There needs to be some accountability here.
With the RBA jacking up rates, with another 50 basis points seemingly on the cards for next month, we’re now looking at the most aggressive hiking cycle in Australian history.
Really? Does the RBA really need to be dropping bombs like this?
But think about what’s happened here.
About 9 months ago the RBA was telling everyone who’d listen that there was absolutely zero chance of rate hikes this year, and that rates wouldn’t lift until 2024 at the earliest.
I think we could say that’s a miss.
But imagine if you took the RBA at its word. I guarantee you there’s some young buyers out there who took the RBA at face value, got a super-cheap fixed mortgage, and told themselves that they’d be able to handle the reset because “rates weren’t going up until 2024 at the earliest.”
What’s happened to them?
With 125 basis points in a matter of months, they’re now probably looking at their mortgage repayments tripling once they come off fixed rates.
The RBA just sucker-punched them.
Not cool, RBA. Not cool.
And having slashed rates, and then hiked rates, and having given everyone whiplash, people are starting to ask questions about the RBA’s credibility.
People are actually starting to ask questions about the RBA’s sanity.
Take the always on point Christopher Joye at the AFR:
Sadly, the RBA is a little unhinged right now. It is mindlessly repeating mistakes it made both before and after the pandemic, the essence of which is predicating truly extreme policy positions on rubbery forecasts of the future that are not worth the paper they are written on.
… I honestly don’t like writing this, but my spidey sense is tingling pretty loudly right now in respect of the RBA’s sudden swing from relentlessly telling Australians that rates will not rise until 2024 at the earliest to imposing one of the sharpest hiking cycles in the world on borrowers in the form of a staggering 125 basis points of rate increases in the very short space of two months (or over three meetings on 4 May, 8 June and 6 July).
The RBA is further conditioning households via the media to expect a third back-to-back 50 basis point hike in August, which would mean they will have had to wear a stunning 175 basis points of rate increases in just three months. It would also approximate the 175 basis points of hikes the RBA imposed in August and October 1994 with the difference being that households in 2022 are much, much more interest rate sensitive than they were 28 years ago…
One of the most worrying features of the RBA’s commitment to aggressive rate hikes is that they will likely snuff-out whatever hope the central bank had of helping Australians realise decent wage growth.
Yep. I’m not sure the RBA knows what it’s doing.
But it has its finger on the Nuclear Button.
Lets hope it comes to its senses… and fast.
JG.
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