Reserve Bank rate hikes failing as discretionary spending surges past inflation
New analysis suggests that high levels of discretionary spending by Australians are undermining the Reserve Bank's efforts to curb inflation through interest rate hikes. While the bank aims to slow the economy, spending on entertainment and gambling remains robust, particularly among mortgage-free homeowners.
Why it matters
This indicates a potential disconnect between monetary policy and consumer behavior, which may lead to further interest rate increases that disproportionately affect mortgage holders.
Reserve Bank Governor Michelle Bullock is expected to announce more rate hikes this year. Picture: John Appleyard
Rampant Aussie spending on discretionary items like gambling and entertainment could be creating a heartbreaking problem for mortgage holders ahead of a widely expected interest rate hike this week.
New analysis of ABS figures have revealed discretionary spending now accounts for 90 per cent of all real per-person growth in household spending, with homeowners who live in homes mortgage-free responsible for the bulk of the spending.
This could be a problem for a Reserve Bank reaching for the trigger on another interest rate hike in the hope that it will tame stubborn inflation as the hike may not stamp out what has become a major source of spending.
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