The Reserve Bank has squeezed us like a lemon, yet it’s still not satisfied.

Let me be the last to tell you that the economy has nearly ground to a halt and is teetering on the edge of recession. This situation has occurred by design, not accident. However, the approach doesn’t seem to be working as intended. So, what happens now? Until we come up with a better solution, we will likely see more of the same measures.

Since May 2022, the Reserve Bank has been diligently working to “squeeze inflation out of the system.” By raising the official interest rate by 4.25 percentage points over just 18 months, it has implemented the sharpest tightening of interest rate policies on households with mortgages in at least 30 years.

To be fair, the Reserve Bank has had considerable assistance in this effort. The nation’s landlords have exploited the rental accommodation shortage to significantly raise rents.

The federal government has also played its part. An unannounced decision by the Morrison government to discontinue the low- and middle-income tax offset effectively increased many people’s income tax by up to $1500 a year around July last year.

Additionally, bracket creep has been reducing the benefit of people’s pay rises. With the release of the latest “national accounts” this week, we learned just how effective the squeeze on household budgets has been. The economy’s growth, measured by real gross domestic product, slowed to a minuscule 0.1 percent in the three months ending in March, and just 1.1 percent over the year to March. This is in stark contrast to the normal annual growth rate of 2.4 percent.