Latest / 360 with Katie Woolf / CDU Lecturer in Finance and Economics Dr Debajyoti Chakrabarty explains the impacts of the RBA's latest rate rise

Transcript

CDU Lecturer in Finance and Economics Dr Debajyoti Chakrabarty explains the impacts of the RBA's latest rate rise · 360 with Katie Woolf

• 0:00
  Speaker 1: You know that nationally, we learned late yesterday that the
• 0:02
  Speaker 1: Reserve Bank has obviously raised the interest rate by zero
• 0:06
  Speaker 1: point five percent of a percentage point, taking its cash
• 0:10
  Speaker 1: rate target to two point three five percent. Now, according
• 0:13
  Speaker 1: to analysis by Rate City, the latest increase is going
• 0:16
  Speaker 1: to add a further two hundred and sixteen dollars a
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  Speaker 1: month to a seven hundred and fifty thousand dollars mortgage.
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  Speaker 1: So we know that this is obviously just one of
• 0:25
  Speaker 1: the concerns that a lot of Territorians have gone at
• 0:27
  Speaker 1: the moment when it comes to the cost of living. Now,
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  Speaker 1: joining me on the line to talk a little bit
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  Speaker 1: more about this, Charles Durwin University's lecturer in Finance and Economics,
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  Speaker 1: Doctor Diba Jotty Chuck Rabati. Good morning to you, doctor,
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  Speaker 1: Good morning to your petty, Deba Jotty. Now talk us
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  Speaker 1: through what does the Reserve Bank, Well, why are they
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  Speaker 1: continuing to raise this this interest rate.
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  Speaker 2: Well, as you know that we have been going to
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  Speaker 2: period a very high inflation. Last quarter it was setting
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  Speaker 2: at around six point one percent, and the Reserve Bank
• 1:01
  Speaker 2: is expecting the inslation rate to go up further toward
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  Speaker 2: towards the end of this year and it's expecting it
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  Speaker 2: to pea gate around seven point seventy five percent, and
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  Speaker 2: the Reserve Bank has a target inflation rate between two
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  Speaker 2: to three percent, and it doesn't want the Australian economy
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  Speaker 2: to get into a wage inflation spiral, so it's trying
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  Speaker 2: to control pull it back. It's trying to get the
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  Speaker 2: inflation rate under control. And that's why one of the
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  Speaker 2: only mechanisms it has to do it is to raise
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  Speaker 2: the interest rates, and that's what it's doing.
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  Speaker 3: And so I suppose you know, what is it?
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  Speaker 1: What's the iem You said that it's you know, the
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  Speaker 1: wages are continuing to go up. I guess for us
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  Speaker 1: here in the territory, some would argue that that is
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  Speaker 1: not the case. So so by keeping the interest rates well,
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  Speaker 1: continuing to put them up, it sort of means that
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  Speaker 1: all of our living expenses continue to rise as well.
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  Speaker 3: Does Nash Oh.
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  Speaker 2: I'm not saying that the wages have been going up.
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  Speaker 2: In fact, the wage growth has been quite sluggish. The
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  Speaker 2: prices have been going up and that's what's been causing
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  Speaker 2: the inslation rates to go up. And the prices have
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  Speaker 2: been going up because of a variety of factors, you know,
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  Speaker 2: the international factors like the war in Ukraine, oil prices,
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  Speaker 2: supply chain bottlenecks. So the cost of living has been
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  Speaker 2: going up, the inflation rate has been growing up. And
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  Speaker 2: that's one of the other real challenges facing the government
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  Speaker 2: and the Reserve Bank that while the cost of living
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  Speaker 2: is going up, the wagers have struggled to keep up
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  Speaker 2: with it. And unfortunately the Reserve Bank has no other
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  Speaker 2: mechanism or tool at its disposal, so the only thing
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  Speaker 2: it can do is to increase the interest rates and
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  Speaker 2: hope that the spending falls.
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  Speaker 3: And what is the time of you know, hoping that
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  Speaker 3: that spending falls.
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  Speaker 2: It's the idea here is that if the interest rates
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  Speaker 2: go up, it becomes more expensive for houses who have
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  Speaker 2: taken out a mortgage, so they will cut down on
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  Speaker 2: their discretionary spending. Maybe other households will feel that they
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  Speaker 2: have less wealth and they will cut down on their spending.
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  Speaker 2: And so that will help bringing back the inflation rate
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  Speaker 2: a little bit lower and under control.
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  Speaker 1: And what kind of impact do you reckon that it's
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  Speaker 1: going to have, you know, for us here in the
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  Speaker 1: Northern Territory, because as we speak about quite a bit
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  Speaker 1: on the show, and we're talking about it earlier this morning.
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  Speaker 1: You know, the cost of living in so many different
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  Speaker 1: ways continues to rise, eye petrol prices as well.
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  Speaker 2: And the petrol prices are likely to go up towards
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  Speaker 2: the end of this month when the full exercise cut
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  Speaker 2: is going to go away. So the full exercise you
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  Speaker 2: will remember that in the budget the full excise was
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  Speaker 2: cut to cut by half and it was only for
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  Speaker 2: six months, so that so far the government has not
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  Speaker 2: said anything whether they will continue with it. So the
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  Speaker 2: petrol prices most likely will go up at the end
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  Speaker 2: of this month.
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  Speaker 3: Yeah.
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  Speaker 2: Well, yeah, as you said that, the cost of living
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  Speaker 2: prices are high in the territory and households will face,
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  Speaker 2: you know you challenges, especially houses who have taken out
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  Speaker 2: loans on variable rates, they will face, you know, quite
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  Speaker 2: a challenging time.
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  Speaker 1: What do you think that it could mean for the
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  Speaker 1: Northern Territory's economy.
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  Speaker 2: It's not going to be very easy. As you know
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  Speaker 2: that we also depend on tourism. Tourism is a type
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  Speaker 2: of spending which is discretionary and anytime houses are feeling
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  Speaker 2: a bit under the crunch, they will try to postpone
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  Speaker 2: their trips. So yeah, it's going to have some impact
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  Speaker 2: on territory's economy, and let's hope that this impact is
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  Speaker 2: not two adverse.
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  Speaker 1: Yeah, and I suppose that's what we're all a bit
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  Speaker 1: concerned about at this point in time. Deba, Jossy, can
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  Speaker 1: you tell us as well, is there, like, is there
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  Speaker 1: any expectation when we might see, you know, the interest
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  Speaker 1: rates start to sort of you know, to stagnate, or
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  Speaker 1: when we might see them go down.
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  Speaker 2: Well, that's a billion dollar question. The major banks are
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  Speaker 2: predicting that the interest rates will go up as high
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  Speaker 2: as four percent by the end of this year, but
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  Speaker 2: some economists feel that things may not be that bad.
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  Speaker 2: But it's around next year we can expect the interest
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  Speaker 2: it's to stabilize, but it all depends on what happens
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  Speaker 2: to the inflation rate. If inflation rate keeps going up,
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  Speaker 2: then you know, we don't know. If you look at
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  Speaker 2: the speech made by there is a Bank governor yesterday,
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  Speaker 2: they are also extremely uncertain about it. Maybe themselves don't
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  Speaker 2: know exactly what's going to happen.
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  Speaker 3: It must be an interesting time.
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  Speaker 1: I mean for somebody who like yourself, who is in
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  Speaker 1: data lecturer in finance and economics, it must be an
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  Speaker 1: interesting time to sort of, you know, be keeping an
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  Speaker 1: eye on this kind of thing, given the fact that
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  Speaker 1: even with those interest rates, I mean, we've not seen
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  Speaker 1: that continuous rise now for such a number of years,
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  Speaker 1: have we.
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  Speaker 2: No, And in fact, it is really interesting because we
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  Speaker 2: haven't seen such economic circumstances for a long long time.
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  Speaker 3: Yeah.
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  Speaker 2: And although the inflation rate is high, the industries are
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  Speaker 2: going up, but we have a very low unemployment rate,
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  Speaker 2: and so we're getting a lot of conflicting news. The
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  Speaker 2: businesses are saying that they're defining it difficult to get workers.
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  Speaker 2: At the same time, the wages are not going up
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  Speaker 2: that much. Inflation rate is high. So this is really
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  Speaker 2: a unique circumstance, I must.
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  Speaker 3: Say, Yeah, it seems that why.
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  Speaker 1: And we were just talking a couple of moments ago
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  Speaker 1: as well, you know, to NTY farmers and talking about
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  Speaker 1: that workforce shortage and the impact that it can have
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  Speaker 1: on some of our various industries. But at the moment
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  Speaker 1: it seems to be right across the board, a lot
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  Speaker 1: of different industries in the Northern Territory are struggling when
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  Speaker 1: it comes to the workforce.
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  Speaker 2: Absolutely, yes, and I think there are some moves that
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  Speaker 2: have been made by the government to ease the visa
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  Speaker 2: restrictions and help improving labor shortage situation. But yes, you're
• 7:02
  Speaker 2: absolutely right businesses across the border facing that problem.
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  Speaker 1: Well deeper, Jotty, Chuck ROBERTI, we really appreciate your time
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  Speaker 1: this morning, of course. Charles Darwin, University lecturer in finance
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  Speaker 1: and Economics.
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  Speaker 3: Thank you so much for your time this morning. We
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  Speaker 3: really appreciate it. Thanks for having Thank you