What if politicians set your mortgage rate? Why it could leave you worse off

A populist push to strip the Reserve Bank of its independence on interest rates is not beyond the realm of plausibility over the next five to 10 years, Property Buzz co-host Liam Garman has warned.

Speaking on the Property Buzz podcast, Garman said Australia currently has the second highest interest rates in the developed world, and that cost of living pressure is creating the conditions for a political move on the central bank.

He pointed to the Labor caucus, which he said voted at a federal convention a few months ago to remove the independence of the RBA in setting interest rates, and to unions that have made the same call.

"There is an undercurrent," Garman said. "How far is populism going to go? Could there be whipped up into a frenzy?"

He sketched out the scenario he is worried about: a coalition between the Greens, Labor and the unions acknowledging household stress and then moving to artificially reduce mortgage interest costs in line with other Western nations.

Garman said he would be completely against any such move. "Incredibly inflationary, price of goods will go up substantially as a result of that, and I think people would be worse off," he said.

He also noted earlier moves in that direction, saying the appointment of new governors and board members two years ago was a step towards it.

'A safety net of stupidity'

Host Phil Tarrant agreed the independence has to hold.

"The RBA is independent to be a safety net of stupidity," Tarrant said. "That's why the independence is key because it's easy for a government to manipulate the operating cadence of the department that operate within it because it's very politicised."

Tarrant said that despite some of the decisions made by the bank, the structure needs to exist to catch poor policy, and he could not see fiscal and monetary policy being melded together.

Garman said the RBA is already signalling its concerns about government spending without crossing into the government's territory. Board members treat government spending as exogenous, he said, and cannot attack it directly.

"They're hinting very loudly to the best of their ability that we've got to get that under control," he said.

Inflation 'baked in' across the board

Garman said price pressure is now showing up almost everywhere in the CPI groups, nominating secondary education as up around 6.5 per cent.

The main exception he identified was shipping, which he said has stayed relatively stable, undercutting arguments that global conflict is driving domestic prices.

"It's baking right across, so it will get worse," he said.

Garman said that while many households and small businesses are doing it hard, Australians remain comparatively well placed. Having travelled to both the UK and the US in recent years, he said goods there are "brutally more expensive than Australia" while wages are lower, and he attributed part of that advantage to independent monetary policy.

Stock sitting on the market

The rates discussion followed a figure Tarrant raised from reporting he had seen, that 25 per cent of properties on the market have been listed for six months.

"That's aged stock. That's a lot," Tarrant said, asking whether some were phantom listings.

Garman said he could not account for it, but was seeing a lot of bargains at the moment as buyers' borrowing capacity has been eroded.

Both hosts also criticised the federal government's handling of credit card surcharges, with Tarrant noting the policy requires businesses to absorb the fees while the government itself will no longer accept credit card payments for tax.

Garman said local councils are also refusing the payments, and that the Australian Taxation Office had cited a cost in the hundreds of millions.

"If you've got government institutions that are backed up by the taxpayer with a recurring source of revenue, that's coming out and saying the government's own policies will bankrupt us as a government body, how are small businesses meant to survive?" he said.

Listen to the full episode: Government Supermarkets, Visa Caps & Perth Property | Property Buzz Live