Prime Minister ‘welcomes’ RBA rate pause

The Prime Minister of Australia, Anthony Albanese, has applauded the Reserve Bank of Australia’s (RBA) decision to leave the cash rate on hold in July, to allow time for the impacts of recent rate hikes to filter through.

After the RBA held the cash rate at its current rate of 4.1 per cent for the second month in a row, Mr Albanese told journalists that he welcomed the decision.

Speaking on Wednesday (5 July), the Prime Minister told 10 News First: “[W]e know that so many families are doing it really tough out there … There is, of course, a lag from when interest rates increase to the impact and we certainly welcome the Reserve Bank’s decision yesterday to leave interest rates at 4.1 per cent because we know that there are signs of slowing in the economy.

“We want to make sure that we manage this in the best way, that is why my government will work each and every day to make a positive difference for Australians, providing that cost-of-living relief, while not putting pressure on inflation.”

Mr Albanese noted that while inflation was falling in Australia, global inflation was still high “as result of the pandemic and supply chain shortages that came from that but also the Russian invasion of Ukraine that saw that huge spike in global energy prices”.

However, he told Sunrise host Natalie Barr that the government was providing support measures to those “doing it tough”, for example, through the Energy Relief Plan and the bulk billing incentive in Medicare.

Mr Albanese said: “Some people are doing okay while others are doing it really tough. And that’s why the government has a difficult task to manage. That’s why we have to target our spending in a way that doesn’t put pressure on inflation, that targets that relief plan that we have.

“That’s why, when we were conscious about the surplus, we put additional money into public housing — $2 billion of additional money above what we were doing already in the budget in May — because we knew that we wanted to put that investment into housing, to increase supply, to make sure we made a difference there in a way that didn’t add to inflation but supported the construction sector and jobs when it’s needed over the next year ahead.

“It is a difficult task, but one of the things that we have to make sure that we do is that monetary policy, that is what the Reserve Bank have been doing, works with fiscal policy. And that’s why we banked those revenue upgrades to the bottom line so that we didn’t provide the Reserve Bank with any more arguments that they should have further increases.”

The Prime Minister was also asked by journalists yesterday about who was in the line-up for the position of central bank governor (given Philip Lowe’s term ends in September).

Mr Albanese said that while the cabinet would be meeting to discuss that imminently (and a decision is expected later this month), he suggested that Jenny Wilkinson, secretary of the Department of Finance (and former department secretary at Treasury), and Steven Kennedy, aecretary of Treasury, were under consideration alongside MrLowe.

“We’ll make those decisions at an appropriate time and we’ll do them properly and in an orderly way. That’s the way my government functions. It’s an adult government that makes decisions after proper processes are in place and we’ll make those decisions at an appropriate time,” he said.

Inflation has peaked: Katy Gallagher

Similarly, the acting Treasurer and Minister for Finance and Women, Katy Gallagher, held a range of media interviews this week in which she highlighted that government doesn’t expect a recession (despite growing concerns that one may occur this year) and believes inflation has peaked.

Ms Gallagher, who is filling in for Treasurer Jim Chalmers who is on leave, also echoed that the RBA decision would “for many Australians” provide “some much-needed relief”.

While this is welcome news, we understand that many people are under pressure from rising mortgage repayments and the increased cost of living,” she said, reflecting that many households across the country have been feeling the pressure over the last 12 months of interest rates increasing and cost of living.

“That’s why the Albanese government remains laser-focused on providing responsible and targeted relief where we can which doesn’t add to inflation — and some of those key measures have started rolling out this week,” Ms Gallagher said.

Speaking in an ABC RN Breakfast interview, the Minister for Finance added: “The [central] bank has a job to do, which is to ensure that inflation comes down and that heads towards the target range and certainly in our budget forecasts we expect that to happen.

“We do believe that inflation has peaked and that we will see moderation of that over the next 18 months. But as to what happens with interest rates, that it really is a matter for the Reserve Bank.”

The acting Treasurer also noted that the RBA’s board is also still expecting the economy to grow as inflation returns to the 2–3 per cent range.

[Related: RBA holds, but for how long?]