The more than a decade long period of the Reserve Bank going without raising interest rates looks set to end. Rising inflation and the unwinding of the pandemic restrictions and border closures means that the emergency cash rate of 0.1% will soon go up. But at the moment the market expects before the end of next year that it will rise to above 3%.
But while that may have been a neutral rate in the past, the Centre’s Fiscal and Labour Market Policy Director Greg Jericho, notes in his column in Guardian Australia, recent surges in house prices means such a rise would place an extreme burdon on mortgage payers – one not conducive to an economy still in recovery.
It took nearly 6 years during the mining boom for the RBA to raise the cash rate by 300 basis points; currently the market anticipates the same rise occurring in 17 months.
That would massively limit economic growth for little purpose at a time when wage rises remains below inflation, and rather unlikely to occur given the Reserve Bank’s recent hesitancy to slow the economy until real wage again start rising.
Between the Lines Newsletter
The biggest stories and the best analysis from the team at the Australia Institute, delivered to your inbox every fortnight.
You might also like
“Right to Disconnect” Essential as Devices Intrude Into Workers’ Lives
Australia’s Parliament is set to pass a new set of reforms to the Fair Work Act and other labour laws, that would enshrine certain protections for workers against being contacted or ordered to perform work outside of normal working hours. This “Right to Disconnect” is an important step in limiting the steady encroachment of work
Fixing the work and care crisis means tackling insecure and unpredictable work
The Fair Work Commission is examining how to reduce insecurity and unpredictability in part-time and casual work to help employees better balance work and care. The Commission is reviewing modern awards that set out terms and conditions of employment for many working Australians to consider how workplace relations settings in awards impact on work and
More loopholes to close on insecure work … and a new right to disconnect from work
Late yesterday the final part 2 of the government’s Closing Loopholes industrial relations bill was passed by the Senate.