In this article:
This week the RBA lifted interest rates by a further 0.25%, bringing the official cash rate to its highest point in over a decade, at 3.85%.
This latest rate hike left many bewildered, as homeowners continue to suffer more than most due to the RBA remaining intent on bringing down inflation.
Mark Bouris has been very active in campaigning for the interests of mortgage holders in recent weeks, championing the fact that despite the RBA using interest rate rises to curb consumer spending, we’re still seeing inflation at record levels and consumer spending is still not coming down.
When asked on Channel Nine’s Today Extra whether this rate rise was necessary, Bouris was apoplectic:
“I think it was the opposite. I think it was unnecessary.”
“In fact, I think it was the rate rise we did not need to have and this is going to be the one that breaks the camel’s back.”
“With all these Federal Reserve’s and central banks around the world, they do not achieve the outcome they want to achieve until they break the system. In other words, breaking us down so that we will stop spending money.”
Bouris was keen to point out that mortgage holders are suffering more than most, evidenced by the stories he’s heard recently:
“The people who reach out to me and our organisation (YBR Home Loans), they’re sending us stories all the time about how they can’t manage, how they’ve had to stop sending kids to school sports, they’ve had to sell their car, they’ve had to rent out a room in their house and move the kids into another room, they’ve had to cancel holidays.”
“It is more than mean, it is destructive. And a lot of people’s lives are being seriously challenged right now across this country.”
The question that needs to be asked
The RBA reiterated its commitment to returning inflation to a target rate of 2 – 3% this week, by stating: “High inflation makes life difficult for people and damages the functioning of the economy. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment.”
They went as far as warning Australians that this might not be the last of rate hikes in the foreseeable future, adding: “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.”
The problem with this logic, at least according to Mark Bouris, is that using interest rates to control inflation is a thirty year old policy, and it begs the question, Bouris believes: “is the ‘2 – 3%’ [inflation] rate the right target, for right now?”
“Maybe we can say two or 3% is going to be the target in three or four years’ time,” Bouris said.
“Maybe the target should now be something like 4 to 5%. If we start to get towards that, let’s have a pause. It’s the same reason, I think, the [RBA] paused last month.
Bouris said that last month’s pause in rate rises by the RBA, “led everybody up a garden path so much so that people started going out and buying property. Everyone was thinking ‘wow, hallelujah, it’s over.’
“Then, after pausing, hitting us again with another rate rise, that’s a real slap in the face for Australians.”
“I just, think right now, they are going down the wrong territory at too fast of a pace.”
See more of Bouris’ analysis by clicking the video above.