Latest / Money Grows on Trees / #303 - WARNING! The RBA is about to HIKE Interest Rates

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#303 - WARNING! The RBA is about to HIKE Interest Rates · Money Grows on Trees

• 0:00
  Everyone thinks the RBA is about to cut interest rates. The media is telling you.
• 0:03
  The banks are telling you. Even the government wants you to believe it. But
• 0:07
  they're all wrong. And if you believe them, if
• 0:10
  you borrow more, if you buy a property, if you think your mortgage is
• 0:13
  about to get cheaper, you're about to get blindsided. Here's
• 0:17
  what nobody's telling you. The RBA is actually trapped. Inflation
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  isn't dead, it's just hiding. And the data that's coming in over the last,
• 0:24
  you know, few months, it's going to force them to do the one thing
• 0:27
  that will shock every single Australian homeowner. They're
• 0:31
  going to actually raise rates, not cut them. raise them. I
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  know that sounds insane, right? Because you're so used to low rates. I
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  know it goes against everything you're hearing, everything they're telling you, but
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  I'm going to show you exactly why it's about to happen. The data they're looking at,
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  the pressure they're under, and what you need to do right now to protect yourself
• 0:49
  before it's too late. late. I'm Lloyd James Ross, seven figure investor and
• 0:52
  entrepreneur and I've helped thousands of business owners and professionals turn
• 0:55
  financial stress into success. If you're stuck in old money
• 0:59
  habits, overwhelmed by investing or unsure where to start, this
• 1:02
  is for you. I'll give you the mindset and strategies to take control,
• 1:06
  grow your wealth and achieve financial freedom. It's time to
• 1:10
  make your money work for you. At its most recent meeting, the RBA held
• 1:13
  the cash rate at 3.6% and explicitly said
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  it did not consider cutting rates. That's not the language of
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  a bank about to loosen policy. So here are the
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  key facts. Rates were cut three times in 2025. which
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  they shouldn't have been, but they were. And then they stopped at 3.6%. The
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  RBA's inflation forecasts have been nudged higher into
• 1:35
  mid-2026, which is this year. And the deputy governor, Andrew
• 1:38
  Hauser, stressed that inflation is still too high, as we know. It's in the
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  threes, right? When a central bank stops cutting and puts inflation
• 1:45
  first, markets start to price in rate hikes instead of all the
• 1:48
  relief. So why the no-cut
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  story is probably now ending? Inflation
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  isn't gone. It's just cooling temporarily. And
• 1:59
  the latest monthly CPI report showed that inflation did
• 2:02
  ease somewhat. It went down from 3.8% to 3.4%, but it's still
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  above the RBA's 2% to 3% target. That's what
• 2:09
  they're targeting. 2% is the best, meaning there's still some pressure there.
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  So core inflation still weighs heavily on the RBA's decisions. So
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  yes, inflation has slowed a little bit, but that's not yet in
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  the zone where cuts can make sense now at all. In fact, they
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  made that mistake last time when they should have left rates at
• 2:27
  4.1 and they cut them right down to 3, but they should have just left them. And they restocked
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  inflation. So the notion that easy cuts are
• 2:35
  coming across 2026 is fading. And everybody knows that
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  now. Hikes are starting to creep into the forecasts. They're assuming that
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  hikes are going to happen this year. So market economists are starting to flip
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  Yeah, the big four banks are now, they're all split. Some
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  are forecasting a 25% point hike as
• 2:52
  soon as next month, February, right? Others are still seeing a
• 2:55
  bit of a hold. But economists are warning that the RBA
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  may raise rates at least twice in
• 3:04
  2026, right? Persistent underlying inflation will force them to do
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  that. So it's not random chatter.
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  It's not just speculation. It's becoming more of a consensus now
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  across the board. And what does this mean for your money? What
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  does this mean for your personal finances? So if you're a mortgage holder,
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  particularly if you've just recently grabbed the mortgage, arguably,
• 3:26
  what could possibly be not a really good time? Record high houses.
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  mortgage rates fairly low still, and you're like, yeah, I've got
• 3:34
  my house, and then bang, you're going to get hit with some rate hikes, right? Like, why is
• 3:37
  my mortgage going up? I didn't understand what interest rates mean. This is what most people do.
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  They jump into the housing market because they get FOMO. They want to go through the
• 3:44
  rite of passage in the Australian life of owning a home.
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  If you don't own a home, you're a peasant. And they want to make sure they're not peasants, so
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  they go and get a house. There's other reasons why they buy houses, too. I get it. But a
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  0.25% rate hike will
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  add to the repayments obviously. And people won't realize that until it happens, especially
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  again if you're a high debt household, meaning you've just acquired
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  a home and you're already challenged to meet the repayments. So
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  that's for homeowners, that's for people who own a mortgage. What about for
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  consumers? Well, it's good for us. The
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  consumer Confidence will dip if rates go
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  higher, which reduces spending. Now, the whole idea of
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  that is that so inflation falls. Now, if you're a consumer, it means
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  you can start buying maxi bonds without having to mortgage your house and get one. It
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  means you can buy maxi bonds for less than $6.60. It just means that
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  maxi bonds aren't gonna go up. And I know that's the most important thing as a consumer. When
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  you go into the corner shop and you go to get your maxi bond, you don't really wanna
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  be paying 10 bucks for it. Now, if we don't get in front of this and hike
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  rates, you're gonna be paying 20 bucks for a maxi bond. And
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  I know you don't want that. I don't want that. So as
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  a consumer, we want rates to go higher. The unfortunate thing is most
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  consumers are mortgage holders too, or a lot of them are. And
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  so you're like at this impasse, like I want rates to go up because I want to have my maxi bond,
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  but for not paying too high a price for it, but I also want to
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  make sure I don't get hit with my mortgage. It's a hard
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  place to be. What about as an investor? Well, interestingly,
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  when rates go up to curve inflation, assets
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  fall. So this is very much an inverse correlation with interest rates. And
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  people don't understand this too, but it's a very important macroeconomic principle.
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  It's physics. It's mathematics. It's not up for debate. When
• 5:28
  rates go up, asset prices fall. I've done a number of
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  episodes. Go back and check out all our episodes. I've done a few episodes
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  on the specifics of this. So if rates start to go up,
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  property prices will come off the ball a bit. I think too,
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  based on what happened in Bondi recently, if a new government
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  is formed with One Nation, and I'm pretty certain they
• 5:53
  have a good chance to win. They're starting to edge in
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  front of the liberal coalition. If
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  they win, if another party, no
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  matter who it is, comes in, they're going to drop immigration down below 100,000. Now
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  if that happens, less people, less demand for housing. So that's
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  going to cool prices. The other thing is inflation will, if
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  they need to get hold of inflation, they'll increase interest rates, which I'm talking about right now. That
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  will curb property prices because people won't be able to borrow as much to buy. Plus
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  they won't want to have more mortgage repayments. So demand for property
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  fueled by debt will fall and prices will fall or
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  they'll stabilize as a result. Now, as rates go
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  up too, there'll be more support for the Australian dollar. Now, you don't have to be a genius to
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  see in the last few months, the Australian dollar has gone from 61 US cents
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  to 67 US cents. So there's been like a 10% increase
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  in the value against the USD and other currencies of the Australian
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  dollar. And the reason why that's happening is because interest rates are going to go up. So in
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  a country, whenever you increase interest rates, you increase the returns people
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  get on the bonds when they put money in the country. So it's increasing the demand for
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  our Australian bonds. And that means that effectively, Australian
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  dollars gonna increase in improving value against the other currency
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  So if you're someone who likes to travel to America, you're gonna get more American dollars for
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  your Australian dollars Okay, the other thing that's gonna happen is capital is gonna shift into
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  you're bearing assets again like bonds and turn deposits So people are gonna start
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  putting money in different places, which means they'll pair it a little bit out of the stock market,
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  too so you're gonna see price stabilizational falls
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  Maybe fall, but I think stabilization in property because the demand is still there.
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  You're going to see falls maybe or stabilization in the stock market. You're
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  going to see other assets fall. You're going to see bonds rise
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  in demand. So you're going to be rising in prices and bonds and turn deposits will
• 7:39
  become more popular. That's what will happen in terms of the investment landscape.
• 7:44
  Just quickly, if you're ready to take control of your finances but feel stuck on
• 7:47
  where to start, I have a solution. My book, Money Buys Happiness,
• 7:52
  simplifies investing and wealth building with practical steps to help
• 7:55
  you achieve financial peace. Get your copy via the
• 7:58
  link in the show notes and let's get your money working for you. Now back
• 8:01
  to the episode. So this isn't just about rates
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  changing, it's about changes of how money's flowing
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  through the entire economy, yeah? Now, why the
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  RBA might actually pull the trigger on this and
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  increase rates. If inflation stays above the target, which it
• 8:18
  looks like it's going to, and household spending remains solid, which by
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  the way, you just go to the corner shop and you see if household spending is high. My
• 8:26
  wife recently went to a concert and people were paying $300 for a VIP ticket that wasn't
• 8:30
  even VIP to drink beer out of plastic cups. I think it's pretty
• 8:33
  solid. I don't think that's going to wane. Even
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  with a 0.25% increase, there seems to be no
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  end to people spending money. It's just crazy. I
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  think that's going to remain solid. That's going to increase the likelihood of a
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  rate increase. Household spending growth is
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  really what's still buoyant. It's going to really probably
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  force their hand. We've got to look at
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  the labor market, the jobs market, right? It's not collapsing. Unemployment's
• 9:03
  actually edging... A little bit higher, but not
• 9:07
  really sharply, which is interesting. In fact, recently it just came down. So,
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  if unemployment was going up, the RBA is like, oh my God,
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  we can't do this and increase rates because we're going to exacerbate the
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  unemployment. But the reality is it's not. So, there's all
• 9:22
  these factors like the spending is still high, the
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  jobs are still there, so there's not unemployment increases. Inflation is
• 9:29
  still sticking high and assets are at all-time highs. Like, the reality is
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  that the RBA is completely justified for increasing the
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  interest rate. It makes so much sense, right? So the RBA's job
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  is not just to guarantee the cheap money, of course, it's to actually manage... The idea
• 9:43
  is to... Manage two things, unemployment and inflation. That's
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  pretty much what it's there for, okay? To avoid big crashes. So
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  here's the big mistake that most Aussies are gonna make. Most people are betting
• 9:53
  on rate cuts. And of course they want them to cut because they all want debt
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  and property. They want property to keep going up. So like, hey, cut rates. They all do
• 10:00
  little dances on TikTok when they cut rates. So whether you've got a mortgage
• 10:04
  or you've got investment decisions, people are wanting lower rates because
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  it's cheap money and that fuels asset prices. and
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  who doesn't want to get richer, right? But they're not pricing in cuts and
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  inflation is still above the target. So consumer sentiment really and household
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  debt really remains somewhat fragile at this point because it is inflated
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  and we will see rates go up at some point. So by
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  the time that happens in the market or people admit it, the
• 10:29
  moves are typically priced in. So, if
• 10:33
  you want to stay ahead of the Australian economic turning points, stay
• 10:36
  close to this channel. Because I do these like every month, we're doing
• 10:40
  more of these and I'm really our fingers on the pulse when it comes to
• 10:43
  the economy. In fact, If you go back and listen to my last few episodes
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  on this before all this stuff happened, we've been very accurate with
• 10:51
  our anticipation of what the RBA will do. Go back. I challenge you. Go back and look
• 10:54
  at the episodes, listen to what happened, and then go track what happened. It's
• 10:57
  fairly obvious to see what needs to happen because a lot of people don't
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  look at the primary data. They don't look at Maxibon prices when
• 11:04
  they're in the BPI, but I think when I see them, I'm like, why did I just pay $6.60 for
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  that Maxibon? That's interesting. Why is my McDonald's meal
• 11:11
  $30? Why? They're not understanding that that's that it's
• 11:15
  huge inflation. And it's not even like small, it's more than 3%. So you don't
• 11:19
  have to be a rocket scientist to work it out. But then because I'm
• 11:23
  not a mortgage holder, I'm completely objective. I'm
• 11:29
  a property bear. At this point in time in the cycle. I
• 11:32
  just don't think there's many of me around. I think when you tune into our channel,
• 11:36
  you're going to get a very objective opinion without me being
• 11:40
  influenced too much by owning housing. I don't even own
• 11:43
  a house. I don't even own any property. If you want an unbiased objective
• 11:49
  opinion with some data that backs it up, some
• 11:52
  real current data about what's happening in the Australian economy and
• 11:56
  how that affects you, subscribe to this channel because I'm not here to BS you,
• 11:59
  right? I got no reason to. So yeah,
• 12:02
  hit the subscribe button, share this with a friend. See you in the next episode. Leave us a comment below and I'll
• 12:05
  see you soon. Thanks for listening to Money Grows on Trees. If you enjoyed the episode,
• 12:09
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• 12:12
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• 12:16
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• 12:19
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