Interest Rates on the Rise
Of course, interest rates will rise. But when and why?
The RBA had been talking about no rate rises until 2024. Now they are making noises about 2023 and expressing concerns about inflation. APRA have just raised the “home loan assessment buffer” from 2.5% to 3.0%.
Inflation is being driven primarily by –
New house construction partially driven by new homeowner grants to stimulate the economy
Growth in demand for established housing driven by increased household savings due to COVID lockdowns, and a low price base (in regional locations)
Supply of steel and timber construction products because we import most of pour manufactured products and there are less cargo ships in the ocean due to COVID impacts
International shipping companies are doing the same as airlines and moving shipment dates and reducing shipping routes until they have full ships, rather than keeping to scheduled times and losing money with half filled cargo
A surge of spending, especially on travel, once COVID lockdowns are removed and this will drive another sector of inflation
They key for me is that the RBA don’t overreact. COVID has reset the baseline on spending and as we come out of COVID of course there will be a surge in inflation… the question is, will this be a sustained surge or is it a correction back to the norm?
The problem is, since the GFC, there just doesn’t seem to be a “norm” any more.
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