Reserve Bank Out Of Order?

Reserve Bank Out of Order?

What It Means for Your Interest Rates, Investments, and More | Wealtheon

It looks like the Reserve Bank is taking out a sledge hammer to battle inflation and economic growth, but unfortunately it’s hitting us all in the pocket. The recent increase in cash rates has been hard on businesses as well as households who are already struggling with the cost of living.

Why is it that every time we hear about inflation either holding steady or having the slightest increase, the .25% interest rate battle axe comes out swinging but when we hear about builders and other businesses going bust, it is still full steam ahead.

So is the Reserve Bank out of order?

The Reserve Bank might have the best of intentions but it’s clear that their strategy lacks a balanced approach. With investments affected by cash rates, households are feeling the pinch even more and in some cases, this can be devastating.

It’s time for the Reserve Bank to work with government to look at ways of controlling inflation without constantly raising interest rates. We need a better balance between economic growth and cost of living that takes into consideration all Australians. Unfortunately, I don’t think any reasonable action on this front will be taken. The political risk is too high right now for governments to meddle in this space.

The question is, how far is the RBA willing to go and what are they going to break in the quest to reduce inflation?

Investing or saving money is becoming increasingly difficult due to these changes – even if we look forward and try to think that these decisions are being made for our own best interests, they’re not making life easier! Not only do higher cash rates make borrowing more expensive but they can also have an effect on returns from savings accounts and investments such as stocks, shares and property.

High interest rates can reduce the bottom line for businesses and increase costs but what we are seeing at the moment is some businesses taking full advantage of the headlines and banking higher profit margins. An ABC article recently shone the spotlight into Coles and Woolworths who raised prices by 10.5% and 8.7% respectively…

So it looks like the Reserve Bank is intent on continuing to wield its sledge hammer in an attempt to control inflation and economic growth. But meanwhile, ordinary Australians are having to bear the brunt – struggling with day-to-day living costs and a shrinking ability to invest or save their hard earned money.

What can you do?

If you’re concerned about how rising interest rates could affect your finances, then you are probably feeling what most people are feeling right now. A lot of people I have spoken with feel like the game is rigged and there is no way for them to get ahead in an environment where there are low wages growth and high cost of living.

It’s time to take control of your financial situation and make sure that you are not affected by any further increases. This could mean looking into alternative investments, or simply being smarter with your budgeting so that you are able to handle any further rate rises. It could even mean the need to reduce your current debt arrangements by selling assets. No matter what option you choose, it’s important to have a plan in place and understand the decisions you’re making around your finances.

If you want to know more, you can check out our other blogs such as this one on negative gearing or are ready to take a step towards getting some professional financial help, you can book a free 20 Minute Discovery Session here.