CONTRIBUTED BY THE REAL ESTATE INSTITUTE OF QLD
In yet another blow to borrowers, the RBA rose the cash rate by 25 basis points from 3.35% to 3.6%, in the tenth interest rate rise since May 2022 – an approach the REIQ says is putting a serious dent in confidence.
REIQ CEO Antonia Mercorella said, “While we were forewarned that we would see another cash rate rise, it’s concerning that it is happening at such a rapid-fire pace with ten out of ten consecutive rises and little impact to inflation.
“You’ve got to be wondering when the RBA might stop and think whether this approach is still the right course of action, because while they are aiming to reduce inflation via these consistent rate hikes, it’s clearly not working.”
Ms Mercorella noted the RBA had stated inflation was largely being driven by supply side matters.
“Energy costs, lack of new land supply and natural disaster impacts are all large contributors to inflation,” she said. “Interest rate increases do nothing to address the cost-of-living crisis that these factors are driving.
“It cannot be left to mortgage holders to do all the heavy lifting to fix our economic woes.
“It’s time for all levels of government to address the productivity constraints on the economy that are actually meaningfully driving inflation. New roads, dams, increased land supply and natural-disaster proofing key infrastructure all need to be addressed urgently,” Ms Mercorella said.
By investing in infrastructure this will reduce the cost of doing business and therefore help moderate inflation growth,
Ms Mercorella acknowledged the pain being felt by mortgage holders.
“Around 80% of Australian mortgage holders have variable loans, which is one of the highest percentages in the world. As a result, our economy is particularly susceptible to rate increases.”
But Ms Mercorella warned that mortgage holders weren’t the only people who would be affected by the RBA’s action, noting that there are much broader implications for all of us.
“There’s no doubt that mortgage holders will feel a direct impact. But it’s important to understand that increasing interest rates have an impact on all of us. Whether you are a renter or running a business, we’re all going to feel the pain of these continual interest rate hikes.
“The number of first home buyers taking out loans in Queensland in January was the lowest in a decade, highlighting the difficulty that this group is now having entering the market. Meanwhile, loans for owner occupiers were below pre-COVID levels, highlighting the negative impact the messaging around rate increases is having on both buyers and sellers alike.”
Ms Mercorella said that “while the conduct of the RBA has justifiably provoked the ire of the community, the reality is that the RBA can only act within the constrained limits of its charter and its objectives”.
“It’s time for governments to step up and play their role to address the issues the RBA is grappling with.”