Jim Chalmers feels your pain, but he won’t cop the blame for interest rate rises and the coming sting for borrowers.
On Tuesday, after the Reserve Bank’s eighth hike in the cash rate target, now 3.1 per cent, the Treasurer made a point of noting rates started going north before Labor was elected in late May.
Chalmers wants to put distance between the government and the “independent” central bank, which he highlighted several times, while shovelling responsibility for high energy costs on to the previous government.
The Treasurer is also trying out a new form of words to empathise with homeowners facing the “harsh and heavy” impact from higher repayments.
It’s the alliterative cousin to “blunt and brutal”, which he used to describe the aggressive monetary tightening by the US Federal Reserve ahead of his trip to Washington in October.
The Albanese government is not an innocent bystander in the fight against inflation, of course.
Six weeks ago, in his first budget, Chalmers’ main job was to avoid stoking demand and adding to price pressures.
The Treasurer’s no-frills fiscal gambit was successful politically, delivering on election promises, and in the short run was right for the economy.
The hard work on spending and taxing is ahead of Chalmers in May, and the next two budgets (at most) before the next election.
In a speech a fortnight ago, RBA governor Philip Lowe sprinkled some advice Canberra’s way about how to help fight inflation, and thus reduce reliance on interest rates.
“In a world of more frequent supply shocks, we will be better off if there is flexibility in our labour and product markets so that we can respond quickly and effectively,” Lowe said.
“This includes flexibility in terms of fiscal policy, which requires maintaining a strong underlying structural budget position.”
Got that? Get cracking on supply-side reform, folks, cut red tape, don’t hinder efficiency in the labour market and get the budget under control.
Last week, clearly on a roll, Lowe told the Senate the two ways the government could help tackle inflation were by increasing the supply of gas and electricity in the domestic market and the supply of housing, to ease the rise in rents. “If we can address those two issues, that will make a substantial contribution to bringing inflation back down over the next couple of years,” he said.
Fresh from his clumsy “forward guidance” mea culpa, Lowe is neither a Labor favourite nor the people’s choice this Christmas.
Far from a reality of a near-zero cash rate lasting until 2024, here we are, shaken and stirred, after 300 basis points in hikes.
The RBA’s policymaking board, on a nine-week hiatus, is closely watching the strength of consumer spending and wage pressures over the summer.
Before its February meeting, we’ll get hefty inflation figures, with expectations the headline rate will peak at 8 per cent this quarter.
That won’t be the end of rate rises, and the ache for some homeowners is likely to be acute, especially those moving off ultra-low fixed rates.
As is the way, those borrowers will be dark and dirty on anyone with their hands on the levers.
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