The Barefoot Investor has warned now is the time to panic for Australians with a mortgage as they fear interest rates won’t fall anytime soon.
Scott Pape sounded the alarm, blaming the budget for giving grim advice to millions of homeowners.
Mr Pape revealed in the run-up to the budget that he was avoiding it for the first time in two decades, describing it as “the poor man’s political theatre”.
He doubled down on his attack after its release on Tuesday, targeting a specific cost-of-living relief package.
Barefoot Investor Scott Pape (pictured) has warned Australians with home loans to ‘panic’ and be prepared to make tough decisions after the Federal Budget
Treasurer Jim Chalmers announced that every Aussie household – regardless of income – would receive a $300 rebate on their energy bill from July 1.
Dr. Chalmers claimed that paying for around 10 million homes would not increase inflation, but Mr Pape is wary of this comment.
‘I’m sure of it James Packer is very happy that he gets a $300 discount on his energy bill, even though he is going through a hard time,” he wrote in a column for the Daily telegram.
He added that the Federal Treasury’s prediction that the payment will not increase inflation was made by “hundreds of the smartest economic experts in the country.”
“The Treasury has 123 years of experience (since 1901) working with the government to analyze the impact of their policies – and they officially predict that inflation will continue to fall,” Mr Pape wrote.
“The problem is that their track record on economic forecasting is worse than my boys’ aim in the toilet.”
The cash interest rate currently stands at 4.35 percent, while inflation in Australia is 3.6 percent.
Mr Pape said the best option for homeowners is to “panic… panic early.”
“Ask yourself what would happen if you lost your job, got sick or interest rates rose,” he wrote.
“In other words, you need to do something Jimbo hasn’t been able to do yet: make some tough decisions right now.”
Mr Pape said he was fed up with the government’s prediction that the budget would not increase inflation, adding that homeowners “have to make some tough decisions now” (stock image).
The Barefoot Investor said he had “low expectations” for the budget, but Federal Treasurer Jim Chalmers (pictured) “went into limbo and went down even further.”
Leading economists sang a similar tune to the Barefoot Investor, with many saying the rebate and Phase 3 tax cuts would impact more consumer spending.
Increased spending will only fuel inflation and perpetuate inflation rates, which in turn could force the economy into a recession.
Cassandra Winzar, chief economist at the Committee for Economic Development of Australia, said cost-of-living relief that is not means-tested risks putting the central bank at risk because the rich will simply spend the extra money.
“Electricity rebates may ease headline inflation, but will boost spending elsewhere,” Ms. Winzar said.
Economist and budget expert Chris Richardson said the budget was expansionary, with $9.5 billion in new spending over the next 12 months.
“The government said it wouldn’t put things at the front, that it would be careful not to poke the inflation bear, but it would put it at the back – they’ve absolutely put it at the front,” he said.