I’M constantly surprised by the continual guessing game that respected economists are playing when trying to second guess what the Governor of the Reserve Bank of Australia might do for her next move with interest rates.

A lot of this guesswork might be their egos responding to present and expected economic conditions.

I’m sure that many of them are interested in becoming “the first” to predict the next directional move for interest rates because if they happen to guess it right, then suddenly they become the go-to expert and dine out on the luck that came their way.

Never let the facts get in the way of a good story, especially when the reality may spook those economically inconvenienced by the financial reality of their often-excessive borrowings.

“It’s all about the cost of housing,” cry the politicians who fear that it might be seen as their doing, when the reality is that the sums being borrowed by today’s real estate buyers are of eye-watering size where two household incomes are needed just to handle the monthly repayment levels.

Pressure can be reduced by moving to interest rate only loans, but often that level of payment is greater than paying rent.

Reducing interest rates is only of value to those who have large borrowings.

These borrowings have forced up the ability for home ownership.

That cost is a major reason why inflation has provided an excuse for all other products and services to get on the bike and peddle up the price of everything else.

The spiral effect on prices, and then inflation, has now created this game of what and when to expect for the next move in interest rates.

However, the expectation is that once rates come down, then so will all other costs.

This is clearly wrong and that just won’t happen.

Once the prices for power, petrol, vehicle purchase, insurances, food and services etc gets to these levels, they simply won’t be permitted to come down by their suppliers.

Like it or not, we are stuck with these inflated costs for the foreseeable future.

Any other reading of these tea leaves is simply not reality.

The experts are now suggesting that in February we will see interest rates being reduced.

Some of that is political expectation for an early March election but again reality says that no matter how hard things are perceived to be at present, people will lash out on pre-Christmas expenditure.

This normal funds splash each year will signal to the Reserve Bank that there is still excess cash in the system so inflationary conditions are still present, thus it could still be too early for them to relax their guard.

By John BLACKBOURN