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Rachel is a hairdresser and is seeing the effects of cost of living pressures on her business.
“We experience it in a client – the lack of clients and all that, because I guess everything increases, inflation, and then obviously you have to give up some of what you’re spending your money on, and one of the first things to go is going to be personalized service.
Retail workers across the country are also seeing a change.
“Particularly mortgages, which I guess affects discretionary spending, which we are. But mental health is also important and people like to go into a store and look around, even if it’s just to brighten their day. So I mean, we’re there for a lot of reasons, but in the grand scheme of things, yeah, it’s really tough out there.”
These experiences are reflected in the national accounts released in the first week of September, which reveal that the economy barely grew.
The Australian Bureau of Statistics says that for the whole year growth was only 1 per cent.
Outside of the pandemic, the annual rate was the lowest since the 1991 recession.
Treasurer Jim Chalmers says cash-strapped households are cutting back on non-essential items to pay for basics.
“What we are seeing here is weakness on the household side of the economy and private investment, offset by the contribution of exports and public final demand. The main story in these numbers is consumption. consumption fell and discretionary spending fell substantially.
Some experts expected the mixed results due to rising interest rates.
But borrowers hoping for cuts to follow the sluggish growth report will be disappointed.
RBA Governor Michelle Bullock said the central bank needed to see more progress on inflation.
“But if the economy performs broadly as expected, the board does not expect it to be able to cut rates in the near term. But over the past 18 months, price inflation of goods has declined significantly due to supply disruptions linked to the COVID-19 crisis. The Covid-19 pandemic and the war in Ukraine have eased and global demand for goods has slowed.
Michele Bullock argues that the demand for goods and services in the economy is always greater than the capacity to supply them.
According to her, a further increase in interest rates is not excluded if prices continue to rise.
“If inflation doesn’t come down, it may be that the best remedy is actually to impose more restrictions on the economy.”
The bank’s argument is that it must curb high inflation to avoid further suffering… which hits those with the lowest incomes, particularly young people, hardest.
“Ultimately, we will have to slow the economy further, which would lead to a greater increase in unemployment and a higher risk of recession. The cost of job loss is very high for individual workers, and that leads persistent income losses This experience is consistent across all groups of workers, but job losses tend to be borne disproportionately by some members of our community, the young, the less educated, and those with lower incomes. .
Michelle Bullock says owner occupiers on variable rate loans could also be vulnerable.
“We estimate that around 5 per cent are in a particularly difficult situation where the combined total of their essential expenses and expected mortgage repayments is greater than their income.”
These figures were taken up by the opposition, which criticizes Labor’s management of the economy.
Opposition Leader Peter Dutton says the cost of living crisis is essentially their fault.
“We have simply received poor economic responses from a government that does not know what it is doing. The situation is as bad as it has been since the early 1990s and in 50 years we have not seen a situation we’ve had has seen six straight quarters of negative household growth, and that’s why families are really suffering.”
Stubborn price pressures and the resulting prolonged wait for cuts remain a sore point for the federal government, which defends its fiscal management against accusations of excessive spending.
This led to speculation about a conflict between Labor and the RBA itself.
Finance Minister Katy Gallagher dismissed the rumors.
“Household budgets are being destroyed, and the 13 interest rate increases are of course contributing to that. The bank has a job to do to bring down inflation. But we also have a job to do to explain what we’re seeing in the economy and what we know is happening, which is that households are under enormous pressure.”
The RBA governor also tried to silence rumors of tensions.
JOURNO: “The Leader of the Opposition said today that you and the Treasurer are at war, right?
BULLOCK: “He’s doing his job and I’m doing mine. I wouldn’t use those kinds of words.”
But while the government says it is aware of the financial pressure Australians are under – and is doing what it can to address it – ordinary Australians say they desperately need a reduction in the cost of living .
voxie 1: “That’s $350 worth of groceries there.”
voxie 2: “Things go beyond a joke.”
voxie 3: “We need a miracle.”
