Markets had priced for the cash rate to remain steady, with the ASX 30 day interbank cash rate futures market giving a 98 per cent chance of ‘no change’ at 3 April 2017.
Members of the ANU Centre for Applied Macroeconomic Analysis (CAMA) RBA Shadow Board also said keeping the cash rate at 1.5 per cent made sense, with Shadow Board member and professor of economics at Macquarie University Jeffrey Sheen noting Australia’s GDP growth wasn’t currently supportive of a cash rate hike.
“The current annual GDP growth in Australia of 2.4 per cent remains tepid, reflected in continuing low wage growth as well as business investment,” he said.
“With the big lenders having raised their mortgage rates in response to the cost of foreign funds, the case for a cash rate rise has been weakened.”
Why is it the stupidity of the Australian public?
The very reason the RBA keeps the cash rate low, is to charge less in overnight commercial loans, to induce spending and boost GDP.
A low interest rate environment does not discriminate individuals from having access to credit. It is accessible to everyone. When businesses do not borrow to invest or innovate, individuals will borrow to spend or invest into financial assets or real estate. When they see asset prices rising, like they have been in the last 5 years (ASX 200 was 4,029.20 as at May 2012),
If individuals do not borrow to either spend or invest, the alternative would be to save – which will boost the nation’s saving rate. However, Australia’s latest savings rate is only 5.2%. as at January 2017, whilst consumer spending was 83.49%.
After so many years of loose monetary policy, financial assets and real estate prices have simply responded. It is not a matter of stupidity or intelligence, but rather cause and effect of the free market.
Should there not be responsible monetary policy? If so, is a low cash rate responsible? Or should it not be raised?
We will see in due course, whether wage growth will keep up with inflating out of debt experiment.
The plan by the RBA to stimulate the economy by lowering interest rates much like other central banks is now coming home to bite in a nasty way. Well the economy is not so stimulated while house prices and household debt are at nightmare levels. Oh but wait. As US rates climb, the cost of funds by our major banks infers, this lot will pass that on to the average borrower. Wait for spending to slow as people scramble to make that mortgage payment that has now risen and you guess it….someone will lose their job. Guess who…the average punter. Now lets just see if the 3 ratings agencies will give our “fiscal”discipline a tick or a cross, If its the latter, there goes the credit rating of Australia and perhaps a recession may be on the way. Will Labor get in….yep…even though they are economic vandals that set us on this stupid path when they were last in office. Me thinks Paul Keating’s utterings of a banana republic may be true…..lets see….
unfortunately for us, everything that you have said is about to unfold and become the reality in a very bad way. God help us
Our tax system which is not globally competitive will see capital flight to other more attractive nations. Treasury Secretary Ken Henry warned us back in 2009 via our then government Labor (Rudd/Swan) who chose to ignore matters completely. We have blown the best terms of trade with the mining boom, bumbled our way to what we have now. The mining boom slowed, but commodity prices have come down so there goes revenue. We have not reformed the economy or the tax and business system. What have we done. Over regulate EVERY sector of the economy to the point where even the RBA have stated that wages growth is the slowest in 2 decades. Add mortgage stress to this and we have real hurt coming our way.
Unlike the recession we had to have days (Labor), this one regardless of the stupids in Cantberra will find that neither Labor or the Libs have a clue. They are fighting for what they want. Political ideology ! Not major structural reforms of the economy
The re structure of the Aussie economy infers, tax reform on a grand scale, regulation to be reduced and eliminated if unwarranted, prudent oversight of finances and having a vision as to where the country needs to move. Done in a smart way, Australia can achieve much. Without the vision though, we are heading towards a mess, Sort of like what happened with the car industry and now with NO vision on energy policy, power shortages in South Australia and even Victoria. Closure of the timber industry in Victoria etc
We have stupids in Federal government on both sides and the Greens and incompetents in State and Local government.
A rising tide of homelessness and poverty across Australia now sees 13.3% of people in this great country hurting living at or below the poverty line according to the Australian Council on Social Services (ACOSS) in their October 2016 report. That same report highlights 731000 children caught in poverty. I do remember a Prime Minister Hawke say that by 1990 NO child shall live in poverty….woops
Our kids are now coming out of universities with pieces of paper with NO job in their chosen path. Oh but they do have massive education costs.
We tell people to prepare for retirement, but the government, thinking short term and revenue at that, do not want contributions above $25000 to go into a retirement account.
Backward vision less thinking on steroids.
And these fools want to tell us IFA’s how to run a business…..really ?
100% agreed.
They were caught between a rock and a hard place… Interest rates needed to be lower for stimulation and to help us get closer to our inflation target (which we still haven’t)… But yes I agree, the stupidity of the Australian public has caused a perfect storm in conjunction with nothing being done about property prices rising far above intrinsic value…