Comment on The RBA faces its 'most complicated' rates call in years. What could it mean for you?

nevetsg@aussie.zone ⁨4⁩ ⁨days⁩ ago

• ryannathans@aussie.zone ⁨4⁩ ⁨days⁩ ago

  One of the RBA’s jobs is to combat inflation. It has very very few tools to do so, but they are broadly powerful. They would not typically care about home loans, but the housing bubble is now so big it is a major throat to our economy as a whole, so they have to not cause major and rapid defaults.

  High energy and fuel prices drive inflation higher. All goods require energy to produce, and fuel to transport.

  Increasing the cash rate decreases inflation because it makes debt more expensive. Higher interest rates lead to less investment in companies and the stock market because money in the bank provides a higher rate of return, which leads to less growth.

  Higher interest rates then lead to reduced wages as businesses have less demand for staff, don’t have investment for new projects, and need to focus on their debt.

  Then you see reduction in consumer spending. People are making less money. People are paying more interest on their debt. People with money are putting it in the bank and not spending it because interest rates are better. It slows down the entire economy, which stops the price of goods going up so fast.

  This can easily lead to a recession if not carefully managed. People are struggling to begin with, but to combat these high prices all the RBA can really do is increase the cash rate to make debt more expensive and money in banks not invested more lucrative

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  • nevetsg@aussie.zone ⁨4⁩ ⁨days⁩ ago

    Thank you for the details. I never thought of the higher return on cash accounts.

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  • prex@aussie.zone ⁨4⁩ ⁨days⁩ ago

    That’s a lot of words to say hello recession.

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  • TheHolm@aussie.zone ⁨4⁩ ⁨days⁩ ago

    Good write up.

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• hanrahan@slrpnk.net ⁨3⁩ ⁨days⁩ ago

  no, you’re still spending, whether it’s pies or petro they’re both measured in the CPI

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