The Sunday read: Why the Reserve Bank needs to be more cautious

You're a pro at running your life, at committing to your workout, at showing up every day.

At Bombas, we're pros too.

Pro is at making socks.

Our Sportist Orban has specialized socks for whatever sport you're committed to.

Running, hiking, golf, Pilates, and so much more.

Mabel's sweat-wicking yarns, blister-fighting details, and targeted art support.

Bombas Sport is pro-level socks from the pros of socks.

For another pro, you go to bombas.com slash audio and use code audio for 20% off your first purchase.

That's bombas.com and use code audio.

Armit here coming to you from Gadigal land, and this is the Sunday read.

This week, as the RBA raised interest rates amid economic fallout from the Iran War,

independent economist Nikki Huttley says,

perhaps in addition to asking Australians to show restraint,

the Central Bank may want to take its own advice.

Here's Nikki.

The Reserve Bank's decision to raise interest rates on Tuesday came as a little

surprise to many in financial markets, but a split decision by the Central Bank's

monetary policy board, with five in favour of hiking and four wanting to stay on hold,

shows very clearly why this outcome was never a done deal.

Many rate hawks were focused on a recent podcast with the RBA's deputy governor, Andrew Houser,

where he said that we have a problem with inflation, it's too high.

But he also said in the same podcast that the path of interest rates to deal with inflation

is less certain, especially given the global backdrop.

That comment, however, seems to have been largely ignored.

A certain amount of the recent rate spike hysteria has been driven by the strong rise in petrol

prices resulting from conflict in the Middle East, as well as some apparent price gouging by

opportunistic petrol companies. Get the RBA governor, Michelle Bullock, in her post-decision

press conference on Tuesday, said that higher petrol prices were not the reason for today's decision.

So what did prompt the RBA board, or at least half of them, to lift rates?

Just six weeks after an increase following the February monetary board meeting,

and amid heightened global economic uncertainty.

And what does it mean for rates in the coming months?

The RBA has been consistent in its mantra of recent months and has set out in the February

statement that at least part of the reason for the recent rise in inflation is that demand exceeds

the economy's supply capacity, or more simply its ability to supply goods and services

hasn't been able to keep pace with demand.

Now, because an economy's supply capacity cannot be expanded quickly, investment decisions take

time as does upskilling the workforce, especially when unemployment is low, then the fastest way to fix

an imbalance is to cut demand that's consumer and business spending. The RBA has a single tool

interest rates to do this, but do consumers or businesses really need to have their spending

rained in? It's important to remember that monetary policy acts with long delays, so it's not

so much where we are now, but where we expect to be a year from now that matters for policy settings.

On businesses, we actually need to see higher investment, not lower if we are to lift the

productive capacity of our economy and allow it to grow faster than the 2% a year that the RBA

is now telling us as the current speed limit. On consumers, it's not at all clear to me that

Tuesday's decision was the best one. There are already numerous factors weighing on household

budgets. The governor herself said, I do understand it's going to be tough for some people.

The RBA has noted that while consumer demand was stronger than expected in the second half of 2025,

at least some of that strength was due to bringing forward of spending to take advantage of

Black Friday and cyber Monday sales. December and January data have seen consumer confidence

plummet and spending has been more subdued. The combined February and March rate rises will

further dampen sentiment, as will speculation of further increases, along with higher petrol prices

and the general uncertainty created by war in the Middle East. It's well worth reminding ourselves

that between mid 2021 and December 25, inflation outpaced wages by a cumulative 5%

each points, or 22.7% compared to 17.5%. And on top of this, the RBA expects real wages to fall

further over the next couple of years. Hardly any wonder then that the collective grown of

mortgage holders at Tuesday's decision could be heard across the nation. On the plus side

for households, but adding to the RBA's reasons to hike, a reasonable number of borrowers have

been making additional mortgage repayments since last year's cuts, which will dampen the impact

of the latest rises for them. A build up in household savings could also help offset higher rates

and prices and soft growth in real household disposable incomes. But there's little in the way

of news headlines that will make the average consumer feel good about raiding the piggy bank.

A key unknown, aside from the duration of the war and escalated oil prices, is how the federal

government will respond when it hands down its budget in May. By restraining spending, the government

can help the RBA with a heavy lifting. If I were on the RBA board, I would have wanted to wait

a couple of months to see just how much consumers can bear. I'd also be weighing up the massive

level of uncertainty surrounding geopolitical events, which should give all policy makers pause

with increased risks to growth. We're all very used to living in uncertain times since 2020,

so we should be used to making big decisions with a higher appreciation of risks and a higher degree

of caution. My unsolicited advice to the board for its next meeting is to exercise restraint,

just as they are asking Australian households to.

That was consulting economist Nikki Huddley. This episode was produced by Karish Maluthreer,

the executive producer is Hannah Parks. I'm Regid Ahmed. See you soon.

Boost mobile is now sending experts nationwide to deliver and set up customers new phones.

Wait, we're going on tour? We're delivering and setting up customers' phones. It's not a tour.

Not with that attitude. Introducing store-in-a-door. Switching

in a new device with expert setup and delivery. Delivery available for selected devices purchased

at boostmobile.com. Knock knock. Oh, who's there? A boost mobile expert here to deliver and

set up your all-new iPhone 17 Pro designed to be the most powerful iPhone ever. You call that

a knock knock joke. This isn't a joke. Boost mobile really sends experts to deliver and set up

your phone at home or work. Okay, it's just that when people say knock knock, there's usually a

joke to go with it. Like I said, this isn't a joke. So the knock knock was just you knocking.

Yeah, that's how doors work. Get the new iPhone 17 Pro delivered and set up by an expert wherever

you are. Delivery available for selected devices purchased at boostmobile.com. Terms apply.

Big news. Boost mobile is now sending experts nationwide to deliver and set up customers new

phones at home or work. Wait, we're going on tour? Not a tour. We're delivering and setting up

customers' phones so it's easier to upgrade. Let's get in the tour bus and hit the road.

No, not a tour bus. It's a regular car. We use to deliver and set up customers' phones

at home or work. Are you a groupie on this tour? We deliver and set up phones. It's not a

tour. Oh, you're definitely a groupie. Introducing Store to Door. Switching in a new device with

expert setup and delivery wherever you're at. Delivery available for selected devices purchased at boostmobile.com.