Former Sunrise host David ‘Kochie’ Koch has challenged the Reserve Bank to identify the Albanese government’s contribution to Australia’s inflation problem, warning millions of mortgage holders could soon face another rate rise for a bill they “did not run up”.
Commonwealth Bank, Westpac and ANZ have each warned borrowers to prepare for another interest rate increase next week.
Financial markets are pricing in a rise in the cash rate to 4.6 per cent on September 29. A further increase to 4.85 per cent is expected early next year, while traders also see a strong possibility of another hike later in 2027.
In an open letter to RBA governor Michele Bullock, Koch called on the central bank to explain in its board decision why households should bear the cost of inflation.
“There’s an increasing likelihood a great many Australians are likely to be handed a bill they did not run up,” he said.
“The June quarter national accounts came in hotter than expected: growth of 0.4 per cent against a forecast of 0.3, and 2.1 per cent over the year against forecast 1.8.”
Before the board votes, Koch said it should examine what drove the unexpectedly strong growth, arguing that households were not responsible.
Instead, he attributed the expansion to federal, state and territory government spending, along with public sector hiring and wage growth.
David Koch argues inflation has been fuelled by public sector hiring, wage growth and government spending
Koch said policymakers should first consider where the recent economic growth originated before requiring mortgage holders to absorb even higher repayments, warning another rate rise could target the wrong part of the economy.
He argued households were already exercising caution, pointing to a 0.4 per cent increase in spending during the June quarter and a rise in the household saving ratio to 6.5 per cent.
The financial expert also highlighted that unemployment had climbed to 4.5 per cent, consumer sentiment was weakening and business conditions had fallen into negative territory.
“So who did the growing? Government, and not by a little,” Koch said.
“Commonwealth government spending has climbed to 26.8 per cent of GDP… the highest level outside the pandemic since 1986.”
“State government spending isn’t helping either. The public sector has also.”
Koch cited Australian Bureau of Statistics figures that he said showed government-influenced prices had increased far faster than prices driven by market forces.
He said those categories included childcare, education, healthcare, utilities and insurance.
In an open letter to RBA governor Michele Bullock, Koch challenged her to explain why Australians may face another interest rate increase as a result of inflation pressures
“In other words, some of the stickiest price pressure isn’t coming from shoppers splurging… it’s coming from prices governments set, subsidise, regulate or index,” Koch said.
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“Governor, that last point deserves emphasis. A meaningful slice of the inflation your board is trying to contain is not being generated in a shopping centre. It is being set in a cabinet room.”
Koch added that petrol price shocks are already a ‘tax on every household’, and a rate rise won’t fix the situation but only harm ordinary Australians.
‘A meaningful slice of the inflation your board is trying to contain is not being generated in a shopping centre. It is being set in a cabinet room,’ he said.
‘Australians have absorbed three rate rises this year, taking the cash rate to 4.35 per cent. Interest payments now consume 5.8 per cent of household gross income… higher than the 5.7 per cent peak of 1990, when mortgage rates were near 17 per cent.
‘Today’s borrowers are carrying a heavier interest burden than the generation we all cite as the horror story.
‘Households complied. Governments didn’t seem to. Yet only one of those two gets the higher interest rate bill.’
Koch asked that the RBA governor follow through on four steps, starting with publishing an estimate of how much of the cash rate is attributable to government spending fuelling demand within every Statement of Monetary Policy.
He called on Bullock to show where the rate would be if government spending had grown in line with GDP rather than ahead of it.
He added there should be a fiscal statement signed by federal and state treasurers committing to a public spending path consistent with the RBA’s inflation target. He also said Bullock should explain the impact of any rate rise in terms of mortgage repayments.
Expectations of another increase intensified after stronger-than-expected inflation data and Bullock’s recent comments to parliament.
AMP deputy chief economist Diana Mousina said Bullock’s appearance before the House of Representatives provided a fresh insight into the RBA’s thinking on the economic outlook.
‘I thought she sounded a little more overt in her discussion around inflation, noting that “developments since [the August board meeting] suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising”,’ she said.
‘That sounds like a central bank preparing to raise rates at its next meeting.’
Koch said if another increase proves necessary, Australians deserve a clear explanation of what is forcing the decision.
‘If the board must move on September 29, please do Australians the courtesy of naming who forced your hand,’ he said.
‘A rate rise won’t pump a single extra barrel, or fix a thing in the Middle East. It simply hits the same kitchen table twice.’
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