New record cash rate 1.75

Now Bill Evans (WBC Chief Economist) has said that with a new RBA Governor in place from later this year (Dr Philip Lowe, btw) that it might be time to revisit and revise downwards the 2-3% CPI target.

Which essentially is not altogether inconsistent with what Bernie had to say - the end result (in the current context) is the same - less pressure to cut interest rates.

It's almost 24 years since Bernie Fraser (as RBA Gov) first referred to a 2-3% target and it is just about due for a review anyway as it happens every 3 years or so, most recently in October 2013.

See: Shift to Lowe may give RBA chance to rethink inflation target

 

Completely sounds reasonable. I don't see inflation being a problem.

 

It isn't until it's 10% or less than 1% or lower, then it becomes a problem.

 

I am betting on negative inflation soon.

 

10% would be an issue. But then I suppose it would make housing at the current prices seem cheap! If high inflation is accompanied by wage increases, then it makes paying off or paying down current loans a walk in the park.

 

10% inflation doesn't mean that house prices are rising. The prices of food, power bills, transport even cars can go up in price but housing can decline. I have experienced that overseas with inflation more than 10% and falling housing prices - an interesting thing to watch, when inflation eats all the money that population makes so there is none left to buy large assets. And if the inflation will be around 10%, credit will not be cheap it'll be more than 10%.

 

I didnt actually say house prices would go up. What I was trying to say was that in a high inflation situation was that wages would increase a lot over time so the home loan repayments you owe for the loan you took out 10 years or so ago would become a very small part of your take home income.
Not sure of the effect high inflation has on interest rates though, if the Central Bank will allow changes in inflation a bit more leeway. (And I think they may be heading that way).

 

I love these PC terms to keep things 'un-scary' for decision makers.

Negative Inflation = Oxymoron = Deflation.

 

Aaron, this doesn't sound too appetising.

Maybe prefer an Iced Vovo instead.

What do you think?

 

As long as you remember another bag for the pot this time, we can go back to slapping each other on the back for a job well done as judged by our own self appointed committee.