Voters might be prepared to give the new government some time to find its feet. But they won’t if they find they cannot afford to go out for dinner or buy extra clothes because interest rates are eating into their budgets. | Shane Wright | OPINION ...
There were two key points in Lowe’s statement announcing the move. They go to risks facing the bank, the economy and the new Albanese government.
The first is the bank admits inflation is moving way too quickly. In a Homer Simpson “d’oh!” moment, Lowe said “inflation in Australia has increased significantly”.But a few lines later, he elaborated by noting the bank’s own forecasts on inflation - less than a month old - were wrong. Those forecasts were for inflation to peak around six per cent by year’s end.
So Australians are going to have to get used to even more pain in our shopping centres, at the petrol pump and through our online purchases. That concession gives the bank the cover for its half percentage point rise, and to move more aggressively through the rest of the year to get interest rates back to some sort of normal.The bank, stung by what happened pre-Covid, is concerned that given Australians’ addiction to housing borders on a medical condition, anything that deflates the market will have a deep impact on the broader economy.
This is a problem the bank have contributed to over a long period of time. But now we’re at the pointy where the second most heavily indebted households in the world are being asked to find hundreds of dollars more a month to cover
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