Mortgagees pay after rate hike
HOME owners with an average mortgage will have to find another $50 a month after the Reserve Bank yesterday raised rates yet again.
As widely tipped by economists the central bank raised the overnight cash rate by a quarter of a percentage point to 4.5 per cent – the third hike in as many months and sixth since October.
“This rate rise is going to be quite devastating,” Southern Cross University adjunct professor in economics, Lawson Savery, said yesterday.
He predicts cash-strapped young couples who were enticed into the property market by the first home-buyers grant and low interest rates will be forced to put off having children as they will need to maintain a double income to meet mortgage repayments.
He also warned jobs may be lost with the industries most affected by the latest rate rise – manufacturing, construction and tourism – with tourism being the bedrock of employment on the Northern Rivers.
“The rise will have a double effect for rural areas: Fewer children and fewer jobs. Many people looking for work will also go to the resource rich states of Queensland and Western Australia,” Prof Savery said.
He said the problem was Australia had developed a two-tiered economy, with the strength of the resource-rich states pushing the rate of inflation into the upper end of the RBA’s comfort zone of between 2pc and 3pc.
Prof Savery said there were winners from yesterday’s decision, inc- luding self-funded retirees who had been particularly hard hit during the world financial crisis.
However, ‘the negatives far outweigh the positives’, he said, adding that if the Federal Government wants to spare households more pain it must make some tough decisions in next week’s Budget.
“Interest rates are a blunt instrument, but the Government has other options that the RBA doesn’t have, like increasing taxes,” he said.
Announcing the decision, RBA governor Glenn Stevens said the threat of a serious economic contraction had passed some time ago.
However, retailers yesterday said the central bank was putting business confidence at risk, with its sector still recovering from the downturn.
“Clearly, the RBA have their heads buried in economic textbooks and are totally unaware of how tough a time it is at the moment for small business and the retail sector,” United Retailers’ Federation national president Scott Driscoll said.
“The rate hike will cost thousands of jobs.”
The one ray of hope for homeowners and businesses is that rates are now ‘back to normal’ after being slashed in response to the economic downturn.