RBA official says rate hikes affect more than just mortgage borrowers

At the Commonwealth Bank global markets conference, RBA assistant governor Christopher Kent refuted the view that interest-rate rises only punish mortgage borrowers, outlining four transmission channels: exchange-rate movements, changes in savings and investment behaviour, asset-price adjustments and the cash-flow effect on home loans. He argued that a higher cash rate supports a stronger Australian dollar, which in turn reduces the local price of oil priced in US dollars.

Kent pointed to recent labour-market figures that suggest the job market is loosening more quickly than expected, though he cautioned that monthly data can be volatile. He also addressed the impact of the Treasury’s tax reforms—ending the 50 % CGT discount and limiting negative gearing to new builds—on the wealth effect and investor credit. The discussion came as REA Group data showed a sixth consecutive monthly decline in national house prices, while inflation remains above the RBA’s 2-3 % target.