Daniel Newell: With most of us ahead on mortgages, who exactly is the RBA squeezing with rate rises?

If Michele Bullock ever needed a clear sign that deploying interest rates as a weapon in the war to tame inflation is inherently unfair, a wander through Whitford City at 10.30am last Thursday would have made it crystal clear. Walking by Flight Centre, the Reserve Bank governor would have seen three couples — each in their mid to late 60s — chatting and laughing with travel agents about overseas holiday and all-inclusive cruise packages. A short stroll away, a young woman — two small kids in tow — was struggling to pay for her small trolley of shopping at Woolworths using multiple payment options — a mixture of gift cards, cash and a credit card. She mumbled something about trying to spread the financial load and higher interest rates as a friendly woman came to her aid. Now, Ms Bullock has never shied away from the fact that hiking interest rates to turn the screws on a household’s disposable income is the only tool the central bank has to curb excess demand in the economy and bring down runaway prices. But think about this. According to the 2021 census, only about 35 per cent of all homes in Australia are covered by a mortgage. That’s a fraction of the population that has already been hit with back-to-back increases in their mortgage repayments this year — and with war raging in the Middle East, there’s the very real risk there could be three more to come this year. Let’s couple that with reports from all big four banks during February reporting season that borrowers are showing remarkable resilience and mortgage defaults remain low. For example, in its latest set of financials Commonwealth Bank — Australia’s largest home loan lender — revealed that 87 per cent of customers are ahead on their repayments. So who exactly is the RBA squeezing? Certainly not those cashed-up baby boomers at the travel agent booking their next overseas adventure. No doubt they worked hard all their lives and are now enjoying the fruits of years of sacrifice and saving. More power to them. Instead, the RBA’s “blunt tool” (as Ms Bullock herself has called it) inevitably puts the most vulnerable — the ones who can least afford the financial burden — where an extra $60 a month can indeed be the difference between eating and keeping the lights on — to the sword in the name of economic stability. Ms Bullock has said many times before that lifting interest rates hits Australians disproportionately. But there is no alternative. The RBA is a one-tricky pony. She also reminds people that higher prices hurt everyone, and that’s a tough argument to crack. But try pointing that out to our Woolies mum just trying to feed her family amid a double whammy — higher prices and now higher repayments.