Speaker 1: This is very welcome news for millions of Australians. This
Speaker 1: is the rate relief that Australians need and deserve.
Speaker 2: When the Reserve Bank finally delivered a rate cut yesterday,
Speaker 2: Treasurer Jim Chalmers was quick to claim credit.
Speaker 1: Under this labor government. Inflation is down, wages are up,
Speaker 1: unemployment is low, and now interest rates are falling as well.
Speaker 1: This is the soft landing.
Speaker 2: It's happy timing for a government with an election looming,
Speaker 2: but for mortgage holders relief may be modest and with
Speaker 2: the RBA warning they don't expect to cut rates again soon,
Speaker 2: how much mileage the government will get out of this
Speaker 2: remains to be seen.
Speaker 3: From Schwartz Media, I'm Ruby Jones. This is seven.
Speaker 2: Am today, Managing editor of the Saturday Paper, Emily Barrett
Speaker 2: on the impact of the Reserve Bank's cut and what
Speaker 2: it tells us about the state of the economy.
Speaker 3: It's Wednesday, February nineteen.
Speaker 2: So, Emily, we've just heard perhaps the most talked about
Speaker 2: cash rate announcement in recent memory. There was so much speculation,
Speaker 2: so much weighing on this moment for many people. So
Speaker 2: to begin with, just tell me what the Governor of
Speaker 2: the Reserve Bank. What Michelle Bullock said, Yeah.
Speaker 4: So, I mean this is the first cut in four years,
Speaker 4: and it follows thirteen hikes that went from May twenty
Speaker 4: twenty two to November tweeny twenty three. Now, the aim
Speaker 4: of those hikes was to bring down inflation, which peaked
Speaker 4: at seven point eight percent, and that was well above
Speaker 4: the banks two to three percent target range. So what
Speaker 4: Michelle Bullock was delivering was good news, Good.
Speaker 5: Afternoon, Thank you all for coming. As you know, the
Speaker 5: board decided today to cut the cash rate by twenty
Speaker 5: five basis points to four point one percent the cash
Speaker 5: This rate has been at four point three five percent
Speaker 5: since November twenty twenty three.
Speaker 4: She said, you know that they had determined that inflation
Speaker 4: had come down enough for them to actually make the cut.
Speaker 4: But it's what's known as a hookish cut, which means
Speaker 4: don't expect too much more.
Speaker 5: I want to be very clear that today's decision does
Speaker 5: not imply that further rate cuts along the lines suggested
Speaker 5: by the market are coming. As I noted, we've removed
Speaker 5: the cautionary increase that we did in November twenty three
Speaker 5: to a level that we still see as restrictive but
Speaker 5: the Board needs more data and evidence that inflation is
Speaker 5: continuing to decline before making decisions about the future path
Speaker 5: of interest rates.
Speaker 2: Okay, and the most obvious immediate effect of this will
Speaker 2: be felt by people who own property. So what do
Speaker 2: we know about whether the banks intend to pass on
Speaker 2: this cut and if so, what does that mean in
Speaker 2: practical terms for people who have a mortgage.
Speaker 4: So the big four banks, they've apparently already given their
Speaker 4: commitment pass it on quickly, and that's something that Jim
Speaker 4: Chandler's the Treasurer, announced almost immediately afterwards, and with all
Speaker 4: the competition in the mortgage market at the moment, it's
Speaker 4: certainly in their interests to follow up. So we'd expect
Speaker 4: that this month and this will flow to most Australians
Speaker 4: with mortgages because they hold variable loans. So if we
Speaker 4: look at one third of Australian households have meltgages, another
Speaker 4: one third are paid off and another third are renters.
Speaker 4: So according to the RBA, the minimum payments for most
Speaker 4: mortgages jumped sort of between thirty and sixty percent since
Speaker 4: the first rate hike in May twenty twenty two. So
Speaker 4: if you had a five hundred thousand dollars loan, your
Speaker 4: monthly repayments would have increased by about twelve hundred a
Speaker 4: month over that time. So today's cut is modest in
Speaker 4: the sense that mortgage holders can look at a round
Speaker 4: sort of one hundred dollars a month maybe in savings
Speaker 4: from this cut. So an extra one hundred dollars a
Speaker 4: month for these mortgage holders, you know, anyone who's looking
Speaker 4: for that extra bit is going to be helpful. But
Speaker 4: I think, as one porter actually said in the press conference,
Speaker 4: it will barely touch the sides for some people.
Speaker 2: And as you say, Governor Michelle Bullock spoke about this
Speaker 2: being a one off, not to expect further consecutive cuts.
Speaker 3: So can you tell me more about why that is.
Speaker 4: Yeah, So, as they've pointed out, the key measures of
Speaker 4: inflation show that it's returned back to the RBA's two
Speaker 4: to three percent target range, and that's quicker than expected,
Speaker 4: but there's still a little bit further to go. Part
Speaker 4: of the reason that they have cut rates is that
Speaker 4: they're concerned about growth in the economy, but they're also
Speaker 4: concerned on the flip side, the productivity, that is, how
Speaker 4: much stuff we're actually making is really low, and so
Speaker 4: the output of this economy isn't as strong as it
Speaker 4: needs to be for supply to meet demand.
Speaker 5: But we all know that productivity hasn't been as strong
Speaker 5: as we would have hoped, and that's the way we
Speaker 5: grow the economy. That's the way that we can have
Speaker 5: trained growth high because if but demand increases and supply doesn't,
Speaker 5: then that's when you get inflationary pressures.
Speaker 4: So also there's the point that house prices are still high,
Speaker 4: so a series of cuts would kind of risk reigniting
Speaker 4: that demand in the market that probably hasn't called as
Speaker 4: much as it could have. And there's also just a
Speaker 4: lot of uncertainty out there. I mean, if we look
Speaker 4: it's where in an election campaign shortly, so domestically, you know,
Speaker 4: election campaigns tend to mean more government spending, more promises
Speaker 4: around spending, which is in itself often inflationary. The global outlook,
Speaker 4: if we look out beyond this country, we've got highly
Speaker 4: unpredictable situation. I mean, you colonomists always say, you know,
Speaker 4: there's uncertainty out there, it gets very boring, but it's
Speaker 4: fair to say that this is an extraordinarily unpredictable outlook.
Speaker 4: We've got we're looking at potential trade wars. That's inflationary.
Speaker 4: And to compound that, the Australian dollar is pretty weak
Speaker 4: right now and so further reate cuts way on the
Speaker 4: Australian dollar and that increases the cost of imports. That's
Speaker 4: also an inflation driver. But the main thing they pointed
Speaker 4: out as a risk is that the jobs market is
Speaker 4: still really strong, right.
Speaker 2: Can you tell me more about that, because economists are
Speaker 2: often saying that to get inflation under control, we need
Speaker 2: unemployment to rise, but that has not happened here.
Speaker 4: Yeah, So central bankers have been obsessed for a long
Speaker 4: time with the links between unemployment and inflation and interest rates,
Speaker 4: but this time around we haven't had unemployment go as
Speaker 4: high at all. People to suffer in terms of their
Speaker 4: jobs as much in the sort of task of lowering inflation.
Speaker 4: So there are a few reasons for that. You sort
Speaker 4: of need to take into account how the economy is
Speaker 4: changing a lot. You know, structurally, there are a lot
Speaker 4: of differences. There, more people working gig economy jobs, there's
Speaker 4: part time work, and measures of underemployment that kind of
Speaker 4: aren't really captured in that headline rate and Importantly, we
Speaker 4: know that wage growth, at least in this case, wasn't
Speaker 4: fueling inflation at all to the extent that you know
Speaker 4: it has in the past. We know that because wage inflation,
Speaker 4: like how much your pay was going up each year,
Speaker 4: was actually being outpaced by inflation, So your pay wasn't
Speaker 4: keeping up with inflation, so it can't have been driving it.
Speaker 4: I mean, it's certainly clear that, you know, while the
Speaker 4: jobs market is held up, that still doesn't kind of
Speaker 4: offset the fact that we've seen people having to pay
Speaker 4: extraordinary amounts more each month for their mortgages and make
Speaker 4: really painful decisions about you know, are they going to
Speaker 4: pay their bills, are they going to pay their mortgage,
Speaker 4: or are they going to buy enough food to put
Speaker 4: on the.
Speaker 3: Table after the break?
Speaker 2: How much credit should the government get for the rate cut? Emily,
Speaker 2: the RBA was able to do this because inflation has
Speaker 2: come back within their target range between that two to
Speaker 2: three percent. And there was a lot of criticism of
Speaker 2: the Reserve Bank for these constant hikes, these thirteen consecutive
Speaker 2: hikes over the past four years. People saw it as
Speaker 2: this blunt instrument to curb inflation. But does the fact
Speaker 2: that inflation is now slowing and we are now seeing
Speaker 2: a cut, proof that despite perhaps being unpopular, the RBA
Speaker 2: strategy did work here.
Speaker 4: You can't say that RBA policy hasn't worked, because inflation
Speaker 4: has definitely come down, right, But the question is always
Speaker 4: at what cost? And as you're saying, you know, the
Speaker 4: blund instrument is really it's absolutely the case that raising
Speaker 4: interest rates to this extent hurt a tremendous number of people.
Speaker 4: And we've definitely looked, we've definitely seen some criticism of
Speaker 4: what the RBA has been doing. That's come from a
Speaker 4: lot of different places, including from the treasurer from Jim Chalmers,
Speaker 4: you know, who's normally very circumspect about reinforcing the central
Speaker 4: banks independence. He said fairly recently that the RBA was
Speaker 4: slamming the economy. That's just to show the level of
Speaker 4: frustration that has been building about the fact that in
Speaker 4: rates have stayed this high for this long. You know,
Speaker 4: what michell Brook was saying today is that inflation is bad.
Speaker 4: Wraith hikes are bad, but you really don't need for
Speaker 4: inflation to get further out of control because then there's
Speaker 4: just more rate hikes.
Speaker 2: Emily, this rate cut it's obviously good news for the
Speaker 2: Abenezy government, who can now use it to talk about
Speaker 2: their handling of the economy and paint a good news
Speaker 2: story about successfully battling inflation and addressing the cost of living.
Speaker 3: How much momentum do you think they can get out
Speaker 3: of this.
Speaker 4: They'd certainly want to capitalize on this moment, and we're
Speaker 4: already seeing it with Jim Chalmer's out very quickly after
Speaker 4: the announcement, But in terms of how much momentum they
Speaker 4: can get out of it going ahead, it's not exactly
Speaker 4: a massive boon for people's budgets to be seeing this
Speaker 4: extra money in their pockets each month. It's not a
Speaker 4: large amount, so there's perhaps that sense that, you know,
Speaker 4: if they're trying to make too much of it, then
Speaker 4: people will sort of be looking at their bank accounts
Speaker 4: and thinking, well, actually, I haven't seen that much back
Speaker 4: from this. It's very delicate. As we're heading up to
Speaker 4: the election, Labor knows exactly how much trouble they could
Speaker 4: potentially be in here in the ABC's ass has shown
Speaker 4: us that there are some of the Labour's marginal seats
Speaker 4: of feeling really have taken the brunt of the higher
Speaker 4: mortgage costs, and we look at seats like McEwen and
Speaker 4: Holt in Victoria PSNWA, they have the highest proportions of
Speaker 4: mortgage holders in the country, abound fifty percent of people
Speaker 4: living there. So, you know, I think that it's quite
Speaker 4: likely that the government is going to want to be
Speaker 4: talking about how their economic management has made this possible,
Speaker 4: and certainly in light of how much inflation has come down,
Speaker 4: they have something to claim there.
Speaker 2: Can you tell me more about that, Emily? To what
Speaker 2: extent can the federal government claim this? Are there policies
Speaker 2: that you think have had a real impact or is
Speaker 2: this lowered inflation rate or just a consequence of what
Speaker 2: the Reserve Bank has done over the past four years.
Speaker 4: There's a really good question. So there's always a bit
Speaker 4: of push and pull, right, how much is fiscal policy
Speaker 4: that's the government actions to do with this, and how
Speaker 4: much of it is monetary policy, which is simpral Bank's input.
Speaker 4: They're always pointing things at each other when things are
Speaker 4: going wrong. Thement does deserve some credit, that's it's resisted
Speaker 4: the temptation to spend more in a cost of living crisis.
Speaker 4: You know, obviously the populist move would be to try
Speaker 4: and shovel more money out the door. It made some
Speaker 4: decent calls on balancing support for households. We remember that
Speaker 4: energy bill subsidies, which actually helped to bring headline inflation down.
Speaker 4: That obviously was you know, sort of kind of decried
Speaker 4: as a bit of trickery on the part of some
Speaker 4: people because it was sort of an artificial suppressing of inflation.
Speaker 4: But it's still you know, you have to say it
Speaker 4: was a deft way to give people some kind of
Speaker 4: cost of living relief, which we know that people needed,
Speaker 4: without sparing inflation. So and for its part, you know,
Speaker 4: the RBA can say, as blonde tall as it is,
Speaker 4: interest rates have done the job here to a certain extent.
Speaker 4: They could also say, as central banks often do, that,
Speaker 4: you know, heavy government spending doesn't help detame inflation. You know,
Speaker 4: government spending is pretty high historically, it's now around twenty
Speaker 4: nine percent of GDP and that's probably more than they
Speaker 4: would be comfortable if it's just that, how do you
Speaker 4: argue against that when people really need the help.
Speaker 3: Emily Thank you so much via Tank, Thank you so much.
Speaker 4: Ruby.
Speaker 2: Also in the news today, the National Anti Corruption Commission
Speaker 2: will investigate six individuals referred to the body by the
Speaker 2: Robodette Royal Commission. The announcement follows an independent review into
Speaker 2: the anti corruption watchdog's refusal to investigate the six individuals,
Speaker 2: five public servants and one public official in June of
Speaker 2: twenty twenty four. The names of the individuals have not
Speaker 2: been released. And New South Wales Police have charged a
Speaker 2: man with the alleged online harassment of journalist Antonettelatouf. The
Speaker 2: sixty one year old from Regional New South Wales has
Speaker 2: been charged with using a carriage service to menace, harass
Speaker 2: or offend.
Speaker 3: It is due to appear before court in March.
Speaker 2: Latouf says she received a number of hateful and racist
Speaker 2: messages since being taken off air from her fill in
Speaker 2: host role on ABC Radio Sydney after sharing a post
Speaker 2: on social media regarding the israeljimas War.
Speaker 3: I'm Ruby Jones. This is seven am. Let's see you tomorrow.