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The Reserve Bank of Australia (RBA) seems intent on pushing the interest rate hikes that are expected, as far back as possible - well, until at least after the federal election, booked in the calendar for the 21st of May. Are they hoping that some miracle will stay their execution via the anger of people who believed them when they promised "no increases until at least 2023"?

![image.png](https://files.peakd.com/file/peakd-hive/tarazkp/23uQLqk9HEw3zxoQwnqusn9r4SgcVoxzReHBCZWrowGTiqPRPekskJiqwL5J7BQb7a7mA.png)

The RBA has 3 mandates: 

1. a stable currency 
2. full employment
3. economic growth

Well, the currency is doing okay stability-wise, hovering around 75 cents on the USD. The unemployment rate is very low at 4% which is good. But, while the GDP is trickling up which is the main indicator used for economic growth, the other is the CPI, which looks at the affordability of households and this is affected heavily by inflation. If wage growth doesn't keep up with inflation, people become poorer. And at 2.3% last year, wage growth is definitely not keeping up and as we are not even close to seeing the real inflation hit yet, there is a lot of pain to come. 

The problem with a lot of the indicators like GDP is, while businesses can make more that add to the growth, this no longer translates into wage growth. We saw this during the last two years where the world's largest corporations and wealthiest people made more and got a lot wealthier, while the average person lost ground. This is further exacerbated because many of the world's wealthiest companies, do not need a lot of people in order to generate their wealth. This means, they can make more, with less.

But, over the last few years, many people in Australia and likely worldwide, have been goaded into buying property, encouraged by the non-existent interest rates. This in turn drove the values of real estate through the roof and made a lot of pre-existing owners wealthier, but it created a massive amount of exposure for the new owners who have had to stretch their losing-ground incomes to the max, just to get a foot in the property door.

As inflation increases faster than wage growth, many are going to find themselves less and less capable of meeting their debt obligations and if interest rates move up, their debts are going to become untenable. When people can't service their loans, they default and when that happens, it all comes crashing down - but the debt doesn't go away. 

By some estimates, the housing market which has been running very hot over the last two years especially, is predicted to shed 30% of its value in the coming two years. This means that all of those families that FOMO'd into a $1.5M house near Sydney with a 20% deposit of 300K, will have the debt on it, but the house will only be worth $1.05M, meaning that if they are forced to sell for inability to service their loan repayments, they will not only lose their deposit, they will still be 200K in debt. This must be pretty bloody scary for a lot of people, especially if they are stretched to their outer edge already and the real cost of living is only now on the rise. 

I don't believe there is some grand plan by the RBA to screw over the Australian population, but going on the basis of the economic mismanagement over the last two years, I could be forgiven for thinking it. What I do believe however, is that the tools that the governments use to control money are inadequate for the economy we have created, one where it is possible to build a business conglomerate and take the majority of incoming wealth, out of the hands of control. The 100-year old systems that the governments are using, were not designed for the likes of Amazon, Google and Facebook.

And, it is exactly these kinds of companies that have made the lion's share of gains over the last two years, where trillions of dollars were directed straight into their pockets, while small and medium business and *normal people,* suffered at the hands of lockdowns. Still forced to spend, the average person directed their value into organizations that took it offshore. This means that less of it was available to leverage to manage internal fiscal policy, which never handles it well anyway. 

I am not an economist, but I feel that we are heading for a global economic catastrophe like we haven't seen before, as rather than the typical "controlled demolition", the usual detonators don't know what the wires are even hooked up to. They keep pressing the button, but what they are expecting to happen, doesn't. This is making them less relevant in society, as if they are unable to fulfill their mandates and *especially* people's sense of quality of life and opportunity, they are going to face heavy backlash.

Is it any wonder that they are waiting until after the election?

Taraz
[ Gen1: Hive ]


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