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How climate change will affect your mortgage

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15.03.2019

In ordinary times, a person standing up to make a statement of the bleeding obvious isn’t news.

But the times, my friends, are anything but ordinary.

And in these times, when a person stands up and says climate change will have an inevitable impact on our economy, that is news.

Reserve Bank deputy governor Guy Debelle focused on how climate change can complicate the task of setting interest rates.Credit:Alex Ellinghausen

And when that person happens to be the deputy governor of the Reserve Bank, that is headline-making stuff indeed.

The RBA has turned the focus on the economic effects of climate change.Credit:Glen Le Lievre

Guy Debelle's speech this week on "Climate Change and the Economy" is significant, representing the first serious foray by our central bank into the policy implications of climate change.

So it's well worth spending some time delving deeper into the details of what Debelle had to say, particularly on how climate change has the potential to significantly complicate the task of setting interest rates, and in turn, our mortgage rates.

The starting point of Debelle's analysis is to remind Australians of the dual mandate of its Reserve Bank: to achieve both full employment and price stability.

Full employment has come to mean maximising both the number of people employed and resources utilised in the economy to achieve maximum output.

Price stability has come to mean limiting annual increases in the price of consumer goods to within a target range of 2 to 3 per cent.

No point, then, having interest rates so low you achieve full employment, but prices are out of control and........

© Canberra Times