All Topics / Finance / CPI comments of note !!

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  • Benny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi all,

    This quote from the ABS arrived in my Inbox – I thought it worthy of some discussion:-

    “Non-discretionary annual inflation is higher than the CPI and more than twice the rate of Discretionary inflation. Non-discretionary inflation includes goods and services that households are less likely to reduce their consumption of, such as food, automotive fuel, housing and health costs, “ says the ABS.

    It is a very good point.  Particularly for those living “close to the wind”, this is very important information.  In a nutshell, those costs we CAN’T do without are increasing at a quicker rate than those things we CAN do without.

    As investors, even if we are not directly affected, we may have (many) tenants who ARE impacted, and any rental increase adds to THEIR pain, thus possibly indirectly affecting us.   Certainly the world today, as we come out of Covid and face possible oil shortages (thanks Biden, Putin et al) and food cost increases (due to staff shortages along with fuel cost increases) becomes a more fragile place.  Consider the RBA and a future Cash Rate increase, and consider how Banks might react to all the above – as well as increasing their rates, they might also choose to lift their qualifying rate to minimise THEIR risk even as yours has increased.

    How are YOU going in these times?  Are you directly affected, or just indirectly?   Are you doing anything specific to manage this possible future?

    Benny

    Profile photo of HomeBuyerLouisianaHomeBuyerLouisiana
    Participant
    @homebuyerlouisiana
    Join Date: 2020
    Post Count: 17

    I am increasing my reserves. I am not so scared of the inflation but the recession that this bring. Thankfully most of my properties are in the USA so I have 30 year fixed debt. This means my main costs are fixed and the inflation is helping my rents increase. Also as interest rates rise it makes buying a house more expensive which adds to the rental pool which puts more pressure on rent. There is a lot of pressure on household budgets and I am conscious of that. I haven’t increased my rents a lot on renewals. I am happy for my rents to stay under market as it means my tenants are better of staying than leaving. Since my debt is fixed I don’t have the same pressure as those with variable mortgages.

    HomeBuyerLouisiana | Home Buyer Louisiana
    https://homebuyerlouisiana.com

    Aussie entrepreneur investing in New Orleans houses

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