Press conference, Commonwealth Parliamentary Offices, Sydney
Today the independent Reserve Bank increased the cash rate by another quarter of a per cent to 2.85 per cent. This is another difficult day for Australians who are already under the pump. This means Australians with a mortgage will have to find that little bit extra in their monthly budget to accommodate these interest rate rises. This is about another $50 a month on an average outstanding balance of $330,000. It's about an extra $75 a month for a $500,000 mortgage.
Importantly as well the Reserve Bank has changed their forecast for inflation. They now expect inflation to peak around 8 per cent towards the end of the year. The Treasury's expectation is more like seven and three quarters but they have always said that the risks when it comes to inflation are on the upside given what's happening in energy markets as a consequence of the war in Ukraine and given the upward pressure on grocery prices brought about by flooding of some of the prime farmland in eastern Australia in particular. This is exactly why inflation is the biggest challenge in our economy.
This is exactly why inflation was the primary influence on the Budget that I handed down last week. When inflation is high and rising, and interest rates are rising with it, it's more important than ever that the Budget is responsible and restrained and right for the times ‑ and that's what our Budget is. We knew when we put the Budget together that inflation was high and rising, and that was bringing with it higher interest rates and that was putting additional pressure on Australians with a mortgage. This is precisely why the Budget was designed for dealing with these inflationary pressures, which will get a little bit worse before they get better, but they will get better in time. Higher inflation and higher interest rates coming with it means that the pressure is coming on Australians from around the world, and that’s felt around the kitchen table. That's precisely why we took difficult decisions in the Budget ‑ we showed spending restraint, put a premium on what's responsible and affordable and sustainable. As today's decision has shown, inflation is the number one challenge in our economy. It's the number one focus of the Government. It's the number one focus when it comes to the Budget that we handed down last week.
Treasurer, how concerned are you by that 8 per cent figure?
Australians already know that the costs of living are high and getting higher, and the Reserve Bank's new forecast for inflation reflects that. Whether it's the Reserve Bank or the Treasury, the expectation has been for some time that the peak won't happen until later in the year. That is especially so when you consider increases in energy prices brought about by the war in Ukraine combined with the price of food going up as a consequence of the flooding of some of our best farmland in Australia. What we're seeing in the economy is all of this inflation brought to us from around the world, but the pressures are felt around the kitchen tables of Australia and that's why the Government's focus and the Budget's focus is squarely on inflation.
Victorian Premier Daniel Andrews has given some very strong statements about a domestic gas reserve policy ‑ how big a priority would that be for the Federal Government? Is that something you will introduce? Just secondly, did Tanya Plibersek raise any concerns with you about the stage three tax cuts?
The answer to the first question is we welcome input from right around the country, from the states and territories and from the impacted industries when it comes to working out whether we can intervene in energy markets in a sensible and responsible and meaningful way. So we welcome the contribution not just of Labor state governments but Liberal state governments as well. We have said that if there is more that we can responsibly do to take some of the sting out of rising energy prices brought about by the war in Ukraine than obviously we will consider that. We are in the process of consulting. We recognise that there are a number of complex interactions here when it comes to energy markets and so we want to take the time to get it right but we recognise the urgency too. We welcome comments from premiers of all of the states and chief ministers of the territories from the affected industries as we go about methodically coming to the right outcome on gas. On your second question, no.
On resource reservations, very few Australians would think it makes any sense that 90 per cent of the black coal we dig up in Australia gets exported. Do you think it's time that we look at what the AWU and Dan Walton have said about having a coal reservation too because a gas reservation will do very little for power bills, specifically in Queensland and New South Wales?
I don't want to think out loud about some of the issues or solutions that are being proposed. Obviously, I engage with Dan Walton, the AWU, with the companies, with our international partners, with the states and territories. I think it's important that people put their views on the table as the Government goes about working out the best, most responsible solution here. I'm not going to get into the business of a running commentary on options. I've said that our focus is on the regulatory side in the gas market as it relates to the code of conduct and price in particular. This is something that Minister Chris Bowen, Madeleine King, Ed Husic, myself and the Prime Minister are very focused on ‑ that code of conduct in the gas industry. There are other proposals being put to us, which are welcome. We've got a big challenge when it comes to inflation in this country, and energy is a big part of it. We recognise that and if there are steps that we can responsibly take to deal with it, we will. Thanks very much.