Sunday, August 10, 2008

Oz staring into the housing abyss too – The government there is getting worried .

Australia's Deputy Prime Minister Pressures Banks to Cut Rates

``If official interest rates were to fall, then we expect banks to pass that on to mortgage holders,'' Gillard told the ABC Television's Insiders program today. Her comments echo those of Prime Minister Kevin Rudd, who said in Beijing on Aug. 8 that lenders ``have a responsibility'' to pass on central bank rate cuts to mortgage holders. Reserve Bank Governor Glenn Stevens signaled this week he may lower the overnight cash rate target from a 12-year high of 7.25 percent for the first time in seven years.

Posted by tyrellcorporation @ 10:32 PM (719 views)
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8 thoughts on “Oz staring into the housing abyss too – The government there is getting worried .

  • “Households spent 38 percent of their incomes repaying mortgages in the March quarter” and they are paying over 7.25%? I thought UK is pretty bad. How can those Oz live?

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  • peter_2008 @ 1

    “I thought UK is pretty bad. How can those Oz live?”

    Maybe the like living somewhere where the sun actually SHINES in the summer! Just a thought….

    and if the Liebore Guv’mint don’t get it’s act together soon, expect 7.25% interest rates here before the end of the decade.

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  • Van Hoogstraten says:

    Australia, like the UK, has a grotesque housing bubble sustained largely by funds borrowed from overseas, probably even more so as a result of Aus’s high interest rates (which reflect the risk premium on lending to the country in the first place).

    Just as the BoE can do diddly squat about about these rates, its the same for the RBA.

    Julie Gillard, whose knowledge of finance is about as comprehensive as to where to obtain a good haircut, unfortunately chooses either to ignore this or more likely is ignorant of this fact, and like her equally dim boss Kevin Rudd, likes to issue empty threats on this (and many other) issues.

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  • I live in oz,you have also to add on the banks own rates our rate is 10% all up, but not to worry, we also have the highest skin cancer rate in the world, and highest suicide rate

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  • The taxation system is also different in Oz compared to the UK for ‘investment’ property. Basically you can claim back interest and depreciation (and other costs) from your tax liability, and with tax at 50% (although it came down a bit a few years ago) for those on AUD75k+ (or roundabout that figure), people view it us a tax efficient form of saving – ie not giving it to the government. And just about everybody has at least one investment property – and a lot have a few.
    Rental demand, I am told, in Melbourne is still high, so provided that stays constant, then for some it won’t matter too much if prices do fall and will all depend on the location of the property, how geared the individual is, and the LTV ratio.

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  • Layer @ 4 You can claim back interest AND depreciation? Seriously? Doesn’t that make the Oz Gment effective railed into covering landlords’ [email protected] and making rich people richer and poor people poorer? I hope the UK Gment won’t follow the suit!!

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  • Peter_2008 – yes, seriously. I bought in 2001 (completion 2003) in Melbourne and managed to sell for a small profit last year. I foget the figures but we used to get back about AUD10k from the tax man annualy, which was a nice bonus. As for your point about making the rich richer, etc., I suppose it does but at the time it seemed like a much safer form of investing (although I always thought it was odd that the govt gave tax incentives and that a bubble was likely). However, you go with the flow. As you might allude from my ‘investing’ above, we were effectively in negative equity for years, so anyone who bought from 2005 onwards I would think is in a lot of trouble.
    And don’t worry, there’s no chance the UK govt will do this!

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  • 0.3% for the quarter – interests rates peaked and about to come down – hardly comparable to the UK is it ?

    I do wonder if their recent house price boom has been influenced by the number of brits selling up and moving down under – swapping their suburban semi for a detached new build with land and a pool. It was hard to resist when we were getting AU$2.80 to the pound. Times have changed.

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