CANBERRA (CU)_As many Australians struggle with the ongoing cost of living crisis, the Labour party did not fail to seize on the Reserve Bank’s recent decision, which Prime Minister Scott Morrison says is only a reflection of Australia’s “journey out of the pandemic”. With less than three weeks to go for the federal elections, opposition treasury spokesman, Jim Chalmers, said the Prime Minister had overseen a “triple whammy” of cost-of-living pressure.
The Reserve Bank on Tuesday (3 May), decided to lift the official cash rate from the record low of 0.1 per cent to 0.35 per cent, which was aimed at tackling rising inflation. According to central bank governor Phillip Lowe, it is “the right time” to begin withdrawing some of the monetary support measures that were launched in response to the pandemic. “The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected,” he said. “There is also evidence that wages growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions.”
However, the opposition saw this as an opportunity to point to a three-fold cost of living crisis, higher interest rates, soaring inflation and stagnant wage growth under the governance of the coalition. “This is a full-blown cost of living crisis on Scott Morrison’s watch and now interest rate rises are about to be part of the pain,” Chalmers said. “This is a crisis. Families who were already finding it hard enough to get ahead – now they are finding it that much harder.”
The recent rate hike is the first increase during a campaign since 2007, following which then-Prime Minister John Howard lost office to Kevin Rudd.
The hike of 25 basis points at the time prompted Howard to apologise to voters for the increased “burden” on households. However, PM Morrison says he will not repeat the apology although he does sympathised with families who would bear the brunt of the RBA’s decision. “I sympathise with Australians as they face higher cost of living pressures,” the Prime Minister said on Tuesday. “I sympathise with Australians when they face higher repayments on their homes, of course I do, and that’s why we’ve provided the relief in the budget that is the function of our strong economic plan.”
He went on to say the Reserve Bank had made “a very important statement” on where Australia stands in its “journey out of this pandemic”. “Australians have been preparing for this for some time. Throughout the course of the pandemic, we have seen them double their buffers on their mortgages and we have seen them move from variable rates to fixed rates,” he said.