The Great Australian Dream is keeping the economy weak

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Perspective: The Great Australian Dream is keeping the economy weak | 1rossgittins

Similarly, the first stage of the massive tax cuts that were Scott Morrison’s key promise at last year’s election, a new tax break worth more than $1000 a year to middle-income-earners, was expected to give the economy a kick along once people started spending the much bigger tax refunds they got after the end of last financial year.Despite Treasurer Josh Frydenberg’s confident predictions, it didn’t happen.

In principle when interest rates fall, people with home loans now have more money to spend on other things. In practice, however, most people leave their monthly payments unchanged. The amount they’re paying above the bank’s newly reduced minimum payment comes straight off the principal they owe, thus further reducing the interest they’re charged.

But get this: not content with those two moves, households have also decided to cut their consumer spending and so save a higher proportion of their income. It’s a safe bet that people with home loans have got that extra saving parked in their offset accounts.Lowe makes the point that, when worried home-buyers take money sent their way to get them spending and use it to reduce their debt, this does bring forward the day when they feel confident enough to start spending again.

This is higher than in most rich countries, but that’s mainly because of our generous tax breaks for negatively geared property investors, a loophole most other,But hang on. Those of us living in Melbourne or Sydney know that, in response to the recent cuts in interest rates, people have resumed borrowing for housing, causing house prices to stop falling and start rising again.Is this a good thing? Lowe can see advantages and disadvantages.

 

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1RossGittins Why should the price of a roof over your head be what this Government relies on to judge the state of the economy? They have killed it stone dead already by keeping everyone poor - except themselves.

1RossGittins ...The RBA is the problem, not the solution; a public urged and forced to borrow and spend their way to prosperity rather than to work and save for it will never reach prosperity on mass but the opposite; indentured servitude is not freedom, it is serfdom! RBAClowns

1RossGittins The Gov of the RBA works for his clients, the Banks He’s fired all his bullets, a few hand grenades can only now be used It’ll keep him afloat until his tenure is up Low interest rates is serving the mortgage holders. They make up 13% of all adults 10-20 times leveraged.

1RossGittins The current Australian Federal Govt is the number one reason for the weak economy, no other reason exists...

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