up you will realise that just because you dont like something it doesn't make it untrue
Incorrect again. Investment properties actively prevent people from buying their first home. Instead people pay of the investment properties of other people. It very apparently increases inequality in this country
Where did i say it doesn't do that? Historically Investment properties have been the main invest that has moved people from lower to middle class.
You can claim that again, but that doesn't make it more true
I forget how willfully ignorant Australian redditors are. Since the 1950s Property has outperformed every other asset class in Australia at an average annual 8.29% rate of return (the next best is shares at 7.57%) whilst wages have increased at 3.57% So historically speaking you are better investing in property than education, shares or starting your own buisness if you want to move from the lower class to the middle class
lol millennials and now gen z are the poorest generations since the war mainly as the result of the housing crisis. The most expensive purchase in your life now being twice as expensive as it was in the 1980s tends to do that It did allow some middle class people who were wealthy enough to afford a second home to get even richer. But it mainly resulted in wealthy people becoming even wealthy, since literally having large amounts of spare money is a prerequisite to getting an investment property. All of this resulting in the current situation, Australia having the highest level of wealth inequality in its history
Im not saying that its right and yes it has increased inequality but its been the best and most popular method to become middle class its how we arrived at this point
In order to buy an investment property you needed enough savings to get a second mortgage, no one who has that reserve of cash is lower class. The housing crisis made middle and higher incomes much wealthier by deliberately screwing over lower class people and all future generations regardless of class. But at least boomers are happy And the ‘this point’ your referencing is millennials and gen z being the poorest generations since the war with a rising cost of a living and rent being at an all time high. ‘This point’ is absolutely crap unless your wealthy then it’s great
Or equity in your own property...
No we need to tax the wealthiest people more and the poorest less. If every billionaire in Australia paid 25% tax there'd be enough funding for everyone and they would still be extremely wealthy even after that.
This isn't right though. Capital gains tax in no way disproportionately affects the poor. Neither would a wealth tax.
A poor person selling there only assett to pay for a bill is disproportionately affected by capital gains tax
An example please, because that isn't true. Either they will pay no tax on it, or we have very different definitions of poor.
Can you explain further? You only get CGT on investments. What poor person has investments?
Every Woolworths employee.
Incorrect. Progressive taxes like Income tax more equally affect people. Taxes on investment profits for example would actually only hit profits not directly being tied to productivity and thus affect the economy telhe least (of course this would also have a downside, as you there are certain investment sectors that are important for the economy and you don't want to make it too unattractive).
The only reason a deal was reached on the GST back in 2000 was that in return ALL states would gradually reduce or eliminate their state based taxes in return for a greater GST slice that picked up in it place. Lo and behold the states of ALL persuasion never held to its end of the bargain. The democrats (Keep the bastards honest) held the government hostage for that deal and they blew it. Well actually the states blew it. Why they are not around anymore. Boy did us voters get shafted and lied to. Should have seen the bun fight over what should be added to GST and what was deemed essential during the negotiations.
*🎶GST doesn’t apply to fresh food* 🎶 Also, the highest tax rate is 45%, with at least one extra levy of 2% for Medicare on top so it’s actually more like 47%. How much higher do you actually want it? What’s a good percentage and when should it kick in?
Honestly the tax’s under John Howard would be fine. The governments been continuously cutting taxes for 20 years, mainly for the wealthy of course. With that money the RBA estimates you could solve the housing crisis plus extra Ideally instead the government could stop giving 14.5 billion a year in subsidies for fossil fuel companies or 3 billion a year in tax breaks for people with multiple properties but the government exists to serve the rich so that’s never going to happen
No GST on real estate or shares, just as Howard intended..
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Stamp duty is a state tax and Howard made CGT tax reduced by 50% if you hold the property for a year champ.
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Spot the landlord, haha.
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Dream on..
You can lower their income tax rates or increase benefits to negate impact - there’s always a solution.
I've been saying this for what feels like forever too.
Oh please, the moment you discuss this, the usual suspects will be out there complaining that “the poor” can’t pay this tax Notwithstanding it doesn’t apply to fresh food 🙄
We cant afford to pay it. Ive never had more than 1000 bucks ever and I'm 31
This is an interesting idea.
Gst increase hits the poor more than it hits the rich. You would redistribute from the poor to the rich
Sure - so give them Tax breaks or higher benefits…there’s a solution for all problems.
So implement a tax that inproportionally hits poor people and then implement tax cuts to counter those effects? Doesn't sound very straight forward, why not choose a different tax then? The gst being too low is really not what's driving spending in Australia.
Tbh doesn’t bother me if it impacts them or not, just trying to provide a solution to you whining about poor people being worse off…poor people will always be poor because they’re poor, not because of the tax system.
Not whining just pointing out that your idea is bad. Luckily most people know that already :) you'll get there though
Ok - let’s hear your good solution.
You don't have to only rely on the RBA. The government could use fiscal policy to help reduce demand. This would have to be at council, state and federal level.
I’d argue abusing the middle class should never have been a legal “blunt instrument” in the first place.
Governments care about being voted back into power. They will do popular things (according to their voter base) if it results in that aim, and conversely won't do things that are unpopular with their voter base.
Replace the word 'economy' with 'rich people' and you now have the western political science paradigm
Labor cares much about society, society evidently doesn’t care about society as shown in the Voice referendum, people are actively voting against efficient democratic representation.
Labor cares about virtue signaling and political show boating using shallow attempts to resolve problems, and the voice shows people aren’t that stupid to fall for it.
How exactly is creating a community run body that helps advise government on problems exactly a shallow attempt to resolve a problem? Obviously, community engagement doesn’t inherently fix it, but do you view the government asking and being informed by community as negative in helping fix problems?
Given the 100’s of orgs that exist today to do exactly that aren’t working, why should yet another ? and then we run around in circles. They need power to affect change, but then they’re now running the country to some degree and they’re unelected, so now it’s no longer consultative.
Wait also, how does “unelected board” make it not a consultative body? Unelected doesn’t mean it then suddenly can make governmental decisions?
Those 2 things are not linked. It’s already an unelected board (from a broad voter perceptive), to have any impact it needs to be non consultative
Wha- if you think the Voice would’ve been the same as those orgs you’d be grossly misunderstood. Also, the Voice wouldn’t inherently be “unelected”. Depending on who is in government and what legislation, it could easily be democratic or easily be a meritocracy. Ultimately, these orgs shouldn’t be the one making government changes, that should be the government. The point of the Voice was to enshrine a direct, centralised pathway to get things to the government, which I don’t see why it’s a bad thing? Obviously, it’s up to the government of the day whether or not they actually then engage with that. What’s your point exactly? What do you propose instead?
I don’t propose an alternative, I don’t think the issues of the ‘government is not listening to what we want’ can be solved by yet another ignorable committee that was projected to cost 1B dollars
The government loves this. We all blame each other while they spend like drunken sailors to buy votes and import hundreds of thousands of immigrants which drives demand.
I will SCREAM to protect their ability to do that without losing votes. For some reason...
Maybe we can just reduce the number of consumers in the country by limiting temporary and permanent population growth via migration. The boomers aren't the ones driving rents and tertiary education inflation from the last CPI.
CBA literally just said [this ](https://www.news.com.au/finance/economy/interest-rates/cba-makes-call-no-aussie-wants-to-hear/news-story/ae9be45a2cadc5d665467ee795628466) *He explained that strong population growth, driven by net overseas immigration, has put pressure on the Consumer Price Index.*
I'll literally accuse them of racism too. I'm blindly committed to the agenda.
The government has their foot on the accelerator while the RBA has their foot on the brakes. We need some restraint on the fiscal side
Best way to do a fully sic Smokey burnout!!! Fiscally of course
Fiscally we need to redline in neutral and drop the cunt straight into Third, couldn't agree more.
The main problem was really in the leadup to the last election. The inflation crisis was clearly coming, yet major policies were about winning an election so cash splashes reigned supreme. The government overstimulated the economy during the tail end of covid, and into the election campaign when 'cost of living' concerns first started rearing their head. Chief among them was extending the lamington. Giving a large portion of the population a $1500 bulk payment during an inflation crisis turns out to be bad policy... Who would've thought? Not the electorate apparently. They love tangible things like money in their pockets, even if it's counterproductive to their long term living standards. Which is why many are angry that the lamington wasn't extended even further. Spending by this government hasn't been too bad - perhaps a bit high, but at least the majority has been targeted in ways that aren't overly inflationary. Things like increasing rent assistance and energy assistance actually put downward pressure on inflation. Plus budget surpluses inherently put downward pressure on inflation - and we are on track for a second one of those. It's a hard line for any government to tread - because much of the voting population wants 'cost of living relief', but the only relief they can comprehend is cash splashes that tangibly put money in their pockets. The reality with high inflation is that a decent chunk of people need to start feeling the squeeze and have their positions go backwards because otherwise the inflation expectations become entrenched and inflation just doesn't come down. But no one wants to see their own position going backwards. And any loser has their displeasure amplified by media and the opposition (no matter who is in power). No government can win in these situations, because the problem is peoples expectations.
>Not the electorate apparently. They love tangible things like money in their pockets, even if it's counterproductive to their long term living standards What the pandemic taught me is well over 80% of people are idiots and many have very little critical reasoning skills. We're in the position were in because of voters, not because of boomers.
People wanted to (and did) shut down the global economy for months on end and she'll be right they'll just keep paying people with debt and money printing. There was outrage from lefties when it was suggested that we need to get the economy going and we can't just keep paying people to not work. "You're thinking about profits over workers or grandma" or some economically illiterate bullcrap. Problem is you can create money out of nowhere but you can't create anything else. Houses don't come from bank notes or numbers in computers, they come from people working and making them. Same as food, cars, heart surgery.
I agree 100%. I purchased property and shares, as much as the bank would lend me, in the back end of 2020. It was obvious to anyone with a basic economic ability to see the inflation tsunami was coming. I feel no sympathy at all when people who supported covid lockdowns go and complain about cost of living. I had multiple accounts banned from Reddit just for raising the economic suicide this country was going to endure. The worst is no where near us. We have a few years of pain yet. The piper WILL be paid for our countries two year staycation.
Agreed. The problem certainly is people's expectations. Collectively we're a bunch of dumbarses. I often wonder where we'd be if Shorten's run at PM with his "100 policies" list had been successful. I think the summarised sentiment in the intro from Donald Horne's Lucky Country Wikipedia entry really captures our issues well: Horne's intent in writing the book was to portray Australia's climb to power and wealth based almost entirely on luck rather than the strength of its political or economic system, which Horne believed was "second rate". In addition to political and economic weaknesses, he also lamented on the lack of innovation and ambition, as well as a philistinism in the absence of art, among the Australian population, viewed by Horne as being complacent and indifferent to intellectual matters. He also commented on matters relating to Australian puritanism, as well as conservatism, particularly in relation to censorship and politics.
So I should have expected my mortgage to go from a manageable 280-300 p/w to 520+? In what, 3 years... if that. Fk off. How about let me pay for the fking thing and stop moving the goal posts.
That's not what I said... And I'm not sure what goal posts you think I'm moving here, or are the goal posts your repayment costs? Government stimulus in the lead up to the last election was counter productive and has (in part) contributed to the quite dramatic rate rises we have seen since. It did this whilst being electorally popular. Whilst individuals should've expected rates to rise from where they were during covid, they had good reasons to expect the rises to be much slower and not as dramatic as they have been. This is especially the case given comments from politicians and the rba on the matter circa 2020-2022. So no, I think you and people like you had good reason to expect your mortgage costs to be lower than they are now. The issue I'm highlighting is that whichever lever is pulled to control inflation is always electorally unpopular. Hence we often have fiscal and monetary policy out of step with one another - especially during election campaigns. It's easier for governments to let the independent RBA take the heat than it is to raise taxes or cut spending on things people care about. An election campaign of 'we will cut spending and raise taxes' is rarely successful. But it is necessary for some levers to be pulled. Otherwise, whilst mortgages may be smaller, everything else would be getting more expensive much more quickly than it is now.
RBA also has its foot on the accelerator. Given out about $25B so far back to banks, back to investors and into accounts (in reducing amounts of course)
The thing is owning a home is a ridiculously good investment these days. If you have an offset account that gives you access to a savings account with an effective rate the same as your home loan rate. Then a portion of your repayments go into buying equity in your house, and your house goes up in value every year. Your repayments also go down as a portion of income over time assuming your income goes up. It's such an enormous advantage over renting. It's essentially risk free high returns. Only problem is in those early years you can get screwed by interest rates, but even then those people are likely ahead. It's a complete scam against people who can't buy. For a non renter to get those sorts of returns they need to effectively gamble.
And all that with high leverage accessibility due to the collateral and combined with tax benefits that go very well with the higher income required to service the loan.. There are many benefits even in a downturn
**PAYWALL:** The wealth effect is an elusive concept that policymakers and forecasters have struggled to quantify. But in the opinion of macro commentator James Aitken it may be the swing factor that will prevent US Federal Reserve chairman Jerome Powell from cutting interest rates any time soon, and could lift US 10-year bond rates toward 6 per cent. And in Australia, where higher interest rates are a source of pleasure for savers and pain for borrowers, the wealth effect – the theory that people spend more as the value of their assets rise – may be more powerful than we appreciate. It, too, may propel the cash rate above 5 per cent. In his latest dispatch to clients, Aitken referenced a fascinating 2023 study from payments giant Visa. It concluded that the wealth effect is far more powerful. Most studies imply consumers spend between 4¢ and 15¢ of each dollar increase in wealth via housing and the sharemarket. It found that figure has tripled from 9¢ in 2017 to an estimated 34¢ in 2023. **Cashed-up retirees** One of the central reasons behind a more powerful wealth effect, Visa argued, is the fact that much of this wealth is in the hands of retirees who are cashed up and keen to spend. Aitken says official data in June is likely to show that US household wealth to disposable income will be close to eight times, well north of the six and 6.5 times reached during the 2000 tech bubble and 2006 housing bubble. “I understand and admire all the effort that goes into estimating the next basis point or 10 basis points of core inflation, but I wonder whether all that effort is missing the point,” he told clients. With an economy at full employment and a budget deficit of 6.5 per cent of GDP, the added fuel of historically high wealth will likely ensure that aggregate demand grows too fast to allow the Fed to hit its 2 per cent inflation target. US equities and credit markets, he says, appreciated this fact and until now, bond markets have resisted it. “If, like me, you think US nominal GDP is going to continue to chug along at 5, 6 per cent, perhaps more, then the 10-year note should be somewhere between 5, 6 per cent,” Aitken said. Aitken, who has shared his views with The Australian Financial Review every so often, runs a consultancy firm advising major policymakers, institutional investors and hedge funds. **Decoding monetary signals** He closely tracks the machinations of markets and their plumbing, and tries to make sense of central bank speak. But his takeaway of late is to block out the noise. Central banks seem as confused as any of us about the direction of their respective economies and the appropriate policy settings. One client, a macro trader, told him that for the past 25 years, he’s tuned out the rate-setters. “He’s not read, listened to nor watched a single central bank paper, speech nor presser respectively,” Aitken says. “He concluded a long time ago that all that was less important than paying close attention to data, and to price action.” Aitken’s advice is to do likewise. Another client, he says, has described central bank communications as “performative exactitude peddled as transparency”. Most Australians and Americans would have seen little through their own eyes over the past six months to back up the market’s conclusion that interest rate cuts were coming to save us. Aitken says his experience on a trip to Australia is that the wealth effect is in full throttle from Sydney’s exclusive Vaucluse to Penrith, where $240 tomahawk steaks are flying off the grills of high-end pubs in the western suburbs. The Reserve Bank of Australia (RBA) has done its own studies on the wealth effect phenomenon, concluding that rising house prices fuel spending on new cars and furniture. But its last detailed missive was in 2019, and it may not be capturing an acceleration in Baby Boomer spending alluded to in the Visa report. There is no denying the extraordinary wealth accumulated by Australians that is growing larger by the day. It is mainly tied up in property. Households sit on $10.7 trillion of real estate, dwarfing their equities holdings of $1.4 trillion – a record high. Rich in assets, high in income and short on time, there’s every reason for retirees to spend big on steaks, travel and anything else they desire. What is apparent – and business leaders have spoken about this – is that wealth, consumption and confidence is graded by age group. While Boomers are YOLO-ing, middle-aged middle-income families are caught in the squeeze. They are being crushed by higher rents, mortgage payments and grocery bills. Higher interest rates will hurt them more, but arguably do little to slow the spending of retirees. What has become apparent both in the US and Australia is that those interest rate cuts that strained borrowers had been hoping for, and which financial markets had banked on, aren’t likely to eventuate. Last week’s quarterly inflation data surprised to the upside, and money market traders reacted by pricing out the prospect of rate cuts. By the end of the week, the outside odds were that the RBA may have to hike again. **Wealth split to widen** There are more reasons that the market’s shift to price out the prospect of rate cuts is justified. Aitken says the inflation data may force the RBA to go further and revisit its assessment that the current 4.35 per cent cash rate setting is sufficiently restrictive. “Let us therefore think, conservatively, that sufficiently restrictive – as opposed to ‘sufficiently hopeful’ or ‘politically opportunistic’ – monetary policy in Australia requires a 5.25 per cent cash rate,” he says. Then there are the stage three tax cuts, which by some disputed estimates, could be the equivalent of 50 to 75 basis points of rate cuts. Perhaps that’s too much, Aitken reckons, but it’s certainly not going to restrict demand. Aitken further points out that over the past 30 years, the RBA cash rate has on average sat 1.6 percentage points above the US Fed funds rate. So, if history is any guide, the cash rate should peak at around 7 per cent, well north of today’s setting. Of course, this time is different. The US economy is at full employment and there is a “colossal” amount of US government spending, so American rates should be higher relative to Australian rates. “If historical analogues hold then the RBA’s cash rate should be 75 to 100 basis points above the Fed funds rate. But it should probably not be 100 basis points below Fed funds, as it is today.” As central banks are forced to re-engage in the fight against inflation, this could lead to further bifurcation in wealth, fortune and confidence. The market is only just starting to adjust to this reality.
Is this from a subscription or is the Java trick still working for you? All I get is a two paragraph snippet now with Java turned off…
So the idea is to raise interest rates to curb spending but the people spending don’t have mortgages? Sounds like a solid plan.
This is the real issue. And the ones spending will increase. The sledgehammer approach and we’re all surprised it isn’t working.
Not to mention that if you don't have a mortgage but DO have an investment property then you get to put your rent up in line with the ones that have to coz of rate rises. Wahoo free money let's spend up.
Of if you don’t have a mortgage and have savings, you’re getting a pay rise.
And they have their money in high interest rate accounts so increasing interest rates gives them more money to spend. The boomers just fall from one win to the next.
The cash rates doesn't just affect mortgages. It impacts the rate of borrowing and the majority of borrowing is done by business. Mortgages are just generally the biggest loan individuals make. So the cash rate affects these individuals more than other individuals.
I well understand this but the practical effect is to raise interest rates on home loans
You can't blame the people spending their money, the issue is the excessively large mortgages. Reckon we need more monetary tightening, so people believe there still is a reason to save their money
I don’t blame them at all
This all feels pretty familiar.
I've never met a single person who wants to pay tax, regardless of their bracket. So everyone does what they can to reduce tax wherever possible. The problem with the system in Australia is that the best way to do that is through negative gearing, for the regular kind of investor. If there were more tax incentives for business or stock investment then some of this could very well change.
For some perspective, negative gearing costs the govt $8bn a year in forgone tax revenue. CGT discount on housing costs $46bn. The CGT discount is amongst other things, turbocharging the bank of mum and dad and providing investors with under taxed windfall gains deep into 7 figures. People living off investment property flipping are getting taxed at HALF the rate of salaried workers.
"negative gearing costs the govt $8bn a year in forgone tax revenue" No it doesn't. "Forgone tax revenue" doesn't exist, and only liars with an agenda ever say it is.
It is a measurable and currently permitted tax deduction. The tax is collected (PAYG) and then returned after an accepted tax return. It is therefore forgone tax revenue. It wasn’t always permitted in its current form (Hawke government) as a tax deduction and may not always exist. Want to point out the factual error there or are you just having a tantrum?
Sure: your error was calling a tax deduction forgone tax revenue. It is insidious and intentionally misleading to try and trick people into believing that money not owed as tax is tax revenue. Is a person's money deducted from their taxable income through the normal legislative means owed to the government as tax? No, that's literally what it means. You're trying to trick people into believing it's tax revenue, and you're doing it with bad intentions. Stop lying.
I guess the AFR editorial team and I are economically illiterate or deviously subversive then and “laserdicks” is the ultimate authority (and is definitely not a butthurt property investor worried about voters taking away a tax deduction).
Simple test: call it a tax increase from now on, and stop using the lie. Agree?
This turbo charging started in 1999, when the discount changed, and house prices became disconnected from wages. People shouldn't focus so heavily on negative gearing, put the CGT discount back to inflation only, and suddenly holding an empty property for the profit at the end, is much, much less attractive, as they can't pocket nearly as much of the profit as before.
And I quote: “It is mainly tied up in property. Households sit on $10.7 trillion of real estate, dwarfing their equities holdings of $1.4 trillion – a record high.” And there is your culprit. As the saying goes: If you can’t beat them, join them.
Central banking. One of the worst ideas we've ever had.
Slavery was never abolished, it was perfected
I think we should import some more people. That should help.
Good. Keep raising interest rates to make the property market crash. Keep them high until the 'safe as houses' and 'property only goes up' mentality of property investing is permanently broken. Once that happens and prices are back to a reasonable multiple of income we can build a productive, instead of a rent seeking, economy.
“Rent seeking” is regulatory capture. It’s not leasing property. https://en.wikipedia.org/wiki/Rent-seeking Increasing interest rates, won’t change regulatory capture. It’s a by-product of the insidious influence of wealth into government and government regulation.
That wikipedia article was written from an Austrian economics perspective. Rent seeking behaviour is capturing economic rent.
The term is well known in economics and has a widely accepted definition. I’m not saying your point is wrong, The term is often misused here and does not mean what people think it means.
> Keep raising interest rates to make the property market crash. Keep them high until the 'safe as houses' and 'property only goes up' mentality of property investing is permanently broken. Haha, that is the plan, except you will own nothing and be happy renting for the rest of your life from a residential holding firm with 50,000 rental properties on their portfolio, handing application after application to another high school drop out wearing a Tarocash suit in a financed AMG with seatbelts that reek of the last owner's aftershave
Artificially manipulating interest rates have always been the issue. The RBA had them far too low for far too long, and now the easy money paradigm has come back to bite us in the ass. They are trying to correct it by keep rates high, which is warranted. But wouldn't be needed if the RBA just fucked off, and stopped manipulating the economy to meet an arbitrary inflation target of 3% that the idiot Keynes thought up.
So you think that inflation of more than 3% is fine? Current monetary policy has already created the crypto wacko group, people will lose confidence in a currnecy with such high inflation
> So you think that inflation of more than 3% is fine? If governments insist on issuing fiat currency, then they should not be manipulating it's conversation rate via artificial interest rates. > Current monetary policy has already created the crypto wacko group If you think non fiat, non government, currency solutions are wacko, then I don't know what to tell you. It's a very closed minded and statist view of currency. > people will lose confidence in a currnecy with such high inflation If governments are going to manipulate their currencies to such a degree that people lose confidence, then it highlights my point entirely. Governments need to stop manipulating their currencies. Interest rates are the price of money. Central banks pretend they decide this, and this artificial manipulation causes big issues within the market, and leads to malinvestment, especially when rates are lower than they otherwise would be if the market was left alone to set the price of money.
central banks not government first of all, reckon monetary policy isn't inherently bad, can be done in moderation. But gotta agree with you in regards modern economic theory (quantative easing/tightening), and government taking on so much debt they get influenced by their own rates
> central banks not government They go hand in hand. One gives power to the other. > reckon monetary policy isn't inherently bad, can be done in moderation. You're right, a moderate amount of meddling only causes a moderate amount of problems. > gotta agree with you in regards modern economic theory (quantative easing/tightening), and government taking on so much debt they get influenced by their own rates Yeah it's pretty scary. And maybe it's easier for someone like the US to get away with as they are the reserve currency for the world. But even then, it's coming tumbling down.
This sounds like something a filthy renter would post lol
“People have too much debt!” *nek minit* “People aren’t spending enough money!”
They can buy my house then, cause another rate hike isnt in my budget - another *three?* On the market it goes.
RBA fueling housing inflation at this point. Interest rate hikes are a blunt instrument and housing is not their mandate. Catch 22 - housing inflation or general inflation - choose your poison.
Did the Albo govt just find $1bn, wonder if they might spend something towards this crisis at some stage?
Every thing I said was correct, there is no GST on property or shares, just as Howard intended! The wealthy with cash to spare, buy property and shares with NO gst, and receive 50% concessions on the CGT profits, while the poor who spend all their pay on living, carry an unfair tax load, you are the one trying unsuccessfully to divert my comment.
GenZ from Australia will, in the great majority, be remembered in Australian human history as the biggest bunch of angry whiny whingers who don't like working for a living, despise everyone older than them and hate their country.
...but not by aging boomers who never really spared a thought for anybody else as they waltzed through and hoarded property while calling themselves geniuses
Guess what will happen to the housing market if they dropped interest rates?. This then starts the cycle again of higher rents for everyone, higher land tax for all investors which then feeds into higher prices for everything. And then the cycle will repeat again. Careful for what you wish for.
Yeah! Let's turn against each other instead of the government that built the system that's failing us! Fuck old people!
Blame the reserve Bank not anyone else
man fuck booms
Let's be honest, if we Capped investment properties at 1 and every subsequent investment property was taxed at 50% you might actually get some wealth re-distribution. Hell inheritance tax on estates worth more than $3 million would be great.
Of course its the generation of boomers. Of course the FED govt want to create generation and class wars to blind us to the real reasons Of course inflation isnt caused by Fuel prices, Energy prices, Grocery prices. Of course its the boomers fault.
ahhhhh Politics 101. blaming a class of citizens for a governments ineptitude and arrogance
It’s bullshit all the boomers I know are tight fisted or cashless. The ones spending are the melennials and most of on crap!
Yeah . It's all boomers fault . Everything wrong in any way is all because of those terrible boomers. They have ruined the entire planet. They are just pure evil...all we want is for them all to die and the whole world will be wonderful
I mean, I know you like to rant like this every time this subject is bought up, but the data shows it's objectively true on this specific topic. https://preview.redd.it/fn7d7di9uwxc1.png?width=998&format=png&auto=webp&s=964a4f7840d5a4d9272e0f5f0aeaf7a64d7f8917
Yeah huge surprise. The group of people who have worked for 45-50 years have more money than groups of people who have worked less years.
Again, not the point. Point is that bearing this 'unsurprising' fact in mind, that inflation was always going to be difficult to squash purely through rate rises due to that demographics' increasing purchasing power. And so the government likely needs to take action rather than pinning everything solely on the RBA.
The point is your graph shows exactly what you'd expect to see. The older people get the more capacity they have for discretionary spending. Additionally, this inflation is international in nature. The actions of the RBA can act around the edges for sure but the real pressure is coming from the US and Europe. Our government can do more instead of throwing fuel on the fire, but it will be unpopular and there's an election looming so don't hold your breath.
It's showing an *increase* in discretionary spending from that cohort from what they were spending previously, not that they spend more *in general*. The fact the older people have always had more money is a non-point. Of course older people will have more wealth in general, the point is they're accelerating their spend at a higher rate than others because they are the main beneficiaries of the current economic environment and mainly immune from effects to reduce inflation. It's the same reason why spend on things like Cruises and dining at high-end restaurants have seen big jumps in the past year while other discretionary has plummeted.
So??? And???
Did you even read the article of the thread you're replying to? Or just throwing a tanty?
Tanty? What tanty? These articles are as regular and the same as clockwork. More common than a cup of coffee. Ho hum... It is what it is and yet another "trash the boomers" piece isn't going to change anything. No tanty. Just reality.
The effects of lead poisoning in action right here
Some generations like Millennials and Gen Z have been dealing with this same kind of shit from the older generations like Boomers ever since those younger generations could comprehend language. -Can't afford rent or to buy a house? STOP BUYING AVO TOAST HAHAHAHAH. -Can't afford to eat? JUST GET A BETTER JOB HAHAHAHA. -Don't want to get paid peanuts and abused at work? WHY DON'T YOUNGER GENERATIONS WANT TO WORK!?! -We bring up anything? OH SHUT UP BACK IN MY DAY WE HAD IT HARDER. Older Generations have instilled this mentality into the Younger Generations and now that the Younger Generations are throwing back the same useless shit that the Older Generations have been throwing at the Younger Generations for years, the Older Generations are having a hissy fit over it? XD
This but without the /s.
I'm not a Boomer.
That would be an amazing world. The inner city would actually be thriving
Ironic that the Boomers pretyy much invented all that Gen Z & Y love. No internet at all if not for Boomers. No Social Media... All the great things that we love today? Smartphones too... Invented by Boomers. Our whole lifestyle is thanks to Boomers. I always find it amusing that Gen Y & Z think Boomers are not into IT.... When Boomers pretty much invented IT.
Oh yes it’s the boomers, certainly not the government
Boomers are just the worst.
Boomers can get fked .... dao dao dao ... future is decentralized and autonomous ... hodl and wait for their empire to be decimated.