Prime Minister’s warning to Reserve Bank on interest rates

Anthony Albanese has told the Reserve bank not to “overreach” with inflation rates as families struggle with rising prices.

Anthony Albanese has warned the Reserve Bank against “overreach” as it races to hike interest rates to contain inflation.

As the Reserve Bank Governor Phillip Lowe conceded the RBA may have “over insured” against the pandemic with low interest rates – contributing to the inflation crisis now gripping the nation – the Prime Minister has urged caution.

Warning there was “real pressure” on families, he said he hoped that rates would not rise as hard and fast as some analysts including the ANZ bank have predicted.

“Well, of course, the Reserve Bank sets these rates independently of government,” Mr Albanese said.

“But they need to be careful that they don’t overreach as well.

“Of course, the Reserve Bank declared a while ago, and they’ve conceded the error that interest rates would, would stay at the extraordinarily low levels where they were for a period of years up to 2024, and that hasn’t been the case.”

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Anthony Albanese has warned the Reserve Bank against “overreach” as it races to hike interest rates to contain inflation. Picture: NCA NewsWire / Jeremy Piper

3AW radio host Neil Mitchell then interjected, “Well, that’s hurt people, they were wrong. Are you saying make sure they don’t go too hard this time?”

“Well, they need to make sure that they get the assessment, right,” the Prime Minister responded.

“There are some circumstances that could not have been foreseen. One thing that has had a real impact globally is the Russian invasion of Ukraine.

“That has had an impact on energy prices that then has gone through to supply chains and had a real impact right around the world.”

In a mea culpa of sorts over widespread criticism that the bank had kept interest rates too low for too long, Dr Lowe said it was “a scary time” and the RBA and the previous Morrison Government wanted to save jobs.

“Looking back at this experience with hindsight, I can understand why some people might conclude that too much support was provided by governments and by central banks,’’ he said.

“It’s really important to remember the context in which these decisions were made.”

The Reserve Bank of Australia has been criticised.

Koch: ‘Was RBA negligent?’

The PM’s comments come after Sunrise host David Koch 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.

Talking to Treasurer Jim Chalmers on Tuesday morning, Koch said there were real questions over the RBA’s 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,’’ the presenter said.

Governor of the Reserve Bank of Australia Philip Lowe, during a press conference after announcing a rate rise in May. Picture: Louie Douvis

“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?”

Mr 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.

The Sunrise 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.

Treasurer Jim Chalmers said there were factors other then the RBS leading to inflation. Picture: NCA NewsWire / Gary Ramage

“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 Treasures said the inflation challenge was not purely a consequence of decisions taken by the Reserve Bank and said there were both domestic and international element to rising prices including the war in Ukraine.

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

Originally published as Prime Minister’s warning to Reserve Bank on interest rates