Businessman Mark Bouris has warned Australians are at risk of losing their jobs because of skyrocketing interest rates that he says have “gone too far”.
The Reserve Bank of Australia raised cash rates to an 11-year high of 3.85 percent earlier this month, its 11th increase in the past year.
The move has put millions of Australians under more strain, while financial experts have warned of a possible recession if the RBA does not cut interest rates before the end of the year.
Mr Bouris, the former Celebrity Apprentice boss and executive chairman of Yellow Brick Road Home Loans, added to the alarm bell by claiming that the rise in interest rates would push economic development and growth back to below two per cent.
Businessman Mark Bouris has warned Australians risk losing their jobs because of high interest rates that he says have ‘gone too far’
“That means people start losing their jobs, when they stop paying their home loans or in the case of other types of debt, they get into debt problems[and]small businesses go out of business,” he said. sky news on Tuesday.
The Reserve Bank of Australia has set an inflation target of 2 or 3 percent – much lower than the current rate of 7 percent.
Mr Bouris questions whether the RBA should be tackling inflation ‘so aggressively’.
“If you try to get inflation from seven percent, where it is now or last quarter, to two to three percent, that sounds ridiculous because you have to cut it by two-thirds,” he said.
“If the only way you can do that is to raise interest rates, you’re going to break something along the way.”
“It should have been a much softer approach, it should have been over a longer period of time.”
Speaking to Daily Mail Australia, Mr Bouris said the combined response of the RBA and federal and state governments to the Covid pandemic was “too stimulative for the economy”.
“The RBA had waited to taper their expansionary measures until inflation was an obvious problem,” he said.
As the RBA was slow to respond to the first signs of the economy overheating, the result was higher inflation that is likely to last longer than it otherwise would have.
“I believe the full effect of the rate increases seen so far has yet to materialize and think the RBA needs to be more patient and assess the slowing effect that the rate changes have already set in motion.”
Mr Bouris said the interest rate hikes made last year will not be achieved yet. Many mortgage holders still have a fixed interest rate, but will soon have a variable interest rate.
“But once they lower their current fixed rates, many thousands of borrowers will face an interest rate hike of about 2 percent to possibly more than 6 percent, increasing their minimum loan repayments by more than 65 percent,” he said.
“It is clear to me that many cannot afford their mortgage.”
He urged many homeowners to be proactive and talk to their mortgage broker.
“They’ll be able to assess your situation and see if there’s an offer you can switch to that will save you money,” he said.
Earlier this month, the financial advisor shared a fiery video in which he called the rate hikes “a slap in the face” and “totally unnecessary.”
‘Are they serious? Are they really, really serious? Do they want to break this economy?’ he said.
“Do they want to break the backbone of Australian mortgage holders?
“This is going to force something to break, from my point of view. I just think they went way too far. They have to stop this.
The Reserve Bank of Australia raised its cash interest rate to 3.85 percent earlier this month
“They don’t have to worry about what the data says anymore. They have to look at the human impact.’
The latest increase means that a borrower with an average $600,000 mortgage will see monthly repayments increase by $95 to $3,555.
That’s based on a variable rate from the Commonwealth Bank rising 25 basis points to 5.89 percent, up from 5.64 percent.
The RBA may need to cut rates by Christmas to avoid a recession, financial experts have told Daily Mail Australia.
Two of Australia’s major banks, NAB and ANZ, both expect a quarter of a percentage point increase in 2023, which would push interest rates to an 11-year high of 4.1 percent.
AMP chief economist Shane Oliver said just one rate hike would be enough to trigger a recession in Australia, as borrowers are already paying down record levels of debt and proposed rates should be cut by the end of 2023.
Debt service payments are at record levels – that puts us at a very high risk of going into a recession,” he told Daily Mail Australia.
Every time you raise interest rates, your risk of a recession increases. The economy could collapse faster.’
If interest rates are cut, as Dr. Oliver says should happen, banks could pass that on to borrowers, meaning mortgage payments start to fall again.