Treasurer Jim Chalmers has warned that the economic conditions of mortgage borrowers will get worse before they improve, as he revealed the terms of the wide-ranging review to the Reserve Bank of Australia.
The review, announced last night, will try to understand why the central bank lowered interest rates to emergency levels before returning to month-on-month interest rate hikes.
Chalmers’ comments come after RBA Deputy Governor Michele Bullock said yesterday that households will be able to cope with a significant rise in interest rates because they were able to get ahead of mortgage payments during the foreclosures.
Treasurer Jim Chalmers has warned borrowers that family budgets would be tightened even more. (new)
“I think Australians find it hard to make room for family budgets to raise interest rates while the other costs of other essential products have been going through the roof,” Chalmers said.
“These interest rate hikes will go to you. Every dollar a home spends on servicing your mortgage is a dollar you can’t spend to cover some of the other skyrocketing costs of the basics.
“The point the deputy governor of the Reserve Bank was raising is that a lot of people, thankfully, have some room in their mortgage. They’ve been able to build a shock absorber.
“But what I would like to say about this is that not everyone has a shock absorber, especially in the teeth of this cost-of-living crisis. We have to recognize that, too.”
Property prices soared and auctions picked up when interest rates hit the lowest level of 0.1 percent. (LOUIE DOUVIS)
The treasurer said the RBA review was necessary because the economy was facing “very difficult” challenges in the medium and long term.
“This is our opportunity to ensure that the monetary policy framework is as good as possible to make the right calls in the interests of the Australian people and their economy,” Chalmers said.
“This review will take into account the objectives of the RBA, the mandate, the interaction between monetary, fiscal and macro credential policy, its governance, culture, operations and more.”
The RBA said widely that it was not interested in raising rates until 2024, and then was forced to introduce multiple rate hikes in 2022. (AAP)
Chalmers insisted the government was having an open mind to the RBA review.
“I don’t want it to be an exercise in throwing or guessing, I don’t want it to focus exclusively on an exercise in shifting guilt backwards,” he said.
“I really want to see what it’s like to have the best central bank in the world in the future.”
Chalmers said a group of three experts from Australia and overseas – who are independent of the Treasury and RBA – will lead the review.
The Adelaide home exceeds expectations with a $ 2.52 million sale