Today’s interest rate rise sacrifices jobs and incomes to curb inflation and the effects will be felt most acutely by people on the lowest incomes, ACOSS says.
ACOSS CEO Cassandra Goldie says:
“The RBA’s decision to lift the cash rate to 4.35 per cent will hurt people with low incomes the most. The worthy goal of reducing inflation must not come at the expense of jobs and incomes, which have just taken another hit from the 13th interest rate rise since May 2022.
“Every rate rise leads to job losses down the line. The RBA expects unemployment to rise to 4.25%, at least an extra 100,000 people out of paid work since it began hiking interest rates. Given the storm clouds over the international economy, unemployment could rise a lot further.
“The RBA Board states that it has ‘a low tolerance for a slower return of inflation to target’ The community’s ‘low tolerance’ for more unemployment must also be taken into account.
“Instead of relying solely on the blunt tool of rate rises, the government must step in to aid the RBA with measures to tackle inflation at its roots.
“This should include working with states and territories to curb soaring rents and additional measures to bring down energy bills for those who can least afford it.”
ACOSS is calling on the government to:
- Work with states and territories to implement stronger regulation of the private rental market to protect against exorbitant rent increases
- Take further action to reduce out of pocket costs such as child care and dental health services
- Protect people on the lowest incomes who are facing destitution amid the rising price of essentials by lifting Jobseeker and related payments
- Take further action to reduce energy costs by investing to make homes energy efficient for people on low incomes
- Invest in a jobs and training offer for the 500,000 people unemployed long-term to improve their employment prospects and ease labour shortages.
FAQs
Higher interest rates can make borrowing money more expensive for consumers and businesses, while also potentially making it harder to get approved for loans.
How do interest rates affect people? ›
Interest rates influence borrowing costs and spending decisions of households and businesses. Lower interest rates, for example, often encourage more people to obtain a mortgage for a home or to borrow money for an automobile or home improvements.
Does interest make the poor poorer? ›
High interest rates are always tougher on borrowers than on savers. But most of the time, they also push down the value of stocks, houses and other assets. That means rate increases usually affect households across the income spectrum, albeit in different ways.
Who makes the most money when interest rates rise? ›
With profit margins that actually expand as rates climb, entities like banks, insurance companies, brokerage firms, and money managers generally benefit from higher interest rates. Central bank monetary policies and the Fed's reserver ratio requirements also impact banking sector performance.
Who is worse off when interest rates rise? ›
The answer is No. when interest rates rise; not everybody is worse off as actions with the loaned funds differ. People who take up loans to purchase assets such as a house or cars are worse off in any interest rate rise as more is expected for them to finance their purchases.
Who benefits most from higher interest rates? ›
Nevertheless, some sectors benefit from interest rate hikes. One sector that tends to benefit the most is the financial industry. Banks, brokerages, mortgage companies, and insurance companies' earnings often increase as interest rates move higher because they can charge more for lending money.
Who gets the money from higher interest rates? ›
Key Takeaways. Interest rates and bank profitability are connected, with banks benefiting from higher interest rates. When interest rates are higher, banks make more money by taking advantage of the greater spread between the interest they pay to their customers and the profits they earn by investing.
Who benefits when yields or interest rates are low? ›
When yields or interest rates are low, it typically benefits borrowers more than lender...
What happens to people when interest rates rise? ›
Higher interest rates increase the return on savings. They also make the cost of borrowing more expensive. Higher interest rates help to slow down price rises (inflation).
Who is happier between the rich and poor? ›
Reconciling previously contradictory results, researchers from Penn and Princeton find a steady association between larger incomes and greater happiness for most people but a rise and plateau for an unhappy minority.
Women, old people and children are the poorest of the poor in the society. They are systematically denied equal access to the resources available in the family. Hence, they are considered the poorest of the poor.
Why do poor stay poor and rich get richer? ›
Not Having The Funds To Invest
However, wages for many middle and lower-wage workers haven't kept pace with inflation, leading to a decline in purchasing power. By making consistent investments when you are young, it enables you to become wealthy by benefiting from compound interest.
Who really controls interest rates? ›
The Federal Reserve determines the price of borrowing money through one of its primary interest rates, the fed funds rate. The fed funds rate influences various financial decisions and products, such as credit card rates and mortgage rates.
Who is paying the highest interest rates? ›
The 5 highest-paying savings rates today
| Institution Name | APY | Compounding Method |
|---|
| MyBankingDirect.com | 5.35% | Manual |
| UFB Direct | 5.35% | Daily |
| Western Alliance Bank | 5.31% | Monthly |
| LendingClub Bank | 5.30% | Monthly |
1 more rowOverview: Best investments in 2024
- High-yield savings accounts. Overview: A high-yield online savings account pays you interest on your cash balance. ...
- Long-term certificates of deposit. ...
- Long-term corporate bond funds. ...
- Dividend stock funds. ...
- Value stock funds. ...
- Small-cap stock funds. ...
- REIT index funds.
Who benefits and who is hurt when interest rates rise? Corporations with immediate capital construction needs are worse off. Households with little debt, saving a significant fraction of annual income for retirement, are better off. The federal government running persistent budget deficit is worse off.
Who gets the interest when interest rates rise? ›
Higher interest rates mean higher payments on many mortgages and loans. So people with those things need to spend more on them and have less to spend on other things. Higher interest rates also mean savers get more return on their savings. And potential borrowers find it is more expensive to take out a loan.
Do rising interest rates help or hurt banks? ›
Higher interest rates have boosted banks' net interest income—resulting in higher net interest margins (NIMs) and enhanced profitability. Lenders have benefited from a widening of the spread between the interest they pay to depositors, and the income they reap on lending.
Are higher interest rates hurting the housing market? ›
Low-interest rates tend to increase demand for property, driving up prices, while high interest rates generally do the opposite.
