Former Sunrise host David Koch has blamed a looming interest rate rise on government spending.

Koch, now the economic director of Compare the Market, publicly addressed Reserve Bank of Australia governor Michele Bullock in an open letter that peeled back layers of recent inflation to reveal the source.

A fourth rate rise for 2026 is expected after an RBA meeting next Tuesday, but Koch says it won’t fix the problem.

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“I’m writing to you publicly because millions of Australians are crying out right now,” he told the RBA in his open letter.

“I don’t dispute your mandate, and I don’t envy the situation you face. But before your board votes, I’d ask you to look closely at who generated that worryingly high level of growth.

“It wasn’t households.”

He said that houshold spending has only fractionally increased, unemployment has spiked, business conditions have turned negative and consumer sentiment has dropped.

“A meaningful slice of the inflation your board is trying to contain is not being generated in a shopping centre. It is being set in a cabinet room,” Koch said.

David Koch penned an open letter to RBA governor Michelle Bullock urging her to be vocal about where the need for the latest looming rate rise comes from. Credit: 7NEWS

Koch addressed recent spending on oil, but warned the RBA it makes up “only part of the story”.

“I know fuel is front of mind for your board, and fair enough. But a petrol price shock is already a tax on every household. It strips spending power out of the economy without you lifting a finger,” he said.

“A rate rise won’t pump a single extra barrel, or fix a thing in the Middle East. It simply hits the same kitchen table twice.”

In contrast to the cost-of-living impact on household spending, Koch highlighted that federal government spending has climbed to 26.8 per cent of GDP, much of it in categories such as childcare, education, healthcare, utilities and insurance.

“Some of the stickiest price pressure isn’t coming from shoppers splurging ... it’s coming from prices governments set, subsidise, regulate or index,” Koch said.

“I’m certainly not asking you to lecture elected governments on what they should fund. Defence, health, aged care, housing and the NDIS are not luxuries. But I am asking you to use the one power you unquestionably hold: the authority of plain speech, backed by numbers.”

‘Say it out loud’

Koch wants the RBA to call a spade a spade and “say it out loud” when interest rates dig deeper into household purses.

He called for the board to be more clear about government spending, to detail it in easy-to-find figures — and explain the impact relevant to mortages, rather than forecast charts — contrasting it with a counterfactual cash rate showing how it would look if government spending actually grew in line with GDP.

Monthly mortgage repayments have grown by $351 for those with an average loan of $735,000, since the start of the latest rate hike cycle, according to Compare the Market data, and Aussies have already absorbed three rate rises this year.

Rate rises mainly affect these mortgage holders, along with variable-rate small businesses, but they do not reach the state government infrastructure pipeline, Koch said.

This is “the fairness problem” that Koch says is at the heart of the RBA task ahead.

“Treasurers do not refinance. Premiers do not take a call from the bank,” he said.

“So when public demand runs hot, the correction is paid for entirely by the people who already stopped spending.

“Governments will say they are paying more interest on their debt as well. Actually we, as taxpayers, pay their interest bill… and why aren’t they cutting spending to pay down debt like most households are? The facts are, they’re doing the opposite.”

Koch ackowledged the RBA is holding a bad hand, but urged Bullock to encourage a fair game nonetheless.

“You have been dealt an economy in which the sector most responsive to your interest rate lever is the one least responsible for the problem,” he said.

“That is not your failing. But it is within your responsibilities to make sure Australians know it.”