I’m not at all surprised at the backlash the RBA has copped over...

I’m not at all surprised at the backlash the RBA has copped over their two rate rises in consecutive months. It seems that many have joined the band wagon with their own “expert” opinions on how things should be sorted out. It’s just a typical response from individuals and corporations with either no clue on current problems or vested interest. One word can describe the reason why the RBA has raised rates…….GREED!

This is what has got us in to this position in the first place so anyone complaining about the rises should take a step back and think of the reasons as to why they occurred. The major problem is the credit bubble we are in where everything we purchase is borrowed for. This is the main reason why our economy has been ticking along relatively nicely. The recent boom in housing prices has seen many Australian’s equity increase substantially and with this comes the spending spree. Cars, TV’s, holidays and ofcourse investment properties. We are of the opinion that house prices will keep going the way they are and that interest rates will remain relatively low for ever. We want everything now and are not prepared to wait for it.

The RBA has had its hands tied for the last year and a half because of problems overseas, both by economic and terrorist situations. It has warned on the blow out in consumer credit numerous times but this has all fallen on deaf ears. We seem to be a society that listens and believes a marketing spill rather than sound fundamental reasoning. The RBA has simply had enough of trying to convince people of impending problems so it did the only thing possible, raise rates. A rising Australian dollar and weaker exports may be a consequence but what did people want, to leave rates where they were and delay the inevitable? The situation would have been far worse if rates where left alone and come 12 months time the credit bubble was out of control (it may still be).

The housing situation has gotten out of hand whereby if we purchase a property, we want to make a 10% profit the following month when we decide to sell. There is nothing wrong with that thinking as we all are trying to make a quid. The problem arises when the idiot who buys the property off us wants the same in the following month…..hence the vicious cycle starts. Everyone is of the opinion that you can’t lose and that money does grow on trees. With this mentality, we borrow to the hilt and buy to our hearts content without considering any downside, just the riches.

You hear real estate agents talking the property scene up every week and that you can’t lose. They lie and deceive us and with dribble that a 10 year old can decipher as rubbish. They make comments on interest rates, the economy and the share market with no qualifications what so ever. What’s the problem? People believe them. The whole auction system has become a complete joke and full of circus acts. It ends up being a comedy show where everyone joins in the laughter. “It’s only money” cry’s the real estate agent during the bidding process to entice more bids. It’s money you don’t have and will be paying back with interest, that’s what it is. They quote properties unfairly, they have dummy bidding and do not fully disclose all information. This however is about to change at last with agents becoming more accountable for their actions. The ACCC has also decided to investigate a matter involving underquoting by a real estate agent (as per article in the weekend press).

Television shows have you believe that it’s ok to be in debt the rest of you life so long as you follow the great Australian dream. Auctions, makeovers and crap are fed to people and at the end of the day what do you have?.....zombies talking about the same thing at the water cooler. They will teach you how to spend $20000 on a house makeover to get an extra $10000 at auction….smart thinking that.

The government is still in denial about a credit bubble even though they helped it along by introducing the first home owners grant. I wonder what recommendations or implementations they will make come March when the housing affordability report is in. I wonder if there’s an election coming up?

The banks ofcourse are safe because they are not over exposed to the real estate market….oh really? They make mention that their lending criteria is tight and they don’t lend to anyone without the ability to repay. Not from some of the stories I’ve heard. Non banking institutions are worse with some offering 105% finance. Go figure, your house is worth less than your loan from day one.

A year ago real estate agents were saying that property appreciation will be in the order of 15 to 20% for many years to come. The media was predicting 10 to 15%. Six months ago this had reduced to 10% for real estate agents and 5% for the media. Now the real estate agents a talking a softening of the market (whatever the hell that is suppose to mean) and possible downturn of no more than 5%. The media has downgraded their predictions to a 5% drop as well. Why the sudden change in attitude? Are they that stupid that they couldn’t see this coming or are they just toying with us to keep a positive side to all of this? The later I think. I wonder what their predictions will be mid next year. Isn’t it amazing how quickly party’s with vested interest can change their minds so quickly. The key aspect from all of this is that conditions can change quicker than we think. Sometimes what is occurring at the moment and what has occurred in the past does not necessarily mean it will occur in the future.

This is only my view on the current state of play and even though simplistic in nature, proposes some more complex issues in this debate. By no means am I an economic expert but it doesn’t take one to see what’s going on. I’m sure others have similar opinions and many others to the contrary.

So once again, why blame the RBA?

And remember, GREED is not good!