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RBA’s ‘unnecessary’ rate rises slammed by experts as ‘consumer recession’ looms

Updated: Apr 21, 2023

One of the nation’s best-known firms has spectacularly unleashed on the RBA, blaming it for pushing the Aussie economy to the brink.

One of the nation’s biggest consultancy firms has spectacularly unleashed on the Reserve Bank of Australia, slamming the board for “tempting fate” and putting the economy “on a knife-edge”.

According to the newly-released Deloitte Access Economics Business Outlook, the RBA’s decision to pass two rate rises earlier this year hot on the heels of eight in a row in 2022 was a mistake that has harmed not only individual homeowners, but the wider economy too.

Despite hitting the brakes this month and leaving the official cash rate at 3.6 per cent, Aussie mortgage holders have been feeling the pinch for months now, with more rate rises in the near future also a near-certainty.

Yet the report notes that Australia now faces the weakest rate of economic growth outside of the Covid pandemic since the recession of the early 1990s, and that our monetary environment is “finely poised”.

Deloitte Access Economics Partner and report lead author, Stephen Smith, came out swinging, directly hitting out at the RBA’s recent moves“Our view remains unchanged – the additional 50 basis points of increases earlier this year were unnecessary, and have prompted a further downgrade in Australia’s growth outlook,” Mr Smith said.

“That downgrade is centred on our households, and a ‘consumer recession’ is now forecast in 2023, with household spending expected to finish the year below where it started. “At a cash rate of 3.6 per cent, most Australians will be just fine. Many, however, will not. In just 10 months, the cost of servicing an average $600,000 mortgage will have risen by more than $14,000 per year once those rate hikes are fully passed through. “But that’s just the average, and there are plenty of mortgage holders on either side of those numbers.”

Mr Smith also highlighted the RBA’s own modelling, which predicts 15 per cent of variable-rate, owner-occupier mortgage holders will be in negative cash flow by the end of the year, with some already suffering. “On these numbers, at least 300,000 Australian households may currently be experiencing negative cash flow, with mortgage repayments and essential living expenses together exceeding household disposable income,” he said.

“That should shock all of us.”

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