RBA decision day

What is everyone calling?

Sounds like 0.4% is the consensus amongst the twitter experts

Does punxatawny phil have the balls to go shock and awe and really bend Albo over

I can’t quite believe what is happening. Seems like a manufactured crisis to further the great reset but here we are

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Inflation numbers justify a 40bps hike, at least. But who knows. Read the knob over at EmBe and he seems to think the RBA hiking once has destroyed services. lol if true.


im a bit on the fence here. Yes I know that interest rate differentials feed into fx rates, but EZFKA faces a much muted effect of that, due to iron ore/coal/gas trade. So “imported” inflation due to AUD devaluation shouldn’t be as bad as many imagine.

I also would entertain the possibility that Labs will curb-stomp the energy exporters some in order to bring down domestic CPI.

these are both factors that should mean rates rise less than some folk expect.

that said, <1% rates are fucking ridiculous and are definitely not “too high”


The rise in interest rate have got nothing to do with wages,

we’ll have an inflation around 7% for that quarter. The RBA will hike more

Ronin doesn’t know what he is talking about. If hypothetically, price inflation could occur in isolation with no wage rises, then it would eat into disposable income (real wages falling). That scenario would more likely lead to a rate cut rather than a rate rise.

The reality is RBA is concerned about workers demanding compensation (wage rises) to offset price inflation. If this was to occur there would be a potential for a classic inflation spiral. So RBA are very much concerned about wages.

And yes, there are other factors such as AUD and imported inflation as Peachy mentioned. I was just pointing out the assertion “nothing to do with wages” is incorrect.

Last edited 9 months ago by Freddy

RBA were hoping for early 2000s scenario of inflation around 3% and wage growth slightly higher. Rates rising slowly over the period of several years.

I am guessing the combination of higher than anticipated price inflation and Labor pushing for minimum wage rises to match inflation has the RBA spooked.


going to take a very long time to inflate it away at 3%

you can’t really inflate it “away” without badly screwing the banks [/lenders], as I’ve been trying to explain.

I think that the asx is beginning to understand this.


I think yields are in play. Dividend yields usually around 2% or so higher than cash rate. CBA dividend yield at 3.5%. If deposit rates rise to 3% then dividend yield will settle closer to 5%. Only two ways this can happen:
1) Rising profits and dividends
2) Falling share price


I think yields are in play. 

that will also be an element, yes 👍


but if wages are also going up (at the same rate), it theoretically cancels out

we need to start here, because the definition of “inflation” which we use matters.

the sort of inflation that would smash the banks would be the 1970s kind – wages through the roof, but interest rates kind of muted.

this significantly devalues assets in real terms. This includes bank balance sheets.

you seem to have something else in mind – some kind of synchronous increase in wages and interest rates and prices. My view – and we’ve discussed this before – that such a simultaneous ratcheting up doesn’t actually achieve “inflating the debt away” or any kind of reset


if money gets devalued, both of these change in real value at the same rate

Are you saying that a bank has equal assets and liabilities and a net worth of exactly 0?


if we are talking about its share price, which is a derivation of its current and future yields/profits then of course it will be reduced by the same mechanism that freddy has stated

So the banks(or their shareholders) are the ones eating it? Except for balance sheet technicalities? I’m really struggling to work out what your actual position is here.

In an inflationary environment where interest rates are lower than inflation the banks income is falling in real terms, so how can they not be getting screwed? New loan creation will never result in loans that don’t continue to screw them until interest rates are equalling inflation again.

Last edited 9 months ago by bjw678

PE multiples are not what we are discussing, but you seem to be agreeing the banks will get screwed, along with shareholders?
So capital?


Man up, luv


I think coming finally understood the answer to his initial question above.
Cognitive dissonance is fun to watch sometimes…


it is Good to talk through these things.

you know you really understand something properly when you can explain it to/teach someone else


The question has been answered many times already. The flavour of inflation (push, pull, whatever) doesn’t matter.

What matters is if inflation is higher than interest rate. then bank gets caned.

perhaps as a different approach: an example in extremis – pretend tomorrow the minimum wage is $1billion, people bring home $20m a week.

in less than 1 day every mortgage and consumer debt is paid off. And the CBA’s $60b balance sheet looks laughable. The bank is finished.


How is the bank “finished”?

You claimed that it would trash the bank’s balance sheet

in fact, its balance sheet looks as secure as possible – there is no way that loans could be non-performing, so its liabilities are fully secured by its assets

where is the loss?

the loss is massive. The balance sheet has been shrunk almost out of existence.

…a medium sized Toyota dealership now has stock on the lot valued at more than $60b…


I think Peachy is referring to Household debt to GDP ratios. Low inflation and rates means banks are raking in bigger profits relative to GDP.

Peachy possibly also agreeing with me that higher wage inflation means people are paying off their mortgages sooner despite higher rates 😉


That Fed Guy also said bank profits would rise along with interest rates. But is that true in real terms? Not saying it isn’t. Just that I believe that is the actual topic being discussed.


simultaneous ratcheting up doesn’t actually achieve “inflating the debt away” or any kind of reset

Shorter term loan repayments rise dramatically. Longer term wage rises win out and you effectively get your jubilee. That is how the Boomers accumulated so much wealth.

It was possible in the 70s because credit was MUCH tighter. Debt servicing at max 30% disposable income. Also, if you couldn’t keep up it was easy to get a 2nd job or get the wife to work part time.

The problem today is debt servicing closer to 50-60% of disposable income on many loans (according to DFA) and already dual income. It would be a disaster.


Shorter term loan repayments rise dramatically. Longer term wage rises win out and you effectively get your jubilee. That is how the Boomers accumulated so much wealth.

to me that says that the ratchet was not simultaneous and that wages grew more than interest rates…. Or that interest rates were not raised enough to compensate for the rise in wages.

one way or another, at that time labour banked the gains and financial capital ate the corresponding losses.

this could happen again, sure. I’m just trying to point out that there is not an “everybody wins” scenario. Best that can be done is to try to hand the losses to foreigners, but I don’t think that anyone is smart enough or brave enough to get that done

Last edited 9 months ago by Peachy

If for example wage inflation was 10% and mortgage rates doubled overnight from 6% to 12% the mortgage repayments would rise by around 65%.

65% rise is mortgage repayment is bad. However, it only takes 5-6 years for wages to catch up. Thereafter it becomes a debt jubilee.

This is how it would have played out in 70s and today as I see it.

  • repayments capped at 30% of disposable income on loan applications. 65% rise in repayments implies new repayment is 50% of disposable income max then falling
  • jobs aplenty and typically a single income family. If you can’t cope with repayments you get wife to work part time for a few years.
  • you pay off mortgage within 15 years instead of 25.
  • you buy 2nd house, 3rd house, and retire at 50
  • despite rising interest rates, asset prices are rising nominally due to previously outlined demand for assets


  • Repayments capped at over 50% of disposable income on loan application. 65% rise in repayments take you closer to 80-90% of disposable income.
  • wife already working so no way of increasing income
  • you get kicked out of your home
  • asset prices have fallen. You have no home and still owe money

IMO 70s were a one-off in many ways.

  1. Union power = high wage inflation
  2. Coming off the gold standard = higher price inflation + a lot of wealth parked in cash chasing assets for the first time
  3. Much tighter credit meaning much less debt

If we do get persistent high inflation the bits in bold could be a problem for asset prices this time around.


IMO 70s were a one-off in many ways.

You missed a really big one.
Crazy beneficial worker/dependent ratios as the baby boom bulge headed through their 20’s, with a significant chunk of the older generation no longer there to grow old.
They are now squeezing out the arse and creating the drag you would expect from such a position.


True. Although the plan seems to be to dilute the pension and force retirees to sell their assets. I also expect the healthcare benefits to wither away over time. My pensioner mother had to pay $14k for an urgent operation which was considered elective.


Although the plan seems to be to dilute the pension and force retirees to sell their assets. I also expect the healthcare benefits to wither away over time. 

All these things mess with the distribution of resources but don’t change the fundamental facts that more man hours and resources will be used supporting the dependent population from less available man hours overall.
I’m getting the feeling this current inflation may be the manifestation of the first serious reduction in living standards for a very long time.


Calling for 0.4% to bring the cash rate back to a multiple of 0.25% seems a little OCD to me. I bet RBA would cop flack for it too.

Agent 47

They’ll go to 1%.

If they puss out and don’t then a larger rise will be next month after US Fed goes higher next week.

Either way, I’m convinced the 50 year mortgages and super for deposits cards will come out in some form before September.


Your fame (infamy) will eclipse bcnich if you are right about this.

you will be crowned the new doom-lord!


Is bcnich famous? Their prediction is yet to come true. The way they act over EmBee, it is like he/she accurately predicted a house price crash.


bcnich predicted 17 house price crashes, of which not one has come to pass. Instead of one of the predicted crashes he actually got a pandemic which shot prices up 20%….so he is not famous for accurate predictions.

rather he is famous for being a big bad mega-bear.

And a 1% rate rise is one of a few things that could out-bear bcnich. Which is why I will recognise A47 as the doom-lord of it happens.

Agent 47

Just clarifying I’m calling to 1% so .65% raise not the full 1%. More likely it will be .4% but fuck it, im for a penny in for a pound.

Bcnich will be right eventually after his 523rd prediction. Just like Davo is.


My feels are that it will be 0.5% today.


Peachy correct once again. Is that you Phil?

Adam Eichman

It’s a small world, and it smells bad.


Peach has some insider knowledge.


i do give investment tips (Which are obviously not investment advice) – but only very occasionally, when I have a strong hunch about something.

Eg the other day I announced that I’m wading in to get some 2-3yr maturity bonds. (Freddy told me off a bit for this).

as to donations – youse should all pull youses fingerses out and get some cryptos to donates, because one day the old girl might go down and stay down.


I didn’t tell you off Peachy. I just said I prefer shorter terms so that I am not speculating on rates.


I know, I know 😁

However, I do want to speculate on interest rates a little.

so both approaches are valid, we are just after different kinds of exposures.


I think he means just buying yield.


I trade CFDs which are highly leveraged. That means I only need a few percent of my savings in the broker account.

Nearly all the rest of my cash is in bonds. I don’t care too much about the yield as I make a lot more on my trading. I am more interested in the “risk free” that you keep referring to.


Just put it in the bank then

I don’t trust the banks with all my cash. I was vindicated during covid when they blocked sizeable withdrawals. I keep about 5% in banks for emergency purposes.

you make a living off trading 

The only easy way I know to answer that is, if my trading system continues to work I will be making more money from trading than wages next year some time. The compounding effect will continue raising my returns exponentially… until it doesn’t. That is the dilemma. Trading systems decay over time. It is unknown by how much, how soon, and whether I will be able to replace it with another profitable strategy. For that reason, the prudent thing to do is to continue working.


There was a bank run during the first few weeks of Covid. Some banks placed withdrawal limits. If you wanted more money you had to provide documentation with a valid reason. “I want my money” was not an acceptable reason.

It was worse with superannuation. The superfunds collectively blocked redemptions.


I am not worried about cash in hand. I am worried about bail-ins that Peachy has alluded to.

Aus govt refused to explicitly exclude deposits from recently bail-in laws. You have to ask yourself why.


an important difference is that bank deposits are predominantly held by mug punters who don’t matter jack.

whereas bonds are held by foreign investors, foreign governments and sovereign wealth funds. Who have clout and matter a lot.

you want your lot thrown in with the second bunch.

this was demonstrated in Greece, when the mug wogs with bank accounts got screwed and all the bondholders were saved


You can buy them from a broker. Treasury will issue a certificate.

Bonds – prices (asx.com.au)