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RBA’s ugly interest rate hike spells rocky times for Australia
It’s an interesting twist in scheduling that the first Tuesday in November is the date of not only the race that stops the nation in the Melbourne Cup, but also the rates decision that REALLY stops mortgage holders in their tracks.
And the ruling from the Reserve Bank board, delivered just half an hour before the Melbourne Cup barrier is lifted for the big race, has far greater consequences than any winnings – or losses – from the track.
The cash rate has been lifted for the fifth time this year. Photo: iStock
As widely expected, the cash rate has been lifted for the fifth time this year, up quarter of a per cent to 4.85 per cent.
That puts interest rates at an 18-year high as the RBA struggles to bring inflation down, sitting above the bank’s 2-3 per cent target range for close to four years.
That inflation failure means Australians with a $600,000 mortgage have had to find an extra $500 every month to cover the continued rate hikes.
The extra hit to the hip pocket comes as wages stall, and prices across the board rise, further fuelling the inflation problem. It’s a perfect storm.
Reserve Bank Governor Michele Bullock says she is aware of the struggles of everyday Australians.
She’s admitted to reading many letters from stretched mortgage holders, some she concedes are very hard to read.
The RBA has, however, taken comfort in the past that the jobs market has been relatively resilient.
Having a job is considered the best security when it comes to keeping up with mortgage payments.
Michele Bullock speaking at her post-meeting press conference on Tuesday. 9News
But with unemployment now sitting at 4.7 per cent, the current labour market is worse than predicted.
People are hurting, and it’s showing. The latest ANZ-Roy Morgan Consumer Confidence and inflation expectations have slumped to a five-month low.
The survey found higher interest rates and persistent inflation is weighing heavily on household spending, and weakening confidence in personal finances.
A ‘soft landing’ has been the goal of the reserve bank in their attempts to bring inflation down, but with every rate hike, the economic road has become a lot rockier.
Governments are being urged to rein in spending to help tame the inflation dragon, at the same time as the union’s protest outside the RBA offices in Sydney warning that constant rate hikes are pushing workers over the edge.
More businesses are also going under. Retail icon David Jones is the latest facing financial troubles, posting plummeting sales and profits and preparing to shed thousands of jobs and close as many as half its stores.
Australia is of course not the only country struggling with economic problems, but it’s not exactly heartening to know that we’re not alone.
As we head closer to Christmas, it feels like financial festive cheer will be in short supply.
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