Australian businessman Mark Bouris has issued a dire forecast for the Australian economy, despite hints that an interest rate cut could soon be on the cards.
The finance guru has warned Australia could be headed for a ‘full blown recession’ due to high interest rates and their crippling impact on household budgets.
The Wizard Home Loans founder began his opinion piece for news.com.au by weighing in on Reserve Bank of Australia decision on Tuesday to keep interest rates on hold at 4.35 per cent.
‘But this time around, the RBA made a massive pivot,’ Mr Bouris wrote.
‘For the first time in years, the Reserve Bank hinted at a coming interest rate cut.’
Mr Bouris wrote the RBA’s statement noted that growth in output has been weak, wage pressures have eased and incomes and consumption have recovered slower than predicted.
‘More importantly, the RBA said that inflation has eased and is moving to target,’ Mr Bouris continued.
‘This is code for a coming rate cut, and frankly, it’s about time.’
Mark Bouris (pictured) warned Australia could be headed for a ‘full blown recession’
Mr Bouris wrote Australia could be headed for a recession due to high interest rates and their crippling impact on household budgets. Shoppers are pictured on Pitt St Mall in Sydney
Mr Bouris called on the RBA to consider cutting interest rates at its next meeting in February to prevent a recession.
He argued maintaining high rates could aggravate economic conditions and lead to a full-blown recession.
Mr Bouris wrote that high interest rates did serve a purpose and had to be increased, as inflation was too high for a long time.
‘But now, the negative impacts of high interest rates outweigh the benefits,’ Mr Bouris argued.
‘High interest rates have slowed the economy to the point whereby we’re on the verge of a full-blown recession.’
Mr Bouris argued high interest rates are killing household budgets due to rising mortgage and as a result, Aussies are spending less.
He warned this could have a knock-on effect on businesses as sales drop and costs increase.
Mr Bouris called on the RBA to reduce interest rates at its next meeting in February. Governor of the Reserve Bank of Australia Michele Bullock is pictured
This will result in companies slashing jobs, which will drive unemployment.
‘This is a recipe for disaster, and the Reserve Bank can’t let it happen as a result of its one-dimensional anti-inflation crusade,’ Mr Bouris wrote.
He argued the perception the only way to put the brakes on inflation is to increase interest rates is wrong.
‘But that’s not true. One of the core drivers of inflation at the moment is electricity bills,’ he wrote.
‘But high interest rates won’t bring down power prices.’
He suggested the same applies to grocery prices, and interest rates won’t achieve boosting competition in the supermarket sector.
‘One of the reasons grocery prices are so high is because the supermarket system in Australia is a duopoly. Woolworths and Coles control most of the market,’ Mr Bouris wrote.
He said interest rates won’t make any difference to the duopoly and that it was a job for Australian Competition and Consumer Commission.
Mr Bouris ended the piece by noting other countries including New Zealand, the US, Canada, the UK and the EU have started reducing interest rates in response to economic conditions.
‘Let’s hope the Reserve Bank follows in February,’ Mr Bouris wrote.
‘Because if they don’t, we’ll trade high inflation for a recession.’
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