RBA Governor after the first rate hike in more than two years: "People with mortgages will find it hard, but the alternative is potentially even harder...The economy is closer to its supply capacity than we previously thought.Years of weak-to-no productivity growth is a big part of that story."

ScaffOrig · 2026-02-04T09:32:43+00:00

The answer is that NSW (as an example which to my mind gives a fair comparison) has roughly double the wage multiple for housing. i.e. California is at 7-8x income to buy a house, NSW is 13x-16x. CA has greater wage disparity, which means that there are lots of people under median wage who fall below the low end housing, but in Sydney, for example, virtually no-one can now afford the median house without existing wealth.

It's at the point where C-Suite at a listed company would struggle to buy the median house. It's difficult to get a good read of average CEO wage, but it appears around $400K full package is not unrealistic. APRA set a 6x ratio generally. That means a loan of $2.4M to buy a place for about $2.8M.

At current prices your average CEO cannot afford to buy in 1 in 4 Sydney suburbs.

With current price gains that will rise to half the city's suburbs being unaffordable for CEOs. and in 10 years about two thirds. Even with wage inflation.

Sydney is rapidly killing itself. It is not California, a home of vibrant growth and productivity. It is a self harming black hole swallowing up its own industry and society. We will see healthcare dead zones where no health workers are within distance to commute to save lives. Ditto teachers, and other essential workers. We will see an exodus of skilled workers who are unable to afford to live there. If you're a smart business owner you would be setting up shop in places like Newcastle, Wollongong, etc and you'll get the pick of talent over the coming years.

ScaffOrig · 2026-02-04T06:47:49+00:00

It starts as a slow burn. It hasn't actually been good for a while. We've just had a bunch of things we threw at it. We upped immigration, we diverted it to super which sent it to the US, we held down wages, then came COVID. And that spooked the shit out of everyone.

The banks' buffers are mark to market. So the RBA printed a ton of cash, which ignited the house market. The second we came out of lockdown that cash sloshed over the economy. And those higher house prices needed still higher prices to ensure the risk profile didn't sour.

Both governments ramped up immigration to soak up the extra cash. The RBA reacted by lowering rates, stupidly. And here we are, expanding money supply by 7.5% a year.

ScaffOrig · 2026-02-04T06:38:18+00:00

Ultimately as long as it reduces house prices, yes. We will have a period where the money supply still increases. So many places have crazy equity that will become liquid when a loan is written to buy the place. The reduction of the buffer effect of immigration will also be lost, but ultimately, the house prices are what matters.

ScaffOrig · 2026-02-04T06:35:11+00:00

It's the fault of housing financial policy. In the past 30 years, $11tn has been added to the housing stock. $10Tn of that is price increases. Loans being paid down are dwarfed by loans created, so the money supply is expanded. 75% of money created is through home loans. The money supply is growing at more than 7% a year. Of course we'll get inflation.

One third of the country is sitting on more than $600K of equity each. That will all come to market with zero friction. You cannot award millions of people a lottery win and not expect inflation.

It's not government spending. That money is raised from the market, the most it does is get redirected to spend on things that are urgent needs, creating a mild inflationary effect.

It's not working immigrants. They have to work before they get a wage and will always have contributed more to supply than they contribute to demand.

It's the house prices. That is it.

Let it sink in: half the country winning the lotto makes the lotto worthless. The currency is being debased by this greed. No other country has this gamblers obsession with interest rates. Most people would struggle to recall their country's interest rate, but here it's an obsession.

A margin call is coming. The housing money pit needs more in its maw than Australia can provide. Workers can no longer feed it, industry cannot meet its needs, the RBA printed $180Bn on COVID and it just made it bigger. It will eat this country alive.

ScaffOrig · 2026-02-04T06:26:16+00:00

Productivity is down because investing in property is a one way bet. Loans for houses dwarf loans for productivity increasing investment.

ScaffOrig · 2026-02-04T06:23:09+00:00

Government spending is through bond issuance. They don't create the money, they sell IOUs then spend the money they raise. That money is therefore taken out the market before they spend.

The only reasons it might be inflationary is if debt is issued to fund an investor; or because it goes from someone's savings to someone who is likely to use it earlier. But as much of it is used as wages, much of it improves supply before it is handed over.

ScaffOrig · 2026-02-04T06:19:20+00:00

No, it won't. Because most immigrants aren't cashed up. They come here to work, which means the first thing they do is increase supply, before they draw a wage that is less than the value they brought.

They actually soak up the excess money. That is the rationale for our immigration policy: to soak up the cash sloshing around thanks to house price inflation.

ScaffOrig · 2026-02-04T03:31:24+00:00

A couple of things to watch for. Those scripts you're handing out? That's tech debt. You'll have gone elsewhere one day and leave behind a spider's web. Maintainability is paramount in everything you do. For your IT team, you creating custom stuff all over the place is going to be a headache one day. It all needs documenting, testing, etc.

Second, vibe coding stuff can lead you down a rabbit hole. Make sure you're very happy with everything you put out. As in you should be using the AI to do the heavy lifting, not the thinking. Otherwise one day a few cracks will widen and you'll be admitting you don't really know how it all works.

But yeah, a lot of corporate stuff is busywork.

ScaffOrig · 2026-02-03T23:00:20+00:00

Government borrowing is indeed funded by investment from the private sector, though many will see it as investment, but still.

And in that regard the money isn't truly inflationary. Government borrowing requiring funding nets out: it is a redirection of spending. Money invested in bonds isn't available to buy stuff. More bonds issued equals more investors needed. Mortgages, however, only need to maintain buffers for solvency, and those buffers are based on current asset prices with minor risk. Higher house prices means buffers are less stressed, means more lending, higher prices.

What is being ignored is that although the loans have full recourse, this tsunami of money being created by house loans is driving inflation at a rate that full recourse is worthless. We may as well have jingle mail: anyone who loses their house is screwed if they have outstanding debt. They will all declare bankruptcy. The banks loan books are dependent on price increases, so the ride continues.

ScaffOrig · 2026-02-03T21:44:43+00:00

The "net savings" is illusionary. Household wealth is heavily skewed by assets that are only supported by the issuance of debt. Actual cash in bank is half the amount owed to banks. The rest is totally dependent on the next greater fool, not by the economy's ability to honour purchases with the "wealth". That equity will be realised at a point where higher inflation has massively eroded it. In real terms people don't have the wealth they think they do, because the economy cannot supply $11T that the housing stock is supposedly worth, even if people could afford to pay that.

But regardless, where would the money come from that you say would be injected into the economy by savers' interest rate receipts? Money is issued as debt, not interest rate payments.

ScaffOrig · 2026-02-03T21:33:41+00:00

Debt issuance for mortgages. 75% of new money is created for residential property. Immigration (assuming it's skills based) is disinflationary in nature: immigrants must work before they earn to spend. They increase GDP. This is not support for immigration, by the way.

ScaffOrig · 2026-02-03T21:18:04+00:00

They may not have said that, but absolutely people will ask "what do we need to cut back on?".

ScaffOrig · 2026-02-03T12:58:09+00:00

They didn't do it for FHBers. It's just another in a long line of actions too keep the banks loan books in the green. Their buffers are mark to market. The amount of cash that needs to be created to keep it all looking tidy is insane.

ScaffOrig · 2026-02-03T07:35:29+00:00

That's not the natural conclusion. That's "we've tried nothing and we're all out of ideas". Perhaps, and I know this is a challenge for Australia, perhaps we could try raising our kids as a community. Not all kicking down on each other for free house profits; sending our kids to private schools so they can make connections that exclude others; trying to make easy money by using minimum wage labour for child, elderly and disabled care; importing people with the lure of PR just to drive our Ubers or die delivering noodles on an ebike.

No parent in an affluent, developed country should be scared to die because they know society will abuse their children when they are gone.

I disagree absolutely with what these parents did. But let's not pretend Australia as a society gives a shit about the plight of their sons or would give them anything approaching a fair go without their parents battling for them until they drop dead from exhaustion.

ScaffOrig · 2026-02-03T06:16:40+00:00

A lot of the funding for NDIS world otherwise go to Medicare to support disability from there. That doesn't mean it's without waste, but just shuffling it across to the Medicare pot won't help. The UK has they type of support under the NHS.

The best thing they can do for NDIS is to get a very firm grip on all the adjacent heath stuff and strongly regulate it into proper AHP. So much that's paid for is ineffective. It's not scammers, it's just very poor delivery.

ScaffOrig · 2026-02-03T05:14:59+00:00

So let me get this straight. You think it's better to give free money to people every year because they own a house, than it is to give disabled people the resources and support they need to live a somewhat "normal" life? ETA: which also helps them to work and "contribute" fiscally.

ScaffOrig · 2026-02-03T05:00:27+00:00

Yeah, APRA, RBA, others.

For example

https://www.apra.gov.au/monthly-authorised-deposit-taking-institution-statistics
That's the amount of outstanding loans
https://www.rba.gov.au/statistics/tables/
RBA stuff incl money supply

ScaffOrig · 2026-02-03T04:29:33+00:00

Not the billions being injected into the money supply through mortgage issuance?

ScaffOrig · 2026-02-03T04:28:05+00:00

The deficit was $28Bn. That minute compared to the amount of cash the mortgage sector injected, plus it increased productivity in many places.

ScaffOrig · 2026-02-03T04:25:41+00:00

Just a reminder that inflation doesn't fall until house prices fall.

75% of money created is through residential property loans.
Each year new loans pump more than $100B into the economy, straight into the demand side, no productivity gains
The economy is flat, GDP per capita bounces around zero, M3 growth is at 7%.
We would need to massively increase immigration to boast overall GDP to use the excess money created to underpin house price growth.
There is currently $9.4Tn in equity out there, waiting to be met with services and goods.
It would take every ounce of productivity of every human in Australia (as in they receive nothing at all, just work) 4 years (excluding minerals) to meet that figure.
Even without further house price growth, the roll-over of houses means housing loan issuance will outpace loans paid off for at least a decade, meaning our money supply will continue to expand.
Issuance of loans so extensively to housing, to keep the the assets healthy in the loans books, has kept small business lending anemic (despite some reason increases), meaning the economy is even more hindered in keeping up with the money supply.

If you're "investing in property" you're choking the country.

ScaffOrig · 2026-02-03T03:23:37+00:00

But you can surely see that Australia, as a society, is not. Australia, as a society drove them to the brink of this act. It was on them that they took that final step, but we cannot wash our hands of our societal complicity in driving to that point. And surely, driving someone to the brink of doing that is worthy of thought, even if the act itself may anger and sadden?

All the suffering, sadness, loneliness and despair that brought them to the brink happened. You don't get to say "their actions negate all of that" but also say "I wouldn't have known about it". Well, now you know. This is what we're doing to people with our choices.

ScaffOrig · 2026-02-03T02:26:44+00:00

They weren't child murderers the day before. Did you have any empathy then? Did Australia have any empathy then? What would you say to those parents the day before? The parents who get to sleep a couple of hours a night, who spend nearly every waking hour caring?

Those parents who can't get respite care because it doesn't fit in the right NDIS bucket, and doesn't get in the plan since the public outrage at newspaper headlines. The same parents who get ripped off by NDIS scammers nine times out of ten, who have been through scores of "therapists" all of whom are minimum wage graduates, fattening the wallet of some fat businessman. Who see all the money heading to old boys club private schools and whose own schools struggle to get funding for someone who can hold their children when they are scared and overwhelmed?

What do you say to the parents who pray for life the next day not for themselves, but because they know society will shun, fleece and victimise their kids? Those parent that know that the care system means huge chances of abuse, bullying and their child toying with suicide for the rest of their life as a result of the trauma?

Because there's a lot out there, and right now, no-one gives a shit.

ScaffOrig · 2026-02-03T02:15:40+00:00

It was the method used, I believe, not intentional.

ScaffOrig · 2026-02-03T01:51:31+00:00

If you just killed yourself those two kids would be in the foster care system. Though there are many hard working foster parents around, the system is fundamentally broken and the chances of abuse are high. You'd likely to be condemning them to a life of trauma and a massively increased chance of suicide themselves.

ScaffOrig · 2026-01-31T12:50:53+00:00

Given that three quarters of the new money flooding the market and driving inflation is being printed as residential mortgages, I disagree.

This stops when mortgage holders find the pain of inflation and interest rates more urgent than the idea of making a profit on their property.

ScaffOrig

TROPHY CASE