Yahoo Finance Interest rate rise ‘depends on you’: Aussies ‘on notice’
Finance expert David Koch breaks down what inflation, consumer spending and the tight job market means for you.
"On notice" Australians are pulling back on spending as the cost-of-living crisis bites, but are warned another interest rate rise will “depend on you”.
Jobs figures, retail numbers and rising CPI - the data rolled in this week and will play into the Reserve Bank of Australia’s (RBA) decision next week to either slog Aussies with another interest rate rise, or hold the cash rate.
Australians are holding back on luxury spending, but still treating themselves to a meal out.
Financial expert David Koch has broken down the “damp towel” currently crushing Australian households.
EXLCUSIVE: Scam: Vulnerable Aussie conned $3,500 in cruel plot
Also read: Electricity bill change: New way to find out if you're getting ripped off
Also read: Inflation goes the wrong way: Here's why it could get worse
What does it mean?
When it comes to potential future rate rises, Koch said the three biggest concerns for the RBA were inflation, consumer spending and the tight job market.
“The figures show consumers and jobs are tracking the way the RBA would have hoped. High interest rates are effectively a damp towel over the economy. They've taken the heat out of the job market and put spending on ice - which both help to cool inflation,” he said.
🔢 The story in numbers
Koch said retail sales were grinding to a halt, showing the slowest trend since 1982.
“Retail trade rose 0.2 per cent in August - up just 1.5 per cent over the year, despite inflation above 5 per cent and a huge rise in population because of migration,” the Compare the Market economic director said.
“We seem to be cutting back on big-ticket items for the house but spending on experiences and rewards like eating out. Spending on cafés, restaurants and takeaway rose 8 per cent over the year, followed by clothing and sports goods - inspired by the FIFA Women’s World Cup!”
🤔 Why should I care?
Aussies have been battling the stubbornly high cost of living and have been responding accordingly, ditching travel plans and luxuries. But Koch said the pressure was also “manifesting in more concerning ways”.
“According to Compare the Market research 19 per cent of people have avoided care for health issues and 18 per cent have skipped meals due to rising costs,” he said.
“It is a time that has been crushing a lot of Australian families - who are used to cheap money - and are coming off the fixed-rate cliff.”
🗣️ What people are saying
The good news? Koch believes all these signs point to another cash rate hold in October.
“The RBA is becoming like our financial therapist - they're lying us down each month and saying: 'Hey, we don't want to increase interest rates any more but it's going to depend on you',” he said.
“They're putting us on notice. They don't want the job market to get too tight because that will push up wages and feed into inflation.
“On the other side of it, they are really concerned that Australian households have gone into the bunker - they're tightening their belts and the slowing down of the economy is really accelerating."
If you're feeling overwhelmed and need help dealing with financial stress, you can contact free advice and counselling from the National Debt Helpline. You can call 1800 007 007 between 9.30am and 4.30pm Monday to Friday.
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.