Currently its difficult to discuss traditional market machinations and the future direction of the stock and housing market because we are going thru unprecedented times created by poor long-term financial practices and also recent developments of pandemic, war in Ukraine and geopolitical trade wars.
For the person in the street, the impact of these changes can be felt in many ways.
Skyrocketing fuel, rises in household groceries, increases in all insurances and after many years of benign interest rates, a sudden turn by the RBA to lift rates hard and fast.
For years they have lamented flagging inflation and a slowing of the growth model and finally, after irresponsibly lowering rates so low for so long, have created an over inflated housing market on the East coast, highly indebted and vulnerable to inflationary pressures and climbing rates.
Interest rates rise when?
Economies boom.
With period of high employment due to a stimulated Economy
During advancements in manufacturing and technologies
Rises in wages
With improved Balance of Trade.
We have none of this currently....
Conversely,
Our Economy is stifled with money created by government money printing ($1Billion per mth in 2021),
Astronomically high house prices on the East Coast because of outlandish RBA Policy on low rates
High employment related mainly to minimal immigration to fill positions
A building boom raging because of Govt stimulus intervention
None of the points above, usually a sign of a growing developing Economy exists for the right economic reasons.
Its bad, all bad...
But I believe the interest rate bubble will be short lived. As these abnormal conditions ease....
People will spend less
Property prices will cool
Fuel prices will stabilise
Immigration will begin again, filling many positions
People will travel again overseas and spend money elsewhere
Interest rates will find a level, hold and then maybe fall again next year
Our status quo pre-covid will return, which was an economical model based on growth. It's the Australian way....Sprawling suburbs create work and money; we know it and we pursue it. Its not smart but we're too afraid to change the model... In the West, we're basically a quarry... We dig dirt and ship it off in its basic form and buy it back for astronomical prices. Our State's wealth feeds off that and building as well. We don't diversify. No tidal power, no manufacturing, no Technology Parks, over half of the national spending is on Health, NDIS, Social Security and interest repayments on Commonwealth debt. We're going nowhere fast and that's why I believe once the pandemic settles, the War ends in Ukraine, immigration returns and more money begins to go overseas again, we'll return to our normalised economy. So, hold your breath as this phase washes over us, it's not going to be the 17% interest rates we hear about of long ago but rates of 4-5% will have ethe same impact, as mortgages now are 5-6 more than they were back then. Opportunities will arise as always for the savvy if they have kept their powder dry
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