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Economist Saul Eslake predicts Australia’s interest rate growth will slow

Economist Saul Eslake predicts Australia's interest rate growth will slow

There is a glimmer of hope for Australians fearing more interest rate pain, with a leading economist predicting the massive hikes could soon start to ease.

On August 2, the Reserve Bank of Australia raised interest rates for a fourth consecutive month, bringing them to a six-year high of 1.85 per cent.

It was also the third month in a row the cash rate rose by 0.5 per cent, the fastest interest rate growth Australia has experienced in almost 30 years.

The RBA has made it clear interest rates will continue to go up as it attempts to bring soaring inflation levels down.

But independent economist Saul Eslake, former Bank of America Merrill Lynch chief economist (Australia and New Zealand), believes interest rates will not rise as high as some are predicting.

“I think the Reserve Bank is of a mind to get it (interest rates) up to about 2.5 per cent by the end of the year. That could be either 2.35 per cent or 2.6 per cent,” he told NCA NewsWire.

“Then they will be able to pause to assess the impact of what they by then will have done.

“In my view, that may well be enough to slow the economy sufficiently.”

Mr Eslake said raising the cash rate to 2.35 or 2.6 per cent should be enough to achieve the RBA’s goal of slowing down the growth of domestic spending to counter inflation.

“As customers do have to start paying for the rate increases that have been announced, you should see spending slow quite a bit,” he said.

“The other part of the answer is that there is now starting to be some evidence to suggest that the global sources of inflationary pressure have peaked.”

Mr Eslake’s projection goes against what the country’s big four banks have previously predicted after they all unanimously forecast more pain for Australians.

NAB expected the cash rate to sit at 2.85 per cent by November, while Westpac forecasted it would rise to 3.35 per cent by February next year.

But Westpac’s forecast was not as dire as ANZ’s, who expected the cash rate to rise above three per cent before the Christmas holidays.

“Our expectation is that the RBA will deliver this via four more successive 50 basis point rate hikes in August, September, October and November,” ANZ’s head of Australian economics, David Plank, wrote in July.

“This 200 basis points of additional tightening sees the cash rate target at 3.35 per cent by November.”

The CBA forecasted the cash rate will sit at 2.60 percentage points by November.

Mr Eslake acknowledged and did not dismiss these projections, but expressed concern over what it could mean for the Australian economy.

“My view would be that if the Reserve Bank does end up going straight to 3 per cent or 3.5 per cent… there will be a much greater risk of a sharper slowdown in the Australian economy,” he said.

RBA Governor Philip Lowe has previously said he expects they will take further action on interest rates, but indicated those changes are not “pre-set” and subject to incoming data at the time.

“The Board expects to take further steps in the process of normalizing monetary conditions over the months ahead, but it is not on a pre-set path,” he said in a statement following the August hike.

“The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labor market.”

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Cost of living: Australians react by eating out, spending $3 billion extra

Cost of living: Australians react by eating out, spending $3 billion extra

recession? Who cares! Aussies are spending wildly on dining out as the ship goes down.

Australia is officially sick of cooking dinner, and we’re done with Uber Eats: we eat in now. At current restaurants.

The latest retail trade data shows Australians have had it up to here with food that comes in plastic boxes and cardboard tubs. We want to go out. We want ambience. We want proper printed menus, commercial crockery, and the kind of wine glasses you’d never have at home because they are as big as your head.

As the next chart shows, it’s not that we’ve stopped buying takeaway food altogether – it’s just that we’ve gone mad for restaurant spending.

Forget pre-pandemic levels – Aussies spent $3 billion dollars on restaurants, cafes and catering in just the month of June. That’s unheard of. We don’t give a damn about Covid and we also don’t care about the possibility of an upcoming recession. We are living for the moment.

Special shout-out to Tasmania too, where spending has gone from under $30 million to almost $60 million. I feel sympathy for the stressed and overworked waiters of Hobart just looking at this chart.

There’s a lot of pent-up birthday dinners in the above charts. Wedding anniversaries too, as well as simple nights at the pub.

I know I’ve been taking the chance whenever I can order a coffee in a cup that doesn’t have a little plastic lid. I actually sit in a cafe and sip it. This chart shows I’m not alone.

Whether Australians are thronging to fine dining or greasy chip joints, we are doing it despite Covid. The most recent retail spending data is from the month of June, so it doesn’t fully capture the latest wave driven by variant BA.5, but Covid has been an ever-present threat throughout this period when restaurant spending was rising. We’re not post-pandemic yet, even if we would like to be.

But what is different from 2020 and 2021 seems to be attitudes: We couldn’t give a stuff. Restaurateurs must be loving it (while infectious disease physicians might have another view).

fear fatigue

Australians are overly concerned. Before we celebrate this too much, we should remember the many with chronic illnesses and immune susceptibility for whom fear fatigue is not an option. Covid is killing more of us than ever. What’s different is we’ve assimilated that information. It’s part of the background hum now, rather than a salient and terrifying factor that affects people’s choices.

New risks are more frightening than old risks. Which is why you might think economic factors could be impeding restaurant spending. There’s a lot of chatter about recession risk, and when you look at surveys of consumer confidence, people report feeling gloomy. ANZ calls it “recession-level” confidence.

Once upon a time consumer confidence was a good guide to spending. But not now, apparently! Real recession level confidence doesn’t make people go out for dinner. What does might be an unemployment rate of 3.5 per cent – ​​by far the lowest in decades.

I know what you are thinking

You’re thinking: Hey, the rise in spending could be because of higher prices. What if it’s not more restaurant meals, just bigger restaurant bills because of inflation?

It’s a really good thing to look at, which is why I checked that data as soon as I saw the spending data I showed you above.

So what does the price data show? It shows the price of restaurant meals shot up in the June quarter, by 1.4 per cent. That is high in historical terms! But not nearly enough to explain how spending rose 10 per cent in the same period.

The numbers really do reflect more plates of scrambled eggs, more Quarter Pounders, more pho, more Diet Cokes and more froyo. It’s a sign Australia has changed: We’re fearless now.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.

Read related topics:Cost Of Living

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What is quiet quitting? How Aussies are pushing back against burnout

What is quiet quitting? How Aussies are pushing back against burnout

There’s a new way to “quit” your job, and it means you don’t have to hand in your notice.

Instead, “quiet quitting” involves the rejection of the idea that work has to take over your life. For many, this is a huge mindset shift and quite a revolutionary concept – and it is one that many Aussies are getting on board with.

“You’re not outright quitting your job, but you’re quitting the idea of ​​going above and beyond,” TikTokker @zkchillin explained in a popular video on the topic.

“You’re still performing your duties, but you’re no longer subscribing to the hustle culture mentality that work has to be your life – the reality is, it’s not and your worth as a person is not defined by your labour.”

That could mean ignoring work emails and calls outside of working hours, and leaving the office on time.

It could also mean declining projects that aren’t part of your job description.

These are all ways “quiet quitters” claim are crucial steps to avoid burnout and regain some work-life balance.

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Many commenters on the TikTok post found the inspiring video, with one writing: “Then when you do it (quiet quitting) you realize nothing at work matters and suddenly all the stress vanishes.”

Another said it can really work: “I quiet quit six months ago and guess what, same pay, same recognition, same everything but less stress.”

While a third said: “I did this when I asked for a raise and they told me no, but then started hiring people with higher pay and less responsibilities.”

However, another commenter cautioned: “This works best if you can tolerate your job – if you’re miserable, get outta there! Your peace of mind comes first.”

It appears the quiet quitting movement has also hit home with many Australians, with the TikTok sparking a lively discussion on an Brisbane Reddit thread.

Many Aussies explained they are currently using this method or have taken similar approaches in the past to their work.

“I stepped down from a management position to a lower one with fewer hours to study,” one user said.

“Went from putting in 110 per cent into everything I did to the absolute bare minimum required to keep me happy and employed.”

Another user, a nurse, said they had definitely “dialled down” their time spent at work after having to take time off for burn out and family issues.

“Since I’ve been back, I only work two to three shifts a week. I do what my job needs me to do,” they wrote.

“My work ethic is still strong but I no longer put my hand up for every other shift and I say no to some that are asked of me.

“I do stay for emergencies after hours but I won’t always be the one to do it. I absolutely don’t want extra responsibility anymore. There are others to do that.”

Another person said they have been “doing this for years”, while person said they adopted this method earlier this years and have since found their “more enjoyable and felt less stress”.

Others pointed out that this wasn’t a new concept, claiming it was nothing more than “healthy boundaries” and having a work-life balance, something any decent company should ensure exists.

One person claimed that the quiet quitting movement seemed to be more prevalent in Brisbane compared to other major cities.

“Having worked up and down the east coast, Brisbane is already ‘quiet quitting’ compared to Melbourne and Sydney,” they wrote.

“What I am noticing is that professional career paths are heading towards more rewarding, creative jobs with less stress. In other words, let the ambitious ones push for the stressful positions.”

While this all sounds very appealing, experts have warned the tactic could backfire, as it’s quite passive and could leave you feeling more powerless.

“If you are getting to the point in your career where you feel that you’re putting work above everything else – at the expense of other important parts of your life – it can be incredibly demoralizing,” LinkedIn career expert Charlotte Davies told Metro. co.uk.

“It’s very likely that you’ll start to retreat from work – ‘quiet quitting’ – in an attempt to bring back some balance.

“Of course, the best piece of advice is to avoid this happening in the first place, but we all know that’s very hard to do, particularly with the pandemic blurring the lines between career and personal lives, which still impacts how we work now. ”

However, while these tactics can reduce overwhelm, you may already be suffering from too much burnout that you may need more support, or to actually quit.

The good news is that some employers are recognizing that many employees are burnt out, and are taking proactive steps to help. A report from May that found more Australian companies are turning to a four-day work week with no pay cut as burnout rises among staff, as well as the fallout from brutal competition to attract employees, with the unemployment rate hitting its lowest level in 48 years.

From August many companies will take part in the reduced work week as part of an initiative from the not-for-profit advocacy group 4 Day Week Global.

Meanwhile, towards the end of 2021, research found that 4.7 million Aussies were willing to switch jobs for less pay but a better employee experience, according to Australian workplace technology company LiveTiles.

The past 12 months saw nearly half of Australian employees feeling stressed, exhausted or fed up, with a third of those surveyed revealing their job has become more difficult.

Have you tried quiet quitting? [email protected]

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