Another rate hike from the RBA could create a recession Australia doesn’t need to have, according to The Switzer Report founder Peter Switzer.
His remarks come as economists predict the RBA will hike rates on Tuesday considering the recent inflationary figures.
“CBA Head of Australian Economics Gareth Aird, he was saying there’s still a lot of people on fixed rate home loans, so the mortgage cliff hasn’t kicked in,” Mr Switzer told Sky News Australia.
“So that monetary policy lag, which is always long anyway, is much longer this time.”
He said this means if RBA Governor Michele Bullock raises interest rates again it could create a recession “we don’t really need to have”.
“So it’s going to take courage to lean against all the economists saying she should raise, but it also takes a lot of courage to basically gamble that we could end up in a recession – so it’s a really tough call for the Reserve Bank governor.”…(read more)
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The Reserve Bank of Australia (RBA) is facing a tough call as it considers whether to raise interest rates in an effort to combat rising inflation. While a rate hike could help to curb price increases, it also carries the risk of pushing the Australian economy into a recession.
In recent months, inflation has been on the rise in Australia, fueled by a range of factors including supply chain disruptions, higher commodity prices, and strong consumer demand. As a result, the RBA has been under pressure to take action to address this issue and prevent it from spiraling out of control.
One potential course of action for the RBA is to raise interest rates, which can help to cool off consumer spending and investment, thereby reducing upward pressure on prices. However, such a move also comes with significant risks, particularly in the current economic environment.
Australia’s economy is still recovering from the impact of the COVID-19 pandemic, and many businesses and households are only just beginning to regain their footing. A rate hike could increase the cost of borrowing for businesses and consumers, potentially stifling economic activity and leading to a slowdown in growth.
Furthermore, a rate hike could also have a negative impact on the housing market, where prices have already reached record levels. Higher interest rates could make it more difficult for homebuyers to afford mortgages, potentially leading to a decline in property prices and a subsequent loss of wealth for homeowners.
Given these considerations, the RBA is faced with a difficult decision. On one hand, the central bank is under pressure to address inflation and prevent it from becoming entrenched in the economy. On the other hand, it must also consider the potential consequences of a rate hike on an economy that is still in a fragile state of recovery.
In this challenging situation, the RBA will need to carefully balance the need to control inflation with the need to support economic growth. It may also consider alternative measures to address inflation, such as tightening monetary policy through other means or working with the government on fiscal measures to support the economy.
Regardless of the path the RBA chooses, it is clear that the central bank is facing a tough call. The decision it makes will have far-reaching implications for the Australian economy and for the individuals and businesses that rely on its stability and growth. Only time will tell how the RBA’s decision will shape the future of Australia’s economic landscape.
We are screwed. Been hung out to dry by Labor and the RBA.
No resilience in the economy. The RBA trying to slow it all down, government across the board, deliberately speeding it up – and we are stuck in the middle.
Most people I know locked in in Sept '21 until Sept '25. So not much pain for those people.
Its not going to cause anything. Stop underestimating the resilence of the Australian economy.
Depression ?
Well the irresponsible Labour government going hell bent on renewable power which has driven up electricity costs is the main contributor for crying out loud
It won't cause a recession. Unemployment is still near record lows.
engineered recession… war… pandem!cs.. bankrupt the world to make way for privately funded global welfare. UBI via a digital 'currency' which you will need permission to ''spend'.. own nothing. be happy. do as ordered or starve.
2030 you will own nothing, but you will be happy. Klause Schwabb of WEF
EVERYONE MUST BE ARSHFUKT!
All part of the plan