Back in May the RBA decided to start increasing interest rates to tackle inflation which is a common financial policy brought in across many nations once the CPI begins exceeding 3%.
As mentioned in the article demand for goods and services increased dramatically which put a lot of strain on the economy. As people began competing with other purchasers there is a risk that more and more people would do this and in turn would require workers to advocate for higher wages. When there is high unemployment generally businesses can deny the requests and employ someone new.
Despite popular belief of Australian's being laid back and chill which we are. We are also really hard workers and our employment rate has hit an all time high. Because during COVID we all got jobs and Government targeted ads to buy local and spend to save the economy gave a rapid boost to employment.
Unfortunately that means now that there is too much money and inflation is running away which is a common experience across the globe. No doubt in future centuries when the next pandemic occurs there will be a different financial response (print less money).
This has resulted in the RBA rapidly raising interest rates in the hopes to dry up disposable income but the impacts have been far greater than first expected with 5 construction companies collapsing with more anticipated to follow. One company that collapsed SoHo had 200 homes that they had taken deposits for but not commenced construction meaning that their money has been lost.
It is estimated that 500 people have been effected and likely to grow which has caused the construction industry to put pressure onto the RBA to slow down interest rate rises or risk further collapses.
My initial thoughts are that the RBA won't heed because their main issue is too much employment and too much cash so mass unemployment will rapidly drop inflation. Loans collapsing and being called in will also reduce the cash rate.
These are uncertain times as we enter uncharted waters for many this is their first economic challenge as the last time the economy was like this was the 1970s.
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