Home » Australia News Live: Treasurer Says Full Impact Of Interest Rate Rises Still To Come As RBA Flags Further Hikes

Australia News Live: Treasurer Says Full Impact Of Interest Rate Rises Still To Come As RBA Flags Further Hikes

Reserve Bank flags further interest rate hikes

Peter Hannam

As widely expected the RBA has increased the cash rate by a quarter-point to 3.1%, the highest level since the end of 2012.

The accompanying commentary by governor Philip Lowe seems at first glance to be very similar to recent previous ones. The need for achieving price stability while keeping the economy on an even keel is the gist of it.

The conclusion from Lowe is that the central bank has more work to do:

The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course.

The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.

More here to come as we go through the commentary and the reaction, but you can also see the news here:

The shadow treasurer, Angus Taylor, says the government promised cheaper mortgages, cheaper electricity and lower cost of living but “what we’ve seen is the exact opposite”.

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He says the government has no plan, and still no clear path forward to reducing energy cost pressures. He says the government has now wasted six months, and has left the RBA to “carry the can” in attempting to reduce inflation.

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He says the Coalition would, if in government, attempt to get more gas into the domestic network.

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Markets have responded to the slightly hawkish tone of the RBA and confirmation that interest rates are yet to peak.

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Stocks went from being about flat for the day just before 2.30pm to about 0.4% lower soon after. The Australian dollar also crept about 0.15 US cents higher to 67.3 US cents. Not big moves by any measure but a hint of which way the sentiment shifted.

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It being the last RBA board meeting before Christmas, season puns are of course unavoidable. (No ‘Santa pause’ was our guilty offering.)

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Gavan Ord, a senior manager at CPA Australia, couldn’t resist either:

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n

Christmas is not coming early for businesses this year. The interest rate rise is no surprise but it will add pressure on business and household budgets at a critical time of the year.

n

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Among 1200 people surveyed in December, more than a fifth named rising interest rates as their number one concern for the new year.

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A hint of why is that many will be coming off fixed rate loans whose interest rates will be bumped up by as much as four percentage points, as we noted in this preview.

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The focus on interest rates may puzzle those without a mortgage but it’s worth remembering that a typical loan of $500,000 is now $834 more costly to service than it was in May (when rates were lifted off record lows).

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The higher borrowing costs dwarfs increases in other parts of household bills – including energy ones, that are also in the news these past few months. You can read more about the relativities here:

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The treasurer, Jim Chalmers, says the Australian economy has a lot going for it with low unemployment, some wages growth and very high prices for a number of our commodities, but says there is much outside of our control.

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He said:

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n

Obviously the war in Ukraine is causing havoc on global energy markets. The Covid situation in China is something that we’re monitoring closely, given the often consequences for our economy. There are some welcome signals out of the US but we’re still expecting a substantial tightening of monetary policy there. The UK is obviously in a very difficult position as is Europe.

n

The full impact of these interest rate rises from our own independent central bank are obviously still to be felt. And the magnitude of that impact and the timing of that impact is still in many ways uncertain. And as always, as we approach the Christmas season, the festive season, obviously harsh weather events and natural disasters have the capacity to have a substantial impact on our economy and on our budget.

n

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He says high prices for commodities are helping the budget a bit but are hurting households a lot.

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“We need to take the sting out of these energy prices,” Chalmers says, saying the government is working with states and regulators to acting in a meaningful, temporary and responsible way, and the government plans to have a response between now and Christmas.

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The treasurer, Jim Chalmers, is speaking after the RBA raised the cash rate to 3.1%.

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He starts by wishing the PM, Anthony Albanese, well in his recovery from Covid-19. He says he was able to speak to the PM this morning about energy policy, the economy and about issues more broadly.

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Turning to the rate rise, Chalmers says the rises are having “harsh and heavy consequences” on household budgets and mortgage repayments, but the full impact of the rises has not been felt in the economy yet.

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He says the economy is expected to slow next year as a result of the rate rises and the downturn in the global economy.

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Chalmers said the September national accounts will be out tomorrow, but stresses they’re backwards looking. They’ll capture some of the uncertainty but not all of it, he said.

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As widely expected the RBA has increased the cash rate by a quarter-point to 3.1%, the highest level since the end of 2012.

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The accompanying commentary by governor Philip Lowe seems at first glance to be very similar to recent previous ones. The need for achieving price stability while keeping the economy on an even keel is the gist of it.

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The conclusion from Lowe is that the central bank has more work to do:

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n

The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course.

n

The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.

n

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More here to come as we go through the commentary and the reaction, but you can also see the news here:

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The Reserve Bank of Australia has hiked interest rates for an eighth time in as many months, lifting its cash rate by 25 basis points to a decade high of 3.1%.

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Damning new evidence presented to the royal commission shows government lawyers warned officials the robodebt scheme may have to be wound up in March 2019, eight months before it was finally stopped.

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The March 2019 draft legal advice from the Australian government solicitor was prepared in response to a legal challenge brought by Madeleine Masterton and Victoria Legal Aid.

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The advice said Masterton had very good prospects of success in her case, because the “income averaging” method central to robodebt was not consistent with the social security act. It noted that while it was commenting on Masterton’s case, the AGS was “conscious it had broader implications”.

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Yet rather than winding up the scheme or pausing it while the solicitor-general opinion was sought, the Department of Human Services wiped Masterton’s debt two months later, as Guardian Australia revealed at the time.

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This left Masterton with no case, forcing VLA to find a new plaintiff, which it eventually did. This plaintiff, Deana Amato, won the case in November.

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Documents shown to the royal commission show the Department of Human Services had wiped Masterton’s debt because it did not want the federal court to make a determination about the legality of the robodebt scheme.

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The royal commission was shown an email from DHS chief counsel Tim Ffrench to top DHS official Annette Musolino and compliance general manager Craig Storen.

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Storen told the royal commission he didn’t necessary know that this advice would mean the scheme would have to stop.

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n

The advice wasn’t to me. I was copied into it. I was aware of the general thrust of the advice … I was aware that there was then processes in place to seek a firmer Commonwealth position on the legality of apportionment.

n

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Storen was then shown a part of the advice which noted it had “broader implications” beyond the Masterton case.

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Storen said later he understood the government needed to “consider its position more broadly”.

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“The Commonwealth was yet to determine its position on where it wanted to take the delivery of the program,” he said.

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The royal commission continues.

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