Anthony Albanese has warned the Reserve Bank of “overrunning” as it rushes to raise interest rates to curb inflation.
As Reserve Bank Governor Phillip Lowe admitted that the RBA may be “over-insured” against the low-interest-rate pandemic — adding to the inflationary crisis that now grips the nation — the Prime Minister has urged caution.
He warned there was “real pressure” on families, and said he hoped yields would not rise as sharply and quickly as some analysts, including the ANZ bank, had predicted.
“Of course, the Reserve Bank sets these rates independently of the government,” said Mr. Albanese.
“But they have to be careful not to go too far.
“Of course the Reserve Bank stated a while ago, and they admitted the mistake that interest rates would remain at the extraordinarily low levels where they were for a period of years up to 2024, and that has not been the case. case.”
3AW radio host Neil Mitchell then intervened: “Well that’s hurt folks, they were wrong. Are you saying make sure they don’t go too fast this time?’
“Well, they have to make sure they get the assessment, good,” replied the Prime Minister.
“There are circumstances that we could not have foreseen. One thing that has had a major impact worldwide is the Russian invasion of Ukraine.
“That has had an impact on energy prices which then moved on to supply chains and had a real impact around the world.”
As a sort of mea culpa due to widespread criticism that the bank had kept interest rates too low for too long, Dr. Lowe said it was “a scary time” and that the RBA and Morrison’s previous administration wanted to save jobs.
“Looking back on this experience, I can understand why some people might conclude that too much support was being provided by governments and central banks,” he said.
“It’s very important to remember the context in which these decisions were made.”
Koch: ‘Was RBA negligent?’
The PM’s comments come after sunrise host David Koch called the Reserve Bank “negligent” and asked if it had neglected its duty to tell homeowners they would not raise interest rates before they hit the accelerator with successive increases to curb inflation.
Speaking to Treasurer Jim Chalmers on Tuesday morning, Koch said there were real questions about the RBA’s recent advice to homeowners.
“Late last November, December, the Reserve Bank, Philip Lowe, told Aussies to go out and borrow, go out and borrow as much as you want, with the proviso. I will not raise the official interest rate until 2024,” said the presenter.
“A few months later, they started raising rates. Was that advice to the average Australian negligent, were they negligent in their duty to train the average Australian down the garden path to put themselves in debt?
Mr Chalmers said he wouldn’t describe it that way.
“Governor Phil Lowe spoke at length about that guidance he provided and how he believed economic conditions were changing faster than the bank expected.
The sunrise replied that “you’ve been very polite with all this.”
“But the reality is that at the time the market was telling the Reserve Bank – to everyone – inflation is roaring back, you’re going to have to raise interest rates, you’ll have to do it fast to get that ahead of inflation,” he said.
“The Reserve Bank didn’t do that, they did the opposite. And that’s why our inflation has gotten a little out of hand. We have lagged behind the rest of the world. Isn’t that negligence on the part of the Reserve Bank?”
The Treasures said the inflation challenge was not merely a result of Reserve Bank decisions and said there were both domestic and international elements to rising prices, including the war in Ukraine.
“And so I think it would be unfair to pin everything to the Reserve Bank.”