example of damage which rba can cause, page-16

Interest rates are a blunt instrument that the RBA try and use to cool the 'supposedly overheating economy'.

The current inflation problem seems to be driven of the back of increasing food prices and oil (of which there seems to be a split view of whether its a bubble or increases that were long overdue).

Incresing interest rates have seemed to curb discretionary spending (which was their main intention), however the small business man has been feeling the pinch for a while now.

How are higher interest rates going to combat the inflation that we are currently seeing? Simple answer its not. People may stop spending as much but I dont think its demand thats driving up current prices.

I dont think the RBA has damaged BNB. BNB may have damaged themselves by pursuing a risky growth path using significant debt. Lets also bear in mind that BNB probably have alot of there debt hedged for the forseeable future.

With the huge level of personal debt that people have taken on over the past few years (given its cheap nature) the government needs to find an added tool to help curb discretionary spending in the future as the cash rate is simply to slow to act and has too many further implications in todays precariously debt laden society.

Whats the tool?? I am not sure. Maybe increase super contributions? All though then it would present another problem of inflating wage growth no doubt, as people wouldnt want their pay packets to decline.

Who has ideas on it?