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Ahead of the Reserve Bank of Australia’s (RBA) monetary policy decision due today (24 September), the Australian Greens party have urged the central bank to lower interest rates and have further pressured Treasurer Jim Chalmers to use his existing powers to cut rates should the RBA decide not to.
According to the Greens, a rate cut of 25 basis points would see the average mortgage of around $641,000 reduce monthly repayments by $100, saving mortgage holders $1,200 per year.
The Greens went on to state that by making lower interest rates a condition of the party’s support, they are “consciously and deliberately putting the RBA in the centre of political debate, where it belongs”.
Greens economic justice spokesperson, Senator Nick McKim said the party is using its power in Parliament to “fight for renters and mortgage holders”.
“The Treasurer has the power to step in, he’s just not using it. The Reserve Bank could act, but they are not acting.
“Mortgage holders are getting smashed right now.
“For weeks the Treasurer has acknowledged the economy is being smashed, and that mortgage holders are being smashed by high interest rates – yet to date he’s done nothing about it despite having the power to reduce interest rates,” McKim said.
It is the party’s assertion that the RBA’s decisions are “inescapably political” as their actions impact all Australians, and that part of the central bank’s modernisation should require the end of the RBA being independent and “above politics”.
“Members of Parliament, including the Treasurer and shadow treasurer of the day should be able to debate, criticise, oppose or support the actions of the RBA,” the Greens stated.
This marks the second time this month that the Greens have urged the government, specifically Treasurer Chalmers, to intervene and lower the official cash rate from its current level.
The party stated that once interest rates are reduced, it will back the Treasurer’s legislation to restructure the RBA on the condition that two existing provisions remain unchanged.
Those provisions include Section 11 of the Reserve Bank Act, which grants the Treasurer the power to override RBA decisions and Section 36 of the Banking Act, which allows the central bank to direct money advanced to commercial banks.
“Mortgage holders are struggling to cover their bills, with the RBA’s governor admitting some will need to sell their homes,” Senator McKim said.
“We aren’t going to pass Labor’s Reserve Bank reforms until interest rates are cut.
“The Reserve Bank Board are not infallible high priests of the economy who are above criticism.”
“Both the Treasurer and the Reserve Bank governor have said they want this legislation passed. Now they know what they have to do to get it done.”
The Greens recently aligned with the Coalition to block the Labor party’s Help to Buy legislation, delaying it for another two months as threats of a double dissolution begin to manifest.
The RBA remains undeterred
The RBA is widely expected to leave the official cash rate unchanged at 4.35 per cent at today’s meeting, as hopes of a rate cut by the end of the year continue to be unlikely.
Despite forecasts from economists and markets, RBA governor Michele Bullock has been steadfast in the stance that a rate cut in the near-term does not align with the agenda of board members, and defended the RBA’s decisions to lift interest rates.
It has also been speculated among economists that the Federal Open Market Committee’s recent supersized rate cut of 50 basis points is unlikely to have any sway with our own central bank.
The primary rhetoric from the RBA (one that they’ve held for quite some time now) is that high and ingrained inflation is ultimately worse for Australians and could spark a recession and further increases to the official cash rate.
The RBA is due to make its September cash rate decision this afternoon at 2:30pm.
[RELATED: Help to Buy vote delayed]
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