Struggling mortgage holders won’t be seeing rate relief any time soon as the Reserve Bank of Australia has said they are looking for ‘softer growth’ in Government spending before it could cut interest rates.
The Reserve Bank of Australia (RBA) told the Cost of Living Committee at its hearing in Sydney, that it had almost doubled its forecast of Government spending since Labor’s Budget, increasing from 2.1% to 4%, confirming that Government spending is driving inflation.
AMP economist Dr Shane Oliver told the Committee that wages had gone backwards by five per cent, and that the economy was at a risk of recession. He went on to tell the Committee that if Labor’s spending was lower, the RBA would be able to consider cutting rates.
Alan Oster, chief economist at NAB, told the Committee that sectors like manufacturing, hospitality, and retail were feeling the pinch of higher interest rates and lower consumer spending most acutely.
Both Dr Oliver and Mr Oster described Labor’s spending as “bad timing” and “unhelpful”.
Economics professor Richard Holden told the Committee that the Labor Government had delivered three very expansionary Budgets that were “putting upwards pressure on inflation.” He went on to say that the Government’s temporary measures that lowered headline inflation were a ‘trick’ and still added to demand.
Judo Bank economist Warren Hogan agreed, and said that the only way to get inflation under control was for the Government to get the policy settings right, including by getting more flexibility into the labour market.
The Business Council of Australia (BCA) highlighted the cost of doing business crisis that was also caused by higher inflation, noting record insolvencies experienced in Australia in recent months. Chief Economist Stephen Walters echoed the economists’ comments that a flexible industrial relations system was key to lowering costs and passing on savings to consumers.
Chair of the Committee, Senator the Hon Jane Hume said that the Albanese Government is ignoring the warnings of experts and running the Australian economy into the ground.
“Instead of showing restraint in their fiscal policy to be in line with the RBA, the Albanese Government has increased spending by $315 billion. That’s not what the RBA wants to see.
“The RBA has now pushed out any hope of a rate cut this year, and in fact they even considered lifting rates yesterday. That brings no comfort to Australian households who are struggling to cope with these higher for longer interest rates.
“Australians are poorer under Labor, and from the evidence we heard today, it’s clear that there is no end in sight to the financial pain households and businesses are facing right now.”
Coalition Senators Smith, Canavan and Kovacic called on the Albanese Government to act on the warnings from the RBA and the economists who gave evidence to the Committee today for the sake of all Australian households and businesses.
