Well not only do we have to put up with high fuel prices, the mongrels have put up interest rates.
Why do they always screw the little bloke?
Thats $20 a week out of my pocket ($40 before tax). Only luxury I have is fishing, so its fishing that gets it.
Wrong logic Feral.
Now is an even more appropriate time to get out and relax. Stops you worrying about things we have absolutely no control over. Interest rates are still very low and I'm sure you will find that $20 somewhere........
Let me think a moment here.
I remember when I got a preferential housing loan from the bank at 17%. Yes 17% not 7% or a fraction more.
Seems a long time ago but it happened for quite some time and for much longer interest rates were over 12%. So folks you are living in somewhat luxurious circumstances at present.
houses were alot cheaper then but, and today people are borrowing alot more...
Ok - Any Economists out there in fish o land - I dont actually understand why interest rates have to go up when in reality it is the cost of fuel that is driving the price of all things up. Petrol / Fuel levys are added to everything and passed on to the end user or buyer. Thats travel, building materials, fruit and veg, delivery of stuff - any stuff. I dont see everybody I know with brand new plasma's and going bereserk with home theatres and I get the feeling that plenty of people are just getting by ( even though we all hear that we have never been better off). We have expensive produce at the moment from extended drought, and cyclone affected vegie pricing, healthcare is more expensive, beer is more expensive................just about everything.
So why or how will raising interest rates affect all of this stuff or reverse the trend which is being controlled by overseas interests.
Any takers?
Thanks
Phill
good point phil,
but you dont have to buy home theatres etc for inflation to be a problem. put it simply, the average home loan will be paying an extra $14 a week from the rate rise. $14 gone out of the pay packet means $14 that cant be spent. Therefore less is being spent in the economy... economy slows down etc... im sure you know the rest.
this being said i think you have a good point
ok , basicaly the story is-- petrol prices are rising faster than the rate of inflation , as a result inflation will surge upwards . the only way to slow this surge down is by increasing interest rates , a rate rise is meant to slow down spending ( but it doesn't help those in debt to their eyeballs ).
we had better get used to it , there will be more rate rises in the coming months.
thank god i don't have a mortgage anymore , there will be a lot of people going to the wall in the next year or so.
cheers
jason
... i only work to support my fishing addiction.....
OK Bigmack I'm an economist. Your right the higher price of oil will increase input costs but there's more going on. The RBA has to look forward and adjust now to influence what the future fundamental economic variables will look like.
The central back in Australia (AKA The Federal Reserve Bank) has the role primarily of but not solely to control inflation. They do this by using the crude monetary instrument of official interest rates or more appropriately the amount of money in circulation. Runaway inflation is the about the worst thing that can happen to an economy. That of course isn't the case here.
The situation at the moment is very complex with multiple effects from rising oil prices and other variables. Rising input cost (higher oil prices) has 2 main effects; they drive up costs of goods down the track. This would lead to higher inflation but also have what is called a substitution effect. People spend more on petrol and less in the rest of the economy decreasing demand and economic output. This would have the opposite effect of decreasing inflation.
The economy at the moment also has to deal with falling unemployment levels putting upward pressure on wages. Access Economics* predicts that during the decade of 2020 the Australian workforce will grow by only 125,000 (for the entire decade) compared with 170,000 per year today.* Access Economics, Population Ageing and the Economy, January 2001. If you have a skill employers next decade will be fighting each other for you!
We also have on average booming levels of wealth (check your superannuation) and add up everything you own you are probably a millionaire. We have huge personal debt levels for houses and personal consumption. And what modellers call expectations of the future. Expectations of the future determine what people do today.
Policy makers have to determine what the economic fundamentals will be in 6, 12 months time and beyond based on this and more...
That's just the closed economy then you have to factor in the effects of the World economy, trade deficits/surpluses, pricing parity differentials, $AUS, future commodity prices...
I don't know whether this helps or not.
Scott
What other people think about me is not my business: Michael J Fox.
I'm not so sure that low interest rates are all that good knowing human nature.
A lot of people come to expect the good times to last for ever and somehow fail to factor in the fundamental history of capitalism ie boom-bust. Older folk can look back and feel deja-vu. Throughout my life I can remember the cyclic nature of capitalism and recall when I have been able to spend, and when I have been unable to spend due to monetary restrictions such as interest rates or devaluing of sterling.
The Thatcher years saw a huge decrease in interest rates and folk who were near to paying off their mortgages then re-mortgaged to purchase caravans, boats etc in order to enjoy their retirement. They thought that they had never had it so good and that Thatcher would last forever......but she fell.......and with her went the blue rinse brigade, who previously were near to debt removal and were now lumbered with debt and rising interest rates. That recession saw more reposessions than ever before and the people that were reposessed were those who had previously been comfortable and should've known better.
Debt is a curse.....it influences the economy much more than we would like to think. After my first missus shot through leaving me with three kids and a heap pf debt, I swore that I would never be in debt again other than to a mortgage and that mortgage would be based on the worst interest rate that I had known so that should it rise, I would be able to meet it. That rate was 17% and we calculated what we would have to pay should that happen and if we could pay it.
So what I am trying to say is that the deckie and I have been blessed by Oz, because that rate never transpired. Throughout the years here we have made the payments as if it was 17% and now have no fear of rises. Yes, it's annoying if they do rise, but the other side of the coin is that those who have no debt and their income/pension is derived from investments will be better off.
It's swings and roundabouts and I'm sure the vast majority of folk who had payed their mortage off would welcome a rise in interest rates.
We really are lucky here, irrespective of interest rates, when I left the UK, if you had a mortgage for 25 yrs, then you were stuck with it. You weren't allowed to pay off extra to reduce the interest and the only way out was to pay it out with the total sum owing.
kev
When you are arguing with an idiot, make sure the other person isn't doing the same thing
Good answer, but Ive always been a bit confused by inflation and RBA policy.
Wouldnt rising petrol prices have the SAME effect as increasing interest rates? The end result of both things, is that we have less to spend. Therefore, wouldnt rising petrol reduce the need for an interest rate rise?
I think increased goods and services costs would only warrant an interest rate rise IF there was evidence of wage inflation. Without wage inflation, surely decreased demand would bring risen goods prices back down in time? To my mind there is no wage inflation yet, so no justification for an increase. Do economists think like I do, and think this rise is unjustified, or have I missed something? Sorry, I failed economics in year 12, ooops.
While were on the subject, what gives with the treasurer removing things from the cpi components? I understand that he removed house repayments from the cpi some time ago, with a very poor reasoning. Wouldnt it be simpler to remove petrol costs from the cpi model, and thus reduce the need for a rate rise? Might as well remove food too if the treasurer thinks that way.....
Looking forward to your answers. I need to learn more on this, so sorry if we are a bit off subject. Its not fishing, but our hip pocket is still important.
Andrew
hi gogecko,
an increase in petrol prices wont act the same because people are still spending the same amount, whether it be on petrol or something else. Whereas an interest rate rise will leave less money in peoples pockets and that means people cant spend as much.
wages are increasing, last time i checked they were increasing comfortably above inflation, but correct me if things have changed.
and dont be sorry gecko, i think everyone has the right to know as it greatly affects us.
I'm just thinking that this could be gloomier than we think. Wheat scandal, repatriation scandal, Visa scandal, low popularity rating.
It seems this gov't is taking a hammering atm so to invite further punishment from the electorate by allowing rates to rise must indicate the (urgent) neccessity for it? Thereby this indicates that they think the future is gloomier than is currently being painted, do they not?
Doesn't look to good
And not only has petrol prices been hit by the Iranian affair we now have the nationalisation of Bolivian oil and trouble in Nigeria!
Always look on the bright side of life.....de dum..de dum de dum de dum[smiley=guitarist.gif]
I think this rise might have more to do with the goverment having no foreign debit and $12 billion in the coffa than "Oil Prices". The thought of AUS$ value taking a sharp drop would hit our trade, and we would be back in the 80s in no time, it's a shame that where not one of world economic powers so we just have to play the game. Money is still cheap even at 10% where it should be!(sorry truth sometimes hurts), Wait it'll get back to that soon!(5 years is my bet not to fast not to slow) At least the goverment will have to spend some of it's money, and we all know there better payers then Private enterprise. New Hospitals, Schools, and the latests crazy Child Care Centre coming to a city near you.
good points all round ,,,, and without highliting all the relevant points and posting on this thread what some of you miss,,, and what some of you may not be aware of,,, and without going into a debate,,,
the rba utilise information and data that is taken and placed into reports that in most cases is 3 months old by the time that they make judgements upon it,,,,
this is the reason why that we may endure 2-3 interest VARIATIONS in a 6-12 month period,,
yes i agree that oil,,,unemployment,,,""self contained"" debt and so on has its weight added to this factor, but when you look back and realise that interest rates have gone down as much as they have gone up on average over a financial period, the main bearing is due to US,,,,,what we spend,, how much we spend,,, and what we spend it on
the BUY AUSTRALIAN campaign has a large chunk of this factor thrown in as well,,, but who really looks at the bar code when buying a product,,,,,a cuppla years back there was about 2 weeks worth of bi****ing cause 1 of the large take away companies started importing pineapple for their burgers,,,, the poor ozzie farmer was in an uproar,,, then the media went dead,, and it moved to smoking being banned from pubs or milk going up or whatever,,,
pink panther has a thread in this forum re petrol prices and i have NEARLY contributed my thoughts on it a few times, but hesitated,,,
can you imagine, if the govt had the power (which they don't) to say,, right interest rates are now UP and petrol,,milk,,,butter,,,& bread is doubled in price,,,
overnight a (hopeful) scenario would be: less traffic, which in turn leads to less accidents,, which in turn leads to cheaper insurance, in turn leads to cheaper cars etc etc etc
a more steady property market, australia was posted a being in the worlds top 5 highest only 2-3 months ago,, but yet our markt was booming
grocery's would fall in price, as the consumer would still need the fundamentals to live, but what will the suppliers do to entice them to shop????
and this is just one of thousands of outcomes,,,, can we have,, or can we survive another recession??
POLITICAL SUICIDE is the answer,,, if we stopped throwing so much money overseas, with getting sweet #### all in return,, this may help,, if we stop handing out so much crap in the way of letting the rich have it there way, and the poor to do as there told may help,,,and what is so evident in most of the forums that i read,, if we decided tomorrow is a good day to catch the bus,, or stop smoking,, or buy australian,, or etc etc etc this would also help,,, but no,,, we all (me included) whinge,,, and sit back and bear it,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,choppa
this post was brought to you by,,,,,,,,,,,,,
can it get any better??????????????,,,,,,,,,,,,,,http://www.youtube.com/watch?v=hgG_TxEPaQE
the rise in interest rates is to just temper the economy a little..put the brakes on ever so slightly.
Most people have mentioned the price of oil...oil is just one component of the commodities market....oil price has very little to do with Iraq, Bolivia or anywhere else...it is, as per all markets, driven by supply and demand. if someone wants to purchase lots of a certain item then the price increases...simple economics on that one. The entire commodities market has skyrocketed..as of Monday I now incur a 7.6& price increase on copper pipe and fittings I purchase. Why has the commodities rised so sharply recently...demand...from whom...India and China..those two nations are having massive growth in their manufacturing sectors...my tip..in 20 years...China will be the key to the world economy..not the USA as at present. I just wish I had more money invested in the commodities..bugger..but, hindsight is a wonderful thing.
Australia,,being the financial minnow that we are, has to endure any of these increases as we have no control over the pricing of any of the commodities.
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