Rudd sets Homeowners expectations of Rates rising

[Brendan]

Kevin Rudd has put forward a warning that over the next 18months rates are expected to rise sharply as high as 1% as stated in the Australian - Kevin Rudd warns homeowners: interest rates to rise fast | The Australian (http://www.theaustralian.news.com.au/story/0,25197,25839599-601,00.html)

Is it just me, or is Ruddy just stating the obvious? 18months is a reasonable time frame to make the prediction in, and if they were to rise a whole 1% they would still only be on around a 6% base rate, which is still incredibly low given historic rates.

Is this just a marketing ploy from the labour government to make it look like they know what they are doing? Or just a good new story to sell papers?

Do you think rates will rise? How sharply and how quickly?

[JamesGG]

It's a reasonable prediction. The timeframe is long enough to cover most bases, so they aren't likely to be proven wrong but have at least covered themselves in preparation of the election.

The government is working towards staving off unemployment (generally by spending more money), whilst the RBA is looking to keep inflation under control (generally by raising interest rates). So, it will be interesting to see how this plays out.

As investors, though, interest rates are one of those things that we cannot individually (or even collectively, really) control. So, we simply need to be able to adapt to whatever the current circumstances happen to be. This may mean trying to make profits under the cloud of high(er) interest rates. Strategies that work in the current environment (ie, pick any property with a yield over 6%) may not work in those circumstances, so it's important to keep this in mind with choosing where to invest that money. Flexibility is a beautiful thing.