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So, I was wrong. I thought the Reserve Bank of Australia (RBA) would hold the line on interest rates this month after telling all and sundry that they would be waiting until there was evidence of accelerating wages growth. They also lured thousands of first-home buyers into a hot property market on that promise, allowing the commercial banks to push mortgage debt onto these borrowers, sometimes at rates of six times the borrower’s income (massively overindebted in other words). The RBA also watched as household debt reached record levels and know that hundreds of thousands of borrowers are now on the margin of solvency. And all this was going on while the RBA promised the borrowers that they would not push up rates until that wages growth was evident. So far, there is no evidence of
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So, I was wrong. I thought the Reserve Bank of Australia (RBA) would hold the line on interest rates this month after telling all and sundry that they would be waiting until there was evidence of accelerating wages growth. They also lured thousands of first-home buyers into a hot property market on that promise, allowing the commercial banks to push mortgage debt onto these borrowers, sometimes at rates of six times the borrower’s income (massively overindebted in other words). The RBA also watched as household debt reached record levels and know that hundreds of thousands of borrowers are now on the margin of solvency. And all this was going on while the RBA promised the borrowers that they would not push up rates until that wages growth was evident. So far, there is no evidence of
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So, I was wrong. I thought the Reserve Bank of Australia (RBA) would hold the line on interest rates this month after telling all and sundry that they would be waiting until there was evidence of accelerating wages growth. They also lured thousands of first-home buyers into a hot property market on that promise, allowing the commercial banks to push mortgage debt onto these borrowers, sometimes at rates of six times the borrower’s income (massively overindebted in other words). The RBA also watched as household debt reached record levels and know that hundreds of thousands of borrowers are now on the margin of solvency. And all this was going on while the RBA promised the borrowers that they would not push up rates until that wages growth was evident. So far, there is no evidence of accelerating wages growth. There is lower unemployment, but that is mostly due to the fact that our external border has been closed for two or more years and labour supply growth has been static. That has now changed. I also thought the RBA was resisting the greedy push from the banks to increase interest rates and redistribute income from the struggling households with huge mortgages to the shareholders of the banks, who are well heeled, if anything. And I thought the RBA understood finally that the current inflationary surge has nothing much to do with excess spending in the economy. But I was wrong. Stupidity prevails.Bill Mitchell – billy blog
The RBA has no credibility and the governor and board should resign
Bill Mitchl | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australiael