The broad consensus is that if so many new people are employed, wages should start growing soon. And if wages grow, inflation may rise. If that happens, then the RBA will be forced to increase rates again. However, there’s one key problem. Wages won’t be going up anytime soon.
Donald Trump campaigned to become US President on conflicting promises about big banks. Some of the populist talk followed Trump into office. But clearly, actions speak louder than words. The steps taken by the new government have been towards pure deregulation. This is how the cycle repeats.
Many Australians share the belief that ‘house prices will only go up in value’. And while this has been the case for the last three decades, it may be about to change.
The buy-the-dip mentality is so ingrained into the investor psyche that it can only mean we’re getting close to a major reversal. When nearly everyone believes the same market myth, it’s a sign the herd is heading to the slaughterhouse.
Whether or not cryptocurrencies are the answer to the banking system’s many flaws remains to be seen. But the attempts by governments to quell the rise of this technology only speaks to the bourgeoning power of this asset class. What we do know for certain is that the financial sector is in a state of flux, and change is occurring rapidly.
Aussie first home buyers are back. Data from the Australian Bureau of Statistics (ABS) shows first home buyers made up 18% of total owner-occupied loans last year.
I give up trying to understand the economics profession. This obsession they have with artificial growth — the headline number — is totally and utterly misleading. The easiest way to boost short-term GDP growth is to double the population and debt load. Is that formula for growth sustainable in the long term?
National Australia Bank has a consensus view that the RBA will start increasing the cash rate around August. But there’s a problem with that line of thinking. Just because rates have been at records lows doesn’t mean they can’t go any lower. For one, there’s the Aussie property market to think about.
Last week saw another 0.1% price drop among most capital cities. With Melbourne the only one to remain on par, left unchanged. A worrying indicator that perhaps the property market is headed south.
The wisdom of the old saying ‘banks give you an umbrella when the sun is shining and take it away when it’s raining’ is forgotten when greed — by all parties in the transaction — is in the air. When it comes to investing, there’s a well-recognised equation: the higher the market, the lower the investor IQ.
The rich get richer. And richer. And richer. The Swamp gets deeper. And deeper. And deeper. Then, suddenly, a ‘levelling’ comes along — plague, war, revolution… or the collapse of government. Then, people are much more equal in income… but usually, much more dead, too.
It’s not the number of properties that makes you rich; it’s the percentage you own. For example, imagine two investors. One owns 20 properties, the other owns three. Who’s better off? To decide, we need more information.
Of course, there are many factors at play. Sure, the RBA kept interest rates at record lows, encouraging potential borrowers. But it’s probably not just the Reserve Bank of Australia’s fault.
Our first-world standard of living sits atop an increasingly unstable debt pile. The world’s next (and even more severe) debt crisis is going to be the ‘solution’ to our real first-world problem of entitlement.
These policies do nothing to alleviate any of these problems. In fact, they exacerbate them by putting pressure on future governments to cut spending. There’s a strong chance that the US will never pay their debts back. In the past the only two ways a country would get out of such a mess is by strongly devaluing their currency. Such a move would end the US’s economic dominance.