The problem the RBA faces is that – with the United States, Canada, New Zealand and the UK – Australia is one of the handful of developed economy bond markets where rates are positive across the yield curve.
The ECB has had negative rates since 2014 and initiated its QE program in 2015 while Japan has had its own version of QE for most of this century. In an ultra-low or negative rate environment with flat yield curves and therefore no term premia, they collect less income from borrowers but can’t fully pass on the lower rates to depositors because they have to offer them something positive, however meagre, to retain the deposits.
It’s not only banks that are adversely affected. Insurers get squeezed in terms of both their profitability and their balance sheets. We’re fortunate that our superannuation system moved away from defined benefit funds to defined contribution funds decades ago.
Because they think a recession and reset must be avoided at all costs. Artificially stretching the cycle now ensures the next disaster will be a full blown crisis.
On the one hand the article states that credit will be reduced due to low margins, and on the other hand assets elevated. With less credit assets price rises would be constrained.
🤣🤣🤣 Hang on, what was it that these idiots stated in June. “Four Kinds of Invisible” 🤔 “In grappling with this issue, I've found it helpful to categorise economic concepts and quantities according to how ‘visible’ they are: Invisibles....that are visible? 🤨
Every central bank is being forced down their current interest rate paths. RBA is not an exception.
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