# Upcoming interest rate rises not a done deal?



## markrmau (30 March 2005)

http://www.tradingroom.com.au/news_...lished/2005/3/89/catf_050330_203800_6380.html

"The Mercer Melbourne Institute Quarterly Bulletin of Economic Trends has gone against market forecasts of a likely interest rate hike in April or May and instead predicted rates to remain on hold.

This may explain the jump in bank stocks this afternoon.

For us bulls:

"Despite the slowdown in 2004 the Australian economy is forecast to remain relatively robust in the next two years, with GDP growth slowing to 2.1 per cent in year-average terms in fiscal year 2004/05 and recovering to 3.2 per cent in 2005/06."

The Melbourne Institute forecasts show that GDP growth in year-end terms will moderate to 2.0 per cent in the first half of 2005 before gradually returning to the long-term trend rate of around 3.5 per cent by late 2006.


----------



## Smurf1976 (30 March 2005)

Another reason to be bearish on the Aussie Dollar?


----------



## wayneL (31 March 2005)

Smurf1976 said:
			
		

> Another reason to be bearish on the Aussie Dollar?




That seems to be the choice Smurf...

% ↑   or    $ ↓       

Cheers


----------



## krisbarry (4 April 2005)

Interest rate rise almost a sure thing for this Wed.  

I am very happy for the interest rates to rise.  House prices in Australia are way over-valued.  Too many investors have been so greedy, putting pressure on house prices and not giving Generation 'X'ers a chance to even get into the housing market.  $550,000 for a family home 1 hour out of the CBD of Sydney, get stuffed!!!!

Sounds cruel but I would love to see a few of these investors go under, freeing up property and dropping these over-inflated prices.

Almost all of my friends in their late 20's early 30 have never been able to afford to buy a house, they all rent.  Some of them are on wages well above the average, and are still on struggle street. 

I get so mad of hearing these people that own 10 houses and are stitting on squillions and the rest of us battle on!  

TIME TO SHARE THE WEALTH!!!!


----------



## dutchie (4 April 2005)

Krisberry

Are you advocating communism for Australia?


----------



## Warren Buffet II (4 April 2005)

krisbarry said:
			
		

> Interest rate rise almost a sure thing for this Wed.
> 
> I am very happy for the interest rates to rise.  House prices in Australia are way over-valued.  Too many investors have been so greedy, putting pressure on house prices and not giving Generation 'X'ers a chance to even get into the housing market.  $550,000 for a family home 1 hour out of the CBD of Sydney, get stuffed!!!!
> 
> ...




Hi krisbarry,

I completly agree, I would like to see the house property market back to "normal" level.


----------



## dutchie (4 April 2005)

Krisbarry

Sorry I mispelt your name in previous post.


----------



## suzanne (4 April 2005)

Dear Krisbarry,,

I can understand your frustration with the rise of house prices. Unfortunately we are possibly one of those people you would like to see go under.

We started out about 4 years ago on the road of property investing where we just owned our own home - just an ordinary old house in need of repair. We came across a book by Jan Somers which set us on the path we are on today. Up to a few months ago we owned 14 properties - mostly leveraged. 

We were ordinary people in our early forties with ordinary jobs- 3 kids at primary school at the time, living week to week  - no real savings in the bank. 

We used the security of our home to borrow the full amount to buy a house in Forster NSW. It was and still is the oldest, cheapest and possibly the worst house in town. It cost us $120,000 all up, including legals. After this we once again bought the worst house nearly, in Port Macquarie borrowing the full amount $140,000. We were lucky as the property boom came about a year later seeing a rise in both properties up to about $300,000 each.

We followed the boom up the coast to Hervey Bay, Bundaberg etc where increasing equity allowed us to borrow more + from the sale of a block of land we owned at Crescent Head.

But we did not earn big money, we went with out the luxuries, for me - no makeup, perfume, jewellery, dinners out etc I bought cheap clothes and watched the pennies. You can do the same. You are only young and have plenty of time to save up and buy a home. Probably a bit late in this property cycle-  wait a few years save your pennies and when the time is right buy and pay off a home and you too can reap the rewards. 

Don't be bitter towards others who have accumulated some wealth as I am sure they have worked hard. It doesn't come on a silver platter.

Regarding the interest rate hike - we are currently down sizing our portfolio and putting some into shares. Finally, hopefully I won't go under if the rates go up and you too can set yourself on a good investment plan.

This is not investment advise but my own personal experience.

Cheers Suzanne


----------



## Smurf1976 (4 April 2005)

Nothing personal Suzanne, but I must ask if you were still living with mum and dad at age 30 as many are now forced to do. More to the point, are you quite happy for your kids to live at home (with their boyfriends / girlfriends in the same room) until 30-something? 

If not then I suggest you are in for a one hell of a shock since that's the reality for many first home buyers these days. Even saving 50% of income for a decade is nowhere near enough to buy a modest home in many cases. $50,000 is a HIGH income, $35,000 is a realistic first home buyers annual earnings BEFORE tax. They just don't qualify for a sufficient mortgage without, depending on where they live, well over $100,000 if not $200,000 deposit which is nearly impossible to save on typical young persons earnings if paying rent, hence living at home.

House prices going up is good in the same way that petrol, food, and clothing prices are good when they go up. Good in the same way as taxes going up is good, higher car registration charges are good and increasing health insurance premiums are good. All good for those making a profit.

As I said, nothing personal and I wish you well with your investments but we are creating the first generation with no alternative to waking up on their 30th birthday still living with mum and dad. Not good IMO.

And if they are foolish enough to move out and rent they have absolutely no chance of ever saving an adequate deposit.

Oh for the days of sensible house prices...


----------



## clowboy (5 April 2005)

It's called the property cycle.

People can't afford to buy and house so they rent.  There is higher demand so rental rates go up which in turn increses house prices.

Unfortunatley house prices will only ever go up (in the longer term) and we have just experienced a rapid rise in the last few years (this has happened several times in the past).

Despite rapid rises in the past and many people (Im sure) would have  thought how will we ever own a home?  I look back and say what we they thinking? houses where so cheap.

House prices will cool and wages will go up and houses will become more affordable again (although not as affordable as the last time).  Thats when first home buyers will start buying in a frenzy again and start the next cycle.


Just remember if you are 30 and living at home (trying to save for a first home) then you have had 12 years to save and buy that first home.

It is unfortunate that many people have missed out and are now priced out of the market but in today's society and economic world the rich will continue to get richer and the poor poorer - This in my opinion is the most valuable lesson of all.


----------



## krisbarry (5 April 2005)

Do the Maths....(On average over the past 4 years)

* 100% increase in house prices
* A 100% increase in the deposit needed to purchase a house
* And a wage rise of about 15%
* A first home buyers grant that in real terms has done nothing but create a false economy and jack up house prices even more.

Hmmm.... something tells me that a whole generation of young people will either live at home with mummy and daddy or rent.

What a mess this will create, a whole generation unable to create wealth from the housing market and in the end will result in millions of dollars in lost savings.

Well done to those who have gained wealth by investing in the housing market over the last 4 years, but at what cost.  

Is it any wonder why young people have just given up on the "Australian Dream" of home ownership and gone overseas for a holiday instead!

GO RBA......JACK THOSE RATES RIGHT UP!!!!


----------



## dutchie (5 April 2005)

I realise how frustrating it must be to live in the capitals and striving to own your own home.

The main reason the prices are so high is because the Australian dream is to own your own home on the coastline. Continuous high demand and limited supply equals higher prices.

The solutions:

1. Analyse how important it is to own your own home - is renting for the rest of your life an alternative option (whilst investing excess capital in the share market/other). Don't blindly follow the dictum that you MUST own your own home.
2. Move to the country (where housing is cheaper) for a while and work your way up to go back to the city (employment opportunities are more limited however). Once you live in the country for a while you won't want to go back.
3. Live with your parents and let your parents live with you - improve the family unit in our society (its much needed!)
4. Don't knock others who have improved their life by investing - learn how they did it instead.


----------



## clowboy (5 April 2005)

Dutchie

Thankyou for those interesting points.

krisbary

Don't lose sight of the biiger picture, yes things look bleak ATM but so much can happen in an hour, yet alone a year or a decade.


----------



## doctorj (5 April 2005)

The state we find ourselves in is, I believe, an unstable equilibrium in the housing market. 

You're right. Many younger people can't afford to purchase their own home in the areas they wish to live (ie. within commuting distance from work).  Many people now look to renting rather than buying their own home.  Yield on resproperty investments are low and demand is falling based on empirical observation.  Coupled with rising interest rates, I would expect housing prices to fall in the near term.

Remember, DEMAND drives price as much as supply.


----------



## money tree (5 April 2005)

whats so bad about renting?

studies have shown those who rent and invest the difference end up much better off.

also, if self employed, you can claim half the rent through your business.

take my situation as an example:

to buy - $280 wk (IO)
to rent - $230 wk
claim half - $115 wk
net expense - $115 wk
saving - $165 wk

then theres rates, maintenance, water etc an owner pays but tenant doesnt


----------



## suzanne (5 April 2005)

Hi Guys,

Some very interesting points of view. Yes things are hard trying to buy in Sydney etc. We would never have been able to get started there either. We were talking to our nephew (28 years) the other day who lives in Sydney. He and his partner are on good money for their ages. He can borrow $250,000 -but he can't afford to buy anything down there. His rent is $350 per week.

If he was to look outside the box and think - Do I have to live in the house? Why not buy one in regional areas and rent it out. The renter out there will pay most of the repayment and the rest is like forced savings. You have to make some sacrifices. Go interest only on your loan so the repayments are less.

My partner's first house was an old dog box he moved on the back of a truck and fixed up. But he has gone through 2 property cycles. So in the first case it is the increase in equity you are looking for. Why not look at buying a block of land - not in Sydney, but wait for the next cycle now. When we started we were both on only around $30,000 each at the time and I was P/T on $35,000 -4 years ago.

A block of land we bought  in 2003 for $41,000 probably the worst in the estate, went up to $180,000 in about 3 - 4 months - we couldn't believe it. It is just picking the cycle and getting that increased equity that lets you borrow more. 

Why not live at home with your parents. I am happy for my kids to do so?

My oldest son is living in the outskirts of Brisbane ( he was 28 years at the time on $45,000 with 2 kids and a wife to support -1 year ago) where he borrowed with the help of the first home grant + a deposit to build a $250,000 brand new home. He sold it 6 to 8 months later and come out with $100,000, which he used to build a new house ( about $270,00 - now valued at $320,000), which he has just moved into + he bought another investment property for $238,000 which he lived in until his house was built- now rents it out.

So yes you don't have to be on big money to get there - just good money management. Why not use the share market now - IF THE RATES DON'T GO UP - to build up a deposit and in a couple of years you will have enough to buy a house elsewhere not in capital cities. Wait for the next boom cash in and go again. You have to start somewhere.

This is not advice just personal experience.

Yes any one can do it. If you come to a brick wall look for ways around it.  There are more than one way to skin a cat!!  I spend any spare money on books/ investment magazines etc. Read everything you can get your hands on. It the best investment there is. 

Good investing

Cheers Suzanne


----------



## krisbarry (5 April 2005)

Fair points raised ....but at the end of the day, almost every regional town in Australia has seen this rapid increase in house prices too, some well up to 200% in 4 years.

** The scales are so far tipped that it cannot sustain this growth **

So you can say what you like to defend your positions.... but I believe that there have been some mighty greedy baby boomers that need not just 1 property and an investment property, but 10.  

Hence the reason why the RBA will push this filthy rich attitude right back at them, send a few to the wall and re-distribute the wealth a little more evenly, accross a number of sectors.

Roll on the rate rises I say!!!!!!  and I am sure that the younger generations would agree.


----------



## dutchie (5 April 2005)

Krisbarry

I hope you don't try and make money in the stock market because I am sure there will be someone out there who says you have too much!!! (and that you need to share it).


----------



## clowboy (5 April 2005)

While I can only speculate I am sure that all the board members of the RBA at the very least own there primary residence and I'm sure many would have investment properties.


----------



## Smurf1976 (5 April 2005)

The simple solution to all of this would be to have the CPI measure the costs actually incurred by ordinary consumers.

Most consumers buy not rent, so the full cost of buying a house should be in the CPI at an appropriate weighting. Not sure what that should be in % terms but somewhere around 25% might be reasonable? 

Rent should also be included because some do rent, but it should be at a lower weighting.

With money supply growth just under 10% per annum it is totally implausible that we have consumer price increases in the order of 2%. Real economic growth takes care of some of the money supply increase, but not 10% per annum. 

I contend that true consumer price inflation over recent years has been somewhere in the order of 6% per annum when actual consumer costs (of which BUYING a house is the largest) are considered. Everywhere you go, prices have gone up. 

What is it that makes me doubt official statistics? Perhaps it's got something to do with what happens every time I go shopping. And no, I don't need a cheap TV or electronic gizmo every day despite them falling in price to skew the stats. The things I actually need to buy keep getting more expensive. 

Just a few common items:

36 watt fluoro tube - was $3.60 last year now $5.95 (reflecting the change from "uncompetitive" Aussie production to "cheaper" imports).

"C" size batteries. Aussie made for about $5 (alkaline type) in the mid 1990's. Almost double that today for imported product. (Another thing we don't make here anymore.)

Petrol - 30% increase over past 3 years.

Housing - Up 115% in local area in past 5 years. 

L.P. Gas (delivered, for domestic use) up about 90% in a decade.

Cigarettes (I don't smoke, but anyway) - up 160% in past decade and about 250%+ since 1992. 

My actual spending on eat at home food - up around 100% in 10 years and I haven't greatly changed my diet.

Health Insurance - Didn't need it in the past - that's what we all pay taxes for isn't it. Now we all pay and pay and pay and still get very little in return.

Some good news though. At least something now seems to be going down in most areas. It's called "house prices".

Just don't tell the investors who jumped on at the last minute.


----------



## DTM (6 April 2005)

Smurf1976 said:
			
		

> The simple solution to all of this would be to have the CPI measure the costs actually incurred by ordinary consumers.
> 
> I contend that true consumer price inflation over recent years has been somewhere in the order of 6% per annum when actual consumer costs (of which BUYING a house is the largest) are considered. Everywhere you go, prices have gone up.
> 
> What is it that makes me doubt official statistics? Perhaps it's got something to do with what happens every time I go shopping. And no, I don't need a cheap TV or electronic gizmo every day despite them falling in price to skew the stats. The things I actually need to buy keep getting more expensive.




I agree with you Smurf on prices.  I spent two years living in Tokyo and came back at the beginning of 1993.  I really noticed how everything had become so expensive in the two years that I was away.  I thought Tokyo was expensive at first but when I arrived back, Tokyo seemed a lot cheaper...,  except for the beer.  $20 per bottle in the night clubs back then.  With the Yen having dropped so much, its more like $12 per pop now, and not too far off from Sydney prices of $5 minimum (in town).


----------



## krisbarry (6 April 2005)

Smurf1976 said:
			
		

> . The things I actually need to buy keep getting more expensive.




Yes....why is it that all the essentials in life have skyrocketed?

*Education
*Health Care/Medicines
*Housing
*Food
*Petrol
*Electricity
*Water

and yet a DVD player which in 2000 cost $600 and now cost $60.


That DVD player is useless unless you have an education to read the manual, a house to store it in and electricity to run it.


----------



## Dwib (6 April 2005)

Interest Rates on hold for another month at least.

_6 April 2005
At its meeting on 5 April, the Reserve Bank Board decided to leave the cash rate target unchanged at 5.50 per cent. _ 
RBA Website.


----------



## suzanne (8 April 2005)

Dear Krisbarry,

In response to your previous post, I can gauge you are very bitter about your lot in life. You have the same opportunity as us 'baby boomers' as you call us. Life was just as tough for us.  Rates back in 1988 when we started out, were around 18% if I remember correctly - so the generation today have got it easy at 6.99%. 

We have a decade up on you guys. Image what you can do in that time if you put your mind to it.

Another thing you have to remember is at our age we are thinking of retirement - there is all this talk that there is going to be very little in the way of pensions, so us 'baby boomers' have to save up our own pension.

When I worked prior to the children being born there was no compulsory superannuation so I have very little to fall back on in retirement - my investments are my retirement fund.

So as you can image in todays dollars what we need to have saved up to give us a weekly allowance in 10 to 15 years time - a damm lot of money- equivalent to 10 properties!!!      -      to live a decent life style anyway. 

Most of our properties are long term investments and are leveraged.


Cheers

suzanne


----------



## krisbarry (8 April 2005)

Well... Employment figures suggest May Rate rise on its way!

Ouch this one may really hurt a few home-owners.

Maybe then I can afford to pitch a tent on a block of land that is way over-priced.


----------



## markrmau (8 April 2005)

Folks, the cardinal rule of investment is to never allow emotion to get in the way of you decissions. You are here to make money. Period. If you want to frig around with emotions, get a cat.

Krisbarry, the worst thing that could happen for all of us, is if the reserve bank decided that investment housing had run too far and an interest rate increase was needed to deflate the bubble. (Raising rates to cap an overheating economy is preferable by a long shot).

Raising them purely to cap the housing market would screw up Australia's economic growth where there is money for you to make. Relax about house prices - market supply and demand forces will take care of that. Currently, in my opinion, it does not make sense to buy your own house. Even if you were suddenly given $750k, you could find far safer and more profitable ways to invest.

Low interest rates are the worst time to take out a housing loan. As Suzanne found out, the best times are when interest rates are at their peak.


----------



## DTM (10 April 2005)

Thought this link might interest people.  Explanations to what happened in Japan.  Three schools of thought, keynesian, monetariasts and austrian.  Even though conditions in Australia are totally different, I found that the austrian school of thought was interesting as it states that there is a cycle of boom and recession, and one necessitates the other.  The market correction is necessary after an unsustainable boom.  The longer you delay the pain the the bigger the problem becomes and the more it will blow up in your face.

Just another perspective in looking at property/interest rates.

http://www.gold-eagle.com/gold_digest_02/powell120602.html

 Make of it what you will  

I'm positively geared with two properties while I am currently renting (with another property in NZ) and am hoping for a market crash to pick up more property.  I've set myself a timeline of three years before I buy another house, maybe 18 months if interest rates go up faster.


----------



## markrmau (11 April 2005)

Don't forget that a lot can happen between now and when the reserve bank meets next....

Market Views: Housing's last hurrah?
Apr 11 13:57

Housing finance again surprised on the upside in February, signalling that demand among investors and owner occupiers was turning up again before the Reserve Bank raised official interest rates in March.

The number of loans to owner occupiers increased by 3.7 per cent, the seventh increase in eight months and topping forecasts of a 2.0 per cent rise. The value of loans, which also includes investor finance, rose by 5.0 per cent.

Here's how economists interpreted the data and the implications for the interest rate outlook. The RBA board meets next on May 3:

DAVID DE GARIS, ANZ:

"These figures pre-date the March rate rise, but a good portion of the approvals would have been sought after the announcement by the RBA on February 7 that rates were likely to "rise in the next few months". This data adds a little more to the case for another rate rise, give the RBA's concern that household spending and borrowing could exacerbate inflationary pressures in the period ahead. ANZ expects that the RBA will lift rates in May, but that will be the last rise in this cycle."

TONY MEER, DEUTSCHE BANK:

"The RBA's rate hikes in late-2003 pricked the housing bubble, but as soon as it became clear in 2004 that interest rates were on hold, the positive fundamentals of still expansionary rates and a solid labour market reasserted themselves. At 5.5 per cent, the cash rate is likely to be still on the easy side of neutral and therefore the RBA most likely has more work to eventually do. If tomorrow's NAB business survey and Wednesday's consumer sentiment data show relatively strong results, the risk of a near term rate hike by the RBA would rise further."

SPIROS PAPADOPOULOS, NAB:

"The data continue to provide evidence of solid demand for housing finance in the lead up to the March interest rate increase. How this series performs in coming months will be driven by households' response to the March rate increase and the speculation about further rises. Although some softening can be expected, the consistently solid outcomes in recent months will keep the RBA on a slight tightening bias with respect to the housing sector, although we do not expect them to follow through with a rate increase due to the anticipated slowing in the wider economy through 2005."

JARROD KERR, JP MORGAN:

"Borrowers seem to have ignored the RBA's warnings and leapt back into the housing market, inspired perhaps by earlier falls in house prices. However, since the RBA delivered on it's hawkish commentary and tightened policy in March, consumer confidence dived 17 percent. Last month's rate hike, and expectations of another by June, probably will see the number of approvals for March to June come in much weaker. The sustained rise in finance approvals probably is inconsistent with what the RBA wants and keeps the bank on track for a further tightening by June."


----------



## Mofra (13 April 2005)

Just wondering where the RBA gets its lending figures from and how it determines what new borrowings for owner occupiers actually constitutes?

The only reason I ask is I work in the lending (approvals) section of a major Australian bank and of the number of loans we write, only a small portion are actually for buying or building.  A huge number of small loans are being written for low income families and people whose sole income is from government benefits, and most of these loans are being spent on consumer luxuries & depreciating assets. 

With all the focus on household debt, I find it strange that there seems to be no major study (that I am aware of) on what Australians are spending their borrowed money on - in my experience, the vast majority of borrowers see their equity as play money an not a useful nest egg for future investment.

If there is a major correction in the housing market, in my opinion the wider economic consequences will be magnified to a greater degree than previous pullbacks simply because so much consumer demand nowadays is fuelled by this secured debt (false equity if you will?) rather than savings or smaller amounts of unsecured credit.


----------



## ghotib (13 April 2005)

That's the most frightening thing I've read all year apart from speeches of the US president. We know that housing statistics are out of date and that no one has current knowledge of housing values nationwide. We know that at least one of the big four banks is publicising that it now offers low doc loans. We've started to get stories of people reducing debt and statements from credit card companies that people are responsible and sensible in their use of credit cards. And now you've reinforced a question that I've managed to avoid asking about how good the RBA's financial data really is. 

Meantime the Treasurer spends his time telling the over 70s to get back into the workforce while over 45s tell anyone who'll listen that no one will employ them, the Prime Minister prepares to ensure that the time for money swap is worth even less than it is now for 70% of those who do have jobs and the economy continues to rely on exploiting the financially incompetent.

It's an odd thing to say on a stockmarket forum, but I really think the Anglophone socio-economic system is already broken and falling house and equity prices are likely to be one of the best things about the rest of the decade. 

Ghoti (Hope I die before I get old)


----------



## krisbarry (14 April 2005)

New figures out today suggest/confirm that Melbourne and Sydney house prices are the most unaffordable the world.

ROLL ON THE INTEREST RATE RISES AND LETS BRING THINGS BACK TO A MORE NORMAL RATE.

25% increases each year, over the past 4 years!  

It is nothing but crazy, filthy and a complete rip-off!

Like I keep saying, how are Generation X and now Y, ever going to be able to afford a house when prices dont even keep up with wage rises.

Source: Sunrise 14/4/05


----------



## DTM (14 April 2005)

krisbarry said:
			
		

> Like I keep saying, how are Generation X and now Y, ever going to be able to afford a house when prices dont even keep up with wage rises.
> 
> Source: Sunrise 14/4/05




Something has to give because our wages can't rocket up to make property affordable.

I think that we are living on credit too much and as Mofra pointed out, its because we are tapping into our over inflated assets.  It would be ok if we were using it to invest and generate more money but we are spending, spending, and spending on luxury items. 

Our Stock market is also teetering on the brink because people are saying that consumer confidence is down so next year there won't be as much economic activity (quoted from NAB) hence less profits next year.

Looks like we could be heading towards recession.


----------



## Smurf1976 (14 April 2005)

DTM said:
			
		

> Something has to give because our wages can't rocket up to make property affordable.
> 
> ...
> 
> Looks like we could be heading towards recession.



Certainly starting to look that way in my opinion.


----------



## wayneL (14 April 2005)

Have you guys read any of Prechters stuff...."Conquer the Crash" etc?

He reckons we're due for a '29 style depression. His arguement is quite compelling.

Bull exit, stage left LOL


----------



## TjamesX (14 April 2005)

Well just having a look at some of Prechter's stuff, I'm not that pessimistic - but I think the pain will come.

I love that comic though, that is Gold!!!

It pictured in my mind some dodgy music in the background as the Bear comes out to do his tap dancing routine, while everyone in the crowd starts booing, and throwing stuff at him  :


----------



## DTM (19 April 2005)

For those who are interested.  A study on relationship between commodities prices and interest rates.  When interest rate are up, commodities are down and vice versa, so property is only one of the things affected by interest rates.

http://ksghome.harvard.edu/~jfrankel/cp.htm


----------



## Investor (27 April 2005)

With the latest PPI and CPI figures announced, it looks like we will not have a rate rise in May 05. This could help the current market correction stabilise.

Seems a bit strange that people worry about 0.25% rate rises these days. 1989 - that's what you call rate rises. However, inflation is lower now.

Due to the quantum of household debt now (over $800 billion and rising), a 1% rate rise now has the equivalent effect of 3% in 1989 in terms of debt servicing costs.


----------



## krisbarry (1 July 2005)

suzanne said:
			
		

> Dear Krisbarry,
> 
> 
> Another thing you have to remember is at our age we are thinking of retirement - there is all this talk that there is going to be very little in the way of pensions, so us 'baby boomers' have to save up our own pension.
> ...




errrr correction....baby boomers are guaranteed a pension, unless you are too wealthy (self funded retirees).  Latest reports suggest that the pension will run out in about 2045.  So it will be generation "X"ers that will be forced to save for their retirement, hence the advent of the super fund and co-contributions.  So not only will you have a house to live in but a pension to sustain your life-span.


----------



## ghotib (1 July 2005)

krisbarry said:
			
		

> errrr correction....baby boomers are guaranteed a pension, unless you are too wealthy (self funded retirees).  Latest reports suggest that the pension will run out in about 2045.  So it will be generation "X"ers that will be forced to save for their retirement, hence the advent of the super fund and co-contributions.  So not only will you have a house to live in but a pension to sustain your life-span.



<sigh>  

(1) Where did thie date come from?  (2) What are the assumptions in that date e.g. What level of aged pension? What constitutes too "wealthy" to receive it? What happens to other components of the social security system?

Hmmmm?

Ghoti


----------



## krisbarry (1 July 2005)

ghotib said:
			
		

> <sigh>
> 
> (1) Where did thie date come from?  (2) What are the assumptions in that date e.g. What level of aged pension? What constitutes too "wealthy" to receive it? What happens to other components of the social security system?
> 
> ...




Sounds like the what, when, why, how scenario....I cannot answer any of it.  Stats have been plugged into compter models over time and media reports have suggested around 2045, same goes for Medicare.

America has the same problem too and they suspect the pension and medicare to run out much earlier than Australia, approx. 2035

They have based it on current and future trends, aging population, work force participation, tax rates, birth and death rates, pension age cut in rates, savings and super accounts etc.


----------



## bvbfan (1 July 2005)

krisbarry said:
			
		

> Latest reports suggest that the pension will run out in about 2045.  So it will be generation "X"ers that will be forced to save for their retirement, hence the advent of the super fund and co-contributions.  So not only will you have a house to live in but a pension to sustain your life-span.





Well I'll be surprized if the pension lasts that long, by 2025 I reckon it will be gone or to the point where no one other than those with a disability will be getting it


----------

