Wicked problems for Australians

By Graeme Salt

Interest rate rises have made it tough for homeowners.  But spare a thought for the Governor of the Reserve Bank of Australia (RBA) – who is dealing with truly wicked problems.

At her press conference yesterday, the Governor, Michelle Bullock, confessed that the economy was at the “complex part of the cycle.”

The RBA is explicitly trying to guide the economy along a narrow path between inflation and recession.  But, as the Governor said yesterday, “it does seem to be getting a bit narrower.”

As a result, the RBA’s Monetary Policy Decision yesterday used the word ‘uncertainty’ nine times yesterday (twice as often as at the end of 2023).

Wherever you look, there is conflicting evidence about the state of the economy – one of the reasons why the Reserve Bank is not budging on interest rates.  For example:

• Business confidence is now negative at -3, but employers are still actively recruiting (unemployment recently fell to 4 per cent)
• Household spending is weak and yet, tax cuts are due to kick in in July – thereby increasing spending power
• Recent GDP results were very weak (0.1 per cent) – the slowest annual growth in three decades. Yet this is the 10^th consecutive quarter of growth
• Business activity is down, yet prices are still up
• Household savings fell to 0.9 per cent – the RBA thinks consumers are still optimistic if they will still dip into their savings

None of us are enjoying these high interest rates.  And while the Reserve Bank is uncertain about the state of the economy, we are going to have to put up with them for a while longer.

If you want to talk about interest rates and your mortgage, please contact me.

Graeme Salt is an award-winning mortgage broker.  For a no obligations consultation on your home loan needs, please contact him on 02 9922 5055.