what they dont say, page-73

  1. 474 Posts.
    Von,

    There is a wide spread belief that in case housing(oz) starts tanking RBA can slash interest rates.

    If the RBA cuts interest rates too aggressively,
    Australian dollar will face downward pressure due to foreign money trying to pull out of Australia or thier increase reluctance to invest further. This is going to be a problem for Australia, as a nation, we are dependent on foreigner's credit to lend us money. If they withdraw their credit en masse, Australian borrowers are going to find that the price of money(cost of credit) will increase ie higher mortgage rates.

    Fall in Australian dollar will trigger a further rise in price inflation, resulting in increased arrears. This in turn will trigger even further cuts in interest rates, resulting in the next round of vicious cycle.

    Regarding high Unemployment,
    US had low unemployments before and few months after the house price started falling, they also had low arrears before the crash, thier unemployment and arrears started increasing only after house price started falling.
    Point is High Unemployment/Arrears was the result of housing price falls not the cause.

    In australia, majority of jobs are in retails/construction and its related sectors(2m+ jobs),manufacturing (1m+), mining(saviour?) employs a very minimal ie 200k of total jobs. Due to high aud, Manufacturing/edu/tourism is already struggling, retail is not far behind due to avg aussie families over debtness and ever increasing cost of living.
 
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