Raising Interest Rates Won’t Stop Inflation
The Reserve Bank of Australia has raised interest rates again, ostensibly to keep inflation in check. But the reality is that the move will only enrich banks and rich property investors — at the expense of renters and struggling mortgage holders.
Signage at the Reserve Bank of Australia (RBA) building in Sydney, Australia, on February 6, 2023. (Brent Lewin / Bloomberg via Getty Images)
On Tuesday, the Reserve Bank of Australia (RBA) raised interest rates for the twelfth time in fourteen months. RBA governor Philip Lowe justified the rate rises as an attempt to reduce inflation from the current 6.8 percent to his preferred range of 2 to 3 percent. Lowe, whose term as governor ends in September, heavily implied that this unprecedented run of rate rises will continue throughout 2023.
The rate rise will overwhelmingly hurt ordinary Australians. Mortgage holders — the majority of whose loans are on variable rates — will suffer directly. Renters will also suffer as landlords pass on the increase to them, exacerbating the cost-of-living crisis and putting homeownership even further beyond reach.
The latest rate rise comes just days after university loans automatically increased by 7.1 percent. Despite the fact that nominal wage growth is only 3.7 percent — dramatically below inflation — Lowe insisted that “we have to make sure that higher inflation doesn’t translate into higher wages for everybody.”
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