What's your prediction on the Australian Dollar?

[Warks]

I wonder if we'll ever see credit card interest rates south of 17% ever again? How do they justify those rates? Most of us here probably don't pay interest on cards because of those usurious rates. However, if someone had card rates around 5-7% then surely it wouldn't be as big an issue for some and the CC providers would make some money? I still don't like paying interest (although I've been paying it on a house for many years) but at least I wouldn't panic if I happened to be late paying the card bill.

 

[knasty]

The thing with credit cards is the default risk. If interest rates are dropping because the economy is in the doldrums hence default risk is higher, you can see why rates may not come down. Similarly the rates.charged by payday lenders bears no resemblance to market rates as funding cost is.insignificant compared with the cost of default and enforcement.

 

[robd]

No impact on the AUD against USD, EUR or GBP. Actually, AUD up since the announcement.

 

[footy99]

No impact on the AUD against USD, EUR or GBP. Actually, AUD up since the announcement.

Yeah it was priced in already.

 

[Alanslegal]

The conspiracy theorist is me says that the higher the property prices is, the better it is for the Commonwealth because every homeowner now sits on a house worth $1M or a flat worth $500K, and because we have an ageing population, most homeowners or investors would be clearly ineligible (or have substantial decrease) for any Commonwealth support due to the assets test. Once upon a time you could sell the family home, have $400K in the bank and be eligible for the pension, but with $1M properties being the bare minimum, that would pretty much rule you out from any assistance. Thus the federal government - on both sides - would have no interest to slow down the growth of housing prices.

 

[cove]

If I was running Australia I would make all social security a loan on property held by the recipient. That would fit in well with your conspiracy theory Alanslegal. It could start around 2016 to allow folks no time to hide their assets like they do now.

 

[andye]

The postulated change to the pension assets test does the housing supply no favours. Would end up with pensioners even more likely to hold onto big hard-to-maintain houses that younger families could move into (that is until they start including the family home as an assessable asset)

 

[cove]

The Aussie dollar is moving unusualy after the rate cut. I was happy to get 0.80 a few days ago.

 

[MEL_Traveller]

The postulated change to the pension assets test does the housing supply no favours. Would end up with pensioners even more likely to hold onto big hard-to-maintain houses that younger families could move into (that is until they start including the family home as an assessable asset)

Let's get rid of negative gearing first.

I don't think pensioners should be asked to sell their primary residence. It is unsettling for many to have to have to contemplate moving in their later years, and if they can maintain their independence, that should be encouraged. Even having a place with a garden can keep people active, rather than sitting in front of TV in a tiny one bedroom apartment or nursing home.

Is it worth adding so much stress for the sake of $220 a week they get on the public pension?

 

[drsmithy]

The conspiracy theorist is me says that the higher the property prices is, the better it is for the Commonwealth because every homeowner now sits on a house worth $1M or a flat worth $500K, and because we have an ageing population, most homeowners or investors would be clearly ineligible (or have substantial decrease) for any Commonwealth support due to the assets test.

The assets test excludes the family home. This is unlikely to change.

Once upon a time you could sell the family home, have $400K in the bank and be eligible for the pension, but with $1M properties being the bare minimum, that would pretty much rule you out from any assistance. Thus the federal government - on both sides - would have no interest to slow down the growth of housing prices.

Often lost sight of, is that these pensioners (or soon-to-be) with million dollar homes probably paid under a hundred grand for them.

The Government has no interest in slowing down housing prices because a) most of them have multiple investment properties and b) most of that expensive property is owned by their constituents.

Also, a couple with $400k in the bank is still eligible for the pension.

 

[andye]

No issue at all with people staying in houses they want to. Just shouldnt set things up to financially penalise a downsizer.

 

[drsmithy]

If I was running Australia I would make all social security a loan on property held by the recipient.

Most people who genuinely need social security don't own any property.

 

[MEL_Traveller]

Most people who genuinely need social security don't own any property.

I disagree with that when it comes to old-age pensioners. Plenty of family friends own their own home (either small house or apartment), and absolutely struggle to survive on the meager pension. They worked, they paid their taxes. They didn't know any better than to rely on the pension. Super just wasn't a common concept 30 years ago. And a house was much cheaper to buy back then.

Some friends of my parents go to bed already (in May) at 6pm because it's too cold to run heating. What's the alternative? A government run nursing home? Not all of which are 'nice' places to be.

 

[drsmithy]

I disagree with that when it comes to old-age pensioners. Plenty of family friends own their own home (either small house or apartment), and absolutely struggle to survive on the meager pension. They worked, they paid their taxes. They didn't know any better than to rely on the pension. Super just wasn't a common concept 30 years ago. And a house was much cheaper to buy back then.

Some friends of my parents go to bed already (in May) at 6pm because it's too cold to run heating. What's the alternative? A government run nursing home? Not all of which are 'nice' places to be.

Asset-rich, cash-poor pensioners are a relative minority. I said most, not all.

Also, the pension may be "meagre", but it has been far, far more generously increased over the last decade or two than other forms of welfare, and the chances of this changing as the baby boomers enter retirement is basically zero.

The real irony is that these people are probably staunch Coalition voters.

 

[Alanslegal]

The assets test excludes the family home. This is unlikely to change.

I am aware the family home whilst they live in it or have dependent children residing in the property is exempt .... however the moment they need to downsize from the family home / move into a nursing home, and good portion of freestanding homes in Sydney now at least $1M, they would automatically fail the assets tests with that amount of money sitting at the bank. Oh and residential aged facilities love cashed up residents, some of the accommodation bonds that they demand upon entry ..... is mind boggling!

 

[cove]

Yes it is true that 30% of Australians would have trouble coming up with a spare $100 note. This will not get any easier for many in the next 20 years. Of course my comment on social security will not work right now as too many people have too little in retirement funding even though compulsory super started 30 years ago.
On the currency the Aussie dollar will now be ruled by overseas traders as the Reserve Bank cannot iron out the kinks in buyers and sellers. It could run up and down all in one month as traders try to make money trading the Aussie dollar.

 

[drsmithy]

I am aware the family home whilst they live in it or have dependent children residing in the property is exempt .... however the moment they need to downsize from the family home / move into a nursing home, and good portion of freestanding homes in Sydney now at least $1M, they would automatically fail the assets tests with that amount of money sitting at the bank. Oh and residential aged facilities love cashed up residents, some of the accommodation bonds that they demand upon entry ..... is mind boggling!

Can you elaborate a bit on why you think someone with a million dollars in the bank should qualify for welfare ?

 

[dajop]

It is unsettling for many to have to have to contemplate moving in their later years,

I'll present a counter view to this .... whilst unsettling initially, it can actually create a more healthy environment for the elderly to downsize. I don't think it is such a bad thing, provided they have support to make the move. Both my sets of grandparents when reaching their 70's made a move to smaller properties that still had ample gardens to potter around in and the like, but were smaller, easier to maintain and importantly came with only 2-3 or no steps. The properties were also much easier to maintain for them. Of course being in regional cities, and more than 20 years ago the property value and impact on pension did not come into it. These days, particularly in cities, those wanting to downsize may face an increase in their non family home assets, but will need to invest cash wisely to cover potential loss in pension.

 

[Alanslegal]

Can you elaborate a bit on why you think someone with a million dollars in the bank should qualify for welfare ?

No I'm not saying at all a person with a million dollars sitting in a bank should qualify for welfare. I was just pointing the conspiracy theorist in me that the governments would love house prices to continue up, up, and up and don't really want to do anything to stop it from rising. State governments are loving it right now with the amount of stamp duty they are collecting each week too.

 

[drsmithy]

No I'm not saying at all a person with a million dollars sitting in a bank should qualify for welfare. I was just pointing the conspiracy theorist in me that the governments would love house prices to continue up, up, and up and don't really want to do anything to stop it from rising. State governments are loving it right now with the amount of stamp duty they are collecting each week too.

Ok, but that's not really how it reads.

Yes, current Governments have no interest in lower house prices, because a) they're up to their eyeballs in property investment themselves, b) they generate a nice chunk of change at the state level (though land taxes could do the job far better and without the negative side effects) and c) rising house prices have created the "wealth effect" and driven consumer consumption for much of the 2000s.

It's just another example of neoliberal short-sightedness (and there have been plenty of those to go around in the last few decades).