I am not an economist, but I did study it in year 11.
So forgive me if this is uninformed brainless speculation, but I was thinking about yesterday’s interest rate rise.
I understand the principle of the Reserve Bank of Australia fiddling with interest rates when inflation is high, to scale back demand, though I wonder if it really works as well as it’s meant to. And although some calculations of inflation include things like petrol (which to a certain extent keeps selling no matter what the price, because so many people have no viable alternative to driving) and bananas (which are not only expensive, but physically hard to find at the moment, so most people aren’t actually buying them), the RBA’s calculations don’t include these, and still come out at 3.3%, which is apparently high.
Is it the case that RBA fiddles interest rates because that’s about the only mechanism it has to affect consumer spending? I’m not sure if this is intentional or just the way the economy ended up by accident, but it seems to be a rather clumsy approach, given that it only directly hits people with loans. (Yeah I’m one of them, though I’m not so close to the line that it’ll cause me any problems.) Are there any more practical ways of doing it? (It’s not like the government is going to give the RBA the power to cut wages or fix prices to slow down inflation.)
As it happens, on the same day the RBA made its decision, I got my first council rates notice. I’m becoming ever-more aware of the financial costs of owning a house, and I can understand why some say it makes better economic sense to rent, and invest.
I really like being in charge of my own place, though.