SKY First Edition 07/06/22

07 June 2022

SUBJECTS: Interest Rates; Cost Of Living Pressures; Inflation.




SUBJECTS: Interest Rates; Cost Of Living Pressures; Inflation.

DANICA DE GIORGIO, HOST: Well, the Reserve Bank of Australia is expected to lift interest rates today in response to soaring levels of inflation across the economy. The cash rate is expected to be lifted by at least 15 basis points and could jump by as much as 50 basis points. Joining me live now is the Treasurer, Jim Chalmers. Treasurer, good morning. Thank you for joining us. More stress now for mortgage holders. How much will a rise mean for households? 

JIM CHALMERS, TREASURER: Well, at the moment Danica an average mortgage is about $330,000, so a quarter of per cent interest rate rise would be about $43 a month. If there’s a bigger rate rise than that, Australian families and homeowners would need to find more than that. That's the average outstanding mortgage at the moment. For a lot of people on newer and obviously bigger mortgages, this will be a difficult day

DE GIORGIO: How much—how are you going to combat this financial stress? 

CHALMERS: Well, first of all, it's important to recognise that this trajectory that we're on of rising interest rates has been set in train for some time now. You'll recall that interest rates went up during the election campaign and when they did, the Reserve Bank and the market analysts all said that that would be the first of a number of interest rate rises, unfortunately. Clearly, we don't pre-empt the decisions of the independent Reserve Bank, but it's universally expected today that those rates will go up. So, the responsibility for our Government during this cost‑of‑living crisis that we've inherited from our predecessors, is to make sure that there is some cost‑of‑living relief in the October budget that will come in after the current round of cost‑of‑living relief runs out. That's why there will be relief in terms of child care prices; medicine prices; we'll try to get real wages moving again; we've got to put downward pressure on energy prices over time as well because that's a big part of the story. So, for a lot of families who will be doing it tough during this cost‑of‑living crisis and who will have to face rising interest rates for a little while yet, their Government understands what is going on at the moment and we will work around the clock to try to alleviate some of this pressure.

DE GIORGIO: Talking about alleviating some pressure down the track, petrol prices are going through the roof once again. The fuel excise is due to end around the time that you do hand down that budget. Will you look to extend the fuel excise? 

CHALMERS: Well, we supported that fuel excise relief that the former government put in place because petrol prices have been incredibly high for some time now and they're spiking once again. We've been up‑front with people and said that that relief is legislated to run out around September and that it will be difficult to extend that relief given how much it costs to do. We won't be able to extend that relief forever, but what we can do and what we intend to do in the October budget is provide responsible, sustainable, long-term cost‑of‑living relief in areas like child care and in health care.  We've got a plan to get real wages moving again. We've got a plan to get those power bills down over time, because the absence of an energy policy for the best part of a decade is a key reason why inflation is going through the roof. So, that's our responsibility. You'll see those policies and plans implemented in the October budget, but we do recognise whether it's interest rates, power bills, petrol bills or any of these cost‑of‑living pressures that people are confronting, it is going to be a difficult time for families.

DE GIORGIO: It really is, and I guess for many families there simply appears to be no end in sight. Now, obviously, there are a number of external factors at play when it comes to the cost of living but right now people want to know, when does it stop?  How does the cost of living come down? When can we start feeling some relief? I know you're talking October here, but what about now?

CHALMERS: Well, there's some cost‑of‑living relief that we supported in the budget that was handed down a couple of months ago and that's been important, and that's why we supported it, frankly. But what we need to do beyond that is to try to get some downward pressure on these prices after that near‑term cost‑of‑living relief runs out. That's our near‑term plan to do that and we will be implementing that plan in the October budget. When it comes to energy prices again, no quick fix, but there are some things we can be doing.

Minister Bowen is meeting with his State and Territory counterparts tomorrow to consider some of the levers that the state governments are able to pull. The regulators in the energy market have implemented some price caps and some guarantees, and that's important. I've empowered the ACCC to be properly monitoring the prices in the energy markets and recommending to me any regulatory changes or steps that we might be able to take based on that evidence that they collect. There's a range of things that we are examining that are all about the near‑term pressures in the energy market, but in the medium term and in the longer term, the only thing that will get these energy prices down is a proper energy policy which builds resilience and certainty into the system and gets more cleaner and cheaper energy into it. The absence of that for the best part of a decade is one of the reasons why we have got these energy prices spiking right now.

DE GIORGIO: Twenty‑five per cent of coal-fired capacity is offline at the moment. Surely that's having an impact on prices. 

CHALMERS: That's a big part of the problem. We've got some planned and some unplanned outages in the energy market and that is struggling. We've had some flooding. We've got some international factors. But sitting over the top of all of this uncertainty and all these price pressures in energy is that the former Government, unfortunately, spent the best part of a decade picking fights on energy, rather than building resilience and certainty into the system and getting that investment in cleaner and cheaper energy flowing. So, that's the task that we've inherited. We're up to that task. Our Powering Australia Plan is all about that, and that's why we'll look to implement it as soon as possible, because the sooner we can get that certainty and resilience into the system the sooner we can start to put some downward pressure on prices. Yes, there are some particular factors at play right now. Yes, there are some international factors at play. But the responsibility of our Government, Chris Bowen, Anthony Albanese, myself and others, is to work around the clock to do what we can to make this energy system better so that we can get some of that downward pressure on prices in the medium-term.

DE GIORGIO: Treasurer Jim Chalmers, we have to leave it there. Thank you for joining us this morning.