Why do people insist on believing at face value what powerful entities like the RBA claim about themselves. A switch? I don't think so.
Interest rates are dictated by the demand for money and all a group like the RBA does is provide political cover for a cartel agreement between the banks. Without them banks would be tempted to undercut each other on rates and get into rate wars, similar to the pizza wars we have seen in Australia. The RBA follows the market and fixes a rate after the fact that is always guaranteed to extract the highest possible userage from the largest amount of borrowers. The most criminal aspect of the whole process here in Australia is no doubt the fact that your home loan rate can only be fixed for 4 or 5 years maximum. This allows price gouging at a future point in time and makes the whole idea of borrowing hundreds of thousands off banks a very risky and dangerous proposal.
The Asians that move to Australia know this quite well and many choose to save up collectively to buy their homes.
That is fundamentally incorrect. The RBA is the sole monopoly issuer of all inside money. And like any monopolist the RBA can set the rate wherever it wants so long as it s in AUD. that is why when the reduce rates, the price moves to the target level instantly.
Interest rates are dictated by the demand for money and all a group like the RBA does is provide political cover for a cartel agreement between the banks. Without them banks would be tempted to undercut each other on rates and get into rate wars, similar to the pizza wars we have seen in Australia. The RBA follows the market and fixes a rate after the fact that is always guaranteed to extract the highest possible userage from the largest amount of borrowers. The most criminal aspect of the whole process here in Australia is no doubt the fact that your home loan rate can only be fixed for 4 or 5 years maximum. This allows price gouging at a future point in time and makes the whole idea of borrowing hundreds of thousands off banks a very risky and dangerous proposal.
Seriously you need to do a little study to understand the transmission mechanism.
The RBA through its open market operations controls absolutely the overnight interest rate because it can peg the market such that anyone who doesn't toe the line loses a lot of money. What is more, as the monopoly issuer of AUD, there is no limitation on the RBA's power to control overnight interest rates.
I do find it interesting that nobody does fixed-rate 30-year mortgages in Australia and often wonder why exactly that is. Is it because there is just no demand, given that they would probably be 350-400bp above the SVR at any given time?
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Seriously you need to do a little study to understand the transmission mechanism.
The RBA through its open market operations controls absolutely the overnight interest rate because it can peg the market such that anyone who doesn't toe the line loses a lot of money. What is more, as the monopoly issuer of AUD, there is no limitation on the RBA's power to control overnight interest rates.
I do find it interesting that nobody does fixed-rate 30-year mortgages in Australia and often wonder why exactly that is. Is it because there is just no demand, given that they would probably be 350-400bp above the SVR at any given time?
We need 30 yr government bonds. This will provide a benchmark for 30 yr bank bonds. That will provide a benchmark for 30 yr mortgages.
This had all been explained to the previous treasurers. For some reason, the govt has no interest issuing 30 year duration.
The RBA has the exact same tools as Ireland, Spain, US and Japan.
One switch for all sectors of the economy.
What makes anyone think that, in Australia, a 2x1 wood cottage that took 4 men 6 weeks to build costs 800k in principle, 800k in interest, 30 years of dual incomes to pay of is 'sustainable' should NOT be in charge of controlling a countries economy.
Unfortunately Australia RBA has ALL the same FLAWS of their international counterparts and simply don't have the tools to prevent investment dollars from flooding into individual sectors or assets.
An Economy in BALANCE is one where the ECONOMIC COST to produce an asset is marginally below the ECONOMIC VALUE. Anything more than this and its unsustainable.
Case in point the aforementioned house which is a common sight particularly in Sydney and Perth.
The RBA has ONE tool to help the Australian economy. I don't blame them for saying 'there is no bubble' because they don't have the tools to stop them forming anyhow.
What the RBA is doing however is encouraging foreign investment instead of local investment so that then the housing market does crash smart Australians shouldn't see as big of a hit to their values as international investors. They will take a double hit from the falling house prices AND the falling dollar trying to sell and return the funds back to their respective countries.
To say that Australia's housing is not in an unsustainable bubble with Holden on a WAGE FREEZE yet inflation pushing the upper limit is counter to what the RBA proposes is a "Balanced" economy.
That is nine paragraphs of non-sequiturial drivel
Collecting desperation. Ex-Bp Golly April 2 2015. "I see with a slight overshoot -70% [fall in Sydney house prices] as being well within possibility"
I would tend to think our interest rates are now dictated by the US economy, and that the rba is just another complete waste of tax payer dollars, nothing new there. Do we really need to pay a bunch of clowns a shitload of money to work for a few hours one day a month. The US fed was created to protect the wealthy not the economy, but their mindless nonsense has slowly screwed the economy rather than let interst rates run there own course which is exactly how the economy corrects itself over time, whether that means a few years of collapse then so be it , a few years of gains, thats how its always worked, but some braindead decided we dont wont anymore collapses so lets interfere with things and hence we we are now.
We need 30 yr government bonds. This will provide a benchmark for 30 yr bank bonds. That will provide a benchmark for 30 yr mortgages.
This had all been explained to the previous treasurers. For some reason, the govt has no interest issuing 30 year duration.
15Y would be a start. The 15Y BBSW is fairly illiquid though, not sure if there is much point in creating an illiquid bond market. I put it down to Australians inability to forward plan. Tropical lassitude or something.
You are employed and have interests in the information & data sector though, don't you?
I haven't been and haven't wished to be employed by anyone since 1994.
I take a small interest in information and data posted here mainly because I enjoy successfully ridiculing misguided souls like yourself. I doubt there is any one in the pleasant small tourist location where I happily live who would actually pay for such information. It's all on the internet for free.
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