https://www.news.com.au/finance/economy/interest-rates/mark-bouris-warns-austral...




Mark Bouris
3 min read
December 11, 2024


Mark Bouris



But now, the negative impacts of high interest rates outweigh the benefits.
High interest rates have slowed the economy to the point whereby we’re on the verge of a full-blown recession.
High interest rates are killing household budgets because the cost of servicing mortgages has skyrocketed.
As a result, households are spending less money at the shops.
That means businesses are seeing their sales tank at the same time as their costs rise.
If the situation gets any worse for businesses, bosses will have to cut their costs.
That means they’ll have to let go some of their workers, which will drive unemployment and see people forced onto the dole.
This is a recipe for disaster, and the Reserve Bank can’t let it happen as a result of its one-dimensional anti-inflation crusade.

By the way, the situation out there is worse than the economic figures out from the RBA and the Australian Bureau of Statistics suggest. Because the economy is being propped up by government policies.
First of all, record-high immigration is artificially inflating economic growth.
That’s hiding the full extent of the pain households and businesses are feeling at the moment.
The same goes for public sector spending.
The majority of new jobs being created at the moment are in the public sector.
The taxpayer is paying for all of that.

Meanwhile, the private sector is struggling.
Business investment is down.
New private sector jobs aren’t being created.
But the boom in the public sector is hiding this.
It’s making things look better than they really are in the economic data published by the ABS.
The RBA must take this into account, just as it has to take into account the supply side of the economy.
You may be led to mistakenly believe that the only way to kill inflation is to hike interest rates.
But that’s not true.

One of the core drivers of inflation at the moment is electricity bills.
But high interest rates won’t bring down power prices.
The only thing that will bring down power prices is building more baseload power stations and increasing domestic gas supply.

The same goes for grocery prices.
One of the reasons grocery prices are so high is because the supermarket system in Australia is a duopoly.
Woolworths and Coles control most of the market.
That means they can charge high prices without losing customers to competition offering lower prices.
Again, interest rates won’t do anything to boost competition in the supermarket sector.
That’s a job for the Australian Competition and Consumer Commission (ACCC).

This is why the RBA should hand down a rate cut in February, especially considering the rest of the world is already doing it.
In New Zealand and Canada, rates have already come down by 1.25 per cent.
In the EU, rates have come down by 1.1 per cent.
In the US and Switzerland, they’ve come down by 0.75 per cent.
In the UK and Korea, they’ve come down by 0.5 per cent.
Let’s hope the Reserve Bank follows in February.
Because if they don’t, we’ll trade high inflation for a recession.

Oh, dearie, dearie, me, you're such a Troll, Bobby.  Tsk, tsk, tsk...

Quote:


He's got it all backwards. Interest rates are nearly always high before a big recession, if the reserve bank is doing it's job right.

UnSubRocky wrote on Dec 13^th, 2024 at 1:47pm:



Yes - his VOICE nonsense cost us about $400 million -  Albo keeps wasting money. 

Daves2017 wrote on Dec 13^th, 2024 at 8:55pm:



Albo seems to make up policy on the back of a beer coaster.   

Oh, dearie, dearie, me, you're such a Troll, Brian.  Tsk, tsk, tsk...

Bobby. wrote on Dec 13^th, 2024 at 4:14pm:


No they did not.

The inflation is caused by the heard mentality of people borrowing to invest seeing only good times ahead. The reserve bank does not cause the high inflation by printing money. It does the opposite. It effectively prints money in a recession. It increases interest rates (the opposite of printing money) when there is high inflation.

This used to be a problem before we had independent reserve banks, but since we have had them, they have always acted to reduce inflation when it is high, and make it easier to borrow to invest when there is a recession. People who say otherwise just cannot get their head around the details, or are too lazy to bother.

Look at the ASX 200 plot. One person might look at that and have a fear of missing out and want to jump on the bandwagon. I look at that and think it is time to sell.

Been in recession for years now and abject poverty staved off by one after another short-term fix at the hands of the economic executioners who are killing the country.

May I say again - a family bringing in $530k pa gets childcare handout - WTF brings in 265k pa?

Childcare is inflationary .... so are all the other handouts that create rising costs.....

Bring in masses of people to cater for construction and aged care... when they settle they create the demand for MORE construction while creating further rises in housing costs all round and thus contributing to inflation - and when they AGE they create the need for MORE aged care.... and so it never ends and more and more will be living in tin shanties and tent cities.

Soon, very soon, we will be living in the same Shythole cities as India ... do not worry!  Soon Hong Strathfield will create need for aircraft to arrive over high rise.....