RBA plays ‘recession roulette’ as it steps up inflation fight

For people who were ahead on their repayments, the length of their mortgage is being extended by months and years every time the RBA board meets.

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Buried among all the inflation-fighting rhetoric, however, Lowe also revealed the economic cost of the RBA’s actions.

Unemployment, now at 3.5 per cent, is tipped to climb to 4.5 per cent. In human terms, that’s about 150,000 people out of work.

The bank expects the economy to expand just 1.25 per cent this year. Population growth is back at 1.6 per cent and on its way to almost 2 per cent.

In other words, there’s going to be less economic pie to share around the growing number of hungry Australians. It’s a recession in everything but name.

The decision puts even more pressure on Treasurer Jim Chalmers to deliver a budget next Tuesday that targets relief at those suffering most from high inflation and the RBA’s rate rises, while also putting downward pressure on inflation.

“I think that the rate rise is really a pretty stark, pretty brutal reminder of the difficult economic conditions that we confront as we finalise the budget,” he acknowledged.

Chalmers will reveal next week the extent of that brutality. Slower growth, higher unemployment, falling real wages – it’s a tough trifecta for all Australians.

Lowe said the path to a soft landing remained a narrow one. Deloitte Access Economics head Pradeep Philip thinks we’ve gone off the path and are now wandering aimlessly in the jungle without a machete.

“The rate increase shows that the Reserve Bank is still playing recession roulette, despite briefly and sensibly walking away from the table when it paused rate hikes last month,” he said.

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