One of my favourite takes on over 30 years of media commentary and education on economics and financial markets is that when the challenges become historically different, you sometimes need experts with grey hair or no hair! So, when it comes to the threat of the mortgage cliff and what the RBA should decide today on interest rates, I think I’m well-qualified.

Revelations in The Australian today make it so easy for me to advise the RBA board to stay on pause. In fact, given what has been revealed in new research from Jarden economist, Carlos Cacho, the interest rate cue should be put back in the rack for quite a long time until it’s needed to cut rates in 2024!

In case you don’t understand why the Reserve Bank is torturing home loan borrowers and rewarding savers with high term deposit rates, well, it’s all about killing inflation. Borrowers/spenders pump up demand and inflation, while savers are weaker spenders and their saving helps lower inflation.

I argue that 12 rate rises in around a year is historically huge and it comes when 40% of borrowers have been on low fixed rate home loans. So, it has been 60% of home loan borrowers who’ve been cutting back in spending as rates rose, along with businesses with loans and tenants who’ve copped significant rent rises. (History shows that the number on fixed rate home loans was around 15%, and that’s when rising interest rates would have worked faster to slow spending compared to now.

However, those 40 percenters will soon feel the pain of bigger home loan repayments. That’s when the economy will miss their spending and that will bring inflation down significantly.

The Australian’s Patrick Commins captured what lies ahead this way: “RBA analysis has estimated that by the end of 2022 there were roughly 800,000 households on fixed-rate loans who were yet to pay a cent more for their loans, despite the Reserve Bank over the past year delivering the most aggressive series of rate hikes in a generation.

“Jarden chief economist Carlos Cacho said analysis showed that $32 billion in fixed loans would expire in each of the three months to September – the peak rate of a roll-off to variable loans that would total nearly $550 billion over the 15 months to March 2024.”

We’re talking over half-a-trillion dollars’ worth of loans between nine months that will see their repayment rates escalate, which will kill a lot spending and a lot of inflation, so the RBA, as well as the Treasurer need to be mindful of the cliff that cometh.

Now this economic hip-pocket shock to many Australians, who are also voters, means the Albanese Government needs to worry about this looming mortgage cliff, with its impact on the cost of living, when a lot people are feeling the pinch from high interest rates, rents, petrol prices, energy bills and any compulsory purchase, which has seen inflated prices over the past few years.

Inflation was easier to deal with when home loan rates were 3% but now they are 6% or higher, and for those still on fixed rates, their life changes over the next nine months.

And the pain is being measured, with the following revealed last month: “New research from Roy Morgan shows an estimated 1.38 million mortgage holders (27.8% of mortgage holders) were ‘At risk’ of ‘mortgage stress’ in the three months to April 2023.”

These people are voters and so are their parents and it’s becoming a bloc of voters who could hold the Federal Government responsible for the pain metered out by the RBA for what they think are good economic reasons.

The problem for the Government is also Treasurer Jim Chalmers regular reply to questions about the impact of many interest rate rises.  “The number one priority of this government … is getting on top of the inflation challenge and rolling out cost-of-living relief for Australians doing it tough,” Dr Chalmers said.

While this is sound economics talk, it’s not great political talk for home loan sufferers, who one day will vote.

The PM has a better political response in Parliament: “We do have a plan to combat inflation…It is about turning the $78 billion deficit into the first budget surplus in 15 years. The second is providing cost-of-living help that supports household budgets without adding to inflation. And thirdly, investing in supply chain challenges.”

Ultimately, it will be the calibre of the help and who it helps that will be important to future votes Labor can get at the next election. If the assistance helps home loan sufferers and rates fall in 2024, all might be forgiven by election time but if the help goes elsewhere, say to typical Labor voters on lower incomes, Albo and Dr Jim could have trouble when we go to the polls in 2025.

My story on the near impossible cancellation of subscriptions

Interestingly, the Government has reacted to my story about subscription contracts that are nearly impossible to cancel. And it’s not made easier because banks and credit card companies won’t help end the wealth-draining, monthly payments for services you eventually don’t want.

Today, Stephen Jones, the Assistant Treasurer and Minister for Financial Services talked to Ben Fordham (on radio station 2GB) about how the Government will respond to help Australian consumers, who are not only dealing with a surging cost of living problem, they’re also finding it hard to stop big companies not letting them get out of contracts by making it too hard to close an account online.

Big companies and organisations, as we saw with the PwC incident recently, need to be brought to account when they don’t play fair, and it’s the job of Governments to do that.