The Question is - Are Rates Going to Rise?
  • 19 March 2017

The Question is - Are Rates Going to Rise?

The answer is no.  But you wouldn't think so looking at the media headlines.  Scary, but scary sells papers and gets people tuning into the news.

The reality is that Australian banks have already bedded down long-term loans for the next ten years at extremely low rates.  Most of these rates are based on the ninety-day bill rate which in fact has gone down so far this year.

The scare is that Trump is going to stimulate a lot of US development which is going to need funding.  They'll have to pay increased interest rates to attract this funding from around the world and thus it would drive up rates on Australian loans.

Big problems with this theory.

  • The first is that this massive spending on infrastructure will take a long time to plan and pass through various state planning authorities - like two years!
  • This means that there will be no immediate requests from the US for more funds for this infrastructure spend.
  • It's missed on all the Australian media that increasing US jobs by the hundreds of thousands actually increases government tax revenue. It's this extra revenue that can go towards paying the interest bills on development loans.
  • Now wouldn't it be good if our federal treasurer knew how to grow our economy and employ our two million underemployed?  Wouldn't it be good if their extra income was contributing to his tax collections rather than him replying on pinching money off of everyone for his tax collections??

So I am not fixing however if you have a lot of property and would like to hedge then it would be worthwhile talking to our Brokers about hedging a percentage of it on five years at below 4.4%.  You won't get this from the banking monopoly but our Brokers can find it for you!

90 Day Rate

Latest update is that the 90 day Bank Bill cash rate is still lower than it was in January slightly. Bank funding though the term is 10 years is a margin of this rate. So the banks aren't paying more - why should they be charging you more??

Oh! That's right, they are operating a monopoly without any supervision from APRA or RBA who are supposed to be defending consumers interest.

We are sending this notice on to all Federal politicians to see if we can get some interest in the treasurer picking up the phone and harassing the banks as all treasurers used to do prior to Rudd. Remember how rates came down by all the banks everytime the RBA lowered rates?

Regards,

Kevin Young Club Founder

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