Slowing economy highlights need to cut rates

Weak economic growth shows the RBA needs to cut interest rates to stem rising financial distress and job losses, ACOSS has warned.

ACOSS CEO Cassandra Goldie said the weak 0.2 GDP growth in the December quarter showed the RBA went too far in hiking interest rates last year.

“The living standards of people on low incomes have taken a huge hit over the past year. Real household income, employment and housing construction are in a nosedive while rents soar,” she said.

“Excessive interest rate rises last year have brought financial distress and job losses as we enter 2024 and they are likely to continue to suppress growth in jobs and incomes unless the RBA changes course.

“Since the rate increases commenced in mid 2022, unemployment has risen from 3.5 to 4.1 per cent – or 90,000 more people out of paid work. The RBA expects unemployment to reach 4.4 per cent by 2025.

“Monetary policy decisions involve challenging trade-offs but we believe the RBA raised rates too aggressively last year and should start bringing them down when it meets later this month.

“People on low and modest incomes cannot absorb any more pressure. People with the least are being forced to make heartbreaking choices between eating and paying the rent to avoid becoming homeless.

“For people already unemployed, it is impossible to survive on $54 a day. It’s wrong for a nation as wealthy as Australia to condemn 872,000 people replying on JobSeeker to abject poverty.

“The government should play its part in restoring growth in jobs and incomes. It should boost the unemployment payment to the pension rate of $78 a day to ease hardship and bolster jobs growth in regions worst impacted by rising unemployment.

“It should ramp up direct investment in social housing and better regulate the private rental markets to stem the surge in homelessness and help meet flagging home construction targets. Public investment in energy efficiency upgrades for low-income homes would provide relief for people suffering during heatwaves while also strengthening jobs growth.”