Why consumers won’t react to higher interest rates the way they used to

By Katherine Hunt, Griffith University The Reserve Bank kept interest rates at a record low of 1.5% on Tuesday. Such low rates create economic uncertainty—and if Australia’s historical gross domestic product (GDP) growth is anything to go by, consumers face more uncertainty than the bottoming out of interest rates would usually suggest. This is because high […]

The Conversation 09 February, 2017

By Katherine Hunt, Griffith University

The Reserve Bank kept interest rates at a record low of 1.5% on Tuesday. Such low rates create economic uncertainty—and if Australia’s historical gross domestic product (GDP) growth is anything to go by, consumers face more uncertainty than the bottoming out of interest rates would usually suggest.

This is because high house prices lead home-owners to feel wealthy, yet the economy as a whole does not convey a message of wealth to all consumers.