Are we on the brink of another recession?

[LaurieHolden]

Nothing surer. Consumer will be tapped out post Christmas, thats when the additonal mortgage repayments, CC debt and rising food prices will be really noticed. I don't want to be the purveyor of doom, but I reckon we'll have a period like later 80's early 90's.

The Reserve Bank is still expecting inflation to stand at about 7.75% at the end of the year.

The average new loan in Australia for people buying an existing property was $596,454 in August.
The repayment has moved from $2,543 in May to $3,335. Crucially, the potential 5.4% of the cycle would put that monthly cost at $3649. Where we stand today, each 25-basis-points rise adds $85.
31% has been added to everyone’s mortgage payments already, from the beginning of May to today. By the potential end of this hike cycle, that would stand at 43%. Not forgetting, this is paid from by after tax dollars. That's up to $24k a year in pre-tax earnings.

The first few increases poeple wouldn't have noticed, but roll together the broader headwinds, expect post Christmas there will be a lot of angst in the Community.

I really am concerned about the Community impact here, I just hope the already stretched mental health services will get some serious Budget Allocations, before it's truly needed, not after the event.
Social reform is critically needed, how the fck Corporate Australia can continue to pay out bonus structures while wage rises are stagnant for workers is beyod be. Viva la revolution!

Raise our voices, raise our flag
Smash the symbols of the life we've had
Long live the picture, long live the scheme
Long live our hopes, long live the dream

[LaurieHolden]

The currency exchange at AUDUSD62 won't help the strain on housing as cost of imported building materials will see little relief. Thankfully the AUDCNY has stayed somewhat constant.

The issue of rising costs is further compunded by lack of real wage growth. When inflation runs at 7.3% in Q3 of 2022 and Wage Growth 2.4% annulised, that 'gap' only hurts more when it comes to housing repayments and broader cost of living.

We need a luxury goods tax to be extended from Luxury Car Tax (2022–23 $84,916 for fuel efficient and $71,849 for all other vehicles over the threshold attract an LCT rate of 33%) to luxury homes.
The mean price of residential dwellings in Australia was $920,100, up from $876,100 in the September quarter 2021.
In response to high prices, the Gov't has been holding an inquiry into housing affordability and supply, which is expected to release its findings this year. Call me cynical but I'm not convinced either party has the stones to make the hard policy decisions, let alone get these measures pushed through the Lower and Upper Houses.

In an ideal or text-book world, as explained by the Henry Tax Review, a pure rent tax levied on natural resource deposits in fixed supply would: (1) take a share of the economic rent; (2) have no effect on production decisions, and therefore be efficient; and (3) be born fully by the investors, or shareholders, and more so by those with the more favoured deposits.
I'd put forward a similar measure where Captial Gains is payable on luxury dwellings, whatever that threshold is would be willing debate. Also, remove the negative gearing benefit on investment properites going forward. Grandfather the exisitng homes but back-date it so there's not a mad scramble to take advatage by wealthy Australains, as they did with lump-sum Super contrbutions a decade back.

One other measure would be to further tax SMSF's that hold in excess of the current Transfer Balance Cap , which they've already done in part where if your total super balance exceeds the TBC (currently $1.7M), you are limited with how much of your accumulation account can be transferred into an income stream. (pension phase is where an individual uses some or all of their accumulated savings to commence an income stream (aka pension).
These investments are then taxed at 15% in Accumulation phase and 0% in Pension phase.
Up until 1 July 2017 the amount that can be held in Pension phase was unlimited, again creating a divide in the community between low-to-middle income earnings and the wealthy.

We can't have this housing and health crisis linger any longer, hard decisions need to be made and we all need to carry the can, otherwise we'll end up like USA.

[What'sinaname]

It depends on whether inflation is transitory or not. If it is only a short term issue, then raising wages is a bad idea as once prices settle down, you'll create inflation through spending.

Get over this little hurdle and then see how things play out.

[think positive]

What do you consider to be luxury goods?

When you say on homes, how would that work? For cars it’s the dealership or if you import a vehicle over the threshold your self. At what price point do you want to add a luxury tax, keeping in mind Capitol gains tax and Victoria’s ridiculously high stamp duty costs. I just checked on 2,000,000 it adds an extra $110,000, surely that’s enough?

Take away negative gearing and the rentals will dry up completely. With all the rule changes re animals, holes in walls for pictures and yearly certification for electrical, gas, smoke detectors, a lot of investors have walked so already, us included.

Are prices too high? Probably, you have to buy /sell at the most advantageous times, but like everything, if people are willing to pay it, then sellers will ask it!

Cheaper housing is desperately needed, I agree, but at what cost? The standards demanded by the building commission are in the gutter, same as imported truck drivers that can’t reverse, so so many dodgey tradies, and yet the prices of those new cookie cutter homes hasn’t dropped.

Also, if people are willing to move further out or to a different area, or lower their expectations, they might actually be able to afford to buy. I honestly can’t believe how much money people are happy to chuck away on rent.


I agree with whatsinaname, the last couple of years have been a whole new ball game, let the ship try and right itself for a while.

Pensioners (aged and disability) are the area I think needs the most work, they should have enough money to run the heater and live to a decent standard.

However I am curious, the mandatory 3% super requirements began in 1992, so it’s been 30 years, isn’t that long enough to have a decent superannuation package to live on? I googled the average for retirement age now, $364,000, along with pensioner discounts, savings, and property, how long does that last? I know people who don’t worry about it but we just assumed we would be on our own, and have taken it into consideration with every financial decision we have made.

[KenH]

Hey Jo, how much super do you think I will need? My super will have to be enough for 2 of us as my wife hasn't any super.

Since we started our business in 2009 the first 8 years we couldn't put any into super as we weren't earning enough to make wages, so don't assume that everyone has had super for the last 30 years it does depend on circumstances. i can also say I have worked bloody hard over those years.

I am curious though on what people think a couple need to retire on?

[think positive]

[What'sinaname]

Cheaper housing is available. The problem is that people want to have cheap housing in inner city and Bay side suburbs. Why? Because they feel entitled to have it in response to all of the horror caused by the greedy baby boomers.

Q. What do we want?
A. We're not sure!

Q. When do we want it?
A. NOW!!!!!!!

[KenH]

[What'sinaname]

Depending on your wealth, you might not be entitled to any pension. If your business in successful, I hope you have wealth to be able to draw upon. The asset threshold is under $1m for a couple before the pension starts to drop and those assets include any business / private company you own.

[think positive]

[think positive]

[stui magpie]

Hey Ken, talk to a financial advisor or good accountant you can trust.

My Uncle retired with around $300k in Super and still has a lot left. He worked it so he left the money in super so it kept earning interest and draws down an amount each month.

So $300k, if your super is currently earning around 8% for example, that's $24k pa in interest, so you could draw down the equivalent (theoretically) of $26k pa ($500 a week) while barely dipping into the principle.

As far as getting the pension goes, again you'll need to check that out, you can't get the age pension until you're 70 (I think) so your super would need ot last at least 10 years until you could start reducing the amount you draw down in super to get the pension. Asset tests for couple etc all apply.

I'm fortunate enough to have been working where I've been getting super since 1985, so I have a fair bit more than $300k waiting for me, but I appreciate not everyone has been so lucky.

[think positive]

interesting Stu,
i found a link that explains it,
i thought it was 65, its now 66 and 6 months! who comes up with this shit!
good point on living on the interest. definitely worth talking to a financial adviser, just got to find an independant one, not one trying to join you up to a scheme he benifits from!

Ken, have a gander at this, it has links to all the answers


https://www.servicesaustralia.gov.au/who-can-get-age-pension?context=22526

and also interesting you can have a health care card evewn if you dont qualify for the pension, depending on income, but its not means tested.

https://www.servicesaustralia.gov.au/income-test-for-commonwealth-seniors-health-card?context=21966

[KenH]

Thanks guys, I will check things out. Fortunately we don't need a lot to live on as we used to getting by. Neither of us smoke and don't drink a lot.
Not planning any overseas trips as we don't have passports and not intending to get one.
We own our house and not a lot of debt and hopefully in 5 years no debt.
So with any luck the super grows to be enough for us to be comfortable.

But agree it is time for us to have a serious chat with our accountant to set us up for retirement in about 5-7 years.

[stui magpie]

Good luck with it Ken, I'm basically entering retirement now. Had the check in with the GP today, despite feeling as good as I have for months I was still shaky and she could see and hear it. Tomorrow morning I apply for Centrelink to try to stretch my savings out. I won't be going back to employment unless something miraculous happens. Temporary illness you go on jobseeker, so we'll see how much they **** me around. Last time I got Centrelink payments was 1984, so I have no guilt about trying to get back some of the taxes I've paid in the past near 40 years