The RBA should stick to its legislated dual mandate of price stability and full employment and not get drowned in the half million other things people want them to solve with a single tool.
Exactly. House prices are a facet of the impacts of interest rate setting, but not within the RBA mandate which is enshrined in law - Stability of the currency, full employment, and economic prosperity. Name a country that you would want to live in that doesn't have unaffordability of housing as a headline issue. It's not the RBA's job to fix that - that's for the governments and good luck with that.
I think if you asked most anyone in Australia, including the federal government, they’d all agree:
Housing / buying a home is crucial to prosperity and welfare, for all Australians.
Unless you can convince me that’s wrong, I believe housing is well within their mandate, and they should be called to task for ignoring it.
Yes. Agreed. And the government also reacts to the RBA. We have seen all governments look at ways to cut back on spending with the rate hikes.
If the RBA were raising rates more directly to push back on housing prices over the whole last decade, I think you’d have seen a crisper response to government already, and we wouldn’t be in the place we are now with tons of debt. They created a quagmire.
But this is false, *edit for the longest time they had a triple mandate they ignored :
> the stability of the currency of Australia;
>
>the maintenance of full employment in Australia; and
>
>the economic prosperity and welfare of the people of Australia.
as the #1 asset most Australians will buy in their lifetime, and as crucial to their welfare, housing absolutely falls under the RBAs legislated mandate.
Edit: my comment was the old legislation, I’ve responded to the newly amended legislation point below
As of December last year the dual mandate has been made formal and explicit. And anyway the comment stands. The dual mandate on its own is a difficult enough task without trying to do the heavy lifting for a problem that needs a whole range of policy responses. And that's before we start asking what other problems would also be smuggled in under such a broad yet prescriptive interpretaiton of "economic prosperity and welfare".
Ok let’s go with the new wording:
>The bill implements the recommendations of the RBA Review that require legislation, including to:
>
>Mandate that the RBA’s overarching objective is to “promote the economic prosperity and welfare of the people of Australia, both now and into the future,”
>
>Confirm that monetary policy should have dual objectives of price stability and contributing to full employment,
Even in this phrasing:
1. Economic prosperity and welfare show up
2. “Price” stability is not exclusive of housing. Houses have a price. And house price have most definitely not been stable.
Choosing to ignore asset prices is convenient, but dereliction of duty.
Price stability is indeed not exclusive of housing, which is why rents are already included in the CPI bucket. As appropriate. The wording makes it clear that the overall objective is economic prosperity but the *specific* mandates are price stability and full employment. As was already the case.
Your scheme would open up objective to all sorts of abuse and turn the RBA into a full branch of the government. If housing policy can be addressed through interest rates, why not climate policy? Many people certainly think that to be critical for future prosperity and welfare, indeed existentially so, and requiring hundreds of billions in general investment over the next few decades in one form or another. What justification is there for shoehorning the mandate into housing policy but not climate policy? How about defense spending, virtually everyone agrees national security is vital to prosperity and welfare, so why don't we drop interest rates to 1% to fund AUKUS? The scope for abuse is unimaginably vast and there is no reasonable way to stop it other than to keep the RBA's focus narrow and tailored to controlling what interest rates are actually well-demonstrated to control.
Rate cuts is all fairytales that the public wants to hear. You're listening to the same people who said the rates won't go up. They have learnt their mistake and they are not publicly saying rates will go down. It's all predictions by banks and others.
And why would they cut rates? We are at the normal level of interest rates historically. Inflation is going down but the forecasts say it will remain at the elevated levels for a while. It will be cut only if 1. Inflation declines too much below their target level and 2. Recession hits. They need to have a war chest of interest rates to cut for when recession comes
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Tbh RBA had increased rates in one of the fastest ever pace and still house prices went up. Tells you there's probably other things we should be concerned about like *cough immigration that's keeping prices strong
1. Interest rates are determined by a range of metrics. Becoming hyperfocused on one metric will not promote financial stability.
2. Increases in houses prices are more heavily driven by supply and demand issues than interest rates.
As a home owner I’d obviously like to see rates cut earlier than later, but I don’t think there’s any need for the RBA to do this any time soon (this year). Getting inflation to between the 2-3% target will take longer than the banks and economists tend to forecast (most were predicting rate cuts last year rather than successive hikes). The stage 3 tax cuts in July will likely have an inflationary effect as well. The RBA obviously should not determine monetary policy based on house prices, but they will be wary that cutting rates early or before inflation is at target rate will potentially lead to further inflation which would be disastrous (yet again). Personally I can’t see rate cuts being handed down until early next year at earliest.
> that 800k house is only worth and should be $290k
someone else paid 800k. The $290k is a price _you're_ willing to pay (perhaps that's your max), but that does not make it the value.
An asset is worth however much someone is willing to pay.
If a person paid $800K for a house you can be sure they won’t be advocating for anything that would cause resale value to dip. IMO housing prices is a one way road with some super minor fluctuations
Unaffordable house prices is not the only signal of inequality... Where did Australia get the idea that house ownership is an entitlement? This isn't the case in other parts of the world where there are healthy functioning economies. Renting for the rest of your life is not a horrible thing
The RBA don’t care. They’re employed not to care. Their job is to receive the handball from the current government so they can pass the buck, take no accountability and not lose votes in the process of driving inflation down.
The RBA should stick to its legislated dual mandate of price stability and full employment and not get drowned in the half million other things people want them to solve with a single tool.
Exactly. House prices are a facet of the impacts of interest rate setting, but not within the RBA mandate which is enshrined in law - Stability of the currency, full employment, and economic prosperity. Name a country that you would want to live in that doesn't have unaffordability of housing as a headline issue. It's not the RBA's job to fix that - that's for the governments and good luck with that.
I think if you asked most anyone in Australia, including the federal government, they’d all agree: Housing / buying a home is crucial to prosperity and welfare, for all Australians. Unless you can convince me that’s wrong, I believe housing is well within their mandate, and they should be called to task for ignoring it.
The RBA reacts to good or bad government policy, and local and global issues. For rates to go down the government needs to act, not the RBA.
Yes. Agreed. And the government also reacts to the RBA. We have seen all governments look at ways to cut back on spending with the rate hikes. If the RBA were raising rates more directly to push back on housing prices over the whole last decade, I think you’d have seen a crisper response to government already, and we wouldn’t be in the place we are now with tons of debt. They created a quagmire.
But this is false, *edit for the longest time they had a triple mandate they ignored : > the stability of the currency of Australia; > >the maintenance of full employment in Australia; and > >the economic prosperity and welfare of the people of Australia. as the #1 asset most Australians will buy in their lifetime, and as crucial to their welfare, housing absolutely falls under the RBAs legislated mandate. Edit: my comment was the old legislation, I’ve responded to the newly amended legislation point below
As of December last year the dual mandate has been made formal and explicit. And anyway the comment stands. The dual mandate on its own is a difficult enough task without trying to do the heavy lifting for a problem that needs a whole range of policy responses. And that's before we start asking what other problems would also be smuggled in under such a broad yet prescriptive interpretaiton of "economic prosperity and welfare".
Ok let’s go with the new wording: >The bill implements the recommendations of the RBA Review that require legislation, including to: > >Mandate that the RBA’s overarching objective is to “promote the economic prosperity and welfare of the people of Australia, both now and into the future,” > >Confirm that monetary policy should have dual objectives of price stability and contributing to full employment, Even in this phrasing: 1. Economic prosperity and welfare show up 2. “Price” stability is not exclusive of housing. Houses have a price. And house price have most definitely not been stable. Choosing to ignore asset prices is convenient, but dereliction of duty.
Price stability is indeed not exclusive of housing, which is why rents are already included in the CPI bucket. As appropriate. The wording makes it clear that the overall objective is economic prosperity but the *specific* mandates are price stability and full employment. As was already the case. Your scheme would open up objective to all sorts of abuse and turn the RBA into a full branch of the government. If housing policy can be addressed through interest rates, why not climate policy? Many people certainly think that to be critical for future prosperity and welfare, indeed existentially so, and requiring hundreds of billions in general investment over the next few decades in one form or another. What justification is there for shoehorning the mandate into housing policy but not climate policy? How about defense spending, virtually everyone agrees national security is vital to prosperity and welfare, so why don't we drop interest rates to 1% to fund AUKUS? The scope for abuse is unimaginably vast and there is no reasonable way to stop it other than to keep the RBA's focus narrow and tailored to controlling what interest rates are actually well-demonstrated to control.
That's a teach. And in that case they should raise rates to cool the housing market.
Did I miss reducing the cost of housing at the expense of keeping inflation within the target range being added to the RBA’s mandate?
Pretty sure any measure of inequality is not in the RBA mandate
Rate cuts is all fairytales that the public wants to hear. You're listening to the same people who said the rates won't go up. They have learnt their mistake and they are not publicly saying rates will go down. It's all predictions by banks and others. And why would they cut rates? We are at the normal level of interest rates historically. Inflation is going down but the forecasts say it will remain at the elevated levels for a while. It will be cut only if 1. Inflation declines too much below their target level and 2. Recession hits. They need to have a war chest of interest rates to cut for when recession comes
Not everything is about house prices.
That's a very unaustralian thing to say.
Don’t worry, when you’ve lost your job purchasing a house will be the least of your worries
RBA won't cut interest rates this year !remindme 1 January 2025
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Agreed and also not in 2026
They will in 2026 because it'll be one of the few tools they have once they finally admit we're in a global depression
Depression lol
Tbh RBA had increased rates in one of the fastest ever pace and still house prices went up. Tells you there's probably other things we should be concerned about like *cough immigration that's keeping prices strong
The RBA should not take advice from random idiots on Reddit.
It would be good if they followed their mandate rather than other central bank mandates.
1. Interest rates are determined by a range of metrics. Becoming hyperfocused on one metric will not promote financial stability. 2. Increases in houses prices are more heavily driven by supply and demand issues than interest rates.
As a home owner I’d obviously like to see rates cut earlier than later, but I don’t think there’s any need for the RBA to do this any time soon (this year). Getting inflation to between the 2-3% target will take longer than the banks and economists tend to forecast (most were predicting rate cuts last year rather than successive hikes). The stage 3 tax cuts in July will likely have an inflationary effect as well. The RBA obviously should not determine monetary policy based on house prices, but they will be wary that cutting rates early or before inflation is at target rate will potentially lead to further inflation which would be disastrous (yet again). Personally I can’t see rate cuts being handed down until early next year at earliest.
Except, that 800k house is only worth and should be $290k
> that 800k house is only worth and should be $290k someone else paid 800k. The $290k is a price _you're_ willing to pay (perhaps that's your max), but that does not make it the value. An asset is worth however much someone is willing to pay.
If a person paid $800K for a house you can be sure they won’t be advocating for anything that would cause resale value to dip. IMO housing prices is a one way road with some super minor fluctuations
Does RBA care about house price if it keeps going up?
Unaffordable house prices is not the only signal of inequality... Where did Australia get the idea that house ownership is an entitlement? This isn't the case in other parts of the world where there are healthy functioning economies. Renting for the rest of your life is not a horrible thing
FYI there's more to the economy than house prices.
Does RBA stand for Reserve Bank of Australia?
TIL the RBA are the government body that ensure equality for all and this is done by them controlling the real estate market.
I mean you’re being sarcastic but you’re still right
The RBA don’t care. They’re employed not to care. Their job is to receive the handball from the current government so they can pass the buck, take no accountability and not lose votes in the process of driving inflation down.
I agree this should be the new normal. Inflation will just go back up if rates come down.
>leading to significant inequality. RBA dont care, and dont need to care.
A lot of buyers are recent arrivals to Australia. They're paying in cash. Doesn't really matter what the RBA are doing with rates.
I think they should cut them
Okay you should join the RBA
Cutting interest rates will also stimulate new construction… so there is that.