Chan & Naylor calls for RBA rate rise tough medicine

Director of property advisory group Chan & Naylor Ken Raiss has called for a rate increase by the Reserve Bank of Australia in what he calls a dose of tough medicine.

He has dismissed recent rate cuts by the RBA saying they are sugar fixes trying to stimulate near term future growth.

“While approximately 35% of home owners have a mortgage and therefore may have an excuse to briefly celebrate, the flow on benefits of an interest rate cut are futile for business lending, job creation or for older Australians in particular who rely on income derived from savings,” said Mr. Raiss.

He says a gloomy forecast of 2.2% economic growth and a 6.7% 2014-15 unemployment rate by the National Australian Bank shows the economy is unwell and needs some healing.

“Now that Australia’s economic well-being has been laid bare, any further saccharine fuelled rate changes will do more harm than good, as it hides the real world of a sick economy,” Raiss says.

He says a near-future rate rise may seem anathema to many but combined with economic reform it may be the "tough medicine" required to restore the country to pre-2007 levels.

“The new Government must cease abrogating monetary policy to Treasury,” Raiss says.

“Whilst some tough tax related questions now need to be asked, we also need to focus on restoring the health to the vital organs of a functioning economy, namely employment, growth and sustainability.

“A future rate rise may make borrowing more expensive, but enlightened homeowners that have jobs will be happy to pay this slight impost, as will those who depend on their income and living standards from higher interest rates.”