RBA

[willedoo]

It looks like we have a new Reserve Bank governor starting soon. Outgoing governor Philip Lowe has copped a lot of flak over the rises in interest rates, but I haven't seen many people, if any, blaming the period relative federal treasurers Frydenberg and Chalmers for the rate increases. Why all the focus on the RBA governor and no blame on the treasurers?

[facthunter]

It's the RBA that raises the Interest rates. Lowe went too Low and raised the rates too fast and worst of all SAID the rates won't rise before 1024 encouraging people who didn't think a lot about it to Borrow staggering amounts they are now unable to pay  with more "normal" rates prevailing at the present. The RBA is INDEPENDENT.  and has a vast well paid staff. but the board may have questionable appointees depending on how you view things. In Hawke's day we had Bill Kelty and (SIR) Peter ABELES on the board..  Nev

[willedoo]

Then why all these years later do so many people blame Paul Keating for high rates in the 1980's. Most people who do probably wouldn't remember who the RBA governor was at the time. I think the answer is personality politics. Keating wasn't personally liked by a lot of people, so everything was his fault. Most people know the RBA is responsible for rates and that the RBA is independent, but to this very day people bang on about Keating wrecking the country with high interest rates. If Frydenberg and Chalmers were as personally unpopular as Keating, a lot of people would be blaming them for the rate rises and RBA governor Philip Lowe would hardly get a mention. Maybe it's time for people to give Keating a break.

[facthunter]

Paul was always a rabble rouser but like Jeff Kennet  He's  really not part of todays scene and should perhaps gracefully withdraw and take  John Howard with him. I'm sure NOT that they would get on together and keep each other busy. There's really not any value in Yesterdays less than perfect men clamouring on is If they have any significance in what's happening NOW.  Too much of the Older I get the faster I went.  Time to leave the job to the later ELECTED ones. Nev

[Jerry_Atrick]

I think also, Keating backed the RBA with statements like the "recession we had to have", etc; and the fiscal policy was more or less lock-step with the monetary policy. Frydenberger and SFM loosened fiscal policy as the RBA tightened monetary policy....

 

I know which one I would have preferred.

[facthunter]

 The later mentioned people were good at shovelling money to the top end of town Their MATES and Party donors. None of which was ever attempted to be recovered when it wasn't needed.  Nev

[onetrack]

I have had little time for Keating since he organised the destruction of the Commonwealth Bank by selling it off to the private banks. The champagne glasses are still clinking in the private banks boardrooms over that once in a thousand year win for them.

The competition and restrictions on private bank greed went out the window the day the Govt cashed in the CTB, and it's no accident we've had bank rort, after bank rort, after unfettered bank greed, ever since the CTB was sold off and the private banks got to shaft all and sundry, without a second look backwards. 

 

The private banks behaviour has been disgusting in the 21st century, and Keatings move returned us to the bad old days of the early 1900's where the unfettered greed of the private banks saw King O'Malley introduce the legislation for the setting up of the Commonwealth Bank, to rein in the private banks. The fact we had to have a Royal Commission into Misconduct in the Banking and Finance Industries in 2017 says it all.

 

The worst feature is that nothing of substance came out of that RC. The banks paid out a relative pittance of a few billion in fines, and everyone who got shafted, just had to wear their sore a***s. We've collectively paid out billions in excessive charges and higher interest rates than we should have over the last 25 years, thanks to no longer having a Govt-controlled bank to rein in this private bank greed. I will never forgive Keating for this short-sighted and possibly corrupt stunt.

[Jerry_Atrick]

Yes.. the ALP government of the day were more of economic rationalists than the LNP.

[nomadpete]

Still, it is curious that the MSM previously blamed the political party for interest rates (Keating), and currently focuses public attention on the Reserve Bank governor.

 

Not that I ever thought a lot of the pig farmer.

 

And I often wondered if there has ever been a unseen influence between government of the day and the Reserve.

[Jerry_Atrick]

I think it was because he (as in Keating)  supported the rate rises... Therefore - it was his fault.

 

Phillip Lowe stated that interest rates wouldn't rise until 2024 and apparently everyone decided to take out 25 - 30 year huge mortgages based on advice that rates would stay low only for a few of years...  and somehoe that is Lowe's fault.  If I had received that advice, I would have gone for 10 year or 15 year fixes (if they are available in Aus)..

 

Press and governments love a scapegoat.

 

Edited July 15, 2023 by Jerry_Atrick

[Jerry_Atrick]

Mind you, I actually lay the blame somewhat at the feet of the PRA and ASIC..

 

You might be thinking - wtf? Has Jerry gone so far left that everything should be controlled by the government?

 

No (I consider myself a caring capitalist)

 

But.. it doesn't take Friedman or Keynes to construct a graph of historical interest rates... and then it wouldn't take a genius to work out that since 2008 (15 years ago), the rates unnaturally pluimmeted because of the financial world's equivalent of COVID, and have stayed artificially low for some time..

 

Therefore, the PRA and ASIC could have compelled lending firms to publish the payments per month difference between the then current rates (low) and the historical average, say since 1970 (we can argue what the yardstick should be). There should have been warnings that rates are expected to rise over the period of the duration of the mortgage - when the rates will increase,  we're not sure, but you can bet on it. And they could have compelled the banks to publish their econoomic forecasts over the average mortgage duration and how the repayments would be affected over that duration.

 

There are similar laws here..

 

That way, people could have chosen the mortage product most suited to their outlook on where their financial life was heading.. or not as the case may be.

 

Edited July 15, 2023 by Jerry_Atrick

[nomadpete]

Nah, the average punter can't bring itself to plan their lives rationally - especially if it requires personal research and thinking about 30 years of mortgage payments. It is just too depressing to think about.

[octave]

This is not a subject that I am not passionate about nor am I particularly knowledgeable.    I am just wondering how much a government can influence interest rates.  When comes to modern economies It seems to me that when interest rates are high in one country they tend to be high in most countries despite governments of varied persuasions.   I can't see anything particularly bad or good about our position compared to similar countries.

 

https://tradingeconomics.com/country-list/interest-rate

 

[nomadpete]

 

(quote Jerry)

"people could have chosen the mortage product most suited to their outlook on where their financial life was heading.. or not as the case may be"

 

Well,

Back when I took out my first mortgage I was only focussing on finding a bank willing to sign me up. Then I got my first bank statement  it showed that my amount owing had gone up! (Interest added prior to my first repayment).

AFTER that, I sat down and worked out (paper + pencil) a couple of years of repayments. Ugh! Then same with paying weekly instead of the bank's monthly request. Then again with me repaying an extra $10 a week.

Next mortgage, I owned a calculator & did the calcs for interest rates doubling, just to make sure the family home wouldn't bankrupt me.

Back in the 70's Nobody explained all this to newly-weds.

 

In spite of everything now being available with a mouse click I suspect there are a lot of gullible folk out there who don't bother to check or plan.

 

Are you suggesting it should be a government responsibility?

 

 

Edited July 15, 2023 by nomadpete

[old man emu]

5 minutes ago, nomadpete said:

Back when I took out my first mortgage

I bet the mortgage was for a simple 3-bedroom, kitchen/dining room, bathroom/toilet, lounge and single garage of about 12 squares (about 130 sq mtrs) on a 1/4 acre (1000 sq ms). The average new house built in Australia in 2019/20 was 235.8 square metres on a block of 475 sq metres. 

[Marty_d]

1 hour ago, Jerry_Atrick said:

I think it was because he (as in Keating)  supported the rate rises... Therefore - it was his fault.

 

Phillip Lowe stated that interest rates wouldn't rise until 2024 and apparently everyone decided to take out 25 - 30 year huge mortgages based on advice that rates would stay low only for a few of years...  and somehoe that is Lowe's fault.  If I had received that advice, I would have gone for 10 year or 15 year fixes (if they are available in Aus)..

 

Press and governments love a scapegoat.

 

I believe you can only get fixed terms of up to 4 or 5 years, unlike many other countries. 

[nomadpete]

4 minutes ago, old man emu said:

I bet the mortgage was for a simple 3-bedroom, kitchen/dining room, bathroom/toilet, lounge and single garage of about 12 squares (about 130 sq mtrs) on a 1/4 acre (1000 sq ms). The average new house built in Australia in 2019/20 was 235.8 square metres on a block of 475 sq metres. 

Actually the first house was a speccy post modern, fibro 3 bedroom shoebox on stilts. 76sq mtrs.

 

It cost $24,500. (Abt 4 yrs nett earnings)

Interest was about 5% ($1225/pa = 20% of income)

 

Now:

Av wage $70k

Av house $1M

(Abt 14 yrs earnings)

Av interest $50k pa. = 70% of income.

 

But as you rightly point out that is for a veritable mansion.

 

I might have stuffed up my numbers but it is clear that it takes a double income to par for a modern home.

[nomadpete]

Now to complete the thread hijack,

Just visited friends living in a caravan. They bought a house lot in a country town for $24k and are awaiting delivery of a factory built one bedroom cottage, $75k delivered, approved  and installed onsite.

So none is compelled to spend a million dollars on a new home.

[onetrack]

Anyone who believes one word that comes out of an economists mouth as gospel has to be one of the biggest suckers around. Economists specialise in futuristic guesswork, and try to convince everyone listening, that they know what they're talking about. The historical record shows economists projections have no more accuracy than Joe Bloggs opinion down at the pub bar.

 

The best quote I've ever seen, relating to economists, is one I read about 30-odd years ago, in a book about the history of gold and gold pricing. The author said (and I quote) -

 

"Around 300 of the worlds leading economists tell us that gold is a barbarous relic, which has no place in the worlds monetary or wealth systems. The problem is, they have to convince 6 billion people, that they're right".

 

Edited July 16, 2023 by onetrack

[facthunter]

My recollection of the disposal of the Commonwealth Bank was HOWARD pushing the idea of a bank WE already owned being put on the Market so SOME of us could buy it. Keating floated the AUD.which was a leap into the modern economic world and most likely a good idea.  Anyhow they are yesterdays people and have had their innings. Nev