Here is an awkward idea doing the rounds this week. Australian households tell the Reserve Bank they cannot cope with higher repayments, then spend like they can. One columnist argues those mixed signals are helping drive the next rate rise, and that the people who pay for it are the ones least able to.
The argument is worth testing, because it has a real kernel and a real flaw.
The case: the RBA reads spending, not complaints
The columnist’s point is simple. When the cash rate goes up, public anger follows. Households say rent, fuel, food and medical bills are biting, and that can unsettle a board and sometimes produce a split vote.
But the bank sets policy off data. And the data keeps showing demand.
The examples cited make the point:
- Finder put national gambling on Melbourne Cup Day at $351 million. The same day, the board was deciding on its fifth rise for the year.
- Black Friday formally starts on 27 November. Last year’s four-day stretch through Cyber Monday brought $23.8 billion in purchases.
- Travel Tuesday, Christmas shopping and Boxing Day sales follow close behind.
By February, the argument goes, the bank will be looking at numbers that suggest households can absorb another increase. Then the cycle repeats through Valentine’s Day, Mother’s Day and end-of-financial-year sales.
Treat the prediction as opinion. It is a columnist’s forecast, not a central bank signal. Still, the underlying mechanism is sound: a central bank trying to cool demand wants to see demand cool.
The flaw: spending is not one household
Aggregate figures blur who is actually spending. A national total of $23.8 billion over four days says nothing about whether it came from a couple on a variable loan or from an outright owner with no repayments at all.
This is the real story. Rate rises do not land evenly:
- Mortgage holders face higher repayments straight away, particularly on variable loans.
- Renters feel it more slowly, as landlords pass on higher costs.
- Outright owners and savers often gain, because deposit rates rise too.
So a retail number can look strong while a large slice of borrowers cut back hard. The bank sees the total. Borrowers live in the squeeze.
The columnist is careful on this point, and so should we be. Struggling borrowers are not being extravagant. The argument is that collective behaviour across the whole economy ends up penalising them. That is a very different claim from blaming people with a tight budget for buying a coffee.
The sandwich test, and why it only goes so far
The piece contrasts a homemade sandwich at roughly $2.50 with a $15 café version near the writer’s Surry Hills workplace, and a delivered one costing at least $10 more. It is a vivid illustration of discretionary spending.
But it is an anecdote, not evidence. A household with a $4,000 monthly repayment is not going to fix its position by skipping lunch out. And a household with no loan was never the one the cash rate was aimed at.
What the RBA can actually do
This is where the tension sits. The cash rate is a blunt tool. It works by raising borrowing costs, so the burden falls on people with debt. If spending is being held up by people who are not feeling the pinch, the bank may need larger moves to slow the economy overall, and those moves land on the same borrowers each time.
The columnist points to other levers that could share the load:
- A higher GST
- Larger compulsory super contributions
- Lower government spending
- Taxes on luxury goods
- Subsidies that boost supply
Each has trade-offs, and none is a quick fix. A higher GST is regressive. Bigger super contributions cut take-home pay. Spending cuts have political limits. Supply subsidies take years to show up in the data. But the list makes a fair point: monetary policy is carrying more of the inflation fight than it should have to.
What it means for borrowers
If you hold a mortgage, you cannot control the national spending figure. You can control your own buffer.
- Know your repayment at a cash rate one or two steps higher than today.
- Check whether your lender has passed on the full movement, and whether a refinance could trim the gap.
- Keep any offset or redraw balance as a buffer, not as spending money.
For a plain-English view of how the cash rate flows through to repayments, see our guide to RBA interest rates and mortgage repayments.
The catch
The catch
- Spending data is aggregate. It hides who is paying the price.
- The February-hike forecast is one columnist’s prediction, not a signal from the bank.
- If demand stays firm, the RBA has few tools that do not fall on borrowers.
Bottom line
The claim that consumers are to blame is too neat. Spending is uneven, and the people carrying the repayments are not the ones driving the retail totals. The sharper question is whether a single, blunt instrument can cool a split economy without crushing the households already stretched. The practical step is to stress-test your own repayments now, before the next decision lands.
If you want the weekly signal, subscribe to the free newsletter.
General info, not financial advice.
