Are rates going to be reduced? Now RC is finished will APRA start to relax

Discussion in 'Property Market Economics' started by Illusivedreams, 6th Feb, 2019.

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  1. Illusivedreams

    Illusivedreams Well-Known Member

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    RBA uses lagging indicators.

    Watch what the current Iron price does to terms of trade and mining sector in general.
     
  2. Waterboy

    Waterboy Well-Known Member

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    "Now RC is finished will APRA start to relax"

    Quite the opposite
     
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  3. marmot

    marmot Well-Known Member

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    Good balance of trade figures will certainly mask over other problems with the economy .
    But as Australia found out in the late 80s and in 1990 when the Japanese bubble burst and Iron ore prices took a big hit, at the same time as commercial and residential property had seen massive gains in Perth ,Sydney and Melbourne, with lots of bad debt floating around, things can get really ugly in a short space of time.
    The money coming in disappears , but your debts stay the same .
    The real danger with having rates to low is it can become a liquidity trap, as the Japanese found out, it turns into a vicious circle with low or no wage growth.

    " A liquidity trap may be defined as a situation in which conventional monetary policies have become impotent, because nominal interest rates are at or near zero: injecting monetary base into the economy has no effect, because [monetary] base and bonds are viewed by the private sector as perfect substitutes.[2]"

    At least for Australia we might see a situation with mining wages seeing good growth in W.A and QLD and it pushes up inflation and interest rates, but that isn't of much use to Sydney and Melbourne residents that would see rates go up without actually seeing any wage growth .
    Or in a worst case scenario the Chinese economy takes a big hit ,and slows down more than expected.