The Reserve Bank’s behaviour last week can only be described as bizarre. It’s a sign that it’s lost its bearings and isn’t sure what’s happening in the economy or where it’s headed. What has caused its befuddlement? Our unexpected return to near full employment.
It’s nice to read something grounded in reality. There’s too much soothsaying promising those drowning in debt, to pay off an outrageously inflated asset, a happy ending.
UnfortunateDoorHinge@aussie.zone 1 week ago
Why would the RBA cut interest rates if inflation and unemployment are fine? No one promised it’ll go back to like 1%.
Joshi@aussie.zone 1 week ago
Because the interest rate has a direct impact on quality of life. Everything else being equal a lower interest rate is better.
dgriffith@aussie.zone 1 week ago
Everything else is rarely equal though. As can be evidenced by decades of >5% rates.
Currently interest rates affect QOL so much because everyone is mortgaged up to their eyeballs. That isn’t normal but unfortunately the policies that have promoted that are beyond the RBAs scope.
So yes , lower interest rates help QOL but they also promote inflation and that’s a much harder beast to reign in once it gets up and rolling - for example, we’re never going to get back the cumulative 25% increase in the cost of living we’ve been hit with in the last 4 years or so.
And calling the RBAs response “bizarre” - when we are in a period where caution might be a good idea due to contradictory economic indicators - just seems a bit hyperbolic.
No1@aussie.zone 1 week ago
Not for everyone. Eg, self funded retirees might prefer higher interest rates as they hold a higher portion of their wealth in cash and interest bearing securities etc.
Oh, and banks and their shareholders would definitely prefer higher interest rates.