Reserve Bank Of Australia (RBA) Does Not Want To Lower Interest Rates
The Reserve Bank of Australia (RBA) does not want to lower interest rates. There I have said it, this is the truth before your eyes, and the evidence backs it up. Central banks around the globe were frustrated when interest rates were at record lows for long periods prior and during the Covid pandemic. Monetary policy is impotent when central banks are in this position. This is why they raised interest rates so steeply and for such a sustained period when inflation jumped up because of supply side shocks within the economy. The RBA wants to have leeway to play with and will not see rates coming back down to the levels they once were.
RBA Maintains High Interest Rate Environment
The Australian economy is in the doldrums with bugger all growth happening. Still, the RBA are keeping their powder dry on interest rates. Yes, unemployment is stubbornly not high enough at 3.9% as of December 2024. This, alone, is not why they are holding off on cutting interest rates. Australians will have to get used to these higher interest rate levels because the central bank will not dramatically lower rates. Yes, we might see a quarter point cut in February 2025 but don’t expect sustained cuts over the year.
Moribund Aussie Economy Hampered By High Interest Rates
Those with home loans should get used to paying higher mortgage repayments for longer. The RBA is not a big fan of where the housing market is at in terms of the Aussie economy. Property prices are too high and their influence on the economy is too great. The current mix is not healthy, economically speaking, for the country.
“Economic growth in Australia is expected to remain subdued in the near term as inflation and higher interest rates continue to weigh on demand. The forecast for GDP growth is softer than three months ago, largely reflecting a weaker outlook for household consumption in the near term. From late 2024, growth is expected to pick up gradually as inflation declines and the pressures on household incomes ease.”
Households have stopped spending to reduce the their risk heading into an uncertain future. The RBA demanded that people reduce their spending and folk have. It is only government spending and immigration keeping us out of a recession, technically speaking, Everybody knows we are in a real recession and have been for around 21 months.
The Reserve Bank of Australia (RBA) does not want to lower interest rates. Their track record is going late and then, going too hard for too long. It is the way they like to do things; it seems.
Robert Sudha Hamilton is the author The Stoic Golfer. His new book is called Bite & Smile. https://www.amazon.com.au/dp/B0DPM9WS6K
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