Interest Rate increase

Hmm. Interesting. This is apparently the first time such a move has been made during an election year, though yesterday I read that Hawke was re-elected just 9 months after interest rates hit 17%, so the claim must refer to calendar years.

"VOTERS normally don't mind rising interest rates. Just ask former Labor prime minister Bob Hawke, who won his fourth election in March 1990 despite home loan rates peaking at a record 17 per cent only nine months before polling day."

We've heard plenty of wailing in the media about how this hike will effect "average Australians", but how will it effect the "average propertyinvesting.com forumite'? The savers can count their pennies, and consider their reduction in borrowing capacity. The debtors can tell us whether the hike will put pressure on their finances and what they might have to go without.

I'll start. Providing the banks pass on the increased rates to savers, I expect to be $2.30 better off per week. In other words, not enough to buy a cup of coffee, therefore not worth even thinking about.

Next?

Not quite, Moose. Households are putting the same proportion of total expenditure toward housing, but over those 20 years, the amount of household income being spent has risen from around 90% to around 104%. And this is only going to rise over time, given that future buyers will be taking on loans and repayments that are much larger relative to their income.

On a related note, did you realise just how much of our expenditure relies on debt these days? It's frankly worrying (and absolutely unsustainable).

Chart courtesy of Steve Keen: http://debtdeflation.com/blogs/

Despite all this talk of a strong economy / export driven economy or what-have-you, the primary source of income in this country is debt! Our own debt! We're effectively borrowing to pay ourselves.

The growth in mortgage debt alone added the same amount of money to our economy in the first quarter as our exports!

We're now addicted to debt, and absolutely, hopelessly trapped. At some point in the future, the rate of debt growth must slow to our rate of income growth or below. That implies a reduction of 50%+. In other words, more than 50% of our current annual debt growth is the unsustainable bit. And if debt growth were to lose that 50+% tomorrow (ie become sustainable), we'd be plunged almost instantly into recession. In fact, the only thing that has kept our economy growing for several years now has been this debt growth… ugh! This can't end well!

What was the question again?

F. [cowboy2]

Did that years ago. No consumer debt here thanks.

Now the card is used solely for the purpose of racking up more frequent flyer points, but we pay the balance off every month.
Notice the f.f flights are harder to get these days?

Has anyone seen "sicko" by Michael Moore yet? I needed a moggy to calm down after it.
His conspiracy theory in one part of the movie was that the whole debt situation is engineered by the Govt and Corporations to keep the average joe trapped in debt, needing the job and too scared to make a move, obedient little footsoldiers for the Corporations earning $10 an hour until they die.

My cynical mind tends to agree; wonder if the same system is in motion in Aus? At least the pay rate in Aus is still ok…for now.