Katy Gallagher spruiks ‘good progress’ on inflation ahead of interest rates call

Anthony Albanese’s top bean counter has boasted of “good progress” on inflation ahead of a call that could make life easier or harder for millions of Aussies.

Anthony Albanese’s top bean counter says the Reserve Bank will consider the “good progress” made on inflation when deciding whether to cut interest rates.

The RBA will hand down its decision on Tuesday after holding its first board meeting since the federal election.

If the central bank cuts rates – as tipped by analysts – it would be the second reduction this year.

Finance Minister Katy Gallagher on Tuesday morning repeated the Albanese government’s line that it was “a matter for the Reserve Bank” but acknowledged the signs were looking good.

Finance Minister Katy Gallagher says the Reserve Bank will consider ‘good progress’ on inflation as it decides whether to further cut rates. Picture: NewsWire / Martin Ollma

“I know that all the markets are pricing in a cut today, and I imagine there are a lot of homeowners all around Australia waiting on that decision at 2.30 this afternoon,” Senator Gallagher told Nine’s Today.

“I mean, the thing for us … has been to try and make sure that we dealt with the inflation challenge.

“We’ve made such good progress over that in the last two years and we’ve got inflation back down and that really … is what the Reserve Bank will be looking at when they make their decision today.”

Inflation data released late last month showed the all-important trimmed mean inflation – which strips out volatile assets and is the preferred RBA measure – came in at 2.9 per cent for the March quarter, down from 3.3 per cent in the December quarter.

It was the lowest annual inflation rate since December 2021 and fell back within the RBA’s 2 to 3 per cent target range.

In the same quarter in 2023, it was 6.6 per cent.

But the headline inflation rate – which includes volatile assets such as energy costs — came in at 2.4 per cent, which, while in line with December’s figures, was slightly higher than markets expected.

The main contributors to headline inflation were housing, up 1.7 per cent, education, up 5.2 per cent, and food and non-alcoholic beverages, which grew 1.2 per cent.

Newly elected Greens leader Larissa Waters has also called on Jim Chalmers to “use a little-known power” to force the Reserve Bank to lower interest rates, saying Australian have been “hurting for far too long”.

Greens leader Larissa Waters has called on Treasurer Jim Chalmers to force a rates cut. Picture: NewsWire / Luis Enrique Ascui

The Greens have long called on the Treasurer to intervene in the RBA’s decisions despite the bank being independent of government.

Senator Waters told Today that her party would also “like to see the banks actually mandated to offer people a low-rate mortgage”.

“I think you’ll find a lot of the pain people are in is translating to bank profits and that’s not fair in a cost-of-living crisis,” she said.

“So, there’s a lot more that could be done. And, of course, building homes, getting on with that, incentivising both private and government-owned builds so that we can actually supply the homes that people need.

“Everyone should be able to have a roof over their head in this wealthy nation.”

Simple trick to save mortgage holders $90k

Mortgage holders who can afford to keep up with their repayments will be significantly better off over the long term if they can resist the lure of an interest-rate cut.

According to research by Canstar, the average Australian borrower with a $600,000 mortgage and 25 years remaining on their debt could save $89,143 in interest payments simply by keeping their repayments at the same amount they were paying in February.

The data is based on four interest rate cuts, expected in February, May, August and November.

Impact of paying more per month on your mortgage. Picture Supplied

Canstar insights director Sally Tindall said the vast majority of Australians were maintaining their existing payments despite a 0.25 per cent rate cut being passed on in full by the banks in February.

“This just illustrates how determined Australians are to get ahead financially, particularly when it relates to their mortgage,” she said.

“Not only will paying extra in your mortgage give you a bigger buffer to fall back on, it also has the potential to release you from the shackles of the mortgage months, if not years, early.”

Not only would the average mortgage holder save thousands in interest, the data shows they would own their house in 21 years instead of 25.

At the time of writing, the money market had factored in a near 95 per cent chance of a rate cut when the central bank announces its cash rate decision at 2.30pm on Tuesday.

Australians are paying more on their mortgage to knock it over faster. Picture: NewsWire / Nicholas Eagar

The Commonwealth Bank confirmed the majority of their customers hadn’t changed their repayments despite the February rate cut to 4.10 per cent.

Commonwealth Bank’s home buying executive general manager, Michael Baumann, said following February’s rate cut about 14 per cent of eligible customers took the opportunity to reduce their direct debit to align with the lower minimum repayment – thereby freeing up cashflow.

“For those who did not reduce their direct debit repayments, they may now be making additional repayments on their mortgage, which could help them to pay off their loan faster,” Dr Baumann said.

“These additional payments will also increase the available balance of their loan accounts and customers may have the flexibility to redraw the available balance at any time, for example if they experience an unexpected cost.”

February marked the Reserve Bank’s first rate cut since November 2020, at the height of the Covid-19 pandemic.