
2 minute read
Reserve Bank Hikes OCR Again!
Hey Everyone! This week, we saw the Reserve Bank raise the cash rate again. While most banks have already factored this in, the increase came as a surprise to some. Keep in mind that the Reserve Bank operates on delayed data, so property market correction phases usually run for longer than needed.
Although the property market is showing signs of recovery, the Reserve Bank targets inflation as an average across all sectors and industries. So, if the OCR needs to keep going up and interest rates follow suit, property values may unfortunately be casualties in this correction.
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It is still our opinion that the OCR cannot possibly keep rising like this. The ripple effects and damage to society will be significant. Moreover, correcting markets are not as simple as adjusting interest rates. The world has changed and grown so much more since the economic birth of the inflation concept and the establishment of inflation targets. Back when nations were more insular and economically isolated, interest rates would directly impact a country’s activity and behavior. But now, with expansive technology and global trade, our ability to connect and exchange financial value is immense.
If you ask everyday consumers whether they believe higher interest rates will result in a reduction in the cost of food, petrol, rent, and mortgage costs, I think you will find that no one believes that. So, if the Reserve Bank believes that further OCR/ Interest Rate increases will reduce inflationary spending, then they are surely missing the point.
Yes, interest rates needed to go up, luxury inflationary spending needed to come down, and property prices needed to be reined in. That has been achieved, and surely, they can see this. But putting more interest rate pressure when most of the country is struggling to make ends meet, put food on the table, and find work is not the best way to proceed.
Our Reserve Bank needs to explore different angles for solving the financial pressures people are facing. Some federal/reserve banks internationally are starting to realize this, so there is still hope left. For now, all we can do is metaphorically water our own lawns and look for ways to provide more value, reduce costs, improve efficiencies, and support local businesses and jobs.
Now more than ever, we need to work together as a community to support each other, shop locally, and provide mutual support.
If you are worried about the market outlook and want to have a strategy discussion about your plans, get in touch – love to hear from you! Have a great week!
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