ANALYSIS: From celebrated governor to object of derision: The fall of Philip Lowe
By the time they realised inflation was entrenched, it was almost too late and they were forced to act with undue haste with a monetary wrecking ball that now is wreaking havoc across the developed world.
None of them, however, are enduring the kind of attack being meted out on Dr Lowe. But there are good reasons for that.But nowhere is the pain likely to be quite so severe as Australia. A lethal combination of insane levels of household debt — most of it in mortgages that, unlike the rest of the world, are either variable rate loans or fixed for only a short time — magnifies the impact of rate hikes here on homeowners, particularly new ones.
Under financial pressure, they rein in the spending, which then quickly flows through to the broader economy.neatly sums up why we are unique. It measures the percentage of home loans written after 2020 across the developed world that are vulnerable to rate changes.In the US, most housing loans are fixed for up to 30 years. So, unlike here, pushing through a rate hike has little impact on American households or their spending.
It is a key difference that seems to have eluded many economists, money markets and the RBA, which now appears determined to ape its global counterparts and keep on hiking in a bid to avoid the "even worse effects of inflation".The governor drops a bombshellThe speed and severity of the RBA's rate hikes is unprecedented. From zero to 3.35 per cent in under a year.
According to Dr Lowe, at least 75 per cent of our inflation problem is from external forces: supply issues we can't do anything about and that rate hikes won't fix.
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