Australia’s finance minister has defended the government’s record after the Reserve Bank’s latest interest rate rise, saying its economic “hard work” should be recognised despite mounting pressure on households and businesses.
Katy Gallagher made the comments after the central bank lifted the cash rate to 4.85 per cent, its highest level in 18 years and the 17th increase since Anthony Albanese’s Labor government took office in May 2022.
Appearing on ABC News Breakfast, Ms Gallagher acknowledged that conditions were “very difficult” but said the government was taking steps to ease the strain on families and businesses.
“These are really difficult economic times, very challenging, and we know that it’s hitting households and businesses really hard,” she said.
She was challenged over whether the government should make deeper spending cuts to help reduce inflation. Ms Gallagher replied that savings had already been made and were reflected in the economic data.
“There has to be also an acknowledgement that the hard work we have done over the last four years is actually being seen in the economic data,” she said.
“It is not government spending that is setting the prices in the economy.”
The latest rate rise has left homeowners facing significantly higher repayments. A borrower with a $600,000 mortgage who was paying 2.5 per cent when Mr Albanese came to power would pay an additional $2,120 a month, or $25,440 a year, if the rate rose to 6.74 per cent and the loan balance remained unchanged.
On an average $731,000 mortgage, each 0.25 percentage point increase has added about $114 to monthly repayments. The fifth rise of the year has increased repayments on a typical home loan by about $584 a month, or almost $7,000 annually.
Real estate expert Tom Panos said the pressure was pushing some homeowners towards breaking point. He said Australians were cutting holidays, abandoning plans for private education and taking second jobs to retain their homes.
David Koch, economic director at Compare the Market, said homeowners were carrying most of the burden while consumer and business confidence remained low and unemployment was rising.
“It is really hard to see is that homeowners are doing all the heavy lifting by shouldering these rate hikes, but to sympathise with the RBA – this is really the only lever they’ve got,” he said.
Mr Koch said governments at local, state and federal level needed to help tackle inflation rather than continuing to increase spending and fuel demand.
Mr Albanese, speaking from the Commonwealth Heads of Government Meeting in the Caribbean, said his government would respond responsibly to the economic challenges.
“We were always going to be fiscally responsible because my government is a fiscally responsible government, and we will take appropriate action,” he said.
“We won’t rip money out of health or schools. What we will do is take responsible action and take hard decisions.”
Ms Gallagher’s call for recognition of the government’s economic record drew a sharp response from Daily Mail politics editor Peter van Onselen, who described her remarks as “breathtaking arrogance” amid the rising cost of mortgages and household essentials.
