EDITORIAL: Regarding that next interest rate rise. Why?

The national mood is sour.

We have been hit by a perfect economic and political storm.

House prices are falling, with expectations of more falls to come, with buyers having retreated to the sidelines in the wake of the Reserve Bank of Australia’s three interest rate rises this year and the Albanese Government’s housing tax policy changes on negative gearing and capital gains tax.

Latest figures show a $34.1 billion property value wipe-out in the three months to June.

Because the home is the biggest investment most Australians are likely to make, falling values makes people feel less wealthy, more inclined to tighten their belts, and drives down their mood.

Consumer sentiment is falling again from already weak levels, with the Westpac-Melbourne Institute measure for September diving by 5.2 per cent to 84.4 points, which is well below the 100-level where optimists outnumber pessimists.

The extent of the expected house price slump is revealed in the ongoing line-up of banks predicting a downward plunge.

By the end of last week the tally included ANZ expecting a 10.6 per cent price decline across Australia from the peak in 2026 to next year’s trough; the Commonwealth Bank predicting a 10 per cent capital city property price decline and National Australia Bank forecasting a 10 per cent decline in Sydney this year and a 9 per cent drop in Melbourne.

And if that wasn’t worrying enough for those paying off their home loans, the interest rate hammer is being raised yet again.

The big four banks and most economists are expecting another hike either later this month or on Melbourne Cup day.

One more interest rate rise would take the cash rate to a 15-year high of 4.6 per cent

RBA deputy governor Andrew Hauser has warned it couldn’t tolerate inflation remaining above target for an extended period.

“Inflation has been above target for a long period of time and at some point we will have to say that is long enough,” he said on Tuesday.

July’s annual headline inflation pace of 3.5 per cent marked the 12th straight month of the consumer price index being above the RBA’s 2-3 per cent target.

There are many numbers at play, but they don’t add up.

We are told the economy is in the doldrums but the response from our economic managers is to target those whose mortgage payments are going up as their house values come down.

High government spending in the capacity-constrained economy is inflationary — which the RBA says it needs to tackle with higher rates — but mortgage holders are smashed and the Government goes on its merry way, throwing out more cash at its favourite causes.

People are under the pump and the RBA’s message to them is “we have to hit some statutory number which we can’t hit because of other factors but we are still going to hit you over the head.”

Surely the inflation target does not need to be so rigid.

The nation’s political and economic structure is out of date.

It is no wonder the traditional political parties are under pressure from people screaming for a change of direction.