Can someone please explain how increasing interest rates can reduce inflation, when a rise in interest rates is inflationary by itself!

For example: Interest rates go up, the cost of fuel goes up, transport costs go up, the cost of producing goods go up, Retail prices go up, Inflation goes up!

HELLO, am I missing something here?

Surely some smart person can work out how we can reduce inflation without adding to the problem.

Reducing petrol excise could be one way, but we need a number of such measures.

Many people don't feel that superannuation is a 100% safe bet for their retirement.

Especially when we see external issues such as the possible American economy meltdown having such an effect on our share market and many of us can still remember that Super had negative returns for far too long.

Not happy Jan, when you rely on your super putting bread and butter on your plate!

What about the State Governments around Australia? What have they done to reduce Housing Trusts waiting lists?

Rental demand is pushing rental prices up and up around Australia. In Adelaide we have seen rents go up $50 per week and it is generally understood that this is only the beginning of a number of such rent increases over the next five years.

So it is no wonder that so many people have turned to property investing as a far more reliable place to put their money.

This in turn means that we have such large borrowings, but in general this is not bad debt and does not have to be curbed.

Most, if not all State Governments and many Councils have lacked in providing sufficient infrastructure to enable land release to keep up with the demand. In South Australia the Land Title Office (LTO) is taking up to 12 months to do a subdivision!

All this has driven up land prices. As people started to realise that if they don't buy land now, they might not be able to afford it later, demand for land is putting further pressure on inflation.

What I'm saying is this, we need to look at all the issues that drive up inflation and then look at how we can curb the inflationary effect of it, rather than just hike up the interest rates that cause even greater inflation, because that is so stupid!!!!!

In the meantime, people with plenty of money will buy up those houses that have been foreclosed by the Banks, because the Reserve Bank of Australia pushes up inflation to fight inflation? Pull the other leg RBA!

This is how the rich get richer and the poor get poorer!

Oh, what a clever ploy RBA!

Please note: This is a reader contribution only and does not in any way reflect the opinions/beliefs of Property Update, Michael Yardney or the editor.