Former Sunrise presenter David ‘Kochie’ Koch has called on the Reserve Bank to identify the Albanese government’s contribution to Australia’s inflation pressures, warning millions of mortgage holders could soon be forced to absorb another interest rate increase for costs they did not create.
Commonwealth Bank, Westpac and ANZ have each cautioned homeowners that the RBA may lift interest rates again at its meeting next week.
Financial markets are currently forecasting the cash rate will rise to 4.6 per cent on September 29. Traders are also anticipating a further increase to 4.85 per cent early next year, with another hike later in 2027 considered a strong possibility.
In an open letter to RBA governor Michele Bullock, Koch, now economic director at Compare the Market, urged the central bank to outline why households should bear the burden of inflation in its next policy decision.
“There’s an increasing likelihood that a great many Australians will be handed a bill they did not run up,” Koch said.
“The June-quarter national accounts were stronger than economists expected, showing growth of 0.4 per cent compared with a forecast of 0.3 per cent. Annual growth reached 2.1 per cent, above the predicted 1.8 per cent.”
Before the board makes its decision, Koch said it should examine who was responsible for generating that unexpectedly strong growth. “It wasn’t households,” he said.
Koch believes the expansion has instead been supported by federal, state and territory government spending, along with increased public-sector employment and wage growth.
David Koch says public-sector hiring, wage growth and government spending have contributed to inflation
Koch said the source of the recent economic growth needed to be examined carefully before mortgage holders were asked to take on even higher repayments, arguing another rate rise could target the wrong part of the economy.
He said households were already showing restraint, with spending increasing by just 0.4 per cent during the June quarter while the household saving ratio rose to 6.5 per cent.
The financial commentator also pointed to unemployment reaching 4.5 per cent, declining consumer confidence and business conditions slipping into negative territory.
“So who was driving the growth? Government — and not by a small amount,” Koch said.
“Commonwealth government spending has increased to 26.8 per cent of GDP — the highest level outside the pandemic period since 1986.”
“State government spending is not helping either, nor is the expansion of the public sector,” he added.
Citing Australian Bureau of Statistics data, Koch said prices influenced by government decisions had climbed significantly faster than those determined by market forces.
He said the figures included costs linked to childcare, education, healthcare, utilities and insurance.
In an open letter to RBA governor Michele Bullock, Koch asked why Australians could be made to endure another rate rise because of inflationary pressures
“In other words, some of the most persistent price pressure is not being created by consumers spending freely — it is coming from prices that governments set, subsidise, regulate or index,” Koch said.
“Governor, that point deserves particular attention. A significant portion of the inflation the board is attempting to control is not being generated in shopping centres. It is being determined in cabinet rooms.”
Koch added that petrol price shocks are already a ‘tax on every household’, and a rate rise won’t fix the situation but only harm ordinary Australians.
‘A meaningful slice of the inflation your board is trying to contain is not being generated in a shopping centre. It is being set in a cabinet room,’ he said.
‘Australians have absorbed three rate rises this year, taking the cash rate to 4.35 per cent. Interest payments now consume 5.8 per cent of household gross income… higher than the 5.7 per cent peak of 1990, when mortgage rates were near 17 per cent.
‘Today’s borrowers are carrying a heavier interest burden than the generation we all cite as the horror story.
‘Households complied. Governments didn’t seem to. Yet only one of those two gets the higher interest rate bill.’
Koch asked that the RBA governor follow through on four steps, starting with publishing an estimate of how much of the cash rate is attributable to government spending fuelling demand within every Statement of Monetary Policy.
He called on Bullock to show where the rate would be if government spending had grown in line with GDP rather than ahead of it.
He added there should be a fiscal statement signed by federal and state treasurers committing to a public spending path consistent with the RBA’s inflation target. He also said Bullock should explain the impact of any rate rise in terms of mortgage repayments.
Expectations of another increase intensified after stronger-than-expected inflation data and Bullock’s recent comments to parliament.
AMP deputy chief economist Diana Mousina said Bullock’s appearance before the House of Representatives provided a fresh insight into the RBA’s thinking on the economic outlook.
‘I thought she sounded a little more overt in her discussion around inflation, noting that “developments since [the August board meeting] suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising”,’ she said.
‘That sounds like a central bank preparing to raise rates at its next meeting.’
Koch said if another increase proves necessary, Australians deserve a clear explanation of what is forcing the decision.
‘If the board must move on September 29, please do Australians the courtesy of naming who forced your hand,’ he said.
‘A rate rise won’t pump a single extra barrel, or fix a thing in the Middle East. It simply hits the same kitchen table twice.’
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