Reserve Bank interest rate hikes fail to stop inflation as mortgage holders suffer

RBA Governor Michele Bullock only has “one lever” for taming inflation. Picture: Nikki Short OPINION Today’s expected RBA hike will not be effective in bringing inflation down. We are seeing month after month that inflation is a much bigger problem than can be solved by taking more money off people with mortgages. And there are a couple of other problems with the way the RBA’s “only lever” (as they keep reminding us) to manipulate inflation works. First of all, raising interest rates may mean less money in the budget for mortgage holders, but it also means more money in the budget for people who own their homes outright, because they get higher returns on their cash product investments. MORE: The 10 economists predicting an RBA hold Mortgage holders make up roughly a third of the adult population of Australia, but so do those who own their homes outright. So one basically offsets the other. And the latter are the ones more likely to be treating themselves to a bit of discretionary spending. Who would be spending extra money on petrol these days, for example? Could it be the grey nomads travelling the highways in their fleets, flush with extra money from their increasing term deposi...