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The Forum > General Discussion > Lower interest rates good or bad?

Lower interest rates good or bad?

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Seems the reserve bank has nearly told us the next move will be down
Good or bad? it along with Scomos new first home buyers and an easing in what is needed to get a loan, will impact
But that too, good or bad, if more buy homes now what happens if interest rates rise back to once normal
Will housing prices return to rising or continue to fall
why would banks and investors want to lend if the profit is not much more than one percent
Posted by Belly, Monday, 27 May 2019 4:19:53 PM
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This is good.

The RBA, at instructions from government, creates inflation which is effectively a tax on savings.

Due to inflation, just in order to keep what we have, we are forced to invest it, but then we pay tax on the interest so we must earn even more to be ahead of inflation, or use different and tricky schemes like superannuation. All this complicates our lives, steals our precious time and feeds a herd of accountants, banks, brokers, "fund managers", "financial advisors" and similar parasites who contribute nothing real to the quality of our lives.

No inflation = some return to simplicity, so I support the reduction of interest all the way down to zero.

Should there be less lending, this is good too for it will break this culture of debt, for a debt is like slavery: let people first work and earn, then only buy/build their house with their own money. Another good outcome is that people will delay having a family, thus bring less babies into this already overcrowded world.
Posted by Yuyutsu, Monday, 27 May 2019 11:01:52 PM
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Lower interest rates are good, because they enable long term investment decisions to be made. It's unlikely they'll ever again rise to the levels of the late 20th century, but it would be better if permanently low interest rates were actually a policy target.

As a trend, house prices will continue to rise, though obviously there will be short term variation based on interest rates and the strength of the economy.

I've previously stated that I think to slow the rate of house price growth, there should be a broad based land value tax (which should eventually replace the GST) but that it must be phased in slowly with plenty of warning to avoid unfairly disadvantaging existing property owners. I'm still of that opinion.

>why would banks and investors want to lend if the profit is not much more than one percent
Firstly because that's better than no profit at all.
Secondly, considering the vast sums banks deal with, one percent can be extremely lucrative.
Thirdly, when the RBA reduces interest rates, it reduces the rate at which banks can borrow rather than the profit they can make.
Posted by Aidan, Tuesday, 28 May 2019 12:12:41 AM
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Find both answers interesting and well thought out yuyutsu however do the government hold true power over what the reserve does
Not sure they do, see America and the troubling Fed Reserve
Much can be said about that, but not saying ours is near as worrying
Small investor, say self managed super, no way you can bank it and keep up with inflation
Shares? well if you get in at the right time houses and land would be my choice
Interest rates rise, due to inflation? say homeloans go to 5 percent, [in truth been higher]
Yes future planning and development are good points IF you trust interest rates not to rise suddenly and sharply
Posted by Belly, Tuesday, 28 May 2019 6:15:12 AM
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Dear Belly,

I don't know about America, but in Australia government dictates to the RBA to try and keep inflation between 2%-3%.

This is a deliberate policy to agitate the economy and disallow (or punish) peace and stability.

Without this policy, the average person need not even know, how less so spend time on, what are shares, markets, investments, funds, trusts, superannuation, accountants, auditors and all that: you do your honest work by day (not to belittle night shifts) then sleep soundly at night, knowing that the money you earned is safe, see you through life and old age and the only way to lose it is if you spend it away too early. Then, if you have one or two children, then at some stage you use some of this money to provide them with houses, so they too never need to bother with interest-rates or even see a mortgaging bank from the inside.

This pushing of "economy" in our face makes us run around like rats: it diminishes our spare time and feeds hordes of parasites who never created anything good in their professional life, only shuffled paper (and its digital equivalent). If you are lucky and are not ripped off by their "services" then you can have some temporary relief, but never peace: even in old age you are required to remain vigilant about just keeping your hard-earned money - is this how life is meant to be?
Posted by Yuyutsu, Tuesday, 28 May 2019 8:33:18 AM
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To start with Belly, current interest rates are similar to what they were for a centaury or more. It was your beloved Keating who mucked with his leavers & gave us 17% interest. Great for me at the time, with no debt & money in the bank, but disastrous for farmers, many companies, & home buyers.

My first home loan in 1960 was at 3.85%, so less greedy banks got along quite well on much smaller margins.

These rates don't do much for many pensioners trying to preserve some savings, me included, but they are really great for our kids, with large mortgages, & kids to educate. So on average good, we oldies have mostly learned to manage, & the kids need all the help they can get.

Aidan, "I've previously stated that I think to slow the rate of house price growth, there should be a broad based land value tax (which should eventually replace the GST) but that it must be phased in slowly with plenty of warning to avoid unfairly disadvantaging existing property owners. I'm still of that opinion".

What utter garbage Aiden. You would have those who have paid their way, supported those who don't for years, & have managed to actually acquire an asset, should then be taxed a second time on that asset they have worked for. With your bludger attitude, no wonder more people are getting sick of the continual growth in the welfare bill
Posted by Hasbeen, Tuesday, 28 May 2019 9:16:48 AM
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