A Super-Simple Way to Stop Rate Rises

Hi Scott,
 
If inflation is a society-wide problem, why is our only reaction to take money from a specific group (mortgage-holders) and give it to a specific industry (banking)? I read an ABC article that suggested it would be fairer and more effective to let people stash that money in something like super (which reduces people’s spending) so it still belongs to them and can flow back into the economy through spending once the crisis has passed. What are your thoughts?
 
Doug
 
Hi Doug,
 
I think it’s a deliciously simple solution …   and it will absolutely not work.
 
Mainly, and most boringly, because the level of our interest rates – relative to other countries – determines the value of our dollar. If we keep our rates low, our dollar will likely be hit, which will make everything we import more expensive.
 
My view is that the real problem we’re grappling with is that money should never have been priced at zero. That decision – which was driven by central bankers around the world, not just the RBA – was pure madness. It fuelled a mania in housing and the sharemarket (and, in the late stages, even in rubbish like Dogecoin). The net result? The rich got richer, the poor got screwed, and an entire generation has been priced out of the property market.
 
And now you want low income earners to bail you out?
 
Because that’s effectively what would happen. Those people at the bottom of the income ladder, who are struggling with the cost of soaring grocery prices and rent, would be forced to take home even less in their weekly pay packet (because they would be forced to put more into super), so they can save homeowners’ (and their landlord’s!) backsides.
 
Good luck with that!

Scott.