David Koch urges RBA to call out government spending as rate hike looms

Mortgage holders are paying the price for higher government spending, with an economic expert urging the RBA to call out the problem.

In an open letter to the RBA, Compare the Market economic director David Koch urged governor Michele Bullock and the RBA board to be transparent with Australians about why they were paying more.

“A meaningful slice of the inflation your board is trying to contain is not being generated

in a shopping centre. It is being set in a cabinet room,” Mr Koch said.

Mr Koch said households had done the right thing in the face of to rising costs, but the Australian government had continued to spend.

“Households complied. Governments didn’t seem to. Yet only one of those two gets the

Mr Koch’s comments come as markets have all but fully priced in an interest rate hike in September.

In grim news for mortgage holders, they are also placing a 44 per cent chance of a second rate hit in December and a 17 per cent chance of a third rate hike in May 2027.

This time last week, economists were split between one or two interest rate hikes.

When asked about rising interest rates on Tuesday, Treasurer Jim Chalmers said Australia was not alone when it cames to inflationary pressures.

“I think it’s self‑evident around the world that in other countries interest rates are going up because of the impact on inflation of this war in the Middle East,” he said.

“From an economic point of view, the war in the Middle East has been a disaster, and from an economic point of view the end of that war can’t come soon enough.”

Last Thursday, the US Federal Reserve lifted the cash rate for the first time since 2023.

The dot plot, which indicates interest rates expectations from the US Federal Reserve board, showed 12 of the 18 members expected at least one more hike this year, while four expect two more rate hikes.