Cost of living crisis forces people to rely on family, friends for handouts

The shock decision this week to keep interest rates on hold proves members of the Reserve Bank of Australia board are not living in the real world. While they debate economic theory, Australians grow increasingly desperate.

The board of the Reserve Bank of Australia kept interest rates on hold this week. Picture: NewsWire / John Appleyard

Members of the Reserve Bank of Australia board are not living in the real world after the shock decision this week to keep interest rates on hold.

The decision left analysts, economists and households stunned. Financial markets had already priced in a more than 90 per cent chance of a rate cut.

Even the big four banks – the institutions that announce record multibillion-dollar profits year after year after year had forecast rates would ease in July.

Yet the board refused to budge.

One explanation was that it was necessary to hold off on a cut to ensure inflation continues to decline and stay within the desired 2 to 3 per cent band.

Another explanation could be that the monetary policy board members – many of whom are on salaries upwards of $1m a year plus sitting on huge property and share portfolios – are out of touch.

“(This) was not the result millions of Australians were hoping for …’’ Treasurer Jim Chalmers said after the shock announcement.

It certainly wasn’t.

And while it isn’t the Reserve Bank’s job to ease cost-of-living pressures for Australians (that’s your job Dr Chalmers) it is clear many have reached their tipping point. While the RBA board was debating macroeconomics theories on the interplay of interest rates and inflation, Australians were growing increasingly desperate.

Australia’s federal Treasurer Jim Chalmers. Picture: David Gray/AFP

As we report today many households are so desperate they are now turning to friends and family for help.

A new survey has found that more than one in three Australians had resorted to a financial bailout from a loved one in the past year.

The money, begged from family or close friends mostly goes to rent, groceries and utilities. People are paying $200 to $300 more per week for rent or for their mortgage than they were this time last year.

And these increases have been compounding, year upon year.

How people with no family ties or close friends cope in these circumstances is not difficult to imagine. The result is evident in the rising tide of homeless living on our streets, or in the tents in our parks and other public spaces.

The reality is that board members are largely quarantined from the economic hardship imposed on the rest of the nation by three years of interest rate hikes, even if we have seen some easing in the past six months.

The Reserve Bank Governor, Michelle Bullock, receives a salary in excess of $1m, while her annual superannuation contribution of $123,000 exceeds the entire annual salary of the average Australian wage earner.

The welcome development inside the RBA is the bid to increase transparency. This week we finally learned how the vote on interest rates went inside the board – six votes to three.

But, unlike the American Reserve, we still don’t know how each board member voted.

It was further heartening to learn from the Treasurer on Friday an update on the Conduct of Monetary Policy and the first Statement of Expectations for the RBA’s board that included board members will have to conduct at least one speech or public engagement each year.

The board will also engage an expert advisory group on monetary policy to provide board members with a wide range of external views.

The reforms, Mr Chalmers said, were all about reinforcing the Reserve Bank’s independence, clarifying its mandate, modernising its structures and enhancing its accountability.

We are very much in favour of all that. Because the RBA board has an extraordinarily powerful role to play in this nation, with its decisions rippling across the lives of individuals, households and small businesses.

We should hear more public speeches from board members to better understand their thinking, and better understand how they come to their decisions.

Because last Tuesday’s decision remains, to most of us, inexplicable.

Leisel Jones on the Gold Coast. Picture: Nigel Hallett

LEISEL’S MESSAGE OF HOPE AMID HURT

Olympic champion Leisel Jones’s candid interview on her mental health struggles is confronting reading. But her message is an important one and she is to be applauded for having the courage to tell her story.

The four-time Olympian, gold medallist and world record holder, has been battling depression since her early 20s but it was just over a week ago that it really took hold and as Jones says, she “wanted to end it all”.

Thankfully she found a way out and has bravely shared her deeply personal ordeal in the hope it will help someone who is going through a similar situation.

“I really had no idea that story was going to impact people and to be so extreme that it might save someone’s life,” she said.

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Originally published as Cost of living crisis forces people to rely on family, friends for handouts