Politics – Page 23 – Digital Finance Analytics (DFA) Blog

Which Households Are Hurting The Most – According To The RBA?

Reserve Bank governor Michele Bullock was back in front of the bright lights, appearing at a House Economics Committee Hearing on Friday.

I have selected the edited highlights in this show, from the 3 hours of questions, and have included some of her statements. While she didn’t add a whole lot more to what she said at Tuesday’s press conference, she emphasised two points that should give pause to those expecting multiple rate cuts this calendar year.

The first was in response to a question on inflation expectations: by the time inflation gets back to the midpoint of the target band of 2 per cent to 3 per cent, as required by the RBA’s new mandate – which occurs some time beyond the middle of 2026 on the RBA’s latest forecasts – inflation will have been outside the target range for four years, which is right on the edge of what the RBA will tolerate.

The second was on productivity.

But she also touched on the risks in the forecasts, the impact of the Bank of Mum and Dad, and other distributional impact questions across households. Frankly, I found this unconvincing. So the think the RBA has much to do to gain a better set of insights into the current state of play!..

Let me know what you think in the comments!

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Is Negative Gearing The Next Target?

Interesting to see the momentum now turning to discussion of whether the Government intends to tackle negative gearing having U-turned on the tax cuts.

As The Conversation put it, there are two things the prime minister needs to get into his head about tax. One is that saying he won’t make any further changes no longer works. The other is that negative gearing doesn’t do much to get people into homes.

Australia’s Treasury has begun publishing estimates of the cost of the present unfocused system of negative gearing. Its latest, released last week, puts the cost at $2.7 billion per year, to which should probably be added a chunk of the $19 billion per year lost as a result of the capital gains concession.

Albanese is normally cautious. But as he is showing us right now with his rejigged Stage 3 tax cuts, there are times when he is not. If he really wants to throw everything he has got at building more homes, he knows what to do.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

The RBA Says Inflation Ain’t Beat Yet!

We discuss the latest from the RBA, via the new press conference and the Statement On Monetary Policy.

In short, the RBA Governor Michele Bullock says she is yet to be convinced inflation is on a sustainable path back to target and further interest rate rises could not be ruled out as the bank seeks to curb price rises stoking the nation’s cost-of-living crisis.

“Domestically, there are uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the slower growth in the economy at a time of excess demand, and while the labour market remains tight,” the board statement said.

This translates into higher rates for longer, which was not what the market wanted to hear!

Do not expect a rate cut soon. Plan accordingly.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

Many Households Are In Trouble – Mate!

We walk through the latest from our surveys and modelling ahead of our live show which will be on 13th February 2024 at 8pm Sydney where we will look at specific post codes in more detail.

Household financial stress continues to bite, and is spreading into many different types of communities.

Ahead, we do not expect cash flow to improve for many, as mortgage rates will not be falling very soon, the costs of living continue to rise and income growth in real terms is muted, at best.

If you want data on a specific post code, put it in the comments and I will either cover it Tuesday week, or via a separate show.

If you want to get the full data set, this is available via Patreon: https://www.patreon.com/DigitalFinanceAnalytics

Our One to One Service is also available: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Australian Inflation Wobbles Lower But…

The ABS released the quarterly inflation read today, together with the monthly update. Overall the Consumer Price Index (CPI) rose 0.6 per cent in the December 2023 quarter, lower than the 1.2 per cent rise in the September 2023 quarter and 4.1 per cent annually, This was the smallest quarterly rise since the March 2021 quarter. The RBA’s preferred measure of underlying inflation (the trimmed mean), which strips out irregular or temporary price changes, rose 4.2 per cent annually, down from 5.1 per cent in the September quarter.

Remember of course this still means that prices continued to rise for most goods and services, though annual CPI inflation has fallen from a peak of 7.8 per cent in December 2022, to 4.1 per cent in December 2023.

Markets reacted by pushing the ASX 200 to a new all-time high, closing at 7,680.70 on Wednesday, 50 points higher that its previous peak set in August 2021 on the assumption that this CPI result will mean the RBA holds interest rates when they meet next Tuesday. Falls however are not expected until later in the year, or into 2025, depending on which economists you chose to listen to.

Money market traders are now fully pricing the first 0.25 of a percentage point cut to the 4.35 per cent cash rate in August, from September before the inflation data. A second rate cut is fully factored in by December.

Westpac chief economist and former RBA assistant governor Luci Ellis said the RBA was “unlikely to raise rates further this cycle”.

there is certainly some more positive news in these numbers, though of course real felt inflation is way off the official reported average numbers for some households.

But that said, domestic-generated inflation remained firm due to strong price rises for new dwellings (5.1 per cent), rents (7.3 per cent after extra rent assistance), insurance (16.2 per cent) and electricity (6.9 per cent after bill subsidies).

The inflation for so-called non-tradable goods and services, which are mostly influenced by domestic factors, rose 5.4 per cent, down from 6.2 per cent.

ANZ economist Catherine Birch said non-tradables inflation was “still very strong” and could make the RBA retain its “hawkish” tone on monetary policy at its meeting next week.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/