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Stephen Capello and 1494 2AY, December 2022 RBA recap.

Our CEO, Stephen Capello, spoke with Kylie and Kev at 1494 2AY, on the Reserve Bank of Australia’s decision to increase the cash rate this month by 0.25%

Stephen comments that it was an interesting decision for the RBA to increase the cash rate by 0.25% while the inflation rate dropped to 6.9%, a marginal decrease from the reported 7.3% inflation rate in September. The inflation rate in Australia is still considerably higher than the RBA’s target of 2.3%.

Kylie and Stephen chat about how some economists say the decrease in the inflation rate is exactly what is needed. The RBA changed the Consumer Price Index basket of goods, reflecting the shift in spending habits with the strong domestic demand relative to the ability of the economy to meet that demand.

They continue to chat about rising prices in new housing (20%), fuel (12%) and groceries (9%), and how many businesses are having difficulty hiring due to the decline in the unemployment rate to 3.4% in October, the lowest rate since 1974.

Kev asked if the continued rise in the cost of living will have further impacts on Australians with Stephen responding that families and individuals will start to cut back with growth in household consumption slowing due to tighter financial conditions. For example, if 500K loans have increased by $834 since the first hike in May, it’s like booking a holiday every month but never leaving your living room. Stephen goes on to say that there is a clear decrease in consumer sentiment around discretionary spending with 37% of Australians planning to spend less on discretionary items less than a year ago and that evidence suggests that 7 out of 10 mortgage owners are reporting they’ll have to or already have adjusted their spending habits over concerns they won’t be able to make repayments.

Kylie comments that the RBA won’t be meeting until February due to the Christmas holidays. The messaging is saying that there is going to be a further increase in inflation over the next couple of months with the RBA expecting to hit 8%.

Click below to listen to the full clip.