The Centralian Advocate Tue 29 Mar 2022
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Community newspapers -- Northern Territory -- Alice Springs; Tennant Creek (N.T.) -- Newspapers; Alice Springs (N.T.) -- Newspapers; Australia, Central -- Newspapers
News Corp Australia
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News Corp Australia
Tuesday March 29 2022 BUSINESS 21 V1 - NTNE01Z01MA TERRY McCRANN THE temporary budget cut in the petrol excise will have zero impact on either the timing or the number of coming Reserve Bank interest rate hikes. Indeed, the entire budget is irrelevant to when RBA Governor Philip Lowe makes that first official rate hike the first we will have seen in more than 11 years; and then also the hikes that come after it. Lowes focus is what is happening with wages and the way the supply chain disruptions during the last two years of Covid have now kicked into higher inflation around the world following the surges in oil and other commodity prices. The budget, even with its generous handouts, will have zero impact on any of that or indeed on the broader inflation psychology that is clearly beginning to take hold. Its the sort of expectingand-accepting-regular-price rises-in-supermarkets-and- generally-across-the-board mindset we havent really seen in Australia in more than 20 years, going back into the 1990s. That is, with one big exception: ever-rising and occasionally leaping property prices, and so albeit to a slightly lesser extent, rentals. The huge and seemingly permanent expansion in the home guarantee scheme, announced Monday, might seem to be exactly what is needed. Its also part of the seeming post-Covid fiscal mindset moneys there just to be splashed around. The scheme offers to get people into their first home with a deposit of just 5 per cent of the purchase price. Its an absolute profitchurning no-brainer for the lending bank. It gets interest on 100 per cent of its loan. But it only starts losing money on any default if the property falls by 50 per cent in value. Up to that, the taxpayer picks up the tab. The borrower though, could start to lose money with even just marginal falls in property values. Indeed, arguably the scheme is setting a financial trap enabling people to get very big loans to buy properties at very high prices, just when interest rates are about to rise and rise perhaps significantly. This could hit these new homebuyers them with a disastrous triple-whammy. Just as they move in, their monthly mortgage payments go up, and then go up again and again. At the same time the values of their properties level off or, worse, actually fall. Because, under the scheme, they bought with just a 5 per cent deposit, borrowing the other 95 per cent, they could quickly fall into negative equity owing more on their loan than the property is now worth. Then, they also find their already strained family budgets thanks to those rising mortgage repayments further hit by rising prices across the supermarket and indeed generally across their weekly and monthly bills. Yes, its true that for many the scheme will be their first best and perhaps even only chance of ever buying a home. And buying a home today is almost always better as in, cheaper than buying it tomorrow. But this is a time that uniquely argues against that with such high property prices and such low, unsustainable, home loan interest rates. Up to 50,000 families a year are in for an interesting experiment and lifetime financial journeys. As for the temporary fuel excise cut, I repeat what I wrote a few weeks back. Its neither a good idea nor a bad one, just an irrelevant idea. Even at 20c its too small to be noticed and thanked for at the ballot, especially with petrol prices jumping around. And hey, might there be a slight cynicism about a handout that starts a couple of months before the election and then gets snatched back a few months after the election? Just asking, for a friend. Petrol cut means zip for RBA interest rates moderate pullbacks, while retail and transport and utilities edged lower. Business conditions as surveyed by NAB fell five points to +9 index points with conditions softer in most states led by WA and Queensland as NSW and Victoria saw more modest declines. Despite a pullback in business confidence and conditions from rebound levels in the fourth quarter of 2021, both remain above average. NAB chief economist Alan Oster said confidence and conditions have held up well. While confidence has pulled back in a quarterly sense, there was little difference in confidence from the first half of the sample which was surveyed before the escalation in Ukraine, and the second half of the sample following the invasion, he said. Overall, the survey continues to paint an optimistic picture on growth including the potential for a pickup in business investment. Forward looking indicators remain healthy despite edging lower. In addition to above average confidence and high rates of capacity utilisation, expectations for employment and capex over the next 12 months remain very high. new year rings in falling confidence levels The construction and manufacturing sectors experienced a moderate pullback in confidence. Picture: Chris Higgins Ask your newsagent how to Prepay & Save today Every 5th paper FREE* with Prepay & Save Top up with $20* Scan or visit prepayandsave.com.au for more information Top up1 Tap & collect for each newspaper 2 Every 5th paper FREE* 3 While you still have credit (must be used within 3 months). Conditions apply* *Only available in participating outlets (listed at prepayandsave.com.au) where Blueshyft is available. Customers must sign up and prepay a minimum of $20 to be eligible. Top up payments can be made at any time. Prepaid credit expires 3 months after the relevant payment was made. 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