Reserve Bank governor Michele Bullock has now told us that the latest iteration of inflation is being driven by demand, reflecting in increased demand for services such as dentistry and haircuts which are driving up prices and interest rates will have to follow.
So, showing my ignorance, which some would say borders on wokeism, I tentatively put my hand up and ask ‘why is it so ?’
Well, as economists roll their eyes at my naivety they patiently explain that interest rates need to increase for a number of reasons :
1. It will put more money in the pockets of bankers and their shareholders and that must be a win win, surely ?
2. Mortgage interest rates will increase – including on existing home loans because the banks don’t like to give fixed interest loans in this country – these increases will immediately flow through to aspiring homeowners and landlords who, in the latter case, will pass it on to renters. So, again it’s win win – it fits into the economist’s mantra articulated by W C Fields that you should ‘never give a sucker an even break’ more commonly, in banking circles, ‘always kick a man when he’s down’.
3. The stated objective of the Reserve Bank is to take money out of the economy to dampen demand ; clearly if people have no money to lavish on haircuts and dentists this is a good thing for the economy.
So my next hesitant question has to be, what about the stage three tax cuts, won’t that pump more money into the economy as the wealthy splurge on their mullets, quiffs and root-canal ?
Again the economists roll their collective eyes and explain that these tax cuts, passed by the Morrison government in mid-2019, begin in July 2024 will cost the economy around $254 billion over the next decade. The Parliamentary Budget Office [The PBO] has found that the tax cuts will cost $20.4bn in their first year, 2024-25, rising every year to $42.9bn in 2033-34. That evidently is a good thing as it directs large amounts of money into the pockets of the generally well-heeled who won’t fritter this windfall on things like dental care and perms but will wisely buy shares in banks because, as bank robber Willie Sutton once noted when asked why he robbed banks : “Because that’s where the money is.”
So the Governor of the Reserve Bank is clearly pointing at you lot for your lavish expectations of living in houses and driving cars and then, to add insult to economic injury, you insist on enriching dentists and barbers – shame on you !
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