There’s no doubt in my mind we’re heading to recession. I would argue that many sectors are already there. We’ve seen it being ‘choppy’ for some time now - and that’s going to get worse before it gets worse.
Keating did it right years ago with the ‘recession we had to have’. No one’s game enough to say it anymore. We do need one in many ways. But it doesn’t need to mean the end of the world for people.
I’ve been through a few of these now so I would reassure that if you’re a bit younger and have recently bought a home are seeing that mortgage weighing over you…don’t worry too much. Even in the worst of the GFC we had time cut back (and pay) in pretty secure jobs, but it’s not the end of the world. Definitely tighten belts and get some savings as you can. Doing this makes it a self fulfilling prophecy in some ways, but better to be ahead of the curve.
I can’t see it being a huge crash though. There’s still plenty of oldies with huge savings that will spend. Housing might mellow but, like during the GFC, the affordable end of the market never dips for long.
Unfortunately for the RBA and everyone else a recession is really the only thing that has a chance to lower inflation this high. Everyone talks about the RBA having only one hammer, but in reality it’s two: a hammer, and a sledgehammer.
Inflation looks entrenched. There is such a massive supply of money sloshing around the economy, and the cash rates effect spending so unequally, no amount of gentle easing is going to fix the issue. Nor will wages increasing: our labor market has been depressed for decades, you don’t unscramble that egg overnight
No I suspect the RBA has known all along the only thing it can really do is turn the economy on and off again. Whether it’s from external recessions brining us down or a homegrown one, it will happen. And it’s necessary to trigger the kind of large scale pivot we need from price gouging to cost cutting again
We’ve been thinking of buying a place for ourselves in the next 6 months and have been sitting on a decent deposit for a while. It’s starting to feel like we should sign another lease agreement at our current rental and see what the next 12 months brings before committing to a mortgage in this economic climate.
Is anyone else in a similar position or has bought recently and feeling the pressure?
I bought two years ago (first home) and have certainly been doing spittakes every time I hear rates are rising again. We planned for a lot of headroom so it’s not the end of the world, but the backflip of the RBA after doing nothing for so long under the Coalition was pretty irritating.
But ultimately they have a very blunt hammer to fix things, it’s really the government that should be stepping in. But of course nobody wants to commit political suicide.
I definitely noticed more posts about mortgage stress on r/AusFinance the last few weeks though.
I don’t know what the structural fix is but, do they simply step in and say variable mortgage rates are now an unfair term in the loan contract and require a min 2 year fixed rate or something? Just workshopping this really, I can already imagine some unintended consequences
