A ‘tough’ day for owners as Treasurer Jim Chalmers predicts more pain before inflation is brought under control
The Federal Treasurer called rising interest rates “difficult news” for homeowners and predicted that life in Australia would become even more expensive.
- Treasurer Jim Chalmers says the cost of living crisis has been brewing for a long time and there is no quick fix
- He says high rates will make it more expensive to pay off the government’s $1 trillion debt
- Shadow treasurer says Labor must adopt measures that will reduce the likelihood of further rate hikes
The Reserve Bank of Australia on Tuesday raised the key rate by half a percentage point to 0.85%.
If passed on to bank customers, the higher-than-expected rate hike will add $133 per month on a loan worth $500,000 over 25 years and $265 per month on a loan worth $1 million.
Treasurer Jim Chalmers said people would feel the economic pain of inflation with the cost of housing and living set to rise further.
“This will be very difficult news for all those Australians who are already facing a spike in the cost of living in this country,” he said.
Prime Minister Anthony Albanese, speaking from Indonesia, declined to comment on the RBA rate hike, saying he would not comment on domestic affairs outside Australia.
Mr Chalmers said the RBA’s rate hike meant the government would face higher costs to pay off its nearly $1 trillion debt.
He said the government would announce more cost-of-living measures when it presents a budget in October.
“This cost of living crisis has been brewing for almost a decade,” Mr Chalmers said.
“It will take more than two and a half weeks to turn around. We have been candid about this.
“We want to work with Australians, we want to work with all parts of our economy to do what we can to overcome this inflation challenge and the interest rate hikes that come with it.”
According to forecasts, the cash rate could reach 2.5% by the end of next year.
If that happened, a borrower with a loan balance of $500,000 could see their monthly repayments increase by $652 a month by Christmas next year.
“Economists, the government and the Reserve Bank expect this inflation challenge to get harder before it gets easier,” Chalmers said.
Shadow Treasurer Angus Taylor said while the RBA was independent of the government, Labor needed to adopt measures that would reduce the likelihood of further rate hikes.
“Today is a tough day for the 3.5 million Australian families who have mortgages,” he said.
“Making ends meet is difficult in an inflationary environment, but it is even more difficult with rising interest rates.”
The labor movement has cited the soaring cost of living as the reason it is calling for an increase in the minimum wage.
According to forecasts, inflation could continue to climb to 6% by the end of the year.
The ACTU wants the Fair Work Commission to raise the minimum wage by 5.5 per cent. This is above the current annual inflation rate of 5.1%, which is the rate at which the government has recommended that Fair Work raise the minimum wage.
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