The frenzy over a Cup Day rate rise is overblown

Everyone needs to take a chill pill about the prospect of a Cup Day rate hike. It’s not as significant as ‘they’ are saying, for the economy or for the new RBA governor.

Reserve Bank of Australia governor Michele Bullock.

It’s difficult to know which of the media hysteria over this Tuesday’s coming Reserve Bank interest rate decision, or over Qantas and its AGM last Friday, has been the more, well, hysterical.

Ludicrously – and utterly, offensively, incorrectly – new governor Michele Bullock’s entire integrity and credibility has been claimed as being on the line, unless ‘she’ – forget the other seven members of the voting board - hikes.

That’s just arrant and offensive nonsense. She will have recommended and the board will decide – most likely, in accord with her recommendation – on the merits (and forecasts), as they see them. And on that alone.

Further, whether or not the RBA – to stress, the RBA board of eight, not just Bullock as Governor-Dictator – delivers the rate hike the media and the broader economentariat has been demanding, with rising shrillness, is just not that determinative.

Yes, obviously, a hike will hurt home loan-borrowers; and coming on the tail-end of all the other hikes since May last year, the pain for them will be punitive.

But in terms of the broader, overall, impact on the economy, a 25-point hike just isn’t that significant.

Leaving the rate unchanged, to stress at this meeting, as I argue is the sensible thing to do, is not going to send inflation spiralling out of control. Or, for that matter, the economy plunging into recession.

A hike, again, at this meeting, would not be the be-all and end-all of getting inflation back down to 2-3 per cent.

A hike in December if needed; or more appropriately at the February meeting when we know the December quarter inflation reality and direction; and have a better idea how the events in the Middle East are playing out, along with ‘everything else’, would be just as effective.

Yes, as I’ve long argued, higher rates – in 2024 – might be needed. Not hiking now does not mean the RBA’s collective hands are then tied against hiking next year.

What I recommend, is chill pills liberally distributed all around.

Last Friday, Qantas’s Rem Report (Remuneration Report) got a stunning – for major companies, record – 83 per cent rejection vote.

And the actual consequences were? Zero. Zip, nothing.

Because these votes are purely symbolic. They allow big holders to vent their supposed displeasure; it’s an “all virtue-signalling, zero-consequence” dummy-spit.

When at the very same meeting, these very same holders had to vote where there could be real consequences, they promptly, mostly, fell into line with the board.

They voted 66 per cent to re-elect director Todd Sampson, who could have been a sacrificial lamb for the ‘sins’ of the Alan Joyce era.

Indeed, they voted 99 per cent to elect new CEO Vanessa Hudson, who had been an integral member of Joyce’s team. And voted appropriately, let me add.

So, please, let’s keep the meaningless virtue-signalling in perspective.

Similarly, my defence of Qantas – and Joyce – was and is solely in relation what it did, or sincerely believed it had to do, to survive, through Covid and in coming back after.

It does not extend to what it might be doing today.