Australia’s four major banks have moved quickly to pass on the interest rate increase announced yesterday by the Reserve Bank of Australia (RBA), while politicians continue to try and weaponise the increase against their political opponents.
The RBA increased the interest rate from 0.1% to 0.35%, with Reserve Bank governor Phillip Lowe using a media conference to explain the RBA’s decision.
He said the low unemployment level and the high level of inflation were significant factors behind the decision.
“The first is that the economy has been very resilient, unemployment is low and economic growth is expected to be strong this year,” Lowe said.
“The second is that inflation has picked up more quickly, and to a higher level, than was expected and there is evidence that labour costs are increasing more quickly. In these circumstances, the board judged that it was appropriate to start the process of normalising monetary conditions.”
The CBA, ANZ, NAB, and Westpac have moved to pass the full rate increase onto customers, with the banks noting in public statements that they are available to talk with customers who are concerned about how the increase in rates impacts their loan repayments.
CBA executive Angus Sullivan said the bank is geared up to help customers who will be experiencing the first interest rate increase they have seen since they entered into loans.
“We are here to help customers who have loans and are considering how repayments might change. Some options available to help our customers manage repayments include fixing or splitting loans or setting up an offset account,” Sullivan said.
Both major political parties have addressed the rate rise, with the government pointing to the RBA’s independence and the fact that interest rates were never going to sit at record lows.
Federal treasurer Josh Frydenberg told the ABC yesterday the interest rate move has occurred at a similar time to other countries’.
“So, this is the normalisation of monetary policy that comes with the worst of the pandemic being behind us, just as we normalise fiscal policy by bringing to an end that emergency economic support, like JobKeeper, the cashflow boost, the COVID disaster payments and other initiatives that we had in place when the pandemic was very, very bad,” Frydenberg said.
Shadow treasurer Jim Chalmers said that while the RBA was independent and made its own decisions on interest rates, the government was responsible for other areas of the economy that contribute to inflation.
“There are places and ways that government can make a difference here, including growing the economy without adding to these inflationary pressures, providing longer-term cost of living relief, getting real wages moving again, and making sure that we have something to show for this budget, which is heaving with a trillion dollars in Liberal debt — and that’s what our economic plan is all about,” Chalmers said.
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