‘Something has to give’: Finance expert Mark Bouris calls on RBA to cut interest rates in February

One of Australia’s top finance experts says mortgage holders and businesses are being pushed to the brink – and something’s got to give.

OPINION

Dear RBA, 

It’s time for a rate cut. 

There’s definitely still an inflation issue out there. 

But you can’t throw the baby out with the bathwater. 

High interest rates have brought down inflation.

But they’re also killing the economy. 

Just ask business owners … 

MORE: Sign RBA is creating ticking time bomb

Over the last two years, a record 26,000 businesses have become insolvent. 

Last November was the worst month for business insolvencies on record. 

In just that month alone, 1442 businesses went under. 

Meanwhile, 930,000 Australians are on welfare, and the jobs market is a mess. 

Chief economist at IFM Investors, Alex Joiner, points out that most of the jobs created over the last two years were in “non-market sectors”. 

“Non-market sectors” are things like public administration, health and education (i.e. things taxpayers usually pay for). 

Between July 2023 and April 2024, a total of 716,000 new jobs were created. 

But 625,000 of these jobs were in “non market sectors”. 

Only 91,000 jobs were in the “market sector”. 

So the private sector is dead, and the non-market sector is propping up the economy, which the taxpayer has to pay for. 

No wonder we’re paying more income tax than ever … 

By the way, record-high migration is also propping up the economy. 

Mark Bouris says high interest rates are ‘killing the economy’. Picture: Kym Smith

Is it time for a rate cut? Picture: Gillianne Tedder/Bloomberg

Over the same time period, our population increased by 656,000.

That means seven times more migrants arrived in Australia than the number of new market sector jobs created.

Something has to give, and my prediction is that something will come soon. 

The bankers agree. 

Macquarie Bank has just lowered its fixed rate by 0.16 per cent. 

They haven’t done that because they’re good guys. 

Macquarie has made the call because it thinks the Reserve Bank of Australia will cut very soon. 

They’re not alone. 

Overall, the money markets are pricing in a rate cut of about 0.67 per cent over the year.

Let’s hope they’re right. 

Macquarie thinks the RBA will cut rates very soon. Picture: NewsWire/Jeremy Piper

Because there’s a dangerous idea out there that high rates are the silver bullet to inflation. 

We can’t forget that lots of the inflation in the economy has nothing to do with interest rates. 

For instance, some of the inflation is driven by our high energy and gas prices. 

New figures show that Australian households pay two times more for electricity than the South Koreans. 

We pay almost four times more than the Vietnamese. 

We pay three times more than the Chinese. 

We also have a gas shortage, even though we’re the world’s largest exporter of gas.

Soon we’ll be importing gas on massive ships because we can’t get gas from Queensland and the Northern Territory to the south. 

To think we used to have the cheapest power in the world.

Meanwhile, mass migration and negative gearing has propped up house prices for decades. 

That has inflated housing costs. 

A staggering 930,000 Australians are on welfare. Picture: iStock

We also spent an insane amount during Covid as we locked down the entire economy. 

To pay for all that, we printed and borrowed hundreds of billions of dollars. 

That’s as inflationary as it gets. 

Plus the cost of getting anything done in this country is higher than the rest of the world. 

That’s because of all the red tape and regulations businesses have to deal with. 

That’s another form of hidden inflation. 

So the question for the RBA is simple. 

Will high interest rates address any of these structural inflationary factors in the economy? 

Or will high interest rates keep hammering mortgage holders and businesses to fix a problem caused by poor planning and poor decisions by government?

I reckon the answers are no and yes. 

Perhaps an election will force us to confront some of these difficult questions.

Mark Bouris is the executive chairman of Yellow Brick Home Loans

Originally published as ‘Something has to give’: Finance expert Mark Bouris calls on RBA to cut interest rates in February