Discussion in 'Current Affairs' started by ozcopper, Jul 11, 2019.
Is Australia In A Recession?
I think so, so do many people I speak too. What do you think?
To be blunt l hope so. Want to buy a house soon at a reasonable price. (i.e. after everything is done and signed, I can stand back and say I some form of value)
There are many indicators to this but the media influnace is strong pump on what isn't going on
Be careful what you wish for. Even if a recession might make it easier for you to buy a house (which is doubtful) it will almost certainly make it harder for you to borrow money in the first place and to service the debt once you have it because it will increase the chances of you finding yourself out of a job or your business (if you own one) struggling to find customers.
I heard Recession was when your neighbors lost their jobs.
And Depression was when you lost yours.
Well, my neighbors still have their jobs, so no Recession yet apparently!
But, I got made redundant some years ago at around 50 years of age
so I guess I am in depression.
Luckily, I had the foresight to start stacking seriously a few years before redundancy
so my stack is helping me get by with all those unexpected living expenses.
I also have become quite skillful at finding gold by electronic prospecting which has helped me
stay afloat financially as well.
Spoken like a true stacker.
I agree with each point you make which are very valid.
Each circumstance is different and some may offset some of these point to some degree or other.
I honestly think something is coming down the line so I have my 20% deposit already and waiting for to the time to feel right, so my 20% now could be more later with the market declining and more with addition savings therefore more likely to be borrow money.
Job security like a public sector job is a little more secure than private sectors jobs.
It's a risk to wait and see what happens but it's a risk worth taking in the long run IMO
^ This is pretty much it.
No recession in my circles (mostly), but the general feeling is that people are "doing it hard".
And most people I know (and news stories suggest it is quite common), have noticed the madness in the world and have been spending less on goods and paying more into the mortgage.
I think it is this fear measure which is suggesting 'recession', more than the rubbery figures presented in parliament.
It's a tough question to answer as the Govt data used to define CPI / GDP etc etc has been so barstadised over the years and CPI is a great example of that, that I have no real confidence in much of the data the Govt produces.
I tend to look at things I can see day to day...ie how many people in my family, circle of friends or neighbors have lost their jobs recently, new resi construction (pls cranes on skyline), new vehicle sales, retails sales or just who many people do you see in a cafe / restaurant (CBD or suburban) the last few being discretionary spend.
I don't think we are in recession yet, but sliding that way I feel as I'm starting to see less people in some of the cafe's I haunt, new vehicle sales are down (would be both private and commercial), resi apartments starts have come off the boil in 2018 thus less construction work, and from a personal perspective I'm in a car club and some people won't spend the $50-$100 extra each month (on top of their weekly fuel costs) for a Sunday drive etc. Once I start to see the Govt unemployment rate go a couple of percent and people I know are being laid off, then I'll start thinking yep, it's here.
The point made by others here re mortgages is also valid as many of those with a mortgage were around for the last recession of 89-91 and remember 11% unemployment and 18% mortgage rates, thus part from a better return on surplus cash as opposed to a bank deposit some are wanting to get ahead of the mortgage repayments whilst rates are low and as buffer if they lose their job. I'm reading lately that people's savings level has ticked up a bit which is another sign for me that people are not seeing things like the Govt wants up to see it.
^^^ wonder how much of the recent tax cuts will get put back into the economy via spending (what the govt hopes) vs paying off debt?
I was at Westfield in Parramatta last night and was surprised how busy it was. Then i wondered if it was due to people expecting the extra tax return, so they are doing what good patriots do and spend. Parramatta is a low demographic area and poor people love to spend money.
Myers was dead as always though. I've got a feeling the government is helping Myers stay afloat to keep the dream alive.
The poor will get a new TV, the more astute will put it to work.
This is true Ag bullet.
If the Govt wanted to see some benefit from this "sugar hit" tax break, it shouldn't be cash that can be used to buy a Chinese made TV or some other gadget for the home, rather it should have been some form of voucher that you could use to pay for a service ie pay a sparkie, restaurant / water bill, movie, anything where someone is providing a service etc that way the cash splash gets more than one life on it's way to zero (from memory, it takes 8 or 9 transactions for a dollar to be reduced to zero) and the govt may collect some back along the way via tax, thus reducing the overall net effect on govt expenditure.
^ TV retailers are also providing a service. The government does a poor job at prioritising people's needs and wants on their behalf. Furthermore vouchers for trades services would mean we'd end up getting electrical or plumbing work done when we really don't need it, just in order to spend the voucher.
Tax cuts are the most effective way to enhance economic conditions. Just reduce the amount of $$$ they obtain by graft.
Australia's 'weak' economy on brink of 'lost decade'
Australians live in a time of low interest rates, low wages growth and low inflation, and they keep thinking this is an aberration.
They talk about "normalisation", expecting the lines on the graphs to soon turn and rise up again. It's time to consider the alternative. That this is normal — the new normal.
A lasting era of low interest rates, low wages growth and low inflation would change Australia. Low interest rates mean borrowing large sums of money will be much easier than in years past — that could push house prices up.
But with low wages growth and low inflation, paying back large sums might be a lot harder.
That matters a lot for a country with record levels of household debt.
Maybe Australians should have seen this coming. After all, big shifts in the level of interest rates and inflation are not unprecedented. Mortgage interest rates fell from about 16 per cent to 5 per cent over the past 30 years. Is a further fall to three-point-something really so unimaginable? Inflation fell from over 17 per cent in the 1970s to a stable 2 to 3 per cent more recently. Perhaps seeing it fall to 1.3 per cent is not so surprising.
What sort of world would Australians live in if their situation continues? One answer can be found if you go north: Japan.
The lost decade
Japan's economy has been stuck in a rut of low growth, low inflation, low wages growth and low interest rates for a long time. They call it "the lost decade" but the sad truth is it's actually two decades now — they first cut rates to 0.5 per cent in 1995.
Japan was once like a vision of the future — all neon and robots. That has faded. Now going to Japan feels like going back in time — lots of cathode-ray TVs, shops that only take cash and real estate that hasn't had a renovation since salmon pink was in vogue. Its economic weakness is tangible. House prices fell for 15 years.
Japan's economy has been growing though. And unemployment is fairly low. It is not in acute crisis like the global financial crisis. Just an ongoing insufficiency it hasn't been able to solve with policy. Which, if you think about it, sounds rather a lot like what's happening in Australia.
Low interest rates have not been enough to solve Japan's problems. It's worth thinking about why that is.
Why do interest rates exist?
Interest rates exist because of something called the "time value of money". Humans are naturally impatient. Would you rather have $100 now or $100 next year? That's an easy question for most people: Now!
Because we prefer money now, we require compensation if you'd like to borrow our money, and we will pay to borrow money. That's why banks exist.
Different people have a different time value of money.
Would you prefer $100 now or $102 next year? This is the question your savings account asks you. When you save money in the bank and get 2 per cent interest, you get $102 next year instead of having $100 to spend now.
If you choose not to save, it's because that extra $2 is not enough for you. In fact, you might want money now so much you're willing to borrow.
Banks know they can lend some people $100 now and they will be willing to pay back more next year — perhaps $104 (for example).
With the low level of interest rates, it is much cheaper for Australians to borrow. This is great news for the people whose time value of money means they want money now. And bad news for savers.
Which is precisely the point. The Reserve Bank of Australia (RBA) is trying to get people to borrow and spend. They want Australians to borrow from the future to spend up big and make the economy buzz with activity.
The problem is that Australians don't always spend on the things RBA want them to spend on. They invest little in business and much in housing.
And if the low interest rates don't make the economy spark to life — then they can be stuck in a cycle of low inflation and low interest rates.
However, Australian rates are not that low
While official interest rates in Australia might be sinking fast, a new analysis published in The Australian points out the actual interest rates on mortgages are reacting slightly differently.
Banks have not passed on the full interest rate cuts of recent years. As the below graph shows, standard variable mortgage interest rates (the red line) used to sit just above the cash rate (the blue line), but as that blue line has fallen the red line has not fallen so much.
Interest rates have been falling, but the banks haven't been keeping pace. Photo / Supplied
The difference between the standard variable rates and the official cash rate is now at its highest level in decades, as the next graph shows.
If the gap had stayed stable, Australians would be paying thousands of dollars a year less on the mortgage.
The gap between official rates and bank rates is getting bigger. Photo / Supplied
But it's not as simple as the banks being greedy. Banks are profitable, yes, but they are no longer making record profits. Part of the problem they face is they still need to get deposits in the door.
They have to pay at least some money to savers, and the official interest rate is very low. One per cent interest doesn't sound tempting when inflation is above 1 per cent. So banks must these days pay interest rates higher than the cash rate to savers.
That said, those savings rates have been slashed too. A term deposit may still get you an interest rate above 1 per cent — but not much above.
It's all part of the same downward trend — lower interest rates, lower inflation and lower economic growth. And Australians might have to get used to it.
The "time value of money" has been the biggest and most disgusting blight on human history since its inception. Interest is a crime against mankind that robs the poor and feeds the rich.
closing the gap- i had a meeting with the bank manager this week. i went in to ask for a discounted interest rate on the mortgage. got a .5% cut just for going in and asking.
ask and you shall receive, don't ask and the bank makes more money than they could otherwise be.
I went into my bank and asked for higher interest on my savings account. I more or less got told to piss off. I guess when banks can borrow directly from the RBA they have no real need for depositors anymore.
yep for loans, RBA rate hikes are passed on in full within the hour but not fully passed on a month later when they are cut. then term deposits and savings interest rates.......as you know
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