Latest / 360 with Katie Woolf / CDU Economist Professor Rolf Gerritsen says with the rate increase the Reserve Bank is anticipating a wage increase...although he's less optimistic about that

Transcript

CDU Economist Professor Rolf Gerritsen says with the rate increase the Reserve Bank is anticipating a wage increase...although he's less optimistic about that · 360 with Katie Woolf

• 0:00
  Speaker 1: Now, as we know, the Reserve Bank has increased interest
• 0:02
  Speaker 1: rates for the first time in more than eleven years
• 0:05
  Speaker 1: with that twenty five basis point hike, taking the cash
• 0:08
  Speaker 1: rate target to zero point thirty five percent. So if
• 0:11
  Speaker 1: it is passed on by banks in full, as I've
• 0:13
  Speaker 1: been saying, and pretty much all of them have said
• 0:15
  Speaker 1: that they are going to will certainly A and Z, Westpac,
• 0:18
  Speaker 1: NAB they've all said, and Commonwealth Bank that they'll be
• 0:22
  Speaker 1: passing it on, it does mean that your mortgage will
• 0:25
  Speaker 1: go up about sixty five dollars a month on repayments
• 0:27
  Speaker 1: of around five hundred thousand. That's what's been calculated. But
• 0:31
  Speaker 1: I guess a lot of people wondering what it means
• 0:34
  Speaker 1: for everyday Territorians like you and I and joining me
• 0:37
  Speaker 1: on the line right now is Charles Dawen University economist
• 0:40
  Speaker 1: Rolf Gerretson. Good morning to you're Rolf.
• 0:44
  Speaker 2: How are you very well?
• 0:45
  Speaker 1: Thank you? Now what does this rate rise mean for
• 0:49
  Speaker 1: everyday Territorians.
• 0:52
  Speaker 2: Well, initially, as you pointed out, the mortgage costs are
• 0:56
  Speaker 2: going to go up, So anybody who bought a house
• 0:59
  Speaker 2: in the housing boom in the last two years is
• 1:01
  Speaker 2: going to suddenly be saddled with the full implications of
• 1:05
  Speaker 2: that decision.
• 1:06
  Speaker 1: And so for some people, as I've said, from what
• 1:09
  Speaker 1: I can gather, if you've got a mortgage around five
• 1:11
  Speaker 1: hundred thousand, it means it'll go up about sixty five
• 1:13
  Speaker 1: dollars a month. For some people that may not have
• 1:16
  Speaker 1: a huge impact. But the cost of living is really
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  Speaker 1: quite high at the moment in the territory as well,
• 1:21
  Speaker 1: isn't it.
• 1:22
  Speaker 2: Well, I mean that's partly why the Reserve Bank raised
• 1:26
  Speaker 2: the rates is because we've got inflationary pressures, some of them,
• 1:30
  Speaker 2: as the government has pointed out, we can't do anything about,
• 1:34
  Speaker 2: I mean, supply mix all over the world as we
• 1:37
  Speaker 2: come out of COVID and that kind of stuff. But
• 1:40
  Speaker 2: there's also I think the Reserve Bank is firing a
• 1:43
  Speaker 2: warning shot across the government's bows by saying, you've budgeted
• 1:48
  Speaker 2: in the forward estimates the next four or five years
• 1:50
  Speaker 2: for large deficits, so you're feeding inflation.
• 1:56
  Speaker 1: Yeah right, And so what do you think I mean
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  Speaker 1: you said that that warning to the government. What do
• 2:01
  Speaker 1: you think they're hoping that the rate rise will do rolph?
• 2:06
  Speaker 2: Well, well, you know, I mean the Reserve Bank is
• 2:12
  Speaker 2: that doesn't take note of politics. So that's why its
• 2:17
  Speaker 2: issue to a rate rise in the middle of an
• 2:19
  Speaker 2: election campaign.
• 2:21
  Speaker 1: Yeah, it was, you go, sorry to say.
• 2:25
  Speaker 2: The Reserve Bank is saying, in effect that over the
• 2:27
  Speaker 2: next year it'll lift the basis rate to about two
• 2:32
  Speaker 2: point five percent. Right at the moment it's about a
• 2:36
  Speaker 2: third percent point three five percent, So that's a massive increase.
• 2:40
  Speaker 2: So they're going to really put the fiscal screws on
• 2:43
  Speaker 2: the economy because they can see the economy is growing
• 2:48
  Speaker 2: reasonably strongly, and they anticipate wage increases. I'm a little
• 2:53
  Speaker 2: less optimistic about that than they are. But we look
• 2:57
  Speaker 2: like we have a labor bottlenecks because we haven't been
• 3:01
  Speaker 2: importing lots of migrants, and the success of governments have
• 3:07
  Speaker 2: run down the tape system, so we're not supplying our
• 3:09
  Speaker 2: own skilled manpower. And we have bottlenecks in terms of
• 3:14
  Speaker 2: women's participation because of the lack of childcare. But so
• 3:20
  Speaker 2: all of those structural factors aside, I mean, the reserve
• 3:23
  Speaker 2: banks in effect saying, well, we've we've seen it. This morning.
• 3:27
  Speaker 2: The banks have put their rates up to get under
• 3:29
  Speaker 2: five percent, between four point sixty five and four point
• 3:33
  Speaker 2: eight five percent. On my home mortgages, and if the
• 3:36
  Speaker 2: rate goes up with the underlying cash rate goes up
• 3:39
  Speaker 2: to two point five percent, then you can expect to
• 3:43
  Speaker 2: be paying the mortgages in the range of eight to
• 3:45
  Speaker 2: nine percent, and that really will hit people, and that
• 3:49
  Speaker 2: will hit people even who bought houses five years ago.
• 3:51
  Speaker 1: Yeah, well and ross, particularly here in the Northern Territory,
• 3:56
  Speaker 1: I would imagine, because to put it into that context
• 3:59
  Speaker 1: for the NT, we know that we've got a situation
• 4:02
  Speaker 1: at the moment where on Monday we had public servants
• 4:05
  Speaker 1: who were protesting against the wage freeze that the Gunner
• 4:09
  Speaker 1: government is implementing. And something like that, I've no doubt
• 4:13
  Speaker 1: is now going to have quite a big, quite a
• 4:15
  Speaker 1: big impact for those people who are affected.
• 4:19
  Speaker 2: Yes, I think the pressure to get rid of that
• 4:22
  Speaker 2: four year wage freeze will become irresistible and so the
• 4:28
  Speaker 2: charity go will add more to its deficit, add more
• 4:31
  Speaker 2: to our debt.
• 4:33
  Speaker 1: And that's the hard part, isn't it.
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  Speaker 2: Well, we're just going to believe it to someone else's
• 4:38
  Speaker 2: grandchildren to sort out.
• 4:41
  Speaker 1: Well, And you know, it does make it so difficult
• 4:43
  Speaker 1: because you sort of think to yourself at the time
• 4:45
  Speaker 1: that they said that wage freeze was happening. I think
• 4:47
  Speaker 1: a lot of people went along with it or thought, oh, yeah,
• 4:50
  Speaker 1: fair enough. I haven't had a wage freeze through the
• 4:52
  Speaker 1: through the global pandemic, or I haven't had a wage
• 4:55
  Speaker 1: increase I should say, throughout the COVID pandemic. But now
• 4:59
  Speaker 1: when you looking at these interest rates, they've gone up
• 5:03
  Speaker 1: for the first time in eleven years. From what you're saying,
• 5:05
  Speaker 1: we can expect them to you know, we can expect
• 5:07
  Speaker 1: them to go up further. So it will have a
• 5:10
  Speaker 1: big impact on people in the territory.
• 5:14
  Speaker 2: Yeah, well, because the cost of living is rising, I
• 5:16
  Speaker 2: mean the cost of food. If you go to wools
• 5:19
  Speaker 2: or Coals to buy your weekly shopping, you will have
• 5:21
  Speaker 2: discovered that instead of spending two hundred, now probably spending
• 5:25
  Speaker 2: two hundred and thirty. And every time you go to
• 5:27
  Speaker 2: the bowser to get fuel the price has gone up.
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  Speaker 2: So there are strong cost of living pressures that are
• 5:36
  Speaker 2: to a degree important, but to a degree a response
• 5:40
  Speaker 2: to fairly strong demand in the economy, which which the
• 5:43
  Speaker 2: federal government is driving through its deficit policy. Might even
• 5:48
  Speaker 2: say they like a labor government.
• 5:51
  Speaker 1: Well, this is always the argument, isn't it that you know
• 5:55
  Speaker 1: they always say that that the coalition or more conservative
• 5:58
  Speaker 1: government is better with the finances then a labor government.
• 6:02
  Speaker 1: I guess you know, depending on which way you vote,
• 6:04
  Speaker 1: you'll have varying, varying, varying opinions on that. But Ralph,
• 6:10
  Speaker 1: I am keen to you know, to know you touched
• 6:13
  Speaker 1: on this just a moment ago when you spoke about
• 6:16
  Speaker 1: the Northern Territory and spoke about whether this you know,
• 6:19
  Speaker 1: whether this increase is going to be sort of too
• 6:22
  Speaker 1: much for the government and they are going to backflip
• 6:25
  Speaker 1: on that, on that wage freeze that's been proposed for
• 6:28
  Speaker 1: territory public servants. We know that the territory budget's obviously
• 6:32
  Speaker 1: being handed down next Tuesday. Do you think that this
• 6:35
  Speaker 1: rate rise is going to have much of an impact
• 6:38
  Speaker 1: and in what way?
• 6:42
  Speaker 2: It's very hard to say, because I mean, in practice,
• 6:46
  Speaker 2: the budget should already have been set and so I
• 6:50
  Speaker 2: don't know until the budget comes out whether they factor
• 6:53
  Speaker 2: in an increase in the cost of purchasing money. I mean,
• 6:58
  Speaker 2: at the moment it's costing about one hundred and fifty
• 7:01
  Speaker 2: million dollars a year to borrow money to upset the
• 7:05
  Speaker 2: deficits that we're running or the deaths that we're accumulating,
• 7:12
  Speaker 2: so that inevitably means that that cost will go up.
• 7:17
  Speaker 2: But you know, we'd have to wait for Tuesday to
• 7:19
  Speaker 2: see whether or I'm the government's factor that's in on anything.
• 7:23
  Speaker 2: When Treasury is a competent department, and I would think
• 7:26
  Speaker 2: that they would have anticipated this raid rose by the
• 7:29
  Speaker 2: Reserve Bank and the increase in the cost of buying money.
• 7:34
  Speaker 1: It's certainly going to be an interesting couple of weeks.
• 7:37
  Speaker 1: I reckon roll for what do you reckon it means though?
• 7:39
  Speaker 1: Or what kind of impact do you think that this
• 7:41
  Speaker 1: rate rise is going to have them when it comes
• 7:43
  Speaker 1: to the federal election. I know, I think the last
• 7:46
  Speaker 1: time that they put the rates up during a federal
• 7:48
  Speaker 1: election was when John Howard was still in power.
• 7:52
  Speaker 2: Yeah, it's well, you know, there's been unusual circumstances obviously
• 7:56
  Speaker 2: in the last two years. But well, I don't know.
• 8:01
  Speaker 2: I mean, if I can put my political hat on,
• 8:06
  Speaker 2: I think, I mean, the Solomon's situation sort of blew
• 8:11
  Speaker 2: the government's defense credentials out of the water, and I
• 8:14
  Speaker 2: think this rate rise will blow its economic manager credentials
• 8:17
  Speaker 2: out of the water. So I think it spells a
• 8:21
  Speaker 2: labor victory in the next federal election.
• 8:24
  Speaker 1: Well, it's going to be, like I said, an interesting
• 8:26
  Speaker 1: couple of weeks off. We might try and catch up
• 8:28
  Speaker 1: with you again after the territory budget's handed down next
• 8:31
  Speaker 1: week if that suits.
• 8:32
  Speaker 2: You, Oh why not.
• 8:34
  Speaker 1: I mean, well, we appreciate your time this morning. Thank
• 8:41
  Speaker 1: you very much for having a chat with us.
• 8:43
  Speaker 2: That's all right, having the data you too.