Noel Whittaker says RBA rate rise feels like a recession for households

Financial author Noel Whittaker has told 4BC Brisbane that the Reserve Bank's latest interest rate rise is hitting households hard. He said it is leaving many families feeling as though they are already in a recession.

Whittaker was speaking on the station's weekly "Ministry of Common Sense" segment. The host said the Reserve Bank board split 6-3 on the decision, the fifth increase this year. He said it lifted the cash rate to 4.85 per cent, which he described as an 18-year high. These figures come from the host's account on air.

The host said the rise adds about $100 a month to repayments on what he called the average $600,000 mortgage. He also cited a report from earlier that morning of a renter facing an increase from $650 to $750 a week from early next year. He said Reserve Bank Governor Michele Bullock has acknowledged the economy is not technically in a recession. He added that he personally believes it is, and that falling real wages and rising costs will make life feel like one for many families.

Whittaker agreed the experience of households is what matters. He said the money people had set aside for planned purchases no longer stretches as far, and that this "is like a recession". He explained that a recession is meant to slow the economy by hurting confidence, and he questioned how much further confidence could fall.

He argued the rate rises were working against the goal of housing affordability. In his view, headlines about falling house prices discourage people from buying, which reduces stamp duty collections and buyer activity. He also said the Reserve Bank governor had acknowledged the higher rates would reduce the ability to build homes, which could shrink the housing stock rather than grow it.

Both men also criticised the federal government's housing promises. They said the target of 1.2 million new homes was far from being met. They said first home buyers who used the scheme backing a 5 per cent deposit could end up owing more than their home is worth if prices fall. Whittaker said this is a problem only if the owner is forced to sell.

The host also read a letter from a listener named Brent, who said he sent it to the Prime Minister, Pauline Hanson, federal member and Speaker Milton Dick, and the program. Brent said he is 37, married, with two children. He said he and his wife worked two jobs each to save for a home and built a house in an up-and-coming area outside Brisbane about 12 years ago. He also described hard times after losing work. The segment's source material ends before the rest of his letter.

The comments are those of the guest and the host. They are opinion on the economy and are not official forecasts.