The nation’s most powerful banker has revealed an increasing number of Aussies are turning to charity for the first time in their lives to survive.
Reserve Bank Governor Michele Bullock told a mental health charity lunch aggressive rate hikes and cost-of-living pressures were now forcing more people to ask for the kind of help they hadn’t previously sought.
‘Information received through the RBA’s liaison program indicates that more people than usual are seeking support from community organisations, and often for the first time,’ she told the n Business Economists lunch in Sydney on Thursday.
‘Those with mortgages are feeling the squeeze on their cash flows not just from high inflation, but also from the increase in interest rates that has occurred in response to it.’
She noted low-income households and renters were the most vulnerable.
‘Lower income households tend to allocate more of their spending towards essentials, including food, utility bills and rent,’ she said.
‘The experience of individual households varies widely, but younger households and lower income households have been particularly affected by cost-of-living pressures overall.’
Ms Bullock, however, has ruled out any rate cuts before Christmas in her speech titled, ‘The High Cost of Inflation’ for the Anika Foundation charity.
‘Circumstances may change, of course, and if economic conditions don’t evolve as expected, the board will respond accordingly,’ she said.
‘But if the economy evolves broadly as anticipated, the board does not expect that it will be in a position to cut rates in the near term.
‘We need to see the results in inflation before we can do that.’
The RBA cash rate was last month left on hold at a 12-year high of 4.35 per cent with no relief likely soon from the 13 rate hikes in 2022 and 2023 .
The most aggressive hikes since the late 1980s are already hitting the economy with the 1 per cent growth rate in the year to June the weakest since the 1991 recession, outside of a pandemic.
Treasurer Jim Chalmers on Sunday said the rate hikes were ‘smashing the economy’ and doubled down on Wednesday by pointing out the national accounts data had ‘borne out’ his point.
The RBA boss denied Opposition Leader Peter Dutton’s suggestion they were at war.
‘He’s doing his job and I’m doing mine,’ she said. ‘I wouldn’t use those sorts of words.’
But Ms Bullock said state and federal governments needed to be focused on bringing down inflation, after suggesting in June that ‘recent Budget outcomes may also have an impact on demand’.
‘The federal government and the treasurer said a number of times, that he’s doing his bit to try and bring down inflation,’ she said.
‘All the governments are conscious of it because, quite frankly, of all their constituents are suffering from high inflation.’
Ms Bullock said failing to tackle high inflation now would simply lead to even higher unemployment later.
‘High and variable inflation can also cause shifts in people’s wealth and spending power,’ she said.
‘Agreeing to a new contract, or making saving plans, is harder if you don’t know how expensive things will be in the future.
‘Moreover, high inflation eventually requires disinflation, which can have long-lasting costs for households through higher unemployment.’
Inflation hit 3.8 per cent in June with the Reserve Bank not expecting the annual consumer price index to fall within its 2 to 3 per cent target until the end of 2025.
Unemployment climbed to a two-year high of 4.2 per cent in July with the RBA forecasting it will climb to 4.4 per cent by the middle of next year.