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Stephen Capello and 1494 2AY, June 2023 RBA recap

Our CEO caught up with Kylie and Matt of 1494 2AY to discuss the Reserve Bank of Australia’s latest interest rate rise.

Stephen starts by commenting that there is consistent language coming from the RBA. That inflation is taking too long to decrease.

He says it was interesting to hear the RBA reiterate again why high inflation needs to be avoided. The eroding value of savings, the negative impact on household budgets and the damaging effect on the economy are among the reasons listed.

The decision to lift the cash rate target by 0.25% means those with a $500,000 mortgage must find an extra $1000 per year.

Stephen explains that it’s $15,000 in extra repayments since the rates started to rise last year. And acknowledges the impact it will add to already high cost of living pressures.

Kylie comments that the increase in the cash rate to 4.1% from 3.85%. It brings it to a level not seen since 2012.

Stephen raises the decision by the Fair Work Commission to lift the national minimum wage by 8.65% and award wage by 5.75%.

He says the decision was made to ensure wages keep pace with inflation. And the real wages of workers don’t go backwards.

Despite it being a “pretty understandable perspective,” he says it will impact businesses. With estimates of almost 8 billion dollars a year in extra costs.

Stephen says many can’t afford it. Which means they’ll have to pass it on to consumers with price increases. Or reduce labour costs and increase unemployment.

He believes Border based businesses will particularly feel the pain. With many still recovering from the pandemic and are reliant on award wage staff.

Matt asks what direction things look to be heading next month. He mentions the latest property reports indicating prices are on the rise again.

Stephen, unfortunately, says it all doesn’t paint a very pretty picture.

He says the property market is unpredictable, and he didn’t expect the rise in the market to come through.

While it may signal that the economic recovery is on track. He says it doesn’t spell good news for renters.

And as for next month’s RBA meeting, Stephen says the governor was clear.
Inflation is still too high. And the key tool the RBA has available to them is the cash rate. So, he anticipates more rises in the months ahead.