This level of spine shits all over ”backbone” Phil.
However, it will serve as a useful case study for Phil and the rest of the EZFKA complex – they will watch very closely what this does to NZ property prices and this will inform their future steps. Beyond that – I am, for now, without words.
Could be worse. The implied fed rates out next two years from forwards look like arse.
On the plus side, better here in Au or NZ than in Europe. Those guys are f’ed so bad its unlikely that Nato will even survive, and the EU may splinter too.
Sucks to be a battler right now. Either (a) rising rates bankrupt you, or (b) currency debasement destroys your standard of living and your real wages fall.
Yay!
The elites will be fine and that is all that matters to them, sucks for the rest of us though.
You are right, T.
in theory inflation has been the economic dream because it will supposedly lift debt burdens, etc.
A similar economic dream was low interest rates and we know how that turns out.
the important question is, of course, not whether there is inflation or deflation, nor whether the interest rates are high or low — but who eats the cost and who reaps the benefit of each alternative.
inflation might be great for the plebs if it looks like galloping wages for the plebs. Terrible if it looks like spiking food and energy prices while wages tread water.
Low interest rates are great if they result in the retirement of debt and deleveraging (ie savings in amount of funds flowing to ticket clippers). But terrible if it just facilitates ever-greater debt expansion.
We both know what the very likely outcome in the EZFKA will be. 🤓
Nah, mortgage battlers can just rely on Clive and the UAP to fix rates at 3%.
We’ll soon see what the level of economic understanding in EZFKA is.
I think 6-8% inflation will become the new 2-3% target. That’s how they’ll deal with this.
So you mean that they’ll let it run to 6%+ and call that a “neutral” rate which they don’t need to act to reel in?
Yeah, plus they can blame the pandemic, Russia, supply chains, the great resignation, etc for any sticky inflation for years to come.
It’s genius. Classic EZFKA solution. Just waiting for Uncle Sam to make the first move.
No other solution for the western world anyway but to shift their inflation target. You have unprecedented stimulus over the past two years, global shortages everywhere. Nominal rates were already negative in parts of the western world.
RBA rate is 0.1% with the worst inflation in the west for 40 years, and it’s been this way for the last 12 months now with no signs of abating. Probably should already be at 5% with half a percent increases at every meeting. The horse has well and truly bolted.
This is what makes my head explode. If the RBA actually gave a shit about inflation the cash rate would already be at least at 1% or more by now. Instead they don’t want to blink and are holding steady, hoping for the election to be over, not wanting to pop the bubble .. completely negligent.
No negligent, intentional, to their masters they are doing a wonderful job, keeping the housing bubble alive is a monumental task.
that’s correct. It is considered an economic truism that a central bank can choose to control either:
but can’t do both at the same time. History is littered with failed attempts.
a very similar thing seems to be true for house prices – if this is what the central bank has chosen to control, then it can’t really pursue other purposes (inflation, employment, fax rate, whatever). Not without blowing up house prices (either up or down).
Peachy embraces mmt at last
Negligent to the bottom 75% income quartile then.
Something like that…
They don’t give a toss at the RBA, and they’ll be long gone when the masses decide to string them up on lamp posts.
Indeed hence my point
Some unelected boffins half responsible for determining the fate of the economy, who can’t even manage inflation which is has been one of their key stated goals for decades.
At 2% people somehow were able to adjust with no/low income growth. At 6 to 8%, it’s doubling the cost of living every 9-11 years! The wages will need to get above the anemic growth to keep up, this rate of increase is harder to hide, in my view. Once the wages start going up in earnest, the horse would have well and truly bolted.
Read your post and subconsciously repeated your last line above lol.
You’re correct people are going to be squeezed a lot more over the next 5 years. People will be having to learn to live with less.
I know a place
Ain’t nobody cryin’
Ain’t nobody worried
Ain’t no smilin’ faces
Mmm, no no
Lyin’ to the races
https://www.youtube.com/watch?v=eygGJHVvBxQ
I got the feeling a while ago that Adrhern is following through on her 2017 election promises, and she is willing to hammer the house prices and lose the election to do it. The RBNZ has probably been waiting for the stars to align to enable this to occur. If she can keep a lid on immigration this will set the NZ people up for a much better economy longer term. If she can’t then none of it matters. Who cares about the future if your people aren’t in it?
Should be fine
like packing 4 jimmies into every room fixed the problem of rising house prices
so will eating soylent and cockroaches fix the food price problem
and wfh and closing borders will fix the oil price problem
wages never have to rise
I mean this is essentially the neoliberal solution – crush growth to keep inflation low
Now do health policy!
8.5% increase above expected mortality without any covid cases
nothing to see here
Bank of Canada also increased 50 basis points overnight, consensus was that they were too slow to act and now need to go hard on rate rises to catch up. Expect another 50 point rise to follow. The longer the RBA waits the more fun this becomes.
Now that we’re at the stage where people are arguing that rate rises will support housing prices, this has to be the end, right? The plebs are fully saturated with debt, now the elites can turn the screws and drain them.
This is very interesting. RBA seems a bit snookered to the downside by their massive erection for housing and the miserable election campaign.
in my mind, there is a chance that the RBA could wait this out, if the foreign CB rate rises come on thick and fast but are then reversed (even even quicker) when shit starts to break. Then the RBA will look like geniuses for sitting on their hands or moving slowly.
they can definitely afford to wait and do nothing (or move slowly) because of the massive strength of the AUD (backed by iron ore and coal). They can easily afford to trade some of this away in currency depreciation due to growing interest rate differential.
if anything, this will make Australian labour relatively cheaper, which they will also chalk up as a success. And the resulting imported inflation they can easily wash their hands of in the current environment (it’s happening everywhere, it’s Russia’s fault, etc).
I’m thinking about the scenario where the banks stop/reverse rate rises and it still doesn’t look pretty.
Without further rises in the great RE soufflé there’s no more equity to pump back into prices, and new entrants are stuffed because living costs leave them with nothing to save.
Maybe the doom and gloom merchants of 2007 were right, just 15 years too early. Don’t buy now!
There is the chance that if deleveraging begins, it the. won’t be able to be arrested even if rates come down and will just spiral down.
on the other hand, EZFKA punters have proven themselves very resilient. They shrugged off the period of negative-sideways-relaxing a few years ago and leveraged up again.
…and then the killer pandemic came and that made lending REALLY boom.
so if anyone can be counted on to do heavy borrowing, EZFKA units certainly can.
beat me to it..
https://www.greaterfool.ca/
There’s a man I haven’t read in a while!
Random bits of anecdata:
– Over the last few weeks our letterbox has been spammed daily by local RE advertising. Has the Sydney market hit a wall? We rarely got any advertising before, have things gotten desperate quickly?
– At work I spoke with someone involved in property market modelling at one of the big 4. I asked him what they were looking at regarding interest rate rises and he said whatever you’ve heard, double it.
RBNZ will see housing conniptions and not have a care. NZ banks are EZFKA banks so EZFKA banks can suck up the underperformance….ie: EZFKA legazens can suck it up too
That’s the optimistic view but there is certainly an underlying truth to that – a distinct advantage due to NZ banks not being like 50% of the local bourse.
I am noticing an increasing number of commentators suggest that house prices will not fall because existing mortgage holders being tested at 3% buffers. They have completely ignored new borrowers having reduced borrowing capacity.
There are also many mortgage holders who have lived beyond their means and only being allowed to Extend and Pretend whilst they have equity in their homes. IMO this is actually the biggest risk. If we do get any significant fall in house prices the number of people with zero/negative equity will rise and the banks could start to panic.
Anecdote. I know someone who purchased a house in inner west Sydney for $150k at the perfect time post-recession in early 90s. Paid it off quickly, lived it up buying racehorses, holidays, etc. Decided to spend ~$550k around 15 years ago to knock down and build a McMansion. They have been going backwards ever since because maintaining existing lifestyle is not negotiable. Banks have let it slide because house value now up over $2m. For the same reason this person was not concerned and planned to use the existing equity to buy a smaller/cheaper house outright in retirement. The last time I spoke to them they were getting nervous at the prospect of losing job and having to take a major pay cut in new job due to age. Still completely in denial about the prospect of property prices actually falling and ending up with little equity.
the 3% buffer thing only really goes to outright default risk. And I don’t think that anyone seriously expects there to be tens of thousands of mortgagee in possession sales in EZFKA. That’s a very unlikely mechanisms for price falls.
exactly, new borrowers would need to be able to service debt at the higher rate +3% and so they would be able to only borrow less… ceteris paribus.
this is a much more plausible mechanism.
Even before any bank panic, there must also be the very vanilla effect of monetary policy. That is, those with debt will devote more income to interest payments and have less left over for manicures, jetskis, restaurants.
this will undermine wages and employment and debt demand/capacity.
but all of this only goes to the dollar-level of house prices. The dollar-level can easily halve and still be profoundly unaffordable if, at the same time, food/fuel/household goods have drifted up 30%-50% (basic model is that all unconsumed income is spent on housing) and another 500,000 residents have been imported (underlying housing shortage)
Also the Wealth Effect disappearing or reversing. But I guess if this all reverses then so will the rate rises.
I have repeatedly mentioned that the government has set us up for a retirement crisis with widespread retirees with zero/negative home equity. If that happens the only options are:
I actually believe #2 is desirable for the elites. There seems to be intent to have retirees die off with zero equity rather than pass on inheritances. Let’s call it a 100% death tax that only applies to the peasants.
3) Let the death jabs do their job and there will be no retirees to worry about.
“But I guess if this all reverses then so will the rate rises.”
there it is
money can only be created through loans
and in Australia , loans are only created through mortgages
fewer loans fewer monies
fewer monies no inflation
no inflation lower rates
lower rates more loans
more loans more monies
more monies higher land prices
all they need to do is keep a lid on wages by ramping up immigration again
then the same ezfka units will simply live in a smaller house, or share with fellow units
This is very MB-style thinking Freddy
I could have read this from one of the imbeciles in the comment section there
the EZFKA way to think about this is – house prices won’t fall because they can’t
we start from that position and work backwards to imagine and understand the reasons why
Actually to be more specific, house prices won’t fall unless doing so would benefit the ruling class
so maybe it’s not quite as clear cut as I first implied
but it first requires a black rock type entity to benefit
in any case I don’t see the cash rate getting beyond 1%
the rba will drag their feet, and by then the world will be in recession, and jimmies pouring back into the country for their hair dressing degrees
inflation (not of wages) will have been “transitory” but the accumulated 30% increase won’t reverse
you will just get less for more
Your friend will sell his house and the new owner will build apartments , or several jimmies will share a room
The thing is EZFKA is no longer controlling their own destiny. It is even in your wording with permanent price rises eating into disposable income, and RBA only being able to limit short term rate rises if the rest of the world enters a recession in fairly quick time.
What if we were to get a perfect storm of the rest of the world not going into recession any time soon, and of course we will still have the muppets suppressing wages with jimmies? The RBA would be snookered. They would either have to continue raising rates, or the dollar would collapse and we would import price inflation. Either way that would reduce debt serviceability.
Recall a conversation we had with Peachy last year about extend and pretend. I think we all agreed that the banks would stop extending and pretending once equity evaporated. So what happens if prices fall far enough to collectively trigger the banking systems’ version of a stop loss?
Think of it like this, house prices must be protected at any cost, with that cost being borne by the younger generations.
Kill the kids to save granny, in this case burden the kids to save granny’s wealth and overseas’s holidays.
Rba is always in control of interest rates, as long as it’s willing to tolerate a lower AUD
fortunately global inflation is high because of commodity and food prices
and what does Australia produce in spades ?
commodities and food
the automatic stabiliser which will lift the AUD
it’s just never going to happen Freddy
this isn’t a natural system that has to return to equilibrium
the plutocracy is fully in control
Higher rates eat into disposable income, lower AUD also eats into disposable income via inflation. Without wage inflation it becomes a case of picking your poison.
There are other major currency flows which affect the AUD. This is the first time in decades that we have had lower rates in Aus than o/s. Think about the investment side:
-Negative interest rate differential
-no foreign asset purchases
and the AUD is still at the upper limit of its usual band
when commodities go down again, so will global interest rates, and the interest rate differential will disappear
inflation keeps the AUD up so rba doesn’t have to
Money markets predicting Aus will once again have the highest interest rates in the OECD in response to inflation.
It is already baked into the cake. We will have higher interest rates or a lower AUD.
Australia has amongst the lowest (reported) inflation in the world
why would we have the highest rates ?
Ask the money markets:
How is this chart derived ?
From what inferred yield
my Belief is that it isn’t purely a prediction of where the overnight will stand in x months
but also reflects the opportunity cost of tieing money up (in an inflationary environment )
we all know the overnight rate isn’t going to be 3.5% in 12 months
https://www.commbank.com.au/content/dam/commbank/personal/apply-online/download-printed-forms/InvInterestRates_ADB1072.pdf
term deposits out to 5 years pay 0.25%
which shows you what fucking nonsense this is
should be from the prices of market-traded debt instruments. That’s what yield curves usually are.
so in that sense it should be very real – you should be able to go and buy some bonds that are priced on the basis interest rates will be 300bps higher soonish.
Right
but that doesn’t reflect expectations of what the RBA will make the overnight rate
it reflects the premium demanded for duration in a high inflation environment
the RBA gave up on yield curve control because it largely doesn’t matter
we have historically seen periods where inflation was very high but central banks kept overnight rates low regardless (eg WWII)
well, generally, so the story goes, the banks can’t just fund themselves from the RBA at the overnight rate^.
so the banks must go and pay the premium for duration when they issue their debt; this becomes their funding cost. And, on the other side, they will charge their customers their funding cost plus a margin. Which is to say – higher interest rates.
I’m assuming that when you say “fund” themselves, you are talking about collateral?
But why do banks need collateral?
For repo?
Why do they specifically need more long term bonds for that? And why do they need to pay more for long bonds when they can go to the overnight window if required?
Its basically what the TFF was – a guaranteed 3 year overnight rate
Doesn’t really matter what you call it
The point is that if the RBA wants to keep mortgage rates low, it can
High fixed rates is just opportunism from the banks – they know that people are going to start panicking with all the news in the media
AHPRA can also probably mandate a low spread if it really needed to (crimping bank profits)
Or the RBA could go full CBDC and offer variable interest rates directly to punters
The RBA is not going to “break”
It is just never going to happen
We will have inflation, and lower quality of life, and the 70% of people who are home owners will be grateful for it
no, I don’t mean collateral. (Collateral is some sort of asset that serves as surety for a loan.) I mean the form of arrangement that counts as “borrowing” by the banks.
Issuing some sort of note/bond (basically a promise to pay). Banks borrow on an unsecured basis.
i know that at a system-level view this “borrowing” basically reduces to some accounting conventions, and yet, this is how “funding” works.
this is how the current system works.
Believe it or not, banks have Treasury departments full of people whose job it is to make sure that the liability side of the banks balance sheet is optimally spread over time.
perhaps there is no fundamental reason why it needs to work that way, but it does. Presently.
perhaps eventually you can sack all those Treasury people and replace them by one guy who says “just borrow infinite money overnight from RBA”. But perhaps not yet.
yes, but TTF was an aberration in the current system schema. It’s possible that in the future this is how it will work – rba prints money and lends it to banks for almost-free; banks on-lend and make profit.
mechanically it could be made work. But it would make it quite obvious that the banks are doing fuck all to “earn” their mega-profits. Presently, this fact is well-obscured.
Banks don’t “borrow” anything though, except reserves (or ES balances) from the rba or from each other
the TTF explicitly showed you who is really in control
“collateral” is for repo operations with the rba too or with other banks
like I said:
i know that at a system-level view this “borrowing” basically reduces to some accounting conventions, and yet, this is how “funding” works.
you can’t deny that bank bills exist or that other bank liabilities exist. You may not like that it’s called “borrowing” but whatever it is – it’s out there. It exists.
likewise, the collateral is just very-high-quality (supposedly) credit obligations. That is, loans receivable.
the repo process is one of transforming receivables (ie not cash) into ES balances (ie cash; thanks RBA).
it’s a way of speeding up the circulation time of debt capital.
“well, generally, so the story goes, the banks can’t just fund themselves from the RBA at the overnight rate^.”
Except they can , if this is your definition of “fund”
that’s exactly what they did from the ttf
yeh, they can. But as Freddy says – with consequences: https://www.ezfka.com/2022/04/13/rbnz-goes-there/#comment-21717
I have said before that there is a lot of AUD-strength that they can afford to trade away: https://www.ezfka.com/2022/04/13/rbnz-goes-there/#comment-21659
but it will hit cost of living thru imported inflation
well then we agree
Will you and freddy agree to explicitly state that you do not expect to see substantial house price falls (20%+) and therefore you do not expect to see overnight rates at 3% or even 2%
I am split between Martin North’s “prices will definitely go down unless they go up” and Chris Joye’s “prices will definitely go up unless they go down”.
Actually, I think Chris Joye is in the moderate (5-10%) price falls camp at the moment.
In other words , interest rates will not reach even close to 3.5%
So you agree with Leith that money markets have it wrong :-p
I don’t know. I can see some scenarios (wage inflation) that could put rates much higher than expected. It is a question of probabilities. 20-30% higher wages being offered in IT at the moment. The jimmies had better arrive soon.
I don’t think money markets have it wrong
i think what you’re relying on to indicate what money markets expect overnight rates to be , isn’t reflecting that at all
Maybe once upon a time it did
there’s simply going to be a disconnect between inflation rising and overnight rates not
but we haven’t been able to identify how your graphs are derived so it’s difficult to articulate my argument, but I just think they are indicating inflation because investors will demand a duration premium in an inflationary environment
but central banks can ignore that
in other words, when inflation is 8% of course private institutions can’t hold debt paying 1% – that’s a real loss of 7%
but the rba can – it’s balance sheet and ability to absorb losses are infinite
slightly different situation in the US where mortgages are predominantly based on 30yr rates
and really – isn’t this exactly what weve already seen ?
RBA gives up on YCC and fixed mortgage rates rise
but variable is still at all time lows
I guess peachy is ultimately agreeing – of course they will hide it behind some sort of acronym like TFF/qe/tarp etc to hide the fact that it is a FIAT system
when the collapse comes it won’t be from a financial crisis, because those can always be papered over
When the pin comes to pop things, it will be political and it feels a very very long way away
Yeh, but the more extreme and unnatural things the RBA needs to pull, the closer the political pop should come.
one aspect I have tried to explain is the resulting nationalisation of banks AND housing if RBA were to become the only lender.
freddy has pointed to household squeeze through currency depreciation & resulting price spike of imported goods
lots of other stuff, no doubt. It would be tricky for them to go full retard solo in a world which continues to play more or less by the old rules. Not impossible, but very tricky.
Let’s assume the cash rate is some mystical thing that can remain dislocated from the rest of the money markets. How long before deposit holders realise they are being taken for a ride and start shifting their money into bonds or other fixed income? How long before the banks themselves realise the cheapest funding for new loans is available by offering deposit rates that are lower than bonds but much higher than the official cash rate?
If all that happens, then how long before the RBA starts to look really stupid with the bond markets, and even the banks ignoring the cash rate? Sure the overnight interbank lending rates still zero but as Peachy implies that is just a small part of funding. It is a small hole being plugged up in a leaky bucket. From that perspective, if the central bank doesn’t plug up the other holes (via bond purchases) then the cash rate starts to become meaningless.
all of this is already happening , and has been since 2009
that’s literally what QE is
I just showed you the link from cba showing term deposits at 0.25% out to 5 years
The overnight rate isn’t a small part of funding
it’s the biggest most important part and can be the ONLY part it required
banks can and will just use the rba to get all the reserves they want/need just as they have been doing with TFF
and exactly why banks haven’t wanted or needed deposits for over a decade now
this absurdity has been going for a very long time now, it’s surprising that you haven’t noticed it
You are ignoring the 40-45% of mortgage funds that were sourced offshore. TFF was introduced to provide even cheaper rates. The offshore funds are no longer cheaper. TFF has been withdrawn.
Take a look at what the fixed rates have done. Variable rates have also started to tick upwards. Some of the banks have already increased variable by 0.5%.
And yes I have noticed. I have been disgusted for over a decade that a big chunk of mortgage funding has to be sourced from overseas which is a sign that we are over-indebted.
Ok, but using the lens of EZFKA
we can see that funding at low rates will surely be supplied by the rba once house prices decline 10%, or 20% at most
you have acknowledged that they CAN do it , because of the mechanics of banking in this country
now surely you must acknowledge that they WILL do it
They will certainly try to do something. Because EZFKA.
but there are some real constraints and consequences that they’ll face and trade-offs that they will need to make. There’s a risk that they’ll misstep, too.
luckily, the Jimmies are returning, which will make the job easier.
well they certainly wont be allowing overnight rate to get to 3.5%, that’s for sure
we’ve had much of this discussion before, actually… : https://www.ezfka.com/2021/05/10/ezfka-immigration-policy-is-the-budget-plan/#comment-3663 onwards
and sorry to keep banking to two-tier drum all this time, but I do think about it this way. If we end up in two-tier land, we could have interest rates and house prices disconnected somewhat from FHB default risk. If they manage to neuter the default risk, they can hike rates.
So in other words rates effectively won’t be 3.5%
because only housing debt matters anyway
I don’t think housing debt for existing borrowers will go to 3.5% + bank margin (so at least 4.5% all-in, or even 5.5%).
not without some kind of very major change in the way that the world works, anyway.
if they need to hike rates that high, they’ll first hand out parachutes to existing borrowers, eg:
which is to say – they won’t let homebuyers go to the wall en masse.
But they might have house prices falls, while defending previous buyers from default.
Peachy,
I still think mortgage bonds the way to go in terms of insulating existing mortgage holders from rate increases. It was actually introduced in the 90s for FHB, but they did it at the worst possible time at peak rates which fell quickly below the mortgage bond rate. Govt ended up buying them out despite the fuckers receiving a massive capital gain in house price and still only having modest repayments.
Regarding 2-tier rates. I would like it from a different perspective. Mortgages vs business lending. Put a floor in mortgage rates (~5%) and have it funded by the pension system. House price stability and retirement stability.
yeah, something like that could work at the big picture level. Of course, the trick would be to ensure that there is no leakage between the housing funding and all other funding. (This is the trick in any two tier system).
there is also a sense in which it would be going back to the future – when 1/business lending was business lending
2/house lending was house lending (P&I mortgages)
3/consumption lending was consumption lending (credit cards, personal loans – expensive)
“financial innovation” turned house lending into consumption lending by normalising redraws/offsets/helocs – id est equity mate.
Not without consequence. That is where we seem to disagree. When AUD/USD hit it’s all time high of $1.10 in 2011 AUS cash rate was 4.75% vs US 0.25%. You can’t just ignore that and say it was all commodity prices.
too right.
but it would be a very interesting experiment if they did try it. Then we could estimate how much of the AUD strength IS commodities and how much is interest rate differential!
rba 0.1%
Fed 0.5%
5x higher
and AUD is still ~75cents
Undoubtedly, there will be consequences – inflation
but that’s just gives them more excuses to “look through it”
🤣
Rba could try to create a two-tier market.
of course there is nothing else; housing is already the only game in town and will become even more so to the extent that it’s preferences by cheap debt. But it’s a good 3-4 years worth of can-kick.
I alluded to a two-tier market above for retirees with zero equity. If it was to happen across the board you get back into the argument about whether RBA can print money with no asset backing.
You know my views on mortgage bonds. They are a good thing and provide protection against rising mortgage repayments, and also no free lunches with falling rates to reduce payments. I mentioned it in the MB chat with Steve Keen and the dope ridiculed it focusing on the length of the mortgage instead of understanding the benefits.
I hadn’t made the connection to your comments about retirees with zero equity, but yes, you’re right.
or at least potentially-right, depending on how RBA prices the debt it pumps into housing and how quickly it expands the amount of debt that is pumped.
as to no asset backing – it would really be backed by a whole bunch of EZFKA real estate. So much the same as commercial bank loan books ;)….Only RBA would have no funding cost.
of course, playing it out that way, it lands in a weird space:
this kind of stuff ties marvellously well into social credit systems and other authoritarian ideas
yeh, he’s a dope.
This is pretty much exactly what the MB staff are saying right now.
Given there track record its not a good sign.
However i agree with your logic i said it in comments at the time when MB were cheering on QE
Massive asset inflation but not in wages and immigration to keep wages down so no need to raise wages/rates
Hard to believe DLS couldnt see it when he was campaigning for QE (i dont ).
Yep JL. The very definition of “inflation” means that prices go up faster than wages.
which is why I’ve always said it’s the devil and those who had been praying for it would come to regret it heartily.
I read an interesting comment a few weeks ago that last time there was high inflation in the U.S the fed traded a few years of high unemployment / high rates for 40 years of low inflation, and they would absolutely take that trade again.
Not saying that the RBA would do the same , or that it will play out the same this time, but food for thought.
I’m not sure that the option of a few years of unemployment and high rates followed by a long period of low inflation is really on the table now.
my sense is that globalisation and demographics are against it….
I agree globalisation and demographics are against it.
I am reading Shvets book the great disruption at the moment , he points to advancements in AI, Robotics and print manafacturing will be deflationary over the the next 20 years …with the caveate that most people will be less able to afford things due to job losses, wage competition etc.
I haven’t read embee for a while – are they still on the negative IR, macroprudential bandwagon will fix asset prices drug trip?
I read an article the other day by some big brained person who said that they cant go past 1% because everything will break.
Dont ask me to explain why, I just read the Cliff notes version.
I think they will condition people to accept 6% inflation as the new arbitrary target like 2% was for 20 years.
Fuel prices got high (so cut the fuel levy in half for 6 months), pandemic so Jobkeeper and let people raid their super funds, rent moratoriums, mortgage holidays, there’s no limit really, increased the dole to $750 per week for 6 months.
If people have negative equity they’ll let them raid their super to top up. They’ll make it easier for foreigners to buy property here.
If supply constraints are resolved (doesn’t look that way especially with silly Russian sanctions not really harming Russia though just the west, plus China sticking to this zero COVID madness), I think it just takes 4 rate hikes this year to bring inflation back into line. That’s what I thought before the was in Ukraine and I thought China would let Omicron rip.