All Topics / General Property / Another 0.5% interest rate prediction …

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  • Profile photo of wealth4life.comwealth4life.com
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    There is some talk and only talk that because of the state of spending we are to have another 2 rate rises before the end of the year.

    If that is the case what do you thing the impact will be on average income earners …

    Not with standing quality property do you think that prices will fall further in outer areas of our CBDs and country towns …

    D

    Profile photo of MaxxiMaxxi
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    wealth4life,

    The lastest job listing figures were just released last week … $20,000 jobs vanished from last quarter.  For this reason it is now unlikely that rates will rise this year … but it is not totally ruled out.  It's a delicate balancing act to not crash the economy but get households to cut their spending to slow an overheated economy … difficult to do when rsiing fuel costs are triggering added inflation.

    Always remember that it's a function of supply and demand … migration fugures are still high in many areas.

    Profile photo of Paul22MPaul22M
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    I think they will defiently here in perth, I know the markets pretty dead here at the moment, something like 17 000 houses and blocks for sale and alot of properties that have just been sitting on the market for a while. I think with every interest rate rise we have had it has basically meant fewer buyers looking around to purchase something, I recently just sold a block of land in the northern suburbs in perth, i first put it on the market in December 2007 and only just sold it recently, and it was about 30 grand less than what i first wanted for it, when i first bought the block a few years ago there was all this 'land shortage' talk around and there was hardly any blocks of sale, now theres something like over 2000 blocks for sale plus all the develpers putting ads on tv and the radio saying ' if you buy a block we will give u 10 grand worth of fencing/landscaping, pay your rent while you build, give you a lower fixed interest rate for the first 3 yrs" .. next they will be sending people on an around the world trip just for buying a block of land .. things seemed to change extremely quickly from the land shortage we had a few yrs ago.

    Profile photo of god_of_moneygod_of_money
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    Hei Maxxi,

    The INFLATION RATE will determine the future rate rise.
    The unemployment rate is still very low at 4.3%.
    Most of the chief economists still predict 1-2 rates rise till end or early next year
    I would like to see it go through double digits to cool down the economy and of course property market.
    Sydney auction rate has been havouring around 46% over the last months

    Cheers

    Donald

    Profile photo of MaxxiMaxxi
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    The problem wioth Perth is that the last boom was artificially boosted by the mining boom and caused many lower priced homes to heavily inflate off the back of high end property sales.  This bubble is now bursting.

    I have a close friend in the same predicament down by Rockingham …. been trying to sell his house for over 12 months now.

    Profile photo of MaxxiMaxxi
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    God,

    That's exactly my point …. that's why it's a delicate balance …. short of writing an essay here!!!
    The reason it is less likely for rate rises is because fo two reasons ….

    1/  If you fix one problem you worsen another …. unemployemnt figures and you can weaken the economy severely,

    2/  Interest rates is not the only way to slow the economy.  Tax cuts for example will also achieve this …. and this is exactly what the govt is speaking of. 

    Contrary to belief … it is not the intention of the govt to see mass forclosures.

    Profile photo of yarposyarpos
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    Hi

    I dont understand……how do tax cuts slow down the economy?  doesnt injecting more spendable cash into the hands of the masses keep it percolating along?….and encourage the RBA to take it away with interest rises

    Profile photo of gmh454gmh454
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    Other issue is will rates still move up a notch even if the RBA does nothing , as it seems that things o/s in the banking sector may still not have settled.

    Everytime it starts to look okay, another loss from a major US bank throws another shiver through the markets and tightens liquidity.

    Profile photo of Michael 888Michael 888
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    yarpos wrote:
    Hi

    I dont understand……how do tax cuts slow down the economy?  doesnt injecting more spendable cash into the hands of the masses keep it percolating along?….and encourage the RBA to take it away with interest rises

    Yep.

    Injecting more "spendable cash" into the hands of the sheeple will make Harvey Norman and other vendors of instant gratification very happy. 

    Profile photo of yarposyarpos
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    maxxi hasnt been back yet to comment,  so far the only thing I can think of is that tax cuts may reduce wage demands therefore help reduce product input costs and contain inflation.   I only ever did economics 101 ,  so would be happy to learn more.

    Profile photo of seankseank
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    yarpos wrote:
    Hi

    I dont understand……how do tax cuts slow down the economy?  doesnt injecting more spendable cash into the hands of the masses keep it percolating along?….and encourage the RBA to take it away with interest rises

    That was a political move by Rudd, which ultimately may backfire on him

    Profile photo of god_of_moneygod_of_money
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    Cutting tax will reduce the interest rates or slow down the economy… Maxxi you must live in la la land…
    Which professor of economy teach you about this?

    Profile photo of god_of_moneygod_of_money
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    Hei Yarpos
    Tax cut never and will never contained the inflation..It will just add more fuel to inflation

    Profile photo of seankseank
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    god_of_money wrote:
    Cutting tax will reduce the interest rates or slow down the economy… Maxxi you must live in la la land…
    Which professor of economy teach you about this?

    Maybe he was suggesting they may put less pressure on wages, however this will have little effect when you have every other profession like doctors,engineers,teachers ect demanding 10-50% wage increases… and in some cases already governments caving in to these demands, welcome back UNIONS

    Profile photo of MaxxiMaxxi
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    People, sorry for the delay … been busy helping my clients!
    I wasn't implying that tax cuts would reduce interest rates … they wont.  Nor was I implying they will directly slow the economy down …. they are likely to have some upward pressure on inflation.  This can't be avoided.

    The point is the unemployment figures and the massive effect this will have on the economy if the unemployment figures go thru the roof.  if you continue to raise interest rates you deepen the wounds of the jobs /unemployment sector …. ie fix one problem on the arm … and loose a leg! 

    The idea the govt are working on is redistributing the wealth to the lower and meddle class workers a little so the whole economy doesnt go belly up!  There are no quick fixes in all of this.

    Profile photo of Chris WhiteChris White
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    Interest rates and the economy – property prices
     

    • Interest rates have been left on hold since March 2008. The immediate inflation figures and outlook is the leading indicator for monetary policy or the regulation of interest rates by the RBA.
    • The cash rate is currently 7.25%.
    • Economic growth (which drives jobs and demand) is expected to fall from 3.25% to 2.75%.
    • Unemployment is tipped to rise from 4.25% to 4.5%. (Reflecting the slowdown in growth).
    • Whilst the RBA has lifted its inflation forecasts from 3.5% to 4.5% by December 2008, the medium term outlook is then a fall to 3.5% – which supports claims that the cash rate should fall over 2009. This should see home interest rates fall and some life come back into the property market.
    • NAB thinks the cash rate will fall from 7.25% to 6% over 2009.
    • Economic forecaster, Peter Switzer states that the above forecast should come to pass so as long as the price of oil does not increase too dramatically. An increase in the price of oil may put further upward pressure on inflation (Goldman Sachs forecast that oil may rise to $US200 a barrel).
    • Peter Switzer states that if oil ‘goes sky high’ that we can count on a recession and then interest rates would fall big time to avoid a long drawn out one. A recession is defined as two consecutive quarters of negative GDP growth.
    • Despite rises in oil and the flow on inflation effects, the RBA has reduced the odds of a rate rise by the end of the year from 100 per cent to 70 per cent. This is mainly due to the slow in the economy and retail spending.
    • The RBA supports Westpac’s statement that the worst is over with regards to the ‘Global Credit Crunch’ and rates should ease in 2009.


    There are a few predictions are there. 

    Chris White | Pillar Property
    http://www.pillarproperty.com.au/
    Email Me | Phone Me

    The Property Investment Specialists

    Profile photo of acelliersacelliers
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    Hi Chris
    Thank you for a well formulated economic response. Some of the other "ideas & opinions" discussed here was a bit "out there". Mind you I am not an economist (just an accountant)

    Annemarie

    Profile photo of Event HorizonEvent Horizon
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    yes thanks chris.. So I guess your saying hold on to any variable loans we might have 

    MOst of us should be getting at least on.07 to 0.9 or even 1.0 off (for the million dollar borrowers)  standard  variable which is under the fixed rates available. This always makes the decision to fix that much harder because you have to predict more than 2 rate rises consecutively otherwise theres no point fixing. Unfortunatly there has been a shite load in a row. Shall we wait till 2009 and hope for rates to come down then lock in again.   Wish all my loans were 6.75% fixed that one currently is. That would be nice..

    Profile photo of ManagerManager
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    Be the Bank, ie; self funded loans, thats the secret to my success.

    Profile photo of MaxxiMaxxi
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    Spot on forecast Chris White!!!!

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