The Hidden Costs of RBA's Interest Rate Hike: How It Harms Lower-Income Australians and What We Can Do Instead

The recent announcement by the Reserve Bank of Australia to increase interest rates following the release of the latest inflation figures for March 2023 has left me troubled. As the President of Australia’s largest independent property investment group, I firmly believe that the fall in inflation should have prevented the RBA from raising interest rates.

If interest rates are increased, landlords will be forced to increase rents to cover additional mortgage repayments, pushing up inflation even further. This will result in a further reduction in lending to property investors, which has already dropped by over 30% since the RBA started to increase interest rates. With 650,000 migrants expected to arrive in Australia over the next two years, few rental properties will be available, and rents will increase.

I believe that higher interest rates only benefit big banks while hurting lower-income Australians. This policy will put an additional $10 billion of profit in the pockets of the big banks and cause immense pain to financially struggling Australians, especially renters. To combat inflation in a fairer way, I propose a temporary 1% increase in GST that would reduce spending equally across ALL Australians, resulting in lower interest rates faster. This would also increase the supply of rental properties as more investors move back into the property market, benefiting tenants.

The additional monies raised from the increased GST could be used to repair the Federal budget, which would help all Australians rather than making big banks even richer.

I also believe that the Federal Government should reverse lousy policy decisions that have negatively impacted landlords over the past five years to help boost the supply of rental properties. The Government should restore negative gearing to cheap second-hand properties and immediately provide thousands of additional, more affordable rental properties for renters throughout Australia. In addition, interest-only lending should be restored to property investors for an indefinite period of time, similar to other developed countries. When APRA imposed lending limits and ended interest-only loans back in 2015, thousands of investors throughout Australia were forced to sell their properties because they could not afford the higher principal and interest mortgage payments.

Kevin Young Club Founder