The federal Treasurer has warned the latest rate hike will put further pressure on mortgage holders.
Speaking at a press conference in Sydney following the Reserve Bank of Australia’s (RBA) Melbourne Cup Day rate decision (7 November), federal Treasurer Jim Chalmers stated that the move to raise interest rates will “make life harder for people who are already doing it tough”.
The RBA raised the official cash rate by 0.25 per cent to 4.35 per cent following four consecutive months of rate holds, bringing the cash rate to its highest point since November 2011.
“This is a difficult day for people with a mortgage,” the Treasurer stated.
“We do understand that Australians are already under substantial pressure in their household budgets and this will tighten the screws further, that’s why the highest priority of the Albanese Labor government is rolling out this cost-of-living relief…
“The government is doing its bit to address the inflationary pressures in our economy.
“The independent Reserve Bank has taken this decision today in the interest of this fight against inflation and what we are doing as a government and what the Reserve Bank is doing as an independent board is all about trying to make sure that we can get on top of this inflation challenge in our economy, which is hurting our people and our economy more broadly.”
Mr Chalmers stated that both the RBA and the federal government want “inflation to moderate further and faster”.
When asked about whether or not his comments on inflation had any influence on forcing the RBA’s hand, Mr Chalmers rejected the notion.
“It is entirely appropriate for the Treasurer of this country to talk about the Treasury’s forecasts and expectation for inflation, especially on the day that inflation figures come out,” he said.
“It’s the job of the independent Reserve Bank to come to their conclusions when it comes to their own expectations for inflation.”
Following the decision, RBA governor Michele Bullock stated that further tightening of monetary policy to return inflation to the 2–3 per cent target will be dependent on future data and the evolving assessment of risks.
“In making its decisions, the board will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market,” Ms Bullock said.
The governor further acknowledged that there are many households “experiencing a painful squeeze” on their finances and that there are still “significant uncertainties” surrounding economic outlook in regard to persistent overseas services price inflation, the lags of the effect of monetary policy and the outlook for household consumption.
As of 8 November, major banks ANZ, Westpac and NAB had announced that they would pass on the RBA’s latest rate hike.
Variable interest rates across ANZ and NAB’s home loan products will increase by 0.25 per cent per annum effective from 17 November 2023. Westpac will raise savings rates on the same day and mortgage rates on 21 November.