The RBA says there is ‘excess demand’ in the economy. Households doing it tough might disagree | Greg Jericho
News Source
•Wed, 04 Nov 2026 14:00:37 GMT
📰 What Happened
The Reserve Bank says the economy has “excess demand”, which is its main reason for keeping interest rates high. In this column, Greg Jericho asks whether that matches what households are actually living through.
Excess demand means spending is running ahead of what the economy can produce, which pushes prices up. Higher rates are meant to cool that spending.
Jericho argues that many families are already cutting back sharply, so the squeeze may be hitting them rather than any excess spending.
🔍 The Backstory
Australian inflation jumped in 2022 and 2023, and the Reserve Bank raised rates 13 times to bring it down. Mortgage holders saw repayments rise by hundreds of dollars a month.
Economists still disagree about how much of today's inflation comes from spending and how much from supply problems such as energy, rent and shipping.
The bank's view decides how long rates stay high, which affects anyone with a mortgage, a car loan or a small business. Economists watch its wording closely for hints about the next move.
🎯 Why It Matters
Rate decisions set mortgage and rent costs for millions. If the bank is wrong about demand, families keep paying for a problem they did not cause.
The Reserve Bank says the economy has “excess demand”, which is its main reason for keeping interest rates high. In this column, Greg Jericho asks whether that matches what households are actually living through.
Excess demand means spending is running ahead of what the economy can produce, which pushes prices up. Higher rates are meant to cool that spending.
Jericho argues that many families are already cutting back sharply, so the squeeze may be hitting them rather than any excess spending.
Australian inflation jumped in 2022 and 2023, and the Reserve Bank raised rates 13 times to bring it down. Mortgage holders saw repayments rise by hundreds of dollars a month.
Economists still disagree about how much of today's inflation comes from spending and how much from supply problems such as energy, rent and shipping.
The bank's view decides how long rates stay high, which affects anyone with a mortgage, a car loan or a small business. Economists watch its wording closely for hints about the next move.
Rate decisions set mortgage and rent costs for millions. If the bank is wrong about demand, families keep paying for a problem they did not cause.