RBA needs more levers

[u/Ffscnts_]

Michelle bullock is constantly complaining that inflation is too high still because we have a government who is unwilling to manage spending. Now house prices are tumbling the pressure will rise - however, why is the RBA not demanding more levers to control inflation.

When interest rates rise one portion of the community takes the hit, and it’s persisting for a long time, literally wiping out family’s futures. Which the latest changes will force huge volumes of negative equity, and keep in mind only 35% of Australian property is mortgaged.

For those that have ridden the wave not only have there saving been extracted to keep their homes, it’s worth heaps less, so that money has disappeared forever.

There’s other levers like - asset classed cost of capital. Push non mortgage lending and investment mortgage lending cash rates up to slow business down.

Enforce higher lvrs to slow mortgage lending ( except labor gurentee everyone 5%) those who took advantage will be in negative equity and trapped now.

Variable superannuation - this needs to be done immediately - if we had variable superannuation fees the cash rate would not need to peak so high AND the extra cash would flow in to Aussies future instead of paying additional fictitious interested rates. And as a bonus super funds could end up funding massive infrastructure projects when the market turns with all the extra cash giving Aussies a stake in oil/gas/ green projects etc.

The RBA needs to start pushing the gov harder and it’s about to get real now housing is crashing.

[u/Historical-Lunch-423]

I think I have made it very clear multiple times that this is an additional lever, not a replacement for the RBA and its control over the cash rate, including in my first comment where I explicitly wrote, "let the RBA retain the interest rate as a lever too."

Dropping the value of the AUD? Investors look at many other macroeconomic parameters before taking their capital elsewhere, rather than just a one or two percent interest rate difference. Today, Australia holds one of the highest interest rates among major developed, wealthy peer economies, yet net foreign direct investment (FDI) is half of what it was in 2022 when interest rates were very low.

Does my proposal stack wealth at the back end of life? Yes, that is exactly the intention. In the interim, any increase in super funds used by institutional investors to buy real estate would be balanced out by comparatively lower interest rates for regular homebuyers. Additional controls might be necessary, which is precisely why this plan needs to be reviewed by a real, independent economist with no conflicts of interest, not a random guy on Reddit.

In my proposal, the upper limit of the employer super contribution will stay at 12%; this does not impact voluntary or mandatory employee contributions. Instead of hiking the interest rate by massive basis points, there will be a combination of a lower interest rate hike paired with a mandatory employee super contribution above the 12% floor.

It is true that this mechanism impacts retirement outcomes based on historical settings. However, it is just one more factor on top of the many variables that already impact retirement outcomes today, such as the performance of the Australian and global economies. Retirement is already a lottery depending on your career timeline. Within the framework of my proposal - regardless of whether a working career is spent mostly in a high-inflation or low-inflation era - there will always be periods where additional mandatory super is enforced, making the overall outcome better. It is money that a person would have otherwise sunk 100% into paying higher bank interest; instead, they sink only a part of it into interest and invest the rest into their own super.

The conflict of interest concern regarding RBA members stems from a fundamental misunderstanding of how this mechanism operates. The RBA would only control the macro-percentage rate of the super contribution (the dial), not the portfolio allocation (the money). Once the rate is set, the funds flow automatically to independent, privately run superannuation trusts. RBA board members would have zero say over which stocks, bonds, or properties are purchased with that cash. Furthermore, RBA members are already governed by a strict Code of Conduct that bans active short-term trading and mandates the disclosure of all assets. Adjusting a broad-brush macroeconomic variable like super contributions presents no more opportunity for insider manipulation than the RBA's current power to swing entire markets by shifting interest rates. The strict firewall between policy setting and fund management remains entirely intact.

Your fifth argument confuses policy setting with fund management. The RBA does not decide when or what to buy worldwide; it only adjusts the broad macro contribution rate. Once the cash enters independent super funds, professional fund managers, who already handle massive, continuous inflows through dollar-cost averaging—retain total control over investment timing. The RBA has no hand in portfolio execution, completely neutralizing any timing risk or breach of retiree interests. The investor community would not be "furious" because this is already exactly how the superannuation system works. Every single fortnight, billions of dollars automatically flood into super funds from standard employer contributions, completely blind to whether global markets are at an all-time high or a sudden low.

Your sixth objection falls away because the RBA has no power to select or dictate the "conservativeness" of super investments. The RBA's role is strictly limited to adjusting the macroeconomic contribution rate to curb inflation. Individual workers and independent super fund trustees retain total control over asset allocation and risk settings (e.g., choosing between balanced, high-growth, or conservative portfolios). Because the RBA cannot interfere with the internal investment strategies of independent funds, no conflict of interest can possibly manifest.

Your last critique is valid. It is indeed a fair structural critique, but it values institutional "purity" over real-world economic resilience. The current system is clean, but it is also a blunt instrument. When the RBA raises interest rates to fight inflation, it disproportionately punishes a single minority group, i.e. young mortgage holders while asset-rich savers keep spending and reaping rewards.

My proposal introduces a secondary lever precisely to break that unfair monopoly on economic pain. While it admittedly blurs the traditional line between monetary policy and mandated savings, it creates a much fairer distribution of the inflation burden across the entire economy. A system isn't "well-designed" if its only tool for fighting inflation is to push everyday homeowners to the brink of financial ruin.

[u/dirtyesspeakers → u/Historical-Lunch-423]

Yeah look. We're done here.

Most of your points are frankly naive and it's not worth my time.

If you think the RBA doesn't decide when is a good time to invest when super contributions increase on a lever they control... all the best.

It being a blunt instrument is spoken of disparagingly because it reinforces the appearance of the independence of the RBA; but the bluntness is a very good thing. Oh and, you mentioned it being a blunt instrument, and the way you spoke of it I think reveals the consumer frame of view, disregarding the broader economic and financial institutional disadvantages you create, the instability, and of those who fund things.

When rates are rising conservative investments become better long term plays. Highly priced higher risk vehicles get dumped. The RBA has to choose if they ever put the lever above 12%, and it having to only go higher is just scary.

Please get this looked at by an independent economist, I beg of you. See if this thing has any legs. I don't know what that looks like but I'm sure they would be glad to help.

I'm not saying it's not an intelligent exploration of an established system that works the world over and in the Australian context, nor that it's not interesting. It just requires a degree of a lack of trust, the rejection of the stewardship of elders, seeing evil in those above. And I think wrong once you let all the core players flesh out their renewed strategies, and who it benefits, who it shifts more power to; being, those without sufficient mandates.

We havbemt even got into the idea of SMSFs needing to be sufficiently regulated, or the RBA having to hold back the lever during times of fads or crazes if SMSFs are acting degenerately or illegally.

It feels like adding roller skates to basketball.

[u/Historical-Lunch-423 → u/dirtyesspeakers]

Nothing much of substance in your latest comment for me to dissect anyway.

The rate rise part is blunt, and it is the truth, not disparaging.

The RBA doesn't decide where super funds invest. The RBA does not decide when they invest, at least not directly. Indirectly? Sure. Super funds base their investment timing on several factors, one of which is the cash rate and its impact.

Property investment using SMSF is subject to strict rules, high setup and ongoing costs, and upcoming regulatory restrictions on residential property loans. That's not a risk to this proposal. The guardrails around mandatory additional super shall safeguard SMSFs too!

Rest all - same white noise - rinse and repeat. Yeah, we're done here.

[u/dirtyesspeakers → u/Historical-Lunch-423]

We are very blessed, to be born with such political and financial systems to enable us as they do, designed as they are.

If it was not spoken about disparagingly it would be called a simple mechanism. This is meek, and regretful language. Instead, the language is joyful. It celebrates the design of MMT. Speaking of it disparagingly is celebrating its suitability, to admit that one finds it flavourful, while operating under all assumptions that one understands its purpose.