How climate change will affect your mortgage

In ordinary times, a person standing up to make a statement of the bleeding obvious isn’t news.And in these times, when a person stands up and says climate change will have an inevitable impact on our economy, thatReserve Bank deputy governor Guy Debelle focused on how climate change can complicate the task of setting interest rates.And when that person happens to be the deputy governor of the Reserve Bank, that is headline-making stuff indeed.

The starting point of Debelle's analysis is to remind Australians of the dual mandate of its Reserve Bank: to achieve both full employment and price stability. To achieve its goal, the Reserve Bank has just one policy lever: interest rates. The changes it makes to the cost of borrowing affect decision-making across the economy, to either heat things up a bit, or cool them down.

Droughts and floods have buffeted the path of economic growth for as long as we’ve been measuring it.But usually, such weather events have been able to be dismissed as one-off shocks, producing a temporarily lower level of output, followed by a return to norm when weather conditions improve. Droughts, however, represent a negative supply shock to the economy. In such cases, economic output falls, but prices rise. As Debelle puts it: “That is a more complicated monetary policy challenge because the two parts of the RBA’s dual mandate, output and inflation, are moving in opposite directions.”

Much will depend, says Debelle, on how quickly households, businesses and - crucially - governments respond to climate changes.

Jess_Irvine RBAInfo On top of the supply shock from crop losses you have a demand shock from high immigration. Double whammy

Jess_Irvine Lefties & their climate change obsession

Jess_Irvine How come Sydney manages to weave mortgages and the cost of housing into EVERY social issue...now climate change, too? Why not just worry about climate change for the sake of climate change alone...not just whether your mtge payments will go up?

Jess_Irvine We can’t accurately predict the weather for the coming week. Jam your climate change propaganda where the sun don’t shine** **pun intended

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