What the hell is the RBA doing?

[Kohinoor]

How well do you recall the RBA of yesteryear. You know, the ones who meet every month except January, and on the first Tuesday of each month they sit around and eat cucumber sandwiches (or something) and discuss "What is the best thing we can do to keep the economy of Australia ticking over?"

It had a band of 2% to 3% that it liked to keep our inflation at - too much inflation or too little were both bad for the economy. And they'd announce changes to the Cash Rate (the Rate at which Banks would lend to each other). We would be paying our mortgages at a rate often around 2% higher than that Cash Rate.

And they'd publish a report after each meeting (whether the Cash Rate was changed or not) to inform us of "What they thought might happen next." In that way, we weren't taken too much by surprise.

But, NOT THIS TIME BABY !!!! Maybe they've put something in the water at RBA headquarters.... Or maybe they are smoking a different brand (or substance) than previous RBA's. Whatever it is, it strikes me that this current mob have TOTALLY lost the plot.

How so Koh?

Well first, they reduced our rate to UNHEARD OF levels two or three years back. An emergency setting they said, of just 0.1% Our norm prior to that would fluctuate but I had NEVER known it below about 4%. Which meant mortgages had previously been about 6% at the lowest. OK, all well and good.

This emergency setting was accompanied by MASSIVE printing of dollar bills too - this meant our dollar was devaluing, which also meant we needed to pay more for everything, including our homes. We saw prices scream upward - Sydney broke the $1m median a few years ago, Melbourne was next, breaking that mark just recently. But wait.....

Last year, as house values climbed, would have been a good time for the RBA to come OFF that "emergency setting" of 0.1% - to take some of the heat out of the market and prevent the boom in house prices that started back then. But then, they said "We won't be looking at lifting this rate until 2024!"


OK then, with all this money sloshing around, we'll just spend it all on real estate. So up it all went in dollar terms (maybe not value, but it needed more dollars to purchase the same value of house).

Then came floods, fires, wars overseas, "climate change alarmism", and they were accompanied by higher prices for food, fuel, power, and the RBA thought we were all spending a bit too much on necessities - so what did it do (over the last 4 months)? It lifted that Cash Rate from 0.1% to 1.85% - which has lifted most people's mortgage Interest from around 3% to 4.75% (which in itself is a 58% increase - 1.75 divided by 3 = 0.58333)

Oh, and the floods - well, they made thousands of houses unlivable which then put a HUGE strain on available rental properties. Many folks now living back with Mum and Dad or, in some cases, in their CARS !!! Oh, and with landlords facing a 58% lift in their mortgage costs, well guess what they have to do to be able to keep providing a rental property? Yep - they need to lift the rents they charge.

And the RBA (who have singlehandedly orchestrated a huge part of this misery) are about to lift the Cash Rate again.... In the past, the RBA of old would make a couple of changes (often 0.25% twice) and then sit back to see its effect before doing any more - but not this current mob....

They just keep stomping on the brakes over and over - and creating a huge pile-up behind them as folks who were tailing them suddenly can't stop in time !!!

Way to go, RBA - NOT !!!

In fact, why don't you just GO, you numbskulls .....

Koh

[Kohinoor]

Well, here we are in 2025 and didn't the RBA stuff things right up? My previous post talked of rates increases of just 1.75%.

IT DIDN'T STOP THERE, as we know in hindsight. Oh no - they continued to crank things up all the way to 4.35% (a 4.25% increase)...... But wait - it is NOT a 4.25% increase is it?

Take the average mortgage rate at the beginning - I used 3% in that earlier post. Now add 4.25% to that. Right off, we know it is MORE than 100% increase. i.e. your mortgage interest MORE THAN DOUBLED. How did YOU get on? Actually it is over 140%.

Now, if your mortgage was both principal and interest, it won't look THAT bad, as the "repaying principal" part of the mortgage didn't increase. But still, you might have needed to find a helluva lot of extra cash just to keep paying your mortgage.

And now (just yesterday - 21Feb25) the RBA admits they started increasing the rates too late. Yeah, by about 18 months in my book. That led to more folks buying up property on lower mortgage rates, leading to more activity, thus higher prices and mortgages. Of course, as rates then climbed, it left many of them way out on a limb, necessitating the sale of the property just to stay solvent.

The upshot of THAT error was that the RBA then needed to make the Cash Rate HIGHER than they should have gone, and we are only now starting to come back down.

Oh, and our rental shortage? That was affected too. I have seen figures that say almost 50% of all rental homes are owned by "Mum and Dad investors" who wanted to make their lives better with a bit more income. Many of them were forced to sell the rental, just to keep their family home as the mortgages screamed upward. Of course, add to that the increase in immigrants above the norm (all needing housing) then throw in floods and fire in various places that removed MANY homes from being habitable, leading to more folks needing to rent suddenly.

And of course, any landlords who still had mortgages would have seen THEIR mortgage costs scream upward too - their only recourse apart from selling, is to raise the rent. Seen anything like that lately?

I'll bet you have !!! The RBA has a lot to answer for, imho.

Koh

[Kohinoor]

So, the RBA dropped the Cash Rate by 0.25% ON 19Feb25, and a further 0.25% on 21May25. Whoopee !! That'll help....... a bit.

Let me see now - lift rates 4.25%, then drop them 0.5%, so back to an increase of 3.75%. Based on that original example of a 3% mortgage, we are still over DOUBLE the interest on your mortgage. Even with projected "3 more drops" that still only drops us to a straight doubling of mortgage interest rates. That still hurts eh?

Of course, the Cash Rate should NEVER have been as low as 0.1% It was said to be an "emergency low rate" during Covid times. And, for mine, it should have lifted in early 2021 when employment rates started looking better. It was left at that emergency rate far too long. Then they had to crank the cash rate WAY past where they should as they played "catch up".

I still think the smartest moves in April 2022 when they lifted for the first time, the lift should have been 1% to get off that emergency rate in an instant. That would have hurt some, but hey, they got hurt anyway 3, 4, 5 and 6 months later as the rate kept inching up way past 1.1% And such a strong move early on would have sent a message - "Watch out - we are serious about bringing things back right", perhaps leading to fewer folks buying up large at low rates and getting into trouble with a huge mortgage as the Cash Rate climbed ever higher.

What if they had lifted 1% in April, then sat back and read the tea leaves over the next month or two. Then perhaps another 1% in July. THAT would've set a lot of folks back on their heels and slowed things down enormously. That could have likely led to MUCH smaller increments in Sep, Oct say, as they fine-tuned the Cash Rate to where we will likely end up in a few months (around 3%). The RBA of old would make a move, then sit back to see the effect over a few months. This lot may yet learn that one !!

We may hope......

[Kohinoor]

Well, they did it again !! I have been hearing recently that the economy has been on life support for almost 3 years now (just ask anyone whose discretionary income has become quite depleted as non-discretionary costs have soared). But the RBA has chosen to NOT cut rates this month to provide a modicum of relief. Why? Ask them - seems what "might" happen is more important to them than what IS happening.

You know "Oh, Trump's tariffs might send our economy into a tailspin". OK, so we'll keep our long-suffering citizens struggling just in case?

To me, a tailspin is a lot like a bridge !! We don't try to cross a bridge until we reach it - and I would think attempting to correct a tailspin before it occurs would severely disrupt level flight, wouldn't it? (Where's that rolling eyes emoji? Ah, here 'tis - )

So come on, RBA. How about you spend the next meeting talking to citizens rather than dreaming up "what ifs" and acting to thwart them? This is our real life you are disrupting severely with your stupidity.

Oh, how I wish Common Sense was still with us !! (See here - https://newyouforum.com/forum/showth...169#post450169 )

Koh

[Kohinoor]

Hallelujah !! Another 0.25 drop. About time for mine.

I hope a little of the pressure drops off of YOUR mortgage.... Yeah, I know, it is still just a little easing, but that is better than no easing at all.

Could it have been better though? Damn straight it could have. Read my previous posts to see what I really think.

Koh