Here it comes – another leg for stagflation
The ABC news site is running with a story that mortgagees, that is home owners and others who have a mortgage will soon be hit with higher interest rates because of the continuing global financial crisis.
Up until now, Australia had been somewhat isolated from the crisis. In fact I had argued that the “stimulus” in 2008 was totally unnecessary because Australia did not have a problem – it was a problem for the USA and Europe at the time. I should add here that my husband was one of thousands made redundant or who lost their jobs in the November (his redundancy was delayed until January 2009) of 2008 as some companies such as QANTAS responded to their own crisis needs.
Australians are being hit by a rather stupid Federal Government who wants to increase our taxes over non-existent climate change (they do not seem to understand that it is called “weather”). As a result we are being burdened with the likelihood of a new carbon tax that will cause an increasing amount of stress and strain on families. Many of us are also burdened by the introduction of a flood levy that covers the butt of the Queensland government because it does not have disaster insurance. If tha levy had been a fair one, then the burden would be shared by all taxpayers. Well it is not, and it was a tax on the middle class a la the usual Marxist pap.
This is what the ABC has to say about the coming interest rate hikes:
Analysts say the increasing cost of funding for the banks will mean higher interest rates, creating another headache for consumers already under pressure from rising rents and utility prices.
Investors bailed out of banking stocks on Monday morning, wiping $8 billion off the banking index.
They are concerned that bank profits are coming under pressure from the rising cost of sourcing wholesale funds offshore, particularly from Europe.
James Rosenberg, a private client stockbroker with Macquarie Bank, says the whole banking sector was affected by the bailout.
“I think ongoing issues in sovereign debt, particularly in the Iberian and Mediterranean nations, are leading to a view that there will be a scramble for wholesale funding,” he said.
“And given the Australian banks have a wholesale funding gap, the costs of it will be putting them under pressure and we’re seeing a pretty broad sell-off across the sector.”
The Australian banking sector may not be under threat yet, but the risks remain for homeowners.
Mr Rosenberg says the banks have a history of passing their cost increases onto customers.
“[The] simple fact is that Australian banks have to source a lot of their funding offshore,” he said.
“As the rises in that funding cost go on, some of it is often passed on to shareholders and some of it to customers.”
He predicts mortgage holders will be hit by a sharp rise in interest rates.
“There has been quite well-publicised history recently of banks passing on rate rises over and above the Reserve Bank rises,” he said.
“That’s because they don’t source their funding primarily from the Reserve Bank; they’ve sourced a lot of it from overseas.
If this report is correct, and there is yet another hike in mortgage interest rates, because Australian banks are sourcing gap funds from overseas, and having to pay higher interest for those funds, then this will be yet another sign that we are hitting a period of stagflation.
The measures taken in 2008 are now starting to come home to roost. This is because the Government borrowings have increased and the Government budget is in deficit instead of surplus. This is due to the wasteful spending which is still not being brought under control. Giving $900 tax rebate to people who do not pay taxes was not going to help a non-existent problem in Australia. The schools building program is well over budget due to the misappropriation of money (what has been built for the money expended is very small i.e. the builders were overcharging for their services). The Insulation program was a total disaster and a bungle and there was a lot of waste – there has been some clawback on the money expended. The Solar panel installation program is also a debacle and with some of the same problems associated with the insuatlion program – unscrupulous people cashing in on the free money. The NBN network rollout is another disaster in the making, especially when it is more than likely that there will be a very slow uptake for the services (the pricing so far is very high).
The end result of these disasters and bungles happens to be that we Australians will be paying for the Government waste through our taxes, but we will be paying a much higher price as stagflation begins to take hold.
This is further evidence that the mistakes of the Whitlam government have been repeated with steroids, and that as a result of these mistakes Australia is about to enter a period of prolonged stagflation. Once the increase in interest rates begins to hit, one can expect further increases in prices leading to higher inflation, followed by an increase in strikes and demands for higher wages, as more and more Australians will find themselves floundering because they are being squeezed.
None of this would have been necessary if the government had been one that was committed to a balanced budget. However with the ALP in charge, and a Marxist as Prime Minister, the aim of a balance budget is nothing but a pipe dream.