The economic growth forecasts are truly dire and point to rising unemployment and falling wages growth
that the bank’s “liaison program and business surveys continue to point to a lift in wages growth from the low rates of recent years as firms compete for staff in the tight labour market”.If all you can say when unemployment is 3.5% is that there has been “a lift in wages growth” from the record low growth of the previous years, then clearly the labour market is broken.
Back then the average new mortgage was around $250,000. It meant mortgage repayments increased $278 a month from $1,847 to $2,215 – a 15% increase.If that happens the standard variable rate would have gone from 4.52% to 7.62%. The actual average rate held by mortgage holders is lower than the “standard rate”, but a 310 basis points rise from the April average of 2.65% would still see it go to 5.75% by March.Little wonder the market is getting nervous about its previous rate rise predictions and is now predicting rates will have to be cut next year.
Six weeks ago, the market priced in a cash rate of 4.25% by May next year; now it expects rates to top out at 3.2% before falling to 2.85%:A 4.25% cash rate would in my view absolutely cause a recession. Could you imagine what home loan repayments rising 60% in one year would do to the economy? I also think the current expectation of 3.2% is too high and would more likely than not produce a recession. I am much more in line with
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