Why not raise taxes to slow inflation?

[evolved2]

Please explain, that doesn't make any sense from a financial perspective. If they're making record profits, what's the risk?

The mortgage cliff as borrowers come off fixed rate loans, international uncertainty affecting their borrowing rates/risk, and concerns over potential economic issues over the next 6-12 months including stagflation.

 

[Big Papa Ted]

The mortgage cliff as borrowers come off fixed rate loans, international uncertainty affecting their borrowing rates/risk, and concerns over potential economic issues over the next 6-12 months including stagflation.

I don't understand why that would cause them to raise rates independently though? That will simply exacerbate the risk of mortgage defaults. They'd be accentuating the problem???

 

[Kram]

The mortgage cliff as borrowers come off fixed rate loans, international uncertainty affecting their borrowing rates/risk, and concerns over potential economic issues over the next 6-12 months including stagflation.

Cash is king atm

 

[evolved2]

I don't understand why that would cause them to raise rates independently though? That will simply exacerbate the risk of mortgage defaults. They'd be accentuating the problem???

This is second hand info so take it for what it's worth. If there's a few good questions here, I'll take them to the guy who knows his shit when I next see him. I'm no expert.

Our banks borrow from other banks, both domestic and international. Our banking industry is healthy by international standards because of our strong regulation. Regardless, international banking issues, such as bank failures, affect our market because our banks borrow internationally. That risk equates to higher borrowing rates for our banks which they have to pass onto us.

 

[Crankyhawk]

I don't understand why that would cause them to raise rates independently though? That will simply exacerbate the risk of mortgage defaults. They'd be accentuating the problem???

its more that it is the only strategy that the banks have to cover risk. And there are probably enough loans there that are serviceable that a gap in the rate between the RBA and the retail rate could still work. They may choose to be selective in not foreclosing on some mortgages as well

 

[Crankyhawk]

Cash is king atm

cash is losing the inflation rate per year though,

 

[Saint]

This is second hand info so take it for what it's worth. If there's a few good questions here, I'll take them to the guy who knows his s**t when I next see him. I'm no expert.

Our banks borrow from other banks, both domestic and international. Our banking industry is healthy by international standards because of our strong regulation. Regardless, international banking issues, such as bank failures, affect our market because our banks borrow internationally. That risk equates to higher borrowing rates for our banks which they have to pass onto us.

Our banks (like US banks) know that the Govt will not let them fail.

Bankers don't want to be seen as greedy so they'll tell you that in bad times they're "at risk" and that's why they need record profits.

And during good times, they'll just make record profits.

Take anything a banker tells you with a grain of salt, and don't forget, their bosses are selling to their employees that they're not pointless blood-suckers on society. So what they're hearing internally is a curated message too.

 

[Kwality]

Our banks (like US banks) know that the Govt will not let them fail.

Bankers don't want to be seen as greedy so they'll tell you that in bad times they're "at risk" and that's why they need record profits.

And during good times, they'll just make record profits.

Take anything a banker tells you with a grain of salt, and don't forget, their bosses are selling to their employees that they're not pointless blood-suckers on society. So what they're hearing internally is a curated message too.

Not everyone who works in a Bank is the mindless follower you paint them to be.

 

[nut]

When you have a private institution with the ability to make money out of thin air via the fractional reserve banking ….. you hand them the power over the population.


“GIVE me control of a nation’s money supply, and I care not who makes its laws.” Mayer Amschel Rothschild

The power banks have is ridiculous….

 

[Kwality]

the fractional reserve banking

How does that function ?

 

[Saint]

Not everyone who works in a Bank is the mindless follower you paint them to be.

No, but their ability to change anything amounts to about the same amount as if they were. It'd probably be better if you were.

 

[evolved2]

Our banks (like US banks) know that the Govt will not let them fail.

Bankers don't want to be seen as greedy so they'll tell you that in bad times they're "at risk" and that's why they need record profits.

And during good times, they'll just make record profits.

Take anything a banker tells you with a grain of salt, and don't forget, their bosses are selling to their employees that they're not pointless blood-suckers on society. So what they're hearing internally is a curated message too.

While some of that is probably true, the word of an insider is generally closer to truth than those who are looking from the outside. Would you agree?

 

[kickazz]

Raising taxes is certainly an option. Indeed, Modern Monetary Theory says that the whole purpose of tax is to curb inflation, not for providing government services.

As in, gov/RBA "print" whatever money they need to keep the system going. Then they tax people, and basically say "thank you" and destroy that money. Sounds weird but it's just traditional monetary theory arse about.

So taxes are key to inflation as they take money out of the system. Stage 3 cuts should happen at some stage, but right now seems to not be the best time.

 

[kickazz]

Thing is, interest rates are still relatively low.

Wanna know the real problem?

Debt levels, caused by inflated house prices caused by cowboy lending and stupid government policy.

It means the RBA's hands are tied somewhat as the smallest pulling of levers to address inflation has a big impact on the indebted.

Joh Howard's home buyer grants, along with Frydenburg's easing of lending criteria have led to this.

And the restriction of supply re new land is a big factor. Negative gearing on non improved property is also dunce policy.

Yes, it is all our own personal responsibility to not borrow too much. But when everyone else is doing it, and $500k houses suddenly get $600k bids it is awfully hard to not get caught in the tide.

 

[Gough]

Thing is, interest rates are still relatively low.

Wanna know the real problem?

Debt levels, caused by inflated house prices caused by cowboy lending and stupid government policy.

It means the RBA's hands are tied somewhat as the smallest pulling of levers to address inflation has a big impact on the indebted.

Joh Howard's home buyer grants, along with Frydenburg's easing of lending criteria have led to this.

And the restriction of supply re new land is a big factor. Negative gearing on non improved property is also dunce policy.

Yes, it is all our own personal responsibility to not borrow too much. But when everyone else is doing it, and $500k houses suddenly get $600k bids it is awfully hard to not get caught in the tide.

Tough economic times make it easy to foment right wing culture wars too which ties in nicely to general Liberal Party policy. Dutton's it already on immigration despite the Libs having a very similar policy in government.

 

[kickazz]

Tough economic times make it easy to foment right wing culture wars too which ties in nicely to general Liberal Party policy. Dutton's it already on immigration despite the Libs having a very similar policy in government.

Another way to fight inflation is increasing productivity.

We have a labour shortage, ergo lower productivity.

So letting in more (especially skilled) migrants should help.

 

[Cap]

Net interest margin.

I think Banks might increase outside RBA next year , but more than likely, they'll keep part of next years decreases.

 

[Madas]

Thing is, interest rates are still relatively low.

Wanna know the real problem?

Debt levels, caused by inflated house prices caused by cowboy lending and stupid government policy.

It means the RBA's hands are tied somewhat as the smallest pulling of levers to address inflation has a big impact on the indebted.

Joh Howard's home buyer grants, along with Frydenburg's easing of lending criteria have led to this.

And the restriction of supply re new land is a big factor. Negative gearing on non improved property is also dunce policy.

Yes, it is all our own personal responsibility to not borrow too much. But when everyone else is doing it, and $500k houses suddenly get $600k bids it is awfully hard to not get caught in the tide.

Negative gearing should have been removed from purchasing existing properties and only be applicable if investors build new stock
That was it’s designed intent in the first place I believe.

Ludicrous policy and simple to fix

 

[kickazz]

Negative gearing should have been removed from purchasing existing properties and only be applicable if investors build new stock
That was it’s designed intent in the first place I believe.

Ludicrous policy and simple to fix

Yep, although I would add it should also be allowed on the cost of improving existing stock. So if you pay 2 million for an old shitbox in Hawthorn, and spend $40K fixing the kitchen and bathroom, then you can only get tax break on the 40k

 

[Madas]

Yep, although I would add it should also be allowed on the cost of improving existing stock. So if you pay 2 million for an old shitbox in Hawthorn, and spend $40K fixing the kitchen and bathroom, then you can only get tax break on the 40k

Yep fair call
Gets money circulating and creates employment

 

[nut]

Thing is, interest rates are still relatively low.

Wanna know the real problem?

Debt levels, caused by inflated house prices caused by cowboy lending and stupid government policy.

It means the RBA's hands are tied somewhat as the smallest pulling of levers to address inflation has a big impact on the indebted.

Joh Howard's home buyer grants, along with Frydenburg's easing of lending criteria have led to this.

And the restriction of supply re new land is a big factor. Negative gearing on non improved property is also dunce policy.

Yes, it is all our own personal responsibility to not borrow too much. But when everyone else is doing it, and $500k houses suddenly get $600k bids it is awfully hard to not get caught in the tide.

And when the entire economy relies on a continuous supply of new loans, governments keep the housing bubble going.

 

[nut]

Another way to fight inflation is increasing productivity.

We have a labour shortage, ergo lower productivity.

So letting in more (especially skilled) migrants should help.

Increasing productivity is another way of saying we need more people to take out more loans..

Money=debt … more loans more debt and more money into the economy.

 

[kickazz]

Increasing productivity is another way of saying we need more people to take out more loans..

Money=debt … more loans more debt and more money into the economy.

Yeah but there is good debts and bad debts, no?

Debt for starting or growing a business that will make shit and employ people? = Good

Debt for an inflated asset, ie a house, that will produce nothing? = bad

 

[nut]

Yeah but there is good debts and bad debts, no?

Debt for starting or growing a business that will make s**t and employ people? = Good

Debt for an inflated asset, ie a house, that will produce nothing? = bad

Agree… but banks make shitload on secured loans that offer basically no risk to them.
Business loans are much more riskier and thus are a small percentage of the total loans issued by banks in Australia…
It’s warped …

The banks have rigged the game…

 

[kickazz]

The banks have rigged the game…

You won't get much argument from me there.



(goes to check contribution of bank shares in superannuation fund )