The economy is different now than five years ago – and consumers just don’t like it.
According to economist Paul Bloxham from HSBC, consumers are used to things being on the up and up, and maybe it’s time they adjusted to the new normal.
“We are in a different economy than we were five years ago,” Bloxham said. “House prices are not rising quickly, household wealth is not building quickly, the global environment is very different. And that is meaning households need to change the way they think about the world and because they haven’t, because the structure of the economy has changed, households are just not very happy about things. They are used to seeing their house prices rising, they are used to seeing their equity rising and that is just not happening now,” he said.
The question is then, will there be further rate stimulus to keep consumer spirits up?
“The rate outlook is a very tricky one at the moment,” Bloxham says. “I think that based purely on domestic conditions here in Australia it is hard to build a case for the RBA to cut any further. The labour market is looking a bit better, the unemployment rate is stable, retail sales rose in the first quarter of this year and I think there is a rebalancing going on.
However, there is one word from offshore that will continue to dog economists – Europe.
“The elephant in the room is what is going on in the rest of the world and particularly what is going on in Europe. And that could see decisive cuts by the RBA,” he says.
LJ Hooker Financial Services’ Peter Bromley says rates at the moment are “still very high”, and he would expect 50 basis points at least by the end of the year. Regardless, he says that experienced brokers will be capitalising on the rate uncertainty.
“The experienced brokers are doing two things. One is talking to their clients about whether they have the best deal. And in terms of refinancing I think there is a great opportunity. Competition is strong with no exit fees now on loans, a consumer can really shop around. So talking to consumers about that and really capitalising that is important,” he says.
“The other thing from a broker’s point of view is they should be making sure they are speaking to those customers they have put into a loan over the last two or three years because people are conscious of what rates are doing, people are conscious about what their property is worth so I think it is important to actually communicate with your customers.”
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