Is it possible to control inflation without rate rises?
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- Опубліковано 17 жов 2024
- #australianrealestate #inflation #interestrates
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Of course, you are absolutely correct!
Another factor is that rent increases have become a significant factor feeding into CPI and, of course, if you increase oteredt rates such that typical P&I mortgage repayments have increased by around 70% and Interest Only payments have tripled, of course that has had an impact on rents as have the huge increases in Land Tax. Some investors have been forced to sell because virtually all there rent has been going to Land Tax, Rates, Levies etc. This has further reduced supply putting upward pressure on rents.
Some Northern Beaches properties are paying over $30,000 pa in Land Tax against $40,000 in rent and the government is blaming 'greedy landlords' whilst effectively increasing Land Tax yesterday again.
On the supply side, they have introduced BASIX changes which will have only an incremental benefit but add around $30,000 to a typical new house build and also a new productivity contribution straight to the government of around $12,000 for each new lot created. This is in addition to the already onerous Council contributions. The requirements for lodging a DA have also become much more onerous and costly.
Meanwhile we have wage demands which have a spiralling effect - how could the RBA ever have thought that such drastic rate changes would not lead to wage demands?
They may cite other nations and their respective interest rates but Australia is a bit unique in that most of our mortgages are at variable rates and thise thatvare fixed are typically only short term. USA by contrast, typically has rates fixed for 30 years and hence their rate changes have a much lower flow through effect as they primarily target new purchases.
It should be remembered that at the outset, the inflation we experienced was supply side and not demand driven. Rate increases do little to help in these circumstances but instead have likely had the effect of entrenching inflation through wage demands, increased rents etc.
On the demand side, we have reckless government spending that has zero sensitivity to interest rates. And, let's not forget the RBA itself with its own RBA building refurbishment which is likely to top out at around $1B!
NO, inflation is caused by printing money, the RBA prints money and lends to banks who then lend to mortgage holders. Debt free people spending money do not cause inflation as they are not spending money they don't have. In other words people borrowing money to buy overpriced homes are causing inflation. However that may not be a convenient fact to the property lobby.
no brainer
Yes. The government could have delayed the Stage 3 tax cuts for a year or two until inflation was under control. They could have reduced government spending to run a bigger surplus which would also have a big bonus of reducing the huge interest bill on outstanding government debt. Superannuation could have been increased to 15% in one hit with employers told to maintain their employee existing total pay inclusive of super automatically getting people to save move and spend less clamping down on inflation.
Tom, rich people cannot have a big impact on inflation because their number is very small and they will not double or triple their consumption of coffee, groceries, petrol or electricity.
Yes, they can cause inflation in some assets or luxury items.
People with money cannot have a meterial impact on either headline or underlying inflation due to them being a very small cohort. Statistically negligible group to make difference in consumption of goods and services bought day to day by an average Joe.
Short answer: No
Long answer: Also no