Kochie slams RBA as negligent for rate rise advice as Treasurer Jim Chalmers announces review

Sunrise host David Koch has laid into the RBA, suggesting the central bank was “negligent” in the timing of its rate increases.

Sunrise host David Koch has slammed the Reserve Bank as “negligent” and asked if it was derelict in its duty for telling homeowners they wouldn’t raise rates before slamming on the accelerator with successive hikes to curb inflation.

As the Treasurer Jim Chalmers announced a major review of the Reserve Bank, he insisted it was not about “taking potshots”.

“It’s not some exercise in second guessing the Reserve Bank, it’s not about pointing the finger or taking potshots at the governor or his board,’’ the Treasurer said.

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Treasurer Jim Chalmers says the major review of the RBA was not about “pointing the finger”. Picture: AAP Image/Mick Tsikas.

But Sunrise host David Koch said there were real questions over the Reserve Banks’ recent advice to homeowners.

“Late last year, November December, the Reserve Bank, Philip Lowe, was telling Aussies to go out and borrow, go out and borrow as much as you like, on the understanding. I’m not going to put up official interest rates till 2024,’’ David Koch said.

“A couple of months later, they started putting up rates. Was that advice to average Australians negligent, were they derelict in their duty to lead average Australians up the garden path to get themselves in debt?”

Treasurer Jim Chalmers said he would not describe it that way.

“Governor Phil Lowe has talked about that at some length about that guidance that he gave and about how he considers the economic conditions to have changed faster than the bank anticipated,’’ he said.

RBA Governor has been criticised over “negligent” advice over increasing the cash rate. Picture: AAP Image/Dan Himbrechts.

“He’s been pretty upfront about that. And the Reserve Bank is, you know, capable of defending its own decisions, what I try to do as Treasurer and my predecessors from other sides of the political spectrum, all sides, we try not to second guess the independent Reserve Bank.

“I’ve got a job to do. That’s to give the Reserve Bank the best set of institutional arrangements. And so I’d rather look forward and talk about getting it right. Rather than look backwards.”

The Sunrise host then responded that “you’ve been very polite with all of this.”

“But the reality is the market at the time, were saying to the Reserve Bank, to everyone saying inflation is roaring back, you’re going to have to put up interest rates, you’re going to have to do it quickly to get that ahead of the curve on inflation,’’ he said.

“The Reserve Bank didn’t, they did the opposite. And that’s why our inflation has got a bit out of control. We’ve lagged the rest of the world. Surely, that is negligence on the part of the Reserve Bank?”.

The Treasurer said that the inflation challenge – high and rising inflation – was not purely a consequence of decisions taken and the timing of the decisions taken by the Reserve Bank.

“There’s a domestic element around our supply chains and our labour shortages and other issues here,’’ he said.

“There’s a lot of international turbulence including Russia invading Ukraine, but other challenges as well.

“And so I think it would be unfair to pin it all on the Reserve Bank.”

The Treasurer has appointed three experts to review the Reserve Bank.

Professor Carolyn Wilkins is an external member of the Financial Policy Committee of the Bank of England, Professor Renee Fry-McKibbin is interim director of the Crawford School of Public Policy at the Australian National University, and Dr Gordon de Brouwer has worked at Treasury and the Reserve Bank of Australia.

Most experts believe the RBA will continue to increase the cash rate this year. Picture: NCA NewsWire / Damian Shaw.

The ANZ bank has predicted that Australian borrowers are facing four more massive rate hikes over the next four months that will take the official cash rate above 3 per cent before Christmas.

But many experts still believe while the rate rises will cause pain that most borrowers can withstand it.

The Reserve Bank believes is also arguing most households can weather the storm although rising inflation will add financial pressure.

The RBA’s deputy governor Michele Bullock said this week that the biggest risk to home buyers would be a sharp lift in the unemployment rate.

But many homeowners had built up substantial buffers during the pandemic.

“These payment buffers help to protect against the risk that, as interest rates rise, households will find themselves unable to meet debt repayments,’’ she said.