Breathe, breathe in the air… the opening words to a now famous opening track of the classic Pink Floyd album Dark Side of the Moon (and yes I have left you with an ear worm, sorry not sorry ) is an apt way to start this – my somewhat irregular, but last blog for 2023.
So yes the RBA have given its time to breathe from now to February 2024. And boy don’t we need it! After all is it 13 or maybe 14 rate rises Michelle Bull-at-a-Gate (see what I did there, we had Glenn double N Stevens, Dr Phil and now in my irreverent tone Michelle Bull-at-a-Gate). For those readers who have been with me for the whole time will know my penchant for naming Reserve Bank Governors. And of course, a new Governor took the steps last month and barely got her feet on the floor before increasing interest rates AGAIN!!!!!!!!!! Talk about not reading the room or in her case the economy.
But thankfully we have a reprieve for Christmas. There is a long statement that accompanies this decision released by the Board but frankly says blah blah blah. Cause I’ve been doing this for a long while and frankly there was no words in there that I could comment on in any meaningful way. We’ll see a rate rise in February, in that blah blah blah there is little comment that says we will do what is necessary to achieve that outcome (inflation at a target rate). So that is the underlying kick you in the pants, don’t go stupid because otherwise we’ll go stupid again and again and again.
Let me circle back to my comment about not reading the room or in her case the economy.
From where I sit, the economy has ground to a halt. We have two quarters of negative on a per capita basis growth. The only reason we do not have an official recession is because of the vast amount of migration that the government has allowed into the country. These people need to buy clothes, cars, rent houses etc. So, in effect they are artificially keeping inflation high. If we took the inflation numbers from the last census, we would be in a recession. Add to that the increasing costs of rentals, the increasing, mostly, cost of fuel and that ever burgeoning of groceries amongst everything else and we have an artificially high inflation figure in my humble opinion.
In addition, I’ve noticed that people are selling off secondary assets. By that I mean those assets that are not central to their needs at this time. So, if you search on Facebook Marketplace you will see a plethora of caravans in caravan parks because people can’t afford to pay the fees and the mortgage. You will see boats for sale and even more key we are seeing a sell-off of investment properties that are foretold in my YouTube post some months ago. These are the signs that people are struggling and getting rid of assets to prop up bank accounts Because when I research loans for clients, I notice trends and patterns in their spending, as well as savings. And what concern me most recently is, people that had a very large buffer are now spending into that buffer, and I don’t think they’re admitting it to themselves.
So where does that leave us heading? I think we’re going to feel more pain, and sadly I think we’ll get a rate rise in February depending on collectively how much we have spent at Black Friday and then again at the Boxing Day sales. If those figures are reasonably strong, Michelle Bull-at-a-Gate, will not hesitate to raise rates again as predicted by a number of bankers (CEOs), because frankly all the rises are good for the bank’s bottom line.
The underlying trend we’re also seeing right now is rising unemployment, unfortunately it’s a little too slow and spasmodic to have a great impact on the economy. However, we have seen in the last month a number of further layoffs in the white-collar industries. We needed this, but businesses been delaying layoffs far too long.
So there you have it my thoughts about where we are at.
As I said earlier this will be my final blog post for the year. As we do every year, we will be closing down for any new matters from Friday 15th December because if we don’t pull the curtains down then we won’t be able to finish the current matters we have on our desk prior to finally closing down around midday the 21st December 2023.
We will be returning mid-January 2024 but of course if you need me during the break, send me a text and I’ll try and get back to you but honestly, some days I won’t be picking up the phone.
We wish you and your family happy and safe holidays (please don’t go overboard with the credit card) and we look forward to catching up with you all next year and to continue helping you achieve your financial goals for 2024.
