Reserve Bank rate hikes failing as discretionary spending surges past inflation

Reserve Bank Governor Michelle Bullock is expected to announce more rate hikes this year. Picture: John Appleyard Rampant Aussie spending on discretionary items like gambling and entertainment could be creating a heartbreaking problem for mortgage holders ahead of a widely expected interest rate hike this week. New analysis of ABS figures have revealed discretionary spending now accounts for 90 per cent of all real per-person growth in household spending, with homeowners who live in homes mortgage-free responsible for the bulk of the spending. This could be a problem for a Reserve Bank reaching for the trigger on another interest rate hike in the hope that it will tame stubborn inflation as the hike may not stamp out what has become a major source of spending. And it could also mean mortgage holders being stung for higher repayments, with the risk that interest rate hikes fail to deliver a meaningful slowing in inflation, experts claim. MORE: Wrong’: Panic warning on RBA move in days Discretionary spending drives 90 per cent of all growth, leaving the Reserve Bank just one direction to move. Source: ABS Household Spending Indicator. Analysis: Primara Research / Credit24 The analysi...