SKY NEWS AFTERNOON AGENDA WITH KIERAN GILBERT
TUESDAY, 7 MARCH 2023
SUBJECTS: Interest rates; Impact and causes of inflation; Government’s response to cost of living.
KIERAN GILBERT (HOST): Let's get back to the issue of the rate rise today, the 10th consecutive rate rise at an RBA board meeting. The Assistant Minister for Treasury, Andrew Lee, joins me now. Is there any hope from the RBA statement that this might be the last, or at least close to it?
ASSISTANT MINISTER FOR COMPETITION, CHARITIES AND TREASURY ANDREW LEIGH: I would have hoped so Kieran but if you look at the end of the RBA statement, they do say that further tightening is likely. So that's unfortunately troubling news for many households. If you look at the impact of the typical mortgage holder over the course of this rate rise cycle, which started just before the election, somebody on a typical mortgage will have seen their monthly repayments go up $658. This increase on its own pushes up repayments for that typical mortgage holder by $51 a month. So it's a significant impost on the Australian household.
GILBERT: The stock markets up and a lot of analysts are saying, okay, looking at the wording, it doesn't look like there's a preset commitment in this statement that, yes, you're right, the board expects the further tightening of monetary policy will be needed. That's the language. But a slight shift. Is there a nuance or are people overreading that?
LEIGH: Well, we're certainly hopeful that we've passed the peak of inflation. That's what the Australian Bureau of Statistics numbers seem to suggest. That's what the Reserve Bank is talking about. And in terms of goods inflation, that does seem to be passing through the system. Services inflation is lagging a little bit more. The rent portion of the Consumer Price Index has pushed up a lot and many of your viewers will have felt that directly with those rent rises that people have been coping. We know this is tough for households and so as a Federal Government, we're looking to do all we can in providing cost of living relief, restraining our spending, making sure that we're not placing any additional upwards pressure on inflation.
GILBERT: The Prime Minister made the point during Question Time that it's a global issue, that unless you're a closed economy like the former Soviet Union, you're going to feel the effects as an integrated global economy. The Deputy Liberal leader, Sussan Ley was on the programme earlier. She says that she said to the Prime Minister during Question Time, apparently you've given up. Has the government simply given up saying it's all too hard?
LEIGH: Not at all. We acknowledge it's a global problem. We acknowledge that there's a need for us to take action at a local level. That's why we're putting in place that energy bill price relief, which the Liberals voted against, and our cheaper childcare package that’s designed to take pressure off households’ cost of living. And we're doing all we can in terms of putting back into the budget the revenue upgrades we've received. More than 90% of those revenue upgrades went back into the budget as compared to less than half under the Liberals’ last two budgets.
GILBERT: But a large chunk of this is dependent upon what happens internationally, isn't it? That it's simply out of the government's control?
LEIGH: Look, some portion of it is clearly global. The war in Ukraine has wreaked havoc with supply chains, and certainly the challenges in China had an impact as well. If you look to the United States, there's now a real debate over what's happening with inflation. And I like to say, Kieran, that the crystal ball has gotten cloudier over the last year. It really is very difficult to forecast the exact pathway for inflation right now. And it's important that we as a Federal Government are taking actions that complement the Reserve Bank's moves.
GILBERT: The Westpac chief economist Bill Evans, says that he's hoping and that there is some hope that rates might start to come down early next year if the bank can get inflation back to a reasonable level by the end of 2023. Do you, as an economist, someone who knows this better than most, are there grounds for hope on that front?
LEIGH: Well, I certainly respect Bill Evans. I noticed he got a bit of a title upgrade in Question Time. Angus Taylor referred to him as the CEO of Westpac rather than the chief economist. But I share that optimism grounded in long term inflation expectations. So one of the things the Reserve Bank does is it surveys consumers and businesses and says, “what do you think inflation is going to be in a couple of years’ time?” And those inflation expectations are anchored in the target band. And that's why the Reserve Bank is expecting to be back in the target band by 2025. But I think there's challenging times coming between now and then. That's why we as a Federal Government are doing all we can to look after Australian households.
GILBERT: Assistant Minister for the Treasury Andrew Leigh. Great to see you. Thanks.
LEIGH: Likewise, Kieran.