A outstanding Australian economist has feared the Reserve Bank of Australia’s (RBA) “over egged” Tuesday’s rate of interest rise, which now has the “genuine” potential to push the nation right into a recession.
Stephen Koukoulas, who was beforehand an economics advisory to the Prime Minister’s Department, believed Tuesday’s Melbourne Cup fee rise of 25 factors went “too far”.
Australia’s official money fee now sits at 4.35 per cent, the best it’s been since November 2011, following 13 will increase in 18 months.
Australia’s Cash Rate 2022
Appearing on 60 Minutes, Mr Koukoulas stated there have been indicators the economic system was slowing down, and the rate of interest hikes wanted extra time to work. Instead, he accused the RBA of “overprescribing the medicine for a problem that’s already been fixed”.
“They didn’t need this last interest rate hike because the economy’s slowing down, inflation’s falling, unemployment’s going up,” he stated.
The danger is now that the “over tightened interest rates” might result in a “hard landing” for the economic system, and plunge the nation into recession. In technical phrases, that is categorised as two consecutive quarters of detrimental progress in actual GDP, the final of which was recorded in 1991.
“There’s a real risk that the RBA has over egged it,” stated Mr Koukoulas.
“(Economists) really dislike them intently … they cause economic pain, they cause people to lose jobs,” he stated.
He stated there was “close” to a 50 per cent, “genuine” probability of a recession.
“So it’s a line ball call,” he stated.
“We’ll be watching the data just like the Reserve Bank … to see whether that’s a real probability.”
Following her first fee rise, as the brand new RBA governor, Michele Bullock stated the hike was wanted to stem inflation.
“Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago,” she stated.
“The latest reading on CPI inflation indicates that while goods price inflation has eased further, the prices of many services are continuing to rise briskly.”
Mr Koukoulas stated he believed charges would doubtless fall between March to May 2024, and advised debtors they have been “almost through the worst of it”.
“For people with a big mortgage, yes, hang in there, beg, steal, or borrow to make your repayments. If you can get through this difficult period of high (and) cost-of-living pressures, then there’ll be a sigh of relief for everybody.”
Source: www.perthnow.com.au
