Well its official.....

[max]

Interest rates up 0.25% again. What do people think?
Did banana and petrol prices do it?

[Aquarius]

I think it is time we voted this Government out, they are stale, that is what I think

[max]

Originally Posted by Aquarius

I think it is time we voted this Government out, they are stale, that is what I think

Hey, I guess I agree with you. But they didn't blow the banana crop away!
And petrol prices, well Mr Howard says he's worried about that. Reckons we love our cars too much.

[niko]

structurally reforming people out of jobs and charging an arm and a leg for bananas and fuel, wheres the control? why are they not helping the public!

[XA Coupsta]

Lets just hope it is this one increase and no more.

Unfortunately it is better to have one now to cap inflation - than not do anything about it - then inflation balloons - then we have to have a series of interest rate rises.

Fingers crossed for one - at worse - two rises.

I've locked in my interest rate anyway so I'm lucky it wont hit my repayments.

Remember too - the Reserve bank will be just as willing to send them back down if this rise achieves what it should and quietens inflation.

Hard to see it - but it actually means our economy is great if they put up interest rates....

[niko]

4% inflation is yuk

[hppsc]

Hey, better they cap it now before we hit hyper inflation :P

[XA Coupsta]

Originally Posted by hppsc

Hey, better they cap it now before we hit hyper inflation :P

Exactly! Remember the 80's!!!!

Monthly repayments werent going up by the $30 and $40 they are here. It was in the hundreds of dollars.....

[max]

Originally Posted by XA Coupsta

Exactly! Remember the 80's!!!!

Monthly repayments werent going up by the $30 and $40 they are here. It was in the hundreds of dollars.....

Yeah, sheesh!! And a big loan then was $40K!!! Now the average is $200K!!

[max]

Originally Posted by XA Coupsta

Lets just hope it is this one increase and no more.

Unfortunately it is better to have one now to cap inflation - than not do anything about it - then inflation balloons - then we have to have a series of interest rate rises.....

Nah, we'll be right! You only get rampant inflation and runaway interest rates with a labor government! Johnny's hanging in there to see the Libs right for a win into a fifth term.

[charles_wif_xf]

Originally Posted by hppsc

Hey, better they cap it now before we hit hyper inflation :P

It's not hyperinflation I am worried about. It's the almost certainty of the beast known as stagflation setting in. This means that prices rocket and wages stagnate or drop. And that seems inevitable, to me anyway, as that's how the banking system is set up.

[XA Coupsta]

Originally Posted by charles_wif_xf

It's not hyperinflation I am worried about. It's the almost certainty of the beast known as stagflation setting in. This means that prices rocket and wages stagnate or drop. And that seems inevitable, to me anyway, as that's how the banking system is set up.

Please explain?

If prices skyrocket (as suggested) - isnt that inflation?

And how banks are set up - what influence does that have?

[Professor Farnsworth]

on the upside, ING Direct savings maximiser accounts have higher interest rates now too, so i advise everyone to sign one up!! Nearly 6% return now which isn't too bad.

[Casper]

Originally Posted by charles_wif_xf

It's not hyperinflation I am worried about. It's the almost certainty of the beast known as stagflation setting in. This means that prices rocket and wages stagnate or drop. And that seems inevitable, to me anyway, as that's how the banking system is set up.

Stagflation is increased inflation and increased unemployment. Given Aust unemployment figures are the best they have been since the 70's I don't think stagflation is going to occur.

Inflation is, unfortunately, a fact of life at the moment with oil being a major contributor (cant blame govt, Lib or ALP, state of federal for record crude prices on the international market unfortunately.).
Also, to put it in perspective, 6% is a LONG way from the mid teens % of the early 90's.

There is also an upside too. As oil is paid for in US dollars per barrel and higher interest rates generally firms the $A to the $US it will, in real terms, create a better strength $A for buying oil in the first place (along with all the other imports we so hungrily consume)

[charles_wif_xf]

Originally Posted by XA Coupsta

Please explain?

If prices skyrocket (as suggested) - isnt that inflation?

And how banks are set up - what influence does that have?

In hyperinflation, prices rocket AND wages generally keep up. In stagflation, wages stagnate and prices rocket, hence the term stagflation.

I should have been a little clearer when I mentioned the banking system. Right now, the Aussie dollar isn't backed by anything, like gold, silver, the economic output of the nation, nothing. This is known as a fiat currency. The only thing keeping the currency alive is people's faith in the currency; that they can go out with a certain amount of plastic notes and get stuff for the plastic.

Now, the Reserve Bank of Australia prints out money ad nauseum, pretty much. It is this non stop running of the printing presses that causes inflation; there is more money competing for the same amount of goods and services. It is a dilution of the buying power of the dollar.

If the currency were backed by silver for arguments sake, (it was backed by gold in days gone by and was made of silver in coin form till 1966), there would be no inflation (external matters aside) because there would be x dollars in circulation for every gram of silver in possesion of the government. Back in the day when the Commonwealth Bank was owned by the government, you could go into the bank with your silver certificates (as notes were known as back then) and redeem them for a fixed amount of silver and vice versa.

With this fixed level of money in circulation, there would be no real economic problems to speak of like recessions and the like because the banks won't be able to restrict the supply of money like they did in the late 80's through to the early 90's by having interest rates of 18-19%.

I could write for hours but if anything seems unclear to you just post back and ask away.

[charles_wif_xf]

Originally Posted by Casper

Stagflation is increased inflation and increased unemployment. Given Aust unemployment figures are the best they have been since the 70's I don't think stagflation is going to occur.

Inflation is, unfortunately, a fact of life at the moment with oil being a major contributor (cant blame govt, Lib or ALP, state of federal for record crude prices on the international market unfortunately.).
Also, to put it in perspective, 6% is a LONG way from the mid teens % of the early 90's.

There is also an upside too. As oil is paid for in US dollars per barrel and higher interest rates generally firms the $A to the $US it will, in real terms, create a better strength $A for buying oil in the first place (along with all the other imports we so hungrily consume)

You make very valid points there Caspar. I forgot to include the increasing unemployment in the definition of stagflation; thanks for that.

The practice of fractional reserve banking here and in the rest of the First World is a cause for concern. Fractional reserve banking basically means that for every dollar the bank has in reserve, they can loan out 10 times that amount. So you see, the currency is partly based in debt. With a commodity backed currency, fractional reserve banking can't exist because the currency produced would have to be redeemable in the commodity it is backed by on demand, not like now; if for instance you wanted to withdraw $20,000 from your account, you would have to give the bank several days notice.

We can have instant price relief for fuel if the government dumped the GST on fuel and knocked off 7 cpl off the excise. At current prices, that's an 18 cpl saving. The federal government can most certainly provide price relief. The bananas on the other hand are another matter. Who knew that the yellow thingies had so much power.

[Casper]

Oh I agree. To start with the State governments can dump the fuel tax's they get, thats about 8cpl I think.. may be more. Then the Feds can stop double dipping the GST on Fuel, another 8cpl or so. So even keeping GST on fuel but doing it fairly the fuel cost to the consumer can be reduced up to 15cpl.. thats going to go a LONG way in peoples pockets.

We will never see fuel under $1 again but we dont need to see $2 real soon either!

[lush]

Okay can I ask a really stupid question? The interest rate rises that have affected mortgages, which is all I ever hear about..........does that mean the interest rate on car loans / personal loans / credit cards etc also goes up by the same percentage?

Im confused as all I have heard mentioned is the mortgage increase, and now that savings accounts are earning a higher interest, so does that mean anything you are paying interest on will now rise?

Thanks

[max]

Originally Posted by lush

Okay can I ask a really stupid question? The interest rate rises that have affected mortgages, which is all I ever hear about..........does that mean the interest rate on car loans / personal loans / credit cards etc also goes up by the same percentage?

Im confused as all I have heard mentioned is the mortgage increase, and now that savings accounts are earning a higher interest, so does that mean anything you are paying interest on will now rise?

Thanks

Thats exactly right lush. Your car loan your credit card, the woiks!
But also business will be paying higher for the amounts it has out in loans for expansion ra ra ra. Soon they will say, shyte we need to put up prices to cover extra running costs (bad luck consumers), or they will not borrow to expand, will fail to compete and go out of business shedding jobs (bad luck workers). Of course its more complex than that but a simple illustration of the knock-on effect beyond simply mortgage holders.

[charles_wif_xf]

Originally Posted by lush

Okay can I ask a really stupid question? The interest rate rises that have affected mortgages, which is all I ever hear about..........does that mean the interest rate on car loans / personal loans / credit cards etc also goes up by the same percentage?

Im confused as all I have heard mentioned is the mortgage increase, and now that savings accounts are earning a higher interest, so does that mean anything you are paying interest on will now rise?

Thanks

The interest rate increases apply to any form of credit, be they personal loans, credit cards, etc.

Theoretically, yes the savings accounts should be earning slightly higher interest but bank fees and other bank shenanigans pretty much nullify the benefit. But usually, the banks are slower to pass on the increases to savings accounts. Way slower.

Regular accounts get squat interest anyway, it's the stuff like ING accounts which would see the most benefit from increasing interest rates.

[lush]

Thanks guys. I dont have any personal loans but I do have a car loan and visa card, so they will go up too?

Dam it, and I was thinking i was safe from it seeing as I was currently renting!!!

[charles_wif_xf]

Originally Posted by lush

Thanks guys. I dont have any personal loans but I do have a car loan and visa card, so they will go up too?

Dam it, and I was thinking i was safe from it seeing as I was currently renting!!!

Fukc yeah, the interest rate on anything credit related goes up by 0.25% as of today/tomorrow.

[Jeeepers]

Originally Posted by niko

structurally reforming people out of jobs and charging an arm and a leg for bananas and fuel, wheres the control? why are they not helping the public!

They are helping, we are closer to the poverty line... : : :

[lush]

Bugger, there are times I think I should sell everything inlcuding the car and just own some 3k bargain outright and owe no one anything

[max]

Apart from superannuation lump sums who's gonna keep cash in an account to get a measly 6%? Personally I'll bat on using the banks money to operate a real estate investment portfolio until I get donged out of the workforce, then I'll **** the lot off, pack it in, live in a nice motor home and go swim with the dolphins!

[lush]

Yep might be travelling behind you Max

[charles_wif_xf]

Funny thing is, I was seriously contemplating getting an investent house some years ago, using the rent and my contribution to pay off the loan quick smart. I hesitated, regretted not buying for a while but now I don't regret it one little bit. I owe no money to anyone, I own all my meagre possessions outright and don't have a stinkin' credit card.

[max]

Originally Posted by charles_wif_xf

Funny thing is, I was seriously contemplating getting an investent house some years ago, using the rent and my contribution to pay off the loan quick smart. I hesitated, regretted not buying for a while but now I don't regret it one little bit. I owe no money to anyone, I own all my meagre possessions outright and don't have a stinkin' credit card.

Yeah well thats how I want to finish up. I got to get through this high-maintenance phase of my life first. And I can see it coming.

[max]

Originally Posted by lush

Yep might be travelling behind you Max

Your'e welcome! I might need to borrow a cup of sugar now and then....

[nobbystang]

How can higher interest rates slow down our economy when the current Govt are so happy spending that inflation is going to take longer to slow down anyway. With the first home buyers and baby bonus around at the moment I don't see them setting a good example.

Hopefully they'll cut at least another 4 cpl excess off the price of petrol to make up for the extra GST they're getting after they reduced the excess last time and petrol went up.

Interestingly enough too, the news stated tonight that the interest rate today makes the condition worse now than when we were under 15%. People have bigger mortgages than back then so each rise will hit harder.

Time for a change before this Govt does what the last one did, at least they learnt there mistake and were reducing interest rates and building a strong economy when they were voted out. The current one has done nothing but run a fear campaign the last 4 elections rather than promote themselves, must be just about ready to dust off the footage ready for another run, makes me sick they can't come up with anything original