David Koch speaks candidly on cost of living crisis

David Koch has spoken candidly on Australia’s cost of living crisis, young peoples’ finances, a key “negligent” authority, and big bank job offers.

Former Sunrise host and self-professed “finance nerd” David Koch has been a trusted voice on the state of Australia’s economy for decades.

Now somewhat untethered in his new role as Compare the Market’s economic director, Koch has candidly shared his thoughts on why younger Australians are being “squeezed” tighter than anyone else by the nation’s current cost of living crisis.

And for many, it’s the first time in their lives they will have felt such pressure.

“Everything goes in a cycle, economies go in a cycle, but a whole generation of Australians have been used to low interest rates and low inflation,” he told news.com.au

“That’s really unusual when you look at economic history, to have had that for so long.”

Koch went on to explain how a “double-shock” of rate rises and inflation was squeezing young Australians in ways they’ve never felt before.

Former Sunrise host David Koch has been appointed Compare the Market’s Economic Director. Supplied

“So for this generation, it’s a double-shock of inflation, and also rising interest rates putting most people’s family finances in an absolute squeeze,” he said.

“It’s as bad as it’s ever been largely because of the amount of debt the average Australian has.

“The increase in interest repayments on their loans is just sucking money out of household budgets.

“Then, on the other side of it, the rising inflation is deteriorating how much you can buy for the same dollar. So it’s a squeeze like we haven’t seen for decades, and it’s not going to get any easier.

“For at least the next year, conditions are going to be as tough as they are now,” he added, citing minutes from the Reserve Bank’s August meeting, which revealed a slowing economy and “acute pressure” on household budgets were behind an interest rate pause that month.

RBA’s ‘absolutely negligent advice’

The Reserve Bank should be held to account, according to Koch, for encouraging borrowing during the low rates period brought on by the Covid-19 pandemic.

According to Koch, those people are suffering the most, and will likely continue to in the coming months and years.

“The people who took the advice of the Reserve Bank two years ago that said, ‘we’re not going to put up interest rates until 2024, go and borrow as much as you like’,” he said.

“That was absolutely negligent advice, and so many people have been caught by it.”

It’s a sentiment that has been echoed this year as rate rises kicked in, including by Victorian Premier Dan Andrews who blamed that same advice provided to national cabinet by the Reserve Bank governor, Phillip Lowe, for his government’s huge borrowings during the pandemic.

“That was the message to governments. The same message was applied to households right across our country, that interest rates would not be going up,” Mr Andrews said in May.

Koch said the Reserve Bank should be held to account for encouraging borrowing during the low rates period brought on by the Covid-19 pandemic. RBA Governor Philip Lowe Picture: Christian Gilles

“I’m not sure that 11 interest rate rises in 12 months is smashing inflation. I’m certain it’s smashing families.”

Adding to the context of the cost of living crisis are reports from June that the proportion of homes for sale that were purchased less than two years ago is at the highest level since at least 2014.

“That’s an indication that a lot of young first home buyers and young Australians extended themselves (by) buying the home of their dreams, and now they have been caught out,” Koch said.

“They re now saying ‘look, we can’t handle it anymore, we’re just going to sell the property’ within a few years of buying it.”

“That’s a classic indication of people getting out of their depths,” he added.

Renters forced to make tough calls

As for Australia’s hard-hit renters, Koch said rent increases could force people into borrowing for home ownership in a climate of less than-ideal rates.

“We haven’t seen an increase this sharp in rental prices for the last 30 years, it has been the worst,” he said.

“You look at previous increasing rent cycles. They haven’t been nearly as severe or nearly as quick as what young people have had at the moment.

“What that’s doing is forcing a lot of renters to say ‘I’m paying so much rent, I might as well go and buy my own’ even with higher interest rates.”

Ask for discounts and get a side hustle

Koch’s new forward-facing role at Compare the Market will see him putting his personal “shop around” mantra into practice.

He shared with news.com.au some saving advice for younger Australians spread thin by the current cost of living crisis.

“You can cut your costs but you can only go so far, and cutting costs means going through every single expense and making sure you’re getting the best deal on it,” he said.

He said there are often ways to reduce loans and insurance premiums.

Koch returned to Sunrise on Wednesday morning as a guest announcing his new job with Compare the Market.

“Go and ask the bank for a discount. You’ll be amazed at how easy it is to ring the bank up and say ‘I’m a loyal customer, I want a discount on my home loan’ – I guarantee you can get half or a quarter per cent off it,” he said.

He said comparing insurance policies upon renewal can save you hundreds or thousands per year and encouraged anyone with the capacity to find a “side hustle”.

“Get a side hustle, turn a passion into a money maker,” Koch said.

“There are about one and a half million Australians who have a side hustle or a second job.”

Koch turned down job offers from banks

Koch took a veiled swipe at Australia’s banks while revealing that since leaving Sunrise, he received numerous job offers from financial institutions before he eventually found somewhere in the sector where he could practice what he’s been preaching for decades.

Koch described his new employer as “a perfect fit”.

“I’ve always been a finance nerd – Sunrise was sort of a mistake or a hobby that got out of control – I was asked to fill in for three months and kept doing it for 21 years,” Koch said.

Koch said he and wife Libby have used Compare the Market for years. Picture: The Advertiser/ Morgan Sette

Meanwhile, Koch said Sunrise is in safe hands.

“Finance has always been my roots – I had a lot of financial institutions since leaving Sunrise ask if I can come and help, or can I be an ambassador, and I’ve said no because my advice always and been saying ‘you should just shop around’.

“That would have just compromised what I’ve always stood for if I associated myself with one financial institution – that’s not how you get the best deal.

“(Compare the Market) was a perfect fit – my wife has used Compare the Market for our household budget for years and years – she is the thriftiest person I know.”

As for letting go of Sunrise – Koch revealed that he tunes in for about half an hour every morning “like everyone else”, and believes the popular morning program is in safe hands.

“Shirvo is doing a great job,” he said. “It’s the best way to wake up.”