Jun 042019

The RBA did what it telegraphed last week and dropped the cash rate by 25 basis points. Government is now using that rate cut as propaganda, claiming a duel income family on $120k/annum before tax, with a $400k mortgage, are $3,000/annum better off.
“Better Off”???? The cost of living continues to rise, wage stagnation is real, Inflation is stagnating in line with wages, consumers have lost confidence and are not spending and unemployment has risen almost 0.5% over a quarter (seasonally adjusted, of course!)
Clearly, Government deliberately structured the election date, ensuring the bi-partisan tax cuts contained within the budget would NOT be passed into law in the 2018-19 financial year, as was promised. The Conservatives believed they were on a hiding to nothing on 18 May, and have now found themselves sitting in the middle of a poisoned economy they though they’d leave behind for their ideological opponents. This so-called Governmental excuse for superior economic managers are intent on using the RBA’s decisions to take management pressure off itself. One only needed to listen to Fraudenberg to understand this.
Today’s rate cut is intended – so the RBA says – to boost employment. How, I can’t see. Mortgage holders will, if they’re sensible and holding fixed rate products, shrug shoulders and move on. No benefit for them. The lesser intelligent borrowers on variable rates will, if they’re sensible, will continue with existing repayments and pay down capital, saving interest over the long term. Only the completely vacant-brained will drop their repayments and blow the spare cash that might eventuate. Commercial borrowers, if subject to fluctuating rate products, will pay down debt, so I fail to see how any leverage through this 0.25% rate cut can be placed on the corporate sector to boost the vacant jobs list.
It’s a good thing Paul Keating made the RBA a fully independent statutory body. At least it’s decisions are not swayed by political pressure, but I fail to understand why, as I heard one economist state today, the Bank didn’t show some gonads and go a full 50 basis points, or in his words, “Go hard or go home!”