The ups and downs of interest rates mean more to Australian families than they do to virtually anyone else on the planet because our broken housing market means we’re among the very biggest borrowers in the world. So it’s no surprise the nation’s long-suffering borrowers are desperately hoping the first interest rate cut from the Reserve will be sooner rather than later.But I’ve got bad news: chances are it’s going to be a long time between drinks if you’ve got a mortgage.
Better still, if you double the pace of price increases over the past six months, that figure is 2½ per cent, smack bang in the middle of the range where the Reserve would love to see inflation over the long haul. That means that there’s already been a remarkable loss of momentum in the Reserve Bank’s number one enemy.
Problem No. 1 is that, although inflation has come down fast, it still has a way to go before it’s out of the red zone. While overall prices rose by “only” 3½ per cent in the past year, the Reserve Bank’s preferred measure shows prices were up by almost 4 per cent. That’s still uncomfortably high.And although the fall in inflation has been rapid , it’s always been the “last mile” in the inflation fight that’s been expected to be the toughest.
But the final nail in the coffin for your hopes of early help on the mortgage front is because of what’s about to happen to your taxes. The political types got excited by the rejig in theIf you’re the Reserve Bank, though, it’s not the rejig in these taxes that you’re interested in. The Bank doesn’t care who gets the dollars – it cares about how many of those tax cut dollars are going to get spent. Remember, inflation boils down to too many dollars chasing too little stuff.
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