Leading auctioneer Tom Panos has hit out at Reserve Bank Governor Michele Bullock for suggesting inflation is a bigger problem than high interest rates.
Ms Bullock also warned that the Reserve Bank is prepared to raise interest rates further if inflation does not improve as expected, triggering Panos’ fiery outburst.
‘The Reserve Bank Governor said something really stupid the other day: ‘inflation hurts more than interest rates’.
However, Mr Panos argued that the financial stress caused by high interest rates was far more severe than the impact of rising prices due to inflation.
‘If you think that paying an extra $1.50 for a cup of coffee because of inflation hurts a person more than having to pay $4,000 a month on their loan instead of $2,500, I tell you you are wrong.
“Mrs. Bullock, the person has a choice whether to buy a coffee or not,” he explained.
“But they don’t have the choice whether they want to repay the loan, so they’re not entirely right.”
The Reserve Bank has raised interest rates 13 times in 2022 and 2023 to 4.35 percent, the highest level in 12 years.
Real estate auctioneer Tom Panos (pictured) has criticised RBA Governor Michele Bullock for saying that “inflation hurts more than interest rates”
Reserve Bank of Australia policymaker Michele Bullock (pictured) also warned that the Reserve Bank is prepared to raise interest rates further if inflation does not improve as expected.
Variable mortgage payments are 70 percent higher than at the beginning of 2022 as rates have risen from starting with a “two” to starting with a “six.”
Inflation over the last financial year rose to 3.8 per cent, despite the most aggressive increases since the late 1980s, with the consumer price index well above the RBA’s 2 to 3 per cent target band.
Mr Panos argued: ‘What is the significance of this effort to reduce inflation to exactly two to three percent in that band?
‘Do you really think a cup of coffee will go back to costing $6.50 to $5?’
However, many Australians were also quick to criticise Mr Panos’s views on inflation.
“Maybe it wouldn’t be better to borrow so much?” said one.
“The RBA is not there to stop people getting into too much debt,” added a second.
“Inflation hits the poor the hardest, as they don’t own any assets. Maybe we should start attacking the banks for allowing people to take on huge mortgages,” said a third.
“Tom is a property developer, he just wants interest rates to go down so he can sell his products,” said another.
His comments come after Treasurer Jim Chalmers accused the Reserve Bank of “wrecking” the economy with its interest rate strategy earlier this month.
However, Bullock said inflation was the biggest problem.
“High inflation hurts everyone, especially the most vulnerable,” he said.
“It reduces what people can buy with their wages, erodes the value of savings and disproportionately hurts those on low or fixed incomes.”
Jonathan Kearns, a former RBA economist, agreed.
“The erosion caused by inflation is greater than that caused by interest rates,” Dr Kearns told the AFR.
“The impact of inflation extends to all households, so everyone feels it. Interest rates are concentrated in some households.”
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