00:00 To cut or not to cut?
00:04 That is the question for interest rates this year.
00:06 Now in the United States, rate cuts are hanging by a thread.
00:10 But what about ours?
00:12 Well, we're different.
00:15 We might be close allies and we might speak a version of the same language, but we're
00:18 not the same.
00:19 And the differences matter.
00:22 Look at this for a start.
00:23 Even though their cash rate is 5.5%, more than a full percentage point higher than ours,
00:28 the interest rates actually paid by Australians have increased more than 3%, versus half a
00:33 percent for Americans.
00:35 Why?
00:36 Because Americans have mostly got 30-year fixed rate mortgages, and we've mostly got
00:40 variable rate loans.
00:42 So Reserve Bank rate hikes get passed on immediately to almost everyone.
00:47 And this, house prices in the US have tripled in the past 20 years, but in Australia, they've
00:53 quadrupled.
00:54 As a result, we've got more debt.
00:57 And the combination of those two things has meant our debt service ratio, which is aggregate
01:01 debt repayments as a percentage of income, has skyrocketed since the pandemic.
01:07 Whereas in the US, it stayed roughly the same and is well below what it used to be.
01:12 With the result that household consumption has collapsed in Australia, while in the US,
01:17 it's kept growing.
01:18 Australians are weighed down by expensive houses and a total absence of long-term fixed
01:24 rate mortgages, both thanks to past government failure and stupidity.
01:29 But at least those burdens weigh on inflation as well.
01:33 [BLANK_AUDIO]
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