TED O’BRIEN MP
DEPUTY LEADER OF THE OPPOSITION
SHADOW TREASURER
MEMBER FOR FAIRFAX
MEDIA STATEMENT
On Melbourne Cup Day, Australians were hoping for a rate cut but, due to the ‘Jimflation effect’, there are no winners in sight.
The RBA has again kept the cash rate on hold, leaving the average mortgage holder paying $1,800 more in interest per month than when the Coalition left office.
Just last week, inflation smashed right through the top of the RBA’s target band, just two weeks after unemployment overshot the RBA’s forecast.
This evokes worrying memories of the economic stagflation of the 1970s—an era of lost economic prosperity.
The Treasurer claims to be a victim of circumstance, but the dire economic situation we find ourselves in is of his making.
Government spending is growing more than four times faster than the economy and is at its highest level outside of recession in more than four decades. In the last two years, 80% of new employment has been in the non-market sector.
The Albanese Government is out there in the Australian economy competing with everyday Australian families for the basic resources they need to get by. This is driving prices up.
The Treasurer has his foot flat on the accelerator while the RBA Governor has her foot on the brakes. Labor’s spending spree left the RBA with no room to move today.
Meanwhile, productivity—a precondition for higher wages without inflation—has fallen more than 5% under Labor. The RBA has repeatedly warned that weak productivity is a key reason it cannot deliver further rate relief.
Labor’s rapid expansion of the less productive public sector has crowded out the more productive private sector. And the government’s complacency on economic reform has left our nation rudderless at a time of global uncertainty.
Beyond an economic roundtable that has already vanished from memory, this government has nothing to offer the Australian people to turn things around.
To turn things around, Labor must do two things. First, it must stop the spending spree. And second, it must start growing the economic pie.
Along with its decision, the RBA released revised economic forecasts, which paint a bleak picture of the future of the Australian economy under this government.
Both inflation and unemployment were revised upwards. Headline inflation is now expected to peak at 3.7% in the middle of next year, well outside the RBA’s 2-3% target band.
Inflation is now not expected to return to the target band until 2027, and is not expected to reach the midpoint of the band, which the RBA targets, at any point during the RBA’s forecast horizon.
Following last week’s shock inflation release, the Treasurer was keen to stress that core inflation remained in the RBA’s target band, at 3%.
However, the RBA’s revised forecasts indicate that core inflation is now expected to exceed the RBA’s target band until the end of next year.
This persistence in underlying inflation pressures makes the RBA’s job challenging.
After 12 interest rate rises under Labor, there have been just three cuts. Markets are currently predicting just one more cut—and none before February.
And, after last week’s sharp spike in inflation, many economists are even speculating that the next rate move may be up.
On the back of today’s disappointing news from the RBA, millions of Australian mortgage holders have been left wondering if interest rates are as low as they’ll ever go under this government.
ENDS