Greens calls on government to freeze mortgage rates

The Reserve Bank of Australia (RBA) and the federal government have been accused of using everyday people as “cannon fodder” in the fight against inflation, according to the leader of the Australian Greens and federal MP for Melbourne, Adam Bandt.

Speaking to ABC on Wednesday (3 May) morning, a day after the central bank’s decision to increase the cash rate by 25 bps to 3.85 per cent, the Greens leader said that the move would “make the rental and mortgage crisis worse” and “increase the pain that people are feeling”.

Indeed, analysis from Roy Morgan estimated that a record 30.5 per cent — or 1,523,000 mortgagors — could be ‘at risk of mortgage stress’ in May. This represented an increase of 3.4 percentage points or 171,000 people than in April.

Mr Bandt said: “The government does need to step in, put its hands on the levers and take a different approach to fighting inflation because, at the moment, in the war on inflation Labor and the Reserve Bank are using everyday people as cannon fodder.

“What’s driving inflation at the moment? A large part of it is coming from rising bills and excessive corporate profiteering. It’s time for the government to step in, freeze the mortgage rates, freeze rents, freeze power bills and pay for it by making these big corporations pay their fair share of tax. That is how you tackle inflation, get it under control without hurting everyday people. 

“But at the moment, it’s everyday people who are bearing the brunt; not only of the inflation crisis, but are now being asked to do the heavy lifting to tackle it as well. 

“It’s not right and the government needs to act.”

When the ABC asked if this wouldn’t ‘destroy RBA independence’, the Greens leader argued that it didn’t because the RBA legislation itself contains the power for the Treasury to step in “when things are in difficult situations”.

Mr Bandt added: “The problem is (if you leave it all up to the Reserve Bank): when the only tool that you’ve got is a hammer, then every problem looks like a nail. And the Reserve Bank is going to keep on rising interest rates because the government isn’t doing its fair share to rein in profiteering.”

He said that the government should therefore not “leave all of the heavy lifting for tackling inflation” to the RBA but take on some of it themselves. He likened the current housing affordability crisis as similar to the COVID-19 pandemic, when the government placed a moratorium on rent rises (and banks offered mortgage repayment pauses) and suggested that similar intervention is needed now.

“We need to understand that the rental and mortgage crisis is reaching the same levels [as during the pandemic],” he said.

The federal Treasurer Jim Chalmers MP has conceded that this month’s move by the RBA to raise rates was “a pretty stark, pretty brutal reminder of the difficult economic conditions that we face” but told the ABC that he “does not typically take [his] economic advice from the Greens political party”.

“We think that the independence of the Reserve Bank is an important feature of the system. And one of the key conclusions of the Reserve Bank Review that I released not that long ago, was that we can improve the objectives and structures and processes and personnel that make these decisions independently on our behalf,” Mr Chalmers said.

“But I won’t be intervening in the way that the Greens Political Party have suggested. I think the independence is a cherished part of the system.”

‘Australians have a right to question how our monetary policy has been managed’

Many members of industry were taken by surprise by the RBA’s move to increase rates this week, with the Commonwealth Bank of Australia (CBA) the only major bank to accurately predict a rate hike for May.

The decision to increase rates has been met with dismay from several quarters, with Peter White AM, managing director of the Finance Brokers Association of Australia (FBAA), stating it was “disappointing”, particularly given findings from its recent research that showed “the real sacrifices borrowers and renters are making in order to make ends meet”.

Mr White said: “This [rate rise] is another hit for Australians. The RBA gives inflation as the key reason for its decision and while I understand this, I suggest that the economic fallout of higher interest rates and rents, along with the cost to the community from increased social and mental health issues, may outweigh the benefits of today’s rise towards trying to lower inflation.”

The FBAA head therefore called on banks to “do the right thing and not to increase their rates outside of increases in the costs of funds”.

“Australians have a right to question how our monetary policy has been managed. Governments and lenders and presumably the RBA could read the global economic indicators well before the first rate rise in May 2022 yet all failed to prepare Australians,” he said.

“Rates could have been raised in smaller increments over a longer period of time, putting far less pressure on borrowers and allowing them to plan.”

[Related: ‘Further tightening may be required’, RBA warns]