- puffl wrote:Scamp wrote:[
Banks will keep raising interestrates because credit is expensive. What RBA does is futile.That doesn't answer my question. Nor does pointing to yesterday's APM figures.
What I'm asking is why you think the RBA should increase interest rates even though, as you say, there's a recession coming.
In saying that you believe a recession is coming and that the RBA should increase interest rates, you're either arguing that the RBA should purposefully deepen the recession (I don't think many Australians would agree with you), or you're exposing your lack of economic understanding.
Which is it?
A recession is not a bad thing. It's just a shift in wealth, a 'season of economic times' as you wish. Recessions are a natural phenomenon. RBA should increase interest rates to counter rampant inflation. RBA exists to make the inflation <-> recession less painful. Their main role NOW is to counter inflation. We all know that recession is coming, there's no stopping that. It's global now. But why would they allow inflation to go up 10% p.a. , and THEN allow a recession ? That will hurt people more than if you fight inflation now.
The RBA will not deepen the recession, they will shorten it, if they fight inflation. Let me put it simply, which would you rather have :
1) you get unemployed and food costs 100$ per week ( RBA rises interest now )
2) you get unemployed and food costs 200$ per week ( RBA lowers interest now )harb wrote:Scamp wrote:http://www.news.com.au/business/money/story/0,25479,24105428-5013951,00.htmlon news.com.au :
THE weakest market in four years has seen house prices drop in most capitals with predictions next year could see 10 per cent falls.
You forgot this part "Weak market blamed on high interest rates"
on news.com.au today :
"For starters, prepare for official interest rate cuts now. The Reserve Bank wants to cut next week. It will cut next month. "
http://www.news.com.au/business/money/story/0,25479,24111198-5016110,00.html
If the rates eventually come down, lets say 2% over the next year, do you think the rents will also come down by a similar $ amount ? Or do you think investors will return and if so what would that do to house prices ?
A lot of blabla. The housing crash isn't a result of the high interest rates, it's a result of the house prices.
Interest cuts will make Australia's pain worse rather than easier. It will just make a recession more painful, that's really all it does. RBA will not cut rates this year, and banks will keep raising interest rates.
Anything else will rise unemployment, hurt export and not have an effect anyway. There you have it : the truth. No good news coming for some years unfortunately.Well said Scamp. (your reasoning on why RBA should not decrease interest rates)
Lets see if the RBA does what it needs to do or bows to political pressure.
Lets see if the RBA further destroys the long term health of the nation by bowing to political pressure and reducing rates.
I'll bet they go the wrong way, reduce rates in September for short term gain and compound and prolong the problems.
I reckon we bring Scamp over to Australia and make him head of the RBA, or even prime minister
Paul22M wrote:I reckon we bring Scamp over to Australia and make him head of the RBA, or even prime ministerWho would want to be prime minister in Australia ? It's like wanting to be the president of the USA.
Anyway, first thing any REAL prime minister does is cut the tax benefits on property investment as a whole.
I know, it's been tried before, but the chickens reverted it. Bad choice, look at what's coming now.About political pressure, I quote Rudd : "I will fight inflation AT ALL COSTS"
There's rampant inflation. So what do you think he will do ? What do you think he CAN do ?
No no.. this is one of those recessions that Australia just needs to have.Scamp wrote:Anyway, first thing any REAL prime minister does is cut the tax benefits on property investment as a whole.Hahaha! Dream on Scamp, without the tax benefits a lot of investors would just kick the renters in the street or put up the rents 4 fold. The rent money alone is not worth the hassle of a tenant, I'd rather keep the place vacant for a few years/decades until I need the money. Due to increasing population property will appreciate in value more then cash in a bank.
Of course there is always the ultimate option, your REAL prime minister nationalizes all the land, factories & building companies and builds free homes for everyone and everyone gets to wear the same nice uniform. Hang on, didn't uncle Mao tried that already ?
You think 4% is rampant inflation ? Wait for RBA to start dropping the rates and see what inflation looks like when the AUD goes down to 70c.And what do you think will happen when the dollar sinks ?…
its likely the RBA will cut but banks will raise, so no effective change.
inflations source is not interest rates being too low. huge demand for basic materials from BRIC countries forces producers to raise their prices, and high oil does it again. Retailers get charged more to buy products so they pass the cost on to consumers, then have to pay more for fuel to distribute them, so they raise retail prices again (CPI).
changing rates up or down has absolutely NO effect on this cycle, except for destroying the wealth of the public.
so………whats going to send house prices higher? we wont have lower mortgage rates, renters wont have money for higher rents, and many will be in rent arrears………….so landlords will be paying out more while getting less rent, which means mortgagee sales in abundance.
harb wrote:Hahaha! Dream on Scamp, without the tax benefits a lot of investors would just kick the renters in the street or put up the rents 4 fold. The rent money alone is not worth the hassle of a tenant, I'd rather keep the place vacant for a few years/decades until I need the money.Put up the rent 4x at the bottom of the market and cashed up renters will just move into better property. Poor renters wont have the money and you may force them onto the streets. This is fine I guess if you own all of your rentals, they will just gather dust and cobwebs as they remain vacant over time, but the rentals that are still being financed need someone in them without negative gearing.
Besides all of this, there exist tenancy advice boards in every state that will protect the rights of tenants if called upon. Have you ever had a tenant take you to the tribunal? You can't change the rent or kick them out till the tribunal has ben held and then they generally rule in favour of the tenant.
ummester wrote:Poor renters wont have the money and you may force them onto the streets.What am I, a not for profit organization ? They can apply for gov. housing or buy their own place somewhere were they can afford it.
Quote:there exist tenancy advice boards in every state that will protect the rights of tenants if called upon. Have you ever had a tenant take you to the tribunal? You can't change the rent or kick them out till the tribunal has ben held and then they generally rule in favour of the tenant.You can’t be forced to subsidize your tenant, not even by a tribunal. If negative gearing is gone the tenant will have to make up for it. Based on a 350K loan and median house prices then a 4x rental increase is probably very close to a fair increase in rent. Which is exactly why negative gearing is here to stay.
harb wrote:You can't be forced to subsidize your tenant, not even by a tribunal. If negative gearing is gone the tenant will have to make up for it. Based on a 350K loan and median house prices then a 4x rental increase is probably very close to a fair increase in rent. Which is exactly why negative gearing is here to stay.No, but only the police have the legal right to evict a tenant and that is only after a warrant is issued by the tribunal. In tougher times, more tenants may exploit thier legal rights and refuse to leave upon unfair rent increases without a tribunal hearing. As a general rule, tribunals rule in favour of the party that stands to suffer the greatest financial stress.
Of course, for a property without a tenant in it you can set the rent at whatever you want and hope you get it.
But in the end it is a mute point because if negative gearing was abolished the tenancy laws would probably be changed.
I think the solution is not to abolish negative gearing but to limit it for residential investment only. This would affect the purchase of residential property purely for capital gain and keep serious investors in the commercial market.
Residential property, by it's nature, is a social and financial investment.
Scamp wrote:Paul22M wrote:I reckon we bring Scamp over to Australia and make him head of the RBA, or even prime ministerWho would want to be prime minister in Australia ? It's like wanting to be the president of the USA.
Anyway, first thing any REAL prime minister does is cut the tax benefits on property investment as a whole.
I know, it's been tried before, but the chickens reverted it. Bad choice, look at what's coming now.About political pressure, I quote Rudd : "I will fight inflation AT ALL COSTS"
There's rampant inflation. So what do you think he will do ? What do you think he CAN do ?
No no.. this is one of those recessions that Australia just needs to have.The "chickens reverted it" because there were no rental properties available and rents were going through the roof. People were being forced out into the street because investors were selling their houses and they were not being bought by other investors to replace them. Rental shortage was the result.
Rampant inflation? Calm down.
Yeah, we'll have a recession. So what? It happens ever other decade and always will. Get over it – you can't change it; just try to profit from the climate.
You keep wanting to save the world – commendable. But there's no use whining about it here – this is a forum for property investing.
We are trying to get rich from property investing, and if you get rich from it, then you may be able to actually do something real towards saving the world with the wealth you've made.
longterminvestor wrote:Well said Scamp. (your reasoning on why RBA should not decrease interest rates)Lets see if the RBA does what it needs to do or bows to political pressure.
Lets see if the RBA further destroys the long term health of the nation by bowing to political pressure and reducing rates.
I'll bet they go the wrong way, reduce rates in September for short term gain and compound and prolong the problems.
It is well known that the RBA repsond primarily to the inflation rates. They don't bow to political pressure. If they did, John Howard would still be in office.
If inflation rises, so do the interest rates as a rule. I don't agree with this personally, as not all of society are mortgage holders. Why should they alone be punished for price rises?
I think they are caught between a rock and a hard place now. If they drop the rates, the sheeple will just start spending again, and if they don't, we'll go into a recession, job losses will emerge.
Meanwhile, the price of oil and associated products could continue tom rise – out of our control, causing inflation anyway.
It's a no-win for the RBA, and in my view, if they are to take action, it would need to be down with rates so that the economy keeps moving forward, albeit with an unfavourable inflation level.
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