The “Intersection” of Rates and Inflation on Weekend Sunrise

Matt Doran: Well, families are nervously waiting to tighten their belts this weekend ahead of the Reserve Bank’s interest rate decision. Now, the majority of economists don’t believe a rate hike is likely, but few are predicting a rate cut.

Angela Cox: Each of the big four banks backs that view and is still forecasting a possible rate cut by Christmas. For more, we’re joined by independent economist Evan Lucas. Good morning to you. Thanks for joining us. So the big question, what is your prediction for Tuesday?

Evan Lucas: Look, Tuesday is going to be a nonmovement and in terms of where it is, it’s more, we are about to have two Tuesdays that could define the rest of 2024, why I say, that we’ve got the RBA this coming Tuesday and Tuesday week, we have the federal budget. And so Tuesday will be an absolute outline of what the RBA now sees around inflation, what it sees around the economy, and as you alluded to, what that means for household budgets, because clearly things have changed. Inflation in the first quarter of this calendar year is ahead of their expectations.

And that’s why some economists have changed their views about possible, not just cut, but rate hikes this year, all around the idea that at the moment, we just cannot get inflation back to a level that’s actually sustainable, which is between 2 and 3%.

Matt Doran: It’s a real change in philosophy, isn’t it? And when you look at these economists saying that we now could be looking at hikes. Do you think that that’s where we’re going to have to end up in terms of trying to get some handle on this inflation?

Evan Lucas: So that question Matt, is amazing because part of the problem inside the inflation, there’s a lot of stories you can spin from it because the data is so diverse, and what I mean by that, we know and those of you out there know, that essentials, rent, housing, insurance, health, education, those prices that you just have to take because they’re essential to what we do, they’re the ones that at the moment we just cannot get down. They are sitting at about 5% per annum, and that is where the question will come. It’s why the federal government is part of that question because they do impact some of those parts.

Yes. That means also, unfortunately Matt, that the impact is to the upside in some people’s views to rain in our spending further, despite the fact we’ve got those essentials. Rates might have to rise further. I’m not one of them. I think rates will sit on hold, but that’s their view, and that’s why they’re calling that call.

Angela Cox: Because I’ve read, what’s tricky about it when it’s not popular to increase rates but if we don’t and inflation keeps going up, that stays up. Once the horse bolts, it doesn’t come back down. So we’re paying 20 bucks for a sandwich soon and you can’t get it back. Whereas with interest rates, if we do hike them, we do still have the flexibility to bring them down later. Do you see some logic in that?

Evan Lucas: Yes, I do. So what you’re sort of arguing there Ange is, we’ve got to also remember it’s not just about the inflation now. It’s the inflation we’ve had over the last three years.

So if you look at the dollar that you had at the start of Covid to use that same dollar today, it’s now sitting at $1.17. So we’ve had a 17% increase in the things that we do over that period, and if we keep going at the current rate, it will mean that dollar that you had to do in Covid will be $1.24 by the end of next year. So it needs to come right back in because it comes back into what they want, that dollar becomes $1.20 next year, and that 4 cent change is a massive issue in terms of the impact it has on compounding.

So yes, I agree with that. That’s the theory. Doesn’t mean it’s easy to sell, and it doesn’t make it any nicer for those out there with some form of lending that has to feel the higher interest rates that get us back to that level.

Matt Doran:  And that doesn’t help at all. And that the government’s under some pressure to deliver some relief. Thank you very much, Evan. Appreciate your time.

Evan Lucas:  Thanks, guys.

You might also be interested in

Try Moorr For Free Today

Spend money on the things you want without guilt and save for the future with confidence. You can have the best of both worlds. Achieve more, with Moorr

Privacy Policy

This following document sets forth the Privacy Policy for this website. We are bound by the Privacy Act 1988 (Crh), which sets out a number of principles concerning the privacy of individuals using this website.

Collection of your personal information

We collect Non-Personally Identifiable Information from visitors to this Website. Non-Personally Identifiable Information is information that cannot by itself be used to identify a particular person or entity, and may include your IP host address, pages viewed, browser type, Internet browsing and usage habits, advertisements that you click on, Internet Service Provider, domain name, the time/date of your visit to this Website, the referring URL and your computer’s operating system.

Free offers & opt-ins

Participation in providing your email address in return for an offer from this site is completely voluntary and the user therefore has a choice whether or not to disclose your information. You may unsubscribe at any time so that you will not receive future emails.

Sharing of your personal information

Your personal information that we collect as a result of you purchasing our products & services, will NOT be shared with any third party, nor will it be used for unsolicited email marketing or spam. We may send you occasional marketing material in relation to our design services.

What Information Do We Collect?

If you choose to correspond with us through email, we may retain the content of your email messages together with your email address and our responses.

Cookie Based Marketing

Some of our advertising campaigns may track users across different websites for the purpose of displaying advertising. We do not know which specific website are used in these campaigns, but you should assume tracking occurs, and if this is an issue you should turn-off third party cookies in your web browser.

How Do We Use Information We Collect from Cookies?

As you visit and browse Our Website, the Our Website uses cookies to differentiate you from other users. In some cases, we also use cookies to prevent you from having to log in more than is necessary for security. Cookies, in conjunction with our web server log files or pixels, allow us to calculate the aggregate number of people visiting Our Website and which parts of the site are most popular. This helps us gather feedback to constantly improve Our Website and better serve our clients. Cookies and pixels do not allow us to gather any personal information about you and we do not intentionally store any personal information that your browser provided to us in your cookies.

IP Addresses

P addresses are used by your computer every time you are connected to the Internet. Your IP address is a number that is used by computers on the network to identify your computer. IP addresses are automatically collected by our web server as part of demographic and profile data known as traffic data so that data (such as the Web pages you request) can be sent to you.

Sharing and Selling Information

We do not share, sell, lend or lease any of the information that uniquely identify a subscriber (such as email addresses or personal details) with anyone except to the extent it is necessary to process transactions or provide Services that you have requested.

How Can You Access and Correct Your Information?

You may request access to all your personally identifiable information that we collect online and maintain in our database by using our contact page form.

Changes to this Privacy Policy

We reserve the right to make amendments to this Privacy Policy at any time. If you have objections to the Privacy Policy, you should not access or use this website. You may contact us at any time with regards to this privacy policy.