Times are tough for the average Australian

Rising interest rates are hitting ordinary Australians where it hurts.

Bella, the publican, tapped her fingers on the bar, as Mick counted out the coins to pay for the two middies.

She said:

“Have you raided the piggy bank, Mick? Anyhow, you are five cents short, but I’m feeling generous and it’s costing me money and pain watching you.”

“Times are tough, Bella.”

Mick strode to the bar table and Bazza frowned at the middy.

"Know All Ron" was holding court:

“The problem is there is too much money chasing too few goods in the economy and Phil Lowe, the Governor of the Reserve Bank, has little choice but to raise interest rates to quell inflation.”

They all took tiny sips of their middies and "Timeless Tom" sighed:

“All I know, Ron, is the Governor is not the sort of bloke who shops at Lowes and is not feeling the pinch.”

There were a few chuckles before Bazza weighed in:

Raising interest rates is such a blunt instrument. Government policy has been spend, spend, spend with various stimulus packages under COVID. Our good friend Mr Lowe even said interest rates will not change until next year.

People changed behaviours accordingly, entered into mortgages and loosened their purse strings. The messages are now totally opposite. Changing people’s behaviour is a bit like trying to turn a jumbo jet around mid air.

Bella, the publican, began wiping their bar table.

“What’s your take on things, Bella?”

She replied:

“Well Bazza, you blokes used to drink schooners and you now sip middies. I am not serving t-bone steaks anymore, given the price of beef and there is now a scarcity of potatoes. I reckon I will start closing earlier and downsizing the staff before long.”

"Know All Ron" cleared his throat: "And that’s the problem if the Reserve Bank goes too hard. They grind down business. The decisions about interest rates are based on past data. They use a rearview mirror to work out where to go.”

There was a long pause and even tinier sips of middies as Bazza screwed his eyes.

“You’re right Ron, but by gee, there should be more subtle ways of achieving inflation aims, apart from belting people with rising interest rates.”

Mick straightened his back and stepped forward:

“Right. I’ve given this whole matter considerable thought.”

Numerous eyebrows danced upwards.

“For starters, I reckon a fair whack of these interest rate rises just end up as bank profits. If we need to take money out of the economy, to cool inflation, let’s look at other options,” he said.

Nods of agreement.

“I reckon the Government should legislate an employee superannuation contribution on top of the compulsory employer contribution. It could be varied, just like interest rates, in accordance with the need to keep inflation under control. It could be used to get money out of the economy.”

Mick took a sip:

“Sure, it would piss people off but not as much as paying higher interest rates that go off into the banking ether. At least people get to enjoy the sacrifice in retirement. It would stabilise interest rates, reduce mortgage stress and hopefully curb rising rents. It will also have less impact on the lower paid and retirees.”

Bazza raised his middy.

“You’re turning into a socialist, Mick.”

“I’m a commie when it comes to the banks, Bazza,” he retorted.

"Know All Ron" tut-tutted.

“Ah. There is always the problem with the currency markets. If our interest rates remain lower than other countries then money will flow out of the country in pursuit of higher returns and weaken the dollar, but it’s worth adding to the debate, Mick. Good on you,” he remarked.

Mick sighed:

“Bloody hell, Ron, I was looking forward to getting back to schooners in retirement.”

John Longhurst is a former industrial advocate and political adviser. He currently works as an English and History teacher on the South Coast of NSW.