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Australians are still spending big bucks, but surveys suggest that could change quickly as rising interest rates send consumer confidence to pandemic lows. Key points: Consumer confidence has fallen to the lows usually seen during a recession Soaring inflation and a sudden spike in interest rates to combat it weigh on households The slump in confidence has yet to feed through spending cuts, with various measures hitting record highs The latest consumer spending data from the Australian Bureau of Statistics showed household spending was 7.9 per cent higher in May than a year earlier. Much of the increase in spending is not because Australians have had to buy more, but reflects a spike in inflation, meaning people are paying more for most of the things they buy. Transportation spending rose nearly 15 percent, as people once again took to the skies, but also as fuel costs soared. Eating out and going out together has also seen a double-digit percentage increase in spending over the past y

South Australian households have complained of declining returns on solar energy they contribute to the grid, with electricity regulators saying it has “no value” in the market. Key points: Some energy companies offer less than 4c/kW for energy fed back to the grid SA minimum feed-in rate ends in 2017 Some consumers are investigating options for investing in solar battery systems to save money The incentive to switch to renewable energy started in SA in 2008. The first household to install a solar panel is priced at a feed-in rate of 44 cents per kilowatt, which significantly reduces the quarterly bill. As time went on, more and more households installed solar panels and feed-in rates continued to decline. Most energy providers in the state offer rates between 5 and 10 cents. But some companies offer less than 4 cents, which causes frustration for customers. What keeps the rates low? The state’s Essential Services Commission (ESCOSA) had previously set minimum feed-in rates through 2

Given Australia’s strong economic growth supported by high export prices, low unemployment and evidence that wages are rising from a bland base, there is an attractive case for starting to normalize cash rates towards a non-contractive or expansionary cost of capital. The problem is that although the RBA has repeatedly alleged that this “neutral” rate is at least 2.5 percent (or a chunky 175 basis points above its pre-pandemic cash rate), the reality is that the RBA has no idea where “neutral” really is. You only know once you are there. Worthless prophecy The RBA’s 2.5 percent estimate is another estimate not worth the paper it’s written for – such as its view in early March 2020 that the pandemic was no big deal and then its subsequent overly pessimistic forecast for a deep recession. Given the unmatched sensitivity of the Australian economy – dominated more than others by more variable rate debt, rather than fixed interest rates – to interest rate changes, prudent policymakers will