A glimmer of hope the Reserve Bank could soon put the brakes on its aggressive rate hike cycle will be cold comfort for borrowers struggling with the cost of living.
All eyes will be on the banks to see which will be the first to pass on Tuesday’s rate rise to mortgage holders.
The central bank board lifted the official cash rate by 25 basis points to 3.6 per cent, the highest level in more than a decade.
But Treasurer Jim Chalmers welcomed the shift in the board’s language in a statement following the 10th consecutive rate rise.
“I think there was a softening in the language in the Reserve Bank statement,” he told ABC’s RN.
A softening of the language from Philip Lowe will provide comfort for homeowners. Picture: NCA NewsWire / Gary Ramage
“I try not to be the main interpreter of the governor’s words.
“People do pay a lot of attention to the words in these statements for understandable reasons. Now I’m not going to make predictions about what might happen in the future when it comes to interest rates, but I know that these interest rate rises, which began before the election, continued after, (are) putting a lot of pressure on people.”
Since May, the central bank has aggressively raised interest rates from a record low 0.1 per cent in a bid to deal with runaway inflation.
Inflation reached a three-decade high of 7.8 per cent in December, well above the RBA’s target rate of between 2 and 3 per cent.
Dr Chalmers reiterated his belief that inflation peaked in Australia over Christmas.
Jim Chalmers thinks inflation peaked at Christmas. Picture: NCA NewsWire / Gary Ramage
“Inflation will moderate over the course of the next 12 to 18 months,” he added.
“It has been stubborn, and it has been higher than we’d like for longer than we’d like.”
But the Treasurer is standing by the stage 3 tax cuts, due to come into force in 2024 despite concerns it could add to inflationary pressures.
The opposition, however, claims the government is not pulling its weight to address the inflation challenge.
“Where’s the plan on inflation? I mean, it’s simple economics if the government doesn’t get fiscal policy right, that makes inflation go up. That makes interest rates go up higher than they need to,” deputy Liberal leader Sussan Ley told ABC’s AM.
Reserve Bank governor Philip Lowe will address a business summit on Wednesday, with a speech expected to cover off the inflation challenge and recent economic data.
Dr Lowe will address a business summit later on Wednesday. Picture: NCA NewsWire / Nicholas Eagar
It comes as Dr Lowe prepares to meet with representatives from the peak body for suicide prevention in Australia after it raised concerns
Data from Suicide Prevention Australia, handed to the RBA governor last week, suggested 46 per cent of people were reporting high levels of cost-of-living distress.
Chief executive Nieves Murray said the Reserve Bank and the government had to consider the impact successive rate rises were having on Australians.
“About one-in-five Australians are reaching out for help. It’s positive that people are heeding the message, but it’s also putting increased pressure on already stretched frontline suicide prevention services,” she said.
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