Treasurer hails progress in fighting inflation as RBA holds rates
Source: Sky News Australia
Federal Treasurer Jim Chalmers has hailed the government’s progress on fighting inflation, even as the Reserve Bank again left interest rates unchanged.
Tuesday’s announcement from the central bank means Australia’s official cash rate will remain at 4.35 per cent for at least a year.
It has been there since November last year and the RBA board will not meet again until November 5.
“We shouldn’t forget that when we came to office, inflation was 6.1 per cent and rising. It now, in quarterly terms, has a three in front of it,” Chalmers said after the RBA announcement.
The latest monthly inflation data will be released on Wednesday.
“Whether it’s the high twos or the low threes, that shows that inflation has halved since we came to office, that’s good progress,” Chalmers said.
“But we know that there’s still pressure on inflation, and we know that people are still doing it tough. And this is why our cost-of-living relief is so important.”
He said the Albanese government’s cost-of-living measures were designed to take the edge off some of the price pressures in the economy, rather than make them worse.
“There’s nothing artificial about helping people with their electricity bills or making early childhood education cheaper, or medicines cheaper, or a tax cut for every taxpayer or energy bill relief for every household, getting wages moving again,” Chalmers said.
“We’re doing all of this in the most responsible way we can. Our primary focus is on the fight against inflation, but we can’t ignore those risks to growth.”
The decision by the Reserve Bank to keep interest rates on hold was expected.
There hasn’t been a rate hike for almost a year. This reflects the good progress we’ve made on inflation.
We expect that tomorrow’s CPI data will further show that our policies are helping.
— Jim Chalmers MP (@JEChalmers) September 24, 2024
But shadow treasurer Angus Taylor said hit out at the government’s actions.
“The Reserve Bank has highlighted today that it is a long road back to a sustainable, low-inflation economy. In fact, they highlight today that we can’t expect to be back at target until mid-2026 and that this has been a long road,” he said.
“Australia is at the back of the pack in fighting and beating inflation. Australia is at the back of the pack in bringing down interest rates.
“Our core inflation hasn’t come down since January this year [while] every other peer country in the world has seen a reduction in core inflation since January. We’ve also got the highest core inflation of any advanced country.”
Millions of mortgage holders/renters are struggling, the big banks are making big profits, Coles/Woolworths are price gouging & household consumption is tanking, but the RBA refuses to cut rates.
It’s not radical to suggest the gov uses its existing power to force a rate cut.
— Max Chandler-Mather (@MChandlerMather) September 24, 2024
Economists had almost universally predicted the RBA’s announcement on Tuesday, despite its US counterpart the Federal Reserve kicking off its monetary easing cycle with a bumper 50-basis point cut.
Australia’s underlying inflation remains worryingly high at 3.9 per cent, while the labour market is in rude health with unemployment at a relatively low 4.2 per cent and participation at a record high.
Reserve Bank governor Michele Bullock said in her post-meeting media briefing that the board’s outlook at not changed “materially” since August.
“Inflation has come down a long way since it peaked in 2022, both in Australia and overseas. Part of this was the resolution of supply chain issues and energy prices easing, and monetary policy has also been doing its job,” she said.
“But inflation is still above our target and it’s proving to be sticky.”
Bullock said the board hadn’t explicitly considered hiking rates, but it did discuss whether its “current settings are sufficiently restrictive”.
“What we are doing is what we think is best to maintain this narrow path of bringing inflation back down, because it’s still too high, it’s still not back in the band. And according to our current forecasts, it’s not really forecast to come back sustainably into the band until 2026. So that’s our focus,” she said.
“We still think we’re on that path where we’re managing to do that without resulting in a large increase in the unemployment rate.”
CoreLogic Asia Pacific research director Tim Lawless said the decision to keep rates steady implied the RBA was satisfied with the gradual downward trajectory of inflation.
“Overall, the hold decision could provide a boost to consumer sentiment, as more households firm up their opinion that rate hikes are over and the next move from the RBA will be a downwards one,” he said.
“The only uncertainty at the moment is the timing and speed of rate cuts.”
-with AAP