Well, the RBA really does need a broom through the joint.
There was another 0.25% lift in May – making it 11 hikes in just 12 months – all on some pretence that doing so will somehow reduce inflation.
Inflation isn’t being caused by the consumer but largely by a range of ill-conceived government policies and actions. The May federal budget will add further fuel to the fire.
If consumer largess was the main culprit, then why not lift the rate of GST and apply the GST on all transactions, including established real estate?
When you survey Australia’s employment situation correctly – and not the hogwash that the ABS peddles – the number of unemployed people across Australia has lifted by 326,000 or 27% since the first interest rate hike this time last year.
The number of under-employed folks is up 178,000 or 15% since May last year.
Overall, some 500,000 Aussies are worst off – job wise – since the RBA decided that hypocrite was too big a word for them. Remember no rate rises until 2024!
Before today’s surprise decision, some 10% of Australians were unemployed and another 9% work but would like more hours.
More, now, will join the jobless queue and work less hours in the months ahead.
On a more positive note, looking ahead, the financial markets are betting that official interest rates will fall.
Chart 1 shows the yield curve – it is the difference between the price of long money versus short term returns – and it is a great bellwether when it comes to the future direction of official interest rates. It typically leads by between three and six months.
So, by the end of calendar 2023 we are likely to see the cash rate start to fall. And just like the overzealous hikes of late, the decline could also be steep.
It will probably need to be, or recession here we come.
And between now and then, confidence – see chart 2 – which is already in the toilet, will take a further hit, as will the share market and private business investment.
Thank goodness Australia has lots of other things going for it, because when it comes to economic management, we couldn’t fight our way out of a wet paper bag.
PS. Between a Laugh and a Tear, by John Mellencamp
When this cardboard town can no longer amuse you
You see through everything and nothing seems worthwhile
And hypocrite used to be such a big word to you
And it don’t seem to mean anything to you now
Just try to live each and every precious moment
Don’t be discouraged by the future, forget the past
That’s old advice but it’ll be good to you
I know there’s a balance see it when I swing past
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