‘Making it worse’: Economist’s unpopular opinion on RBA rate cut

An economist has issued a scathing assessment of the RBA’s interest rate cut saying it will only make the cost-of-living crisis worse.

Homeowners may be rejoicing over the RBA’s decision to cut rates by 25 basis points on Tuesday, however a leading economist is warning it may have been a mistake.

Warren Hogan said the rate cut has come too early and will potentially drag out the cost-of-living crisis.

“What’s really hurting, even for people with mortgages, is the fact that your grocery bill is going up every week,” he told A Current Affair’s Ally Langdon on Tuesday evening, “cutting rates doesn’t get us any closer to fixing that problem, in fact, it risks making it worse.

“We’ve got this problem in [this] country, the idea that rates going up is bad and rates going down is good.

“The act of cutting rates today may have helped people with mortgages to reduce their repayments, but it’s actually put more upward pressure on prices in the economy.”

Economist Warren Hogan thinks the RBA's rate cut could worsen the cost of living crisis. Picture: Nine/A Current Affair

Ally Langdon said Mr Hogan would be her viewers' "least favourite person on the planet" thanks to his predictions. Picture: Nine/A Current Affair

Mr Hogan, who is Judo Bank’s Chief Economic Adviser, went on to explain, “A rate cut, an easing of monetary policy, puts inflation into the economy.

“[A rate cut] does keep inflation going for longer, and the forecasts today show that, they revised up their inflation forecast which basically says that the cost-of-living crisis is going to extend.”

He said that while inflation figures are looking better, there is still a way to go, and the RBA’s move to cut interest rates now will “look a bit silly” if inflation suddenly becomes an issue again.

When pressed on the RBA’s motivations for the cut, Mr Hogan said he believed that “non economic factors” were influential.

“If they didn’t cut today, the pile on would’ve been severe,” he said.

The RBA Board cut interest rates by a quarter of a percent from 4.35 per cent to 4.10 per cent after meeting on Tuesday.

Although the Board said in its statement that inflation “has fallen substantially since the peak in 2022,” governor Michele Bullock warned that the fight against the rising cost of living isn’t over.

“We cannot declare victory on inflation just yet,” she said.

The Board is still concerned about “upside risks” and will lift interest rates again if “inflation reversed course” and began to increase again, she said.

“Now, what we’ve observed from overseas, we have observed it a bit here as well, it can be bumpy. It’s not a smooth ride.”