Michele Bullock points out that many people are not spending the three interest rate cuts but instead are using them to pay off their mortgages faster. Lower interest rates only stimulate the economy if the money is spent.

This is likely because people have been scarred by the big increases in prices and higher mortgage rates. Many were caught out and faced real financial pain. Now that real wages are growing again and they are not facing as much financial pain, they don’t want to loosen their belts and spend. Why? Because they want to build up a buffer in case something like this happens again.