The Great Australian Finance Experiment

My five-year-old son is obsessed with maths.

The other night he worked out that the maths app game we play each night is charging us a recurring fee.

He was ropeable: “You need to delete this game off the iPad, or we’ll keep getting billed. Do you understand, Dad?”

I nodded.

Chip off the old block.

Anyway, it wouldn’t surprise me if he eventually studies finance at university.

And if he does, he’ll almost certainly (as part of his ‘financial history’ class) look back at this monetary madness we’re living through in 2019.

I picture him coming back to the farm, scratching his head:

“Dad, what the hell were you guys thinking?

“The housing market was slowly deflating after the mother of all housing booms … but then you started cutting interest rates to almost zero?

“And at the same time you loosened lending criteria and encouraged young people to buy a home with just a 5% deposit?

“How did you think it would end?!”

Okay, so I’m putting it on record that I don’t think any of this is a good idea.

Yet I’m clearly in the minority: this week the media predictably cheered that the average homeowner would be $58 a month better off with the latest rate cut.

They’re missing the point.

Having to cut rates to the lowest levels in history ‒ with the promise of even more to come ‒ is a sign that we’re in deep trouble.

Rate cuts are supposed to act like cocaine … yet after this many hits, their effectiveness is wearing off. (The Verve sang it best: “Now the drugs don’t work, they just make you worse.”)

Just like I can’t fathom my father paying 20% on his home loan in the early nineties, I’m sure my son will be baffled by our rock bottom rates today. Either way, this is a massive financial experiment that we’ve all signed up to … and the effect could be felt for generations.

Tread Your Own Path!