glenns wacky definition of stress

  1. 6,716 Posts.
    According to Glenn Stevens, rising interest rates don't cause "STRESS" until your home loan repayments are 90 days overdue !

    I would not call that "stressed". I would call that homeless. This clown is way out of touch.

    This from "The Australian"

    Loan stress is overstated: RBA

    David Uren, Economics correspondent | April 05, 2008

    REPORTS that more than half a million households are in financial stress because of interest rises are exaggerated, says Reserve Bank governor Glenn Stevens.

    The bank estimates that, at most, 15,000 households are more than 90 days in arrears with home loans, and says the number has fallen this year, despite rate rises.

    "There is a tendency to try to exaggerate the number of people under real stress, which is unhelpful because it distracts attention from those who really are under stress," Mr Stevens told the House of Representatives economics committee yesterday.

    Although higher interest rates caused pockets of pain, Mr Stevens said the rise in rates would succeed in reining in inflation.

    The 16-year run of economic growth would continue, he said. "I do not think we are going to have a recession any time soon."

    Speaking a day after his counterpart at the US Federal Reserve, Ben Bernanke, conceded recession was possible in the US, Mr Stevens said Australia's growth would be supported by the strength of the Asian economies.

    He revealed that the Reserve Bank would be lowering its forecasts for growth and inflation in its May economic update to take account of the rise in official interest rates last month. The bank's forecast in February put growth at 3.25 per cent in the year to December, while inflation was expected to be 3.5 per cent.

    Mr Stevens said that as well as rising interest rates, real incomes were rising. The reason people were spending more than 30 per cent of their income on housing had more to do with lifestyle choices than interest rates.

    "As you get more affluent, some of the necessities take up a smaller share of income and some of the things you really want take up a larger share," he said. Many people had opted for better housing. "That is not stress, per se; that is a choice."

    Bank deputy governor Ric Battelino said the 15,000 households having trouble servicing their mortgages were a tiny proportion of home owners. "At a macro level, defaults and arrears on loans are at record lows," he said.

    Mr Stevens's comments were aimed mainly at the Housing Industry Association, which claimed that the 650,000 households paying more than 30 per cent of their income on mortgages were in stress.

    Housing Minister Tanya Plibersek said 1.1 million people were spending more than 30per cent of their income on either rent or mortgage payments. This was why the Government had made tackling inflation a priority.

    HIA chief Ron Silberberg said his figures were from the 2006 census, which he said was more reliable than the HILDA survey used by the RBA. "I don't think the Reserve Bank does itself any service by trying to downplay the incidence of housing-related stress," he said.

    Mr Stevens defended the major banks, saying they were entitled to raise their rates to cover rising funding costs. "This outcome is preferable to the alternative of lending drying up," he said.

    Mr Stevens said he believed the central bank had now raised rates far enough to bring inflation under control.

    "I cannot tell you at what point rates can start to come down," he said. "I cannot even promise really that they might not rise again. I think for the time being this is the right number."

    He foreshadowed that interest rates could start to be cut before inflation fell from 4 per cent - the level the bank thinks it is at now - back below 3 per cent, the upper limit in the bank's target range. However, the bank would need to be convinced growth in consumer demand had slowed to a sustainable level.
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