If you want to see clear evidence of the yawning disconnect between the political chattering class and the rest of the country, look only at the ridiculous hoopla over this week’s Reserve Bank interest rate cut. Yes, that’s right: after nearly five years of non-stop rate rises, 13 since Labor came to power, of nearly five per cent, the rate has been cut by one-quarter of a per cent.
If we’re to believe the chatterers, this is such an astounding economic fillip to the Labor government who’ve overseen most of it. It suggests Anthony Albanese will be rushing to the polls any moment.
This is the rate cut that borrowers have been praying for and the Albanese government desperately needed.
It will inject optimism into the Labor campaign and add weight to Chalmers’ economic narrative.
The prime minister will be banking on it to take some of the edge off voter anger.
The odds of a late March or early April election have just rocketed up the charts.
Tell ’em they’re dreamin’. Voters will take the pittance that’s been tossed to them, sure, but don’t expect them to roll over for a belly rub. Around the kitchen table, millions of Australians are asking themselves one simple question: ‘Are we better off now than we were three years ago?’ We all know the answer – and we all know who they’ll blame. And rightly so.
Anyone who thinks this piddling cut in rates will be the saviour of a government that was elected with a record-low vote and has been on the poll slide for nearly two years just isn’t paying attention. Albanese and Treasurer Jim Chalmers have thrown sweetener after sweetener – tax cuts, ‘bill relief’ handouts, childcare subsidies – at voters, and every single one has sunk without a trace under a sea of voter contempt. Not a one has managed to boost the government’s poll numbers.
The idea that a footling quarter per cent will do any different is simply delusional. Especially not when the Reserve Bank governor herself has made clear that there’s no more coming down the pipeline in the near future.
Household borrowers are being warned against expecting further relief in the short term amid uncertainty about the global economy.
After the central bank cut the cash rate by 25 basis points to 4.1 per cent, RBA governor Michele Bullock said she was not convinced about market expectations of a further three interest rate cuts by the middle of next year.
Her comments poured cold water on the prospect of a second pre-election rate cut at the RBA’s April 1 meeting and signalled that the central bank predicted the cash rate would be above market expectations of 3.4 per cent by June next year.
What the central bank didn’t say in its statement, but is contained in the data drop accompanying it, is that the time it is going to take for living standards to return to anything resembling pre-2022 will now take longer than they expected.
Another two years in fact.
June 2031, to be precise.
While the bank is giving with one hand, it appears to be taking away with the other – reducing interest rate pain now but forecasting the broader cost-of-living pain to go on longer than it had predicted only three months ago.
There’s also a dangerous perception that the RBA has succumbed to political pressure. Labor have made no secret of their displeasure with the Reserve Bank for not helping their political chances. More recently, Albanese and Chalmers forced through changes to the bank’s governance that had every appearance of political stacking. This week’s decision will only strengthen that perception.
The fundamental question we should be asking ourselves is an entirely different one: was the cut warranted, given the clear test Bullock and her board have repeatedly stated? That is, they can have confidence that inflation will sustainably return to its 2-3 per cent target […]
If the board believes inflation is sustainably under control, why offer a one-off 25 basis point cut, with no indication that another one will come soon? Another question worth posing is: why the urgency of the action taken today?
Anyone who thinks this single rates swallow makes a summer of cost-of-living relief for Australian voters is kidding themselves. Nothing’s changed: Albo is still as toasted as he was last week.
