What we learned today, Tuesday 3 May
There was a tingle of anticipation about today’s cash rate announcement, and the Reserve Bank of Australia’s Philip Lowe managed to surprise quite a few people. Here are the highlights from this Tuesday in the fourth week of the six-week campaign:
- The big news was the RBA putting up the cash rate in the middle (almost exactly the middle) of an election campaign. That decision will supercharge the barney over cost of living pressures.
- Here’s how a rate rise might affect your mortgage.
- The latest Guardian Essential poll found Labor is still ahead of the Coalition – but it’s complicated.
- Former Nationals leader Michael McCormack isn’t ruling out having another crack. Meanwhile, the Greens are confident about winning a second lower house seat at the May election.
- It’s set to get cold in the eastern states – as in, “polar cold”.
- In terrifying news out of the United States, the supreme court has “provisionally” voted to overturn Roe v Wade.
- And in disturbing news, Stephanie Convery got up close and personal with that raw chicken curry.
The fallout from the cash rate (and maybe the curry) is sure to continue tomorrow, and Amy Remeikis will steer you through the choppy waters. And I’ll see you again tomorrow afternoon!
There is a “silver lining” for some people, Chalmers says, but it’s not “massive”. He says:
There are 3.4m households who have got mortgages. That’s not a small number. Yes, the silver lining in an interest rate rise is for people who live off their savings.
The usual rule of thumb is for every $20,000 you’ve got saved, for an interest rate rise of this magnitude, it is $50 a year. It is not a massive amount of money, but it is better than nothing. That’s the silver lining, but the decision taken today will make life harder for millions of Australian families.
Chalmers concedes there are some international economic issues at play, but says there are domestic issues as well. That’s along the lines of what Reserve Bank of Australia Philip Lowe said, although I am unclear on whether there’s a proportional breakdown of domestic vs international factors.
Labor treasury spokesperson Jim Chalmers is up now. Much of the argy bargy today has been about whether or not governments are responsible for inflationary pressures. Chalmers says:
We don’t judge Scott Morrison for not taking responsibility for all of it. We judge him for not taking any responsibility for any of it. 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 and getting real wages moving again.
He has got an excuse for everything, but a plan for nothing.
Q: Would you want to be leader of the Liberal party in the wash up?
I’m trying to ensure that the Coalition is returned, and that means all my colleagues who are running in those seats and beyond and right across the country and the prime minister and I are prosecuting the economic argument against the Labor party that has no economic plan.
Sales asked Frydenberg if Morrison should stand aside (in the wake of comments from Warringah MP Zali Steggall that she wouldn’t be interested in negotiating with Morrison). He says:
Scott Morrison is the prime minister. He’s the leader of the party and we’re working to win government. I don’t think that is a reasonable question to be honest because what we do know is if we have a hung parliament then that will be chaos and confusion and we do know in so-called independents, as former members of the Labor party will join with the Labor party in the event of a hung parliament.
(On the whole, the independents are declining to say how they think it’ll work out in the event of a hung parliament).
Treasurer Josh Frydenberg is on 7.30. Presenter Leigh Sales is asking him about how big an issue people’s dislike of prime minister Scott Morrison is in his seat of Kooyong.
“That’s not the issue,” he says. “The issue is what can the government do for them to make their lives better.”
Sarah Martin brings you the war of words over the cash rate:
Another one down (or, more accurately, up):
Teacher strikes set to go ahead in NSW (read all about it here) and this won’t help:
Oh, dear. There’s been a Covid outbreak on a cruise ship.
About a dozen people who were on a luxury cruise from Broome to Darwin have tested positive, AAP reports.
There were 74 guests and 38 crew on board the Coral Geographer. The infected passengers isolated on board then were offloaded in Darwin to continue isolating in an undisclosed location.
If you haven’t heard about the chicken curry, sorry. It’s not really up there with rate rises or housing policies. And yet, you have to take the light with the shade. The sweet with the spice? So Stephanie Convery explained to Cait Kelly what happened.
(Although we still don’t know whether korma caught up with prime minister Scott Morrison):
CBA increases home loan variable interest rates by 0.25 percentage points
After radio silence from the Reserve Bank of Australia – we heard not a peep from them since 22 March other than the April board meeting – we got a hearty roar today, after it surprised everyone with that 25-basis-point rise in the cash rate.
Not one in 32 economists (who are paid heaps to crystal-ball gaze) picked that, with most pencilling in 15bp to 0.25% not the 0.35% that we got.
Gareth Aird, head of economics at Commonwealth Bank of Australia, was one who tipped no change, and that’s hard for him as the main forecaster at the country’s biggest lender.
But as he told us last week, an RBA rise today would “make it hard for us to take at face value what they say because their actions will be inconsistent with what they said”.
Governor Philip Lowe, you see, had said he needed to see inflation and wage growth before he lost his famous patience. So how did the good governor excuse himself?
Well, there was no mea culpa as such. Instead, the bank’s liaison group, that talks to business, had learned about 40% of firms were looking at wage increases with a “3” on them and some had a “4”.
Fine, though, the headline CPI had a “5” on it, so most of us muggins are going backwards. In any case, Lowe didn’t bother to flag it.
Or as Aird said in a briefing note (which had a bit more of a mea culpa flavour):
The business surveys had for some time indicated that wages growth was moving higher, so it was a surprise that the Board only today decided to put weight on ‘unofficial’ wages data.
(FWIW, I picked no change too, which is partly why I’m a journalist and not retired to my private tropical island that happens also to be magically spared rising sea levels, coral bleaching and increasingly intense cyclones.)
We digress. Aird also notes the RBA today “massively upwardly revised their forecast profile for both headline and underlying inflation”:
The RBA now expect underlying inflation of ‘around’ 4.75% in 2022. Their previous forecast from the February Statement on Monetary Policy was underlying inflation of 2.75% in 2022.
That 200bp increase in their inflation profile over 2022 is “a radical revision”, and means “the RBA has completely changed their view on the outlook for inflation”, Aird concludes.
I knew there was a Simpsons joke I missed earlier. Labor’s treasury spokesman Jim Chalmers was talking about prime minister Scott Morrison, who said the cash rate increase was not about the politics. Chalmers said:
Scott Morrison saying not he’s not focused on the politics is like Homer Simpson saying he’s not focused on the donuts.
The rate went up. The chicken was cooked. The lettuce was there. And there was a Kat in a hat. Josh Butler has rounded up everything you need to know (and a couple of things you didn’t) in today’s election briefing:
The Campaign catchup has landed! Sarah Martin, Jane Lee and the team busted their guts to get this thoughtful look at today’s complications to you quickly:
Caitlin Cassidy has crunched all the numbers to work out what today’s announcement is likely to mean for your mortgage repayments:
How are the major parties planning to help people into their own homes? Sarah Martin’s compared the Coalition and Labor policies:
And here are the highlights from today’s big news story, starring prime minister, Scott Morrison, and Labor’s treasury spokesman, Jim Chalmers:
Life moves pretty fast:
There have been 7,311 cumulative Covid deaths in Australia:
The Australian sharemarket has dropped modestly while the Australian dollar has risen after the reserve bank hiked the cash rate for the first time in more than a decade, AAP reports.
The benchmark S&P/ASX 200 index closed down 30.8 points, or 0.42%, to 7,316.2 on Tuesday, while the All Ordinaries finished 36 points, or 0.47%, lower at 7,587.6.
The decision also caused the Aussie dollar to lift to a four-day high of 71.40 US cents, although by 4.15pm AEDT it had eased to 71.14 cents, from 70.58 US cents at Monday’s close.
Financial services minister Jane Hume has been talking to the ABC, and is sticking closely to the government talking points. She says the reserve bank’s decision is independent, but the government has overseen a strong economic recovery. Australians have saved billions during the pandemic, which will give them a buffer against rising interest rates, and so on.
Dfat warns of Covid disruptions in China in updated travel advice
Australians face lockdowns, mass testing, and other disruptions on top of possible arbitrary detention in China, the Department of Foreign Affairs and Trade has warned.
Dfat has updated its travel advice to reflect the Covid outbreaks. It says:
Recent Covid-19 outbreaks in Shanghai, Beijing and other large cities have resulted in mass testing, residential lockdowns, closures of schools, businesses and suspension of public transport.
Restrictions have impacted daily business and the ability to move around freely. Restrictions in Shanghai are particularly severe. Restrictions include mandatory regular Covid-19 testing with positive cases being subject to the requirements of local authorities and possible transfer to a designated medical or quarantine facility or additional testing.
There are ongoing food security issues and a lack of access to hospital intensive care (ICU) facilities in Shanghai.
Access to medical facilities and other essential services has been disrupted. Further Covid-19 outbreaks throughout China are possible and countermeasures including flight suspensions and re-routing may be imposed with little or no warning.
Stay informed of local conditions, particularly if you intend to travel within China.
As previously advised, authorities have detained foreigners on grounds of ‘endangering national security’. Australians may be at risk of arbitrary detention.
Labor’s finance spokeswoman, Katy Gallagher, is talking to the ABC now.
She says Labor accepts the independence of the reserve bank, but that it’s the cost of living that the government of the day can affect.
All of our key policies are about investing in a productive side of the economy, encouraging growth in childcare, clean and cheap energy, making things here, investment in skills for new jobs of the future, all of those areas we have policies on and go right to the heart of driving growth, beyond the election cycle.
We also have these investments that are not inflationary, investing in the productive side of the economy.
The ABC’s Fran Kelly asks Gallagher if Labor will have to change its slogan about everything going up except wages, now that RBA governor Philip Lowe says they are.
Most households will still be behind, she says, and costs are going up faster than wages.
Lowe is asked about assurances he gave that rates were unlikely to go up until 2024, which encouraged people to borrow for mortgages. He says:
We changed the guidance and we have changed it because the economic circumstances have changed. Nobody predicted we would be looking at the lowest unemployment rate for decades now.
You might recall that during the dark days of the pandemic ... people talked about an unemployment rate in Australia of 15%. There would be deep scarring that would take many years to overcome.
That was the situation people were thinking through 2020. Fortunately things have worked out better than that, which means we don’t need these very low level interest rates that we thought we were needing. And I know it comes as a shock to people but it is a testimony to the resilience of the economy and the fact more Australians have jobs today than ever before.
People knew rate rises were coming, he says.
As you’d expect there’s a bit of reaction to the RBA’s rate rise.
David Plank, ANZ’s head of Australian economics, notes the 25 basis point increase “ended up surprising everyone”.
“The move is at the hawkish end of the spectrum,” Plank said. “This reflects the RBA’s elevated inflation forecasts.”
(The alternative is dovish, which would have been leaving rates unchanged.)
The RBA’s predictions include the headline inflation reaching 6% by the end of 2022, with core or underlying inflation at 4.75%. In March, the latter came in at 3.7%.
Just five weeks ago or so, the federal budget was tipping CPI to end this fiscal year with a 4 on it, and fall in coming years. That looks a little unlikely at this point.
Another increase at next month’s board meeting of 40 basis points to 0.75% “seems a distinct possibility”, Plank said.
Meanwhile, it’s interesting Scott Morrison is saying the higher inflation rates in the US and New Zealand (above 8% and 7%) “could have happened here”.
That’s mischievous, to say the least. Every economist following these things knows that Australia’s inflation rise was delayed compared with most other countries because the Omicron lockdowns came later and lingered longer than most places elsewhere.
Actually, today’s rate rise and those still to come are intended to learn from the mistakes of other central banks, including US Federal Reserve. The aim is make sure the spike here is blunted, and it remains to be seen whether Lowe was in fact too slow to go.
Asked if the reserve bank is “playing catch up” and should have moved sooner, Lowe says they waited for the evidence. “As soon as we’d seen the evidence, we moved,” he says.
'Interest rates could rise to 2.5%': Philip Lowe
Lowe says: “It’s not unreasonable to expect that ... interest rates could rise to 2.5%”
How quickly we get there and if we do get there will be determined by how events unfold. We have an open mind. Over the past two years we have been very flexible, it changed in response to changing circumstances and we will continue to do that ... A more normal level. How fast we will get there will be determined by events.
And he says no one from the government called him about today’s announcement.
The election had “no influence” on today’s decision, Lowe says. “We have operational independence.” He says:
We have operational independence and it’s testimony to the political culture of Australia that the independence is respected, we take our decisions in the best interest of the country – that is what we always do ,and what we did today, and we did that without any interference from politics. We don’t take the political situation into account, we do what we think is right for the country.
More interest rate rises to come, Lowe warns
Further “normalisation” of interest rates will be required, Lowe says, and the RBA will not at this point sell government bonds it acquired during the pandemic, and also will not rule out a return to quantitive easing. He says:
We will also continue to be flexible and responsive to changing circumstances. We will do what is necessary to ensure inflation outcomes are consistent with the medium term inflation targets.
Lowe says there is a “strong link” between the inflation rate and the rate of growth in labour costs.
Inflation should return to a lower rate once labour supply washes through, he says. But if not... not. He says:
The evidence that we have received on inflation ... has been clear. Inflation has been high, and it’s been higher than what was expected. On labour costs, while the various data for the March quarter compiled by the ABS has not yet been released, other evidence received over the past month through our business and through business surveys has indicated there is now strong upward pressure on labour costs and this is likely to continue.
We expect to see this in the ABS data over the period ahead. In a tight labour market, some firms are paying higher wages to attract and retain staff, this is especially so given the higher inflation rate.
The higher inflation numbers do have a domestic component, Lowe says, even if they are not as high as they are overseas.
But they are higher than we have experienced for many years and they are higher than we were expecting, Lowe says:
There are a number of areas with strong demand now putting pressure on available capacity, with many firms reporting it’s quite difficult to hire workers with the right skills.
This pressure on capacity is reflected in the broadening of the areas which prices are rising more quickly than they have over recent years. Firms in a range of industries are now indicating they are prepared to pass on cost increases through into higher consumer prices. Looking forward, we expect a further increase in the inflation rate as the effects of global developments wash through the year-end inflation figures.
I acknowledge that the increase in interest rates comes earlier than the guidance that the bank was providing during the dark days of the pandemic.
During that period ... the national health situation was precarious, the economic outlook was dire and it was clouded by a lot of uncertainty. The board wanted to do everything it could, in those circumstances to help get the country through that difficult period.
In those unprecedented times, we charged that the economic damage from the pandemic was likely to require interest rates remain low in Australia for years. As things have turned out, the economy has been much more resilient than we had expected, which is clearly very welcome news.
The combination of fiscal and monetary support has worked. And the development of vaccines in record time has allowed our society to return to more normal functioning more quickly than we had expected. Australians have also proven to be resilient and we have adapted well to the changed circumstances.
RBA governor Philip Lowe holds press conference
Reserve bank governor Philip Lowe is up now (the treasurer and PM weren’t quite finished, so we’ll have to come back to them). Lowe says:
The economy has been very resilient.
Unemployment is low, and economic growth is expected to be strong this year ... Inflation has picked up more quickly and to a higher level than we had expected.
The board judged that it was now appropriate to start the process of normalising monetary policy.
Q: What’s in the “shield” for people on fixed rates who’ll face a hike?
Jobs and lower taxes, Morrison says. And a strong economy to maintain “essential services”, like pharmaceuticals and Medicare.
He says these are things you can’t guarantee without a strong economy (I hope he doesn’t mean that if there are more economic shocks, essential services will be threatened).
Q: Does your cost of living help pour fuel on inflation?
No, Morrison says. Frydenberg picks it up, and says treasury confirmed (before the inflation hike) that it wouldn’t.
Q: Hasn’t your shield started shattering right before your eyes?
Morrison says he sympathises with Australians on cost of living pressures and increased mortgage repayments. And, again, he compares Australia to other advanced economies. That’s the economic shield, he says.
We’ve steered this country through one of our most difficult times. The stresses and the pressures are intense.
Q: Do you have sympathy with mortgage holders?
Scott Morrison says “of course” he has sympathy. And that he expressed that concern through lower taxes, cutting the petrol excise, etc. The RBA statement does not mention any government policies that led to this decision, he says. But it does refer to the strength of the economy.
And it’s a judgment of the resilience and strength of household balances sheets, he says.
Q: Is the budget already out of date? And if people can’t trust the budget or the RBA, how do they trust your government or any government?
The budget is made up of many assumptions, Morrison says:
There are many swings and roundabouts in what goes into the budget.
Frydenberg says today’s RBA decision is independent and that global factors are driving up inflation, as are disrupted supply chains and the war in Ukraine, and the increase in fuel prices. “It would be completely unreasonable for any objective analysis to think that emergency level cash flows and monetary policy could satay in place,” he says.
This is a reflection of an “economy coming back to life”, he says.
He’s asked whether the RBA should perhaps not have said interest rates would stay low until 2024. Frydenberg declines to speak specifically on that.
The first question is: “Has your government just lost this election?” (!)
“Of course not,” Morrison says. He points to “evidence of wages rising”, and the inflation outlook, which he says is “caused by the events, particularly in Europe, but also the hangover effects cause by the pandemic”.
And we’re back to the employment rate.
The treasurer, Josh Frydenberg, says fiscal policy is “normalising” and the RBA’s decision is a “walk along the path” to normalcy.
He points to other advanced economies that have seen their cash rates lifted.
Just as the Morrison government has had the back of every Australian during this process, we continue to have their back.
And (while Morrison said earlier this wasn’t about the politics), it is about the choice at the 21 May election, and he points to Labor leader Anthony Albanese’s gaffe on the unemployment rate – was that three weeks ago? Gosh.
Morrison says economic 'shield' has protected households
What the government’s “shield” has done (shield being a sort of superhero metaphor for the government’s economic management), has stopped more serious impacts occurring, Morrison says.
It will be hard for some, but that’s why tax reductions are so important, he says:
It has all been about having a strong economic plan that understands the global environment in which we are operating.
The cash rate rise is part of “the process of normalising monetary conditions”, Morrison says, pointing to the low rate of unemployment. The increase is “largely reflecting global factors”, he says. He says Australians have braced for it (this may come as a surprise to some):
Australians have been preparing for this for some time. Throughout the course of the pandemic we have seen them double their buffers on their mortgages and move from variable rates to fixed rates ... We’ve also seen them strengthen their own balance sheets.
Scott Morrison and Josh Frydenberg press conference
The prime minister, Scott Morrison, and treasurer, Josh Frydenberg, are speaking now.
Morrison is pointing to the pandemic, and the war in Ukraine, and outlining the measures his government took – the stimulus it put into the economy to ensure it got through the pandemic.
One of the hallmarks of success of coming through the pandemic was that government policy was aligned with the policy decisions of the Reserve Bank.
The RBA supported what we were doing, and vice versa, our responses worked to support what the Reserve Bank was doing.
The RBA says wages growth was picking up (while Labor’s catchcry is that everything is going up except your wages). Which is right?
Chalmers says he hopes they’re right, but:
Wages matter a great deal, inflation matters a great deal, but the real wages calculation matters the most. Australians are finding it harder and harder to get ahead.
Next question is on this morning’s report that some flood and fire prone areas are uninsurable.
Tackling climate change is the most important thing, Chalmers says. He says the government has “dropped the ball” and that has implications for insurance and for premiums.
Q: Was the stimulus spending a mistake?
Chalmers says “there has been wasteful spending”, although “a lot of it was supportive”. He points again to jobkeeper and the submarines.
Some of our policies are designed to begin to address some of these pressures right away ...
Some of them will take a bit longer but we don’t have Scott Morrison’s approach ... pretending he hasn’t been in government for most of the last decade.
He’s asked about previous plans Labor had to hand out money, such as promising $300 for people to get vaccines. Chalmers says it’s not the level of spending, but also the quality of that spending, and the economic dividend you would get from that investment.
Morrison will “try to wash his hands” of this outcome, Chalmers says, “but ... domestic capacity constraints are playing a role here”. He says:
We will do what we can to grow this economy the right way.
And he has a crack at the prime minister, Scott Morrison, who said this wasn’t about the politics.
Chalmers is asked about back when he was chief of staff to treasurer Wayne Swan in 2010.
Back then, when Labor was in power, you predicted an opposition scare campaign, the reporter says.
Chalmers says Labor has been “responsible and reasonable” about the causes of these interest rate rises.
Chalmers is running through a range of issues, from the payment of Jobkeeper to companies that turned a profit, to the $5.5bn spent paying out the cancelled French submarine project. He says:
This is a very serious development in the economy.
He says Lowe pointed out that domestic capacity constraints are playing a role in inflation, that inflation will climb even higher, and that the economy will only grow 2% next year.
Shadow treasurer Jim Chalmers gives press conference
Shadow finance spokesman, Jim Chalmers, is on the ABC with his take on those RBA figures. He’s running through the potential impacts (see our table below for a good guide).
“This is a full blown cost of living crisis on Scott Morrison’s watch,” he says.
Chalmers accuses the prime minister of taking all the glory and none of the responsibility for the economy.
RBA governor Philip Lowe has shed his “Go-Slow-Lowe” reputation with a fatter rate rise increase than the market had been tipping (they’d expected a gentler 0.15 percentage point rise to 0.25%; instead the cash rate was hiked to 0.35%).
The question then is how fast it will rise. Here’s what was expected before Lowe pulled the pin today:
Fallout includes the sharemarket tumbling and the Aussie dollar climbing back above 71 US cents.
Here’s what higher rates will mean over time depending on the city you’re in (apologies to the mass readership outside our capitals).
One thing that we can take from today’s decision is that the RBA’s credentials as an independent entity have been done no harm. Remember that among the board members is the treasury secretary, Steven Kennedy, a government appointee.
And the other board members are also appointed at the pleasure of the treasurer. We’re about to see how much pleasure Josh Frydenberg has in today’s rate hike.
Thank you, Amy Remeikis! And excuse me, everyone, I’m just running the numbers on my mortgage. With you in a sec.
Jim Chalmers is about to step up, and shortly after, Philip Lowe will answer questions on the day’s decision.
Tory Shepherd will take you through that. I’ll be back early tomorrow morning – take care of you.
The government is still yet to respond, but here is what Simon Birmingham said this morning (ahead of the rate rise) to the Nine network:
Look, a rate hike is never good news or welcome news for first home owners. We acknowledge and understand that – or for mortgage holders generally.
Whilst it will be news for some pensioners and retirees and others with savings that they may welcome, ultimately we need to all appreciate and understand that interest rates at 0.1% official cash rate are abnormally low. In fact, the lowest RBA official cash rate ever.
They’ve been at this level for some period of time and the international factors that Australia is facing at present are very real. We’re not immune from them but we are doing better than most countries which have already had to put up interest rates, which have seen higher inflation levels than Australia’s got.
And it’s why the government made sure that we delivered a careful budget a few weeks ago that was careful in terms of how it handled inflationary impacts, but also careful in terms of providing cost of living relief to Australians.
Speaking of rate rises and the cost of living, Thrive by Five, which is advocating for better and cheaper early childhood education, says politicians shouldn’t forget the cost increases those using childcare are already experiencing.
From its statement:
The increase in interest rates to 0.35% announced by the Reserve Bank of Australia today, combined with the rising costs of childcare, will place pressure on family budgets and risk children missing out on early learning, according to the Thrive by Five campaign.
The Sydney Morning Herald recently reported parents were hit with a massive 48.7% inflation in childcare costs since December 2022, while overall inflation went up by 17.8%.
Thrive by Five Director Jay Weatherill said, ‘Rising interest rates announced today will increase the burden on struggling families and leave them facing the impossible choice of whether they can afford investing in early learning for their young children.
‘The mounting pressure on families from soaring childcare costs has been hidden in plain sight for too long.’
Thrive by Five’s eight key recommended early learning policy reforms are:
- Long-term federal and state partnership to fund 15 hours per week of three year old pre-school;
- Long-term federal and state partnership to fund 15 hours per week of four year old pre-school;
- Progressive increase in the childcare subsidy for first child to 95 per cent, starting with lifting the current subsidy to 90 per cent;
- Increase in the childcare subsidy for second or third children to 100 per cent;
- Make universal early learning system a formal National Cabinet priority;
- Improved workforce planning to fund appropriate pay and conditions for teachers and educators to end the problem of skill shortages, high vacancy rates and high turnover in the sector;
- Phase-in paid parental leave paid at the minimum wage for up to 12 months shared between parents/carers starting with an immediate move to 26 weeks of paid leave; and
- Universal access to maternal and child health care, with additional home visits for families needing extra support.
There is still no response from the government on the rate change.
And here is the key line from the RBA statement on further rate rises:
The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead,” the statement said.
“The board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases.”
Peter Hannam has all you need to know:
The shadow treasurer, Jim Chalmers, has also called a press conference for 3pm.
Labor has been VERY quick off the mark, releasing this statement ahead of anything from the government:
It was hard enough to make ends meet under Scott Morrison and today it got even harder for millions of Australians.
Even before today’s decision Australians were facing a full-blown costs of living crisis on his watch.
Scott Morrison’s economic credibility was already in tatters, now it’s completely shredded.
After almost a decade of this Liberal-National Government, the costs of essentials are out of control, real wages are falling, and now interest rates are rising by a quarter of a per cent.
Everything is going up except wages and now interest rate rises are part of the pain.
When things are going well in the economy Scott Morrison takes all the credit, but when things get difficult he takes none of the responsibility.
He can’t have it both ways.
The RBA is an independent body and makes its own decisions on monetary policy free from political interference.
We’ve been responsible and reasonable about the causes of today’s decision.
But governments have a role to play in easing cost of living pressures, and in creating secure jobs which put upward pressure on wages.
All Scott Morrison and Josh Frydenberg have is a plan to get them through the election, and one-off payments timed to land during the campaign and end after.
Labor has a plan for a better future beyond the election, which is designed to: grow the economy without adding to inflationary pressures; ease cost of living pressures; get real wages growing again; and to get economic bang for buck from a Budget heaving with a trillion dollars in Liberal-National debt.
This Prime Minister and this Government have an excuse for everything and a plan for nothing, and it’s hardworking Australians who are paying the price once again.
Peter will bring you more on that decision very soon.
Some very quick takeaways:
- This is the first rate rise in an election since 2007.
- The 0.25% increase to 0.35% is unusual – expect more movement on rates from the RBA in the future.
- The Australian dollar will most likely gain in value on the back of this, but expect to see the stock market drop a little.
You can expect banks to react pretty quickly.
Peter Hannam has taken a look at the statement:
“The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic,” governor Philip Lowe said in the statement.
“The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wages growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions.”
So interest rates WILL rise. The level of increase will come as a bit of a surprise.
Philip Lowe has called a press conference for 4pm.
RBA raises cash rate target to 0.35%
There we have it: The Reserve Bank has effectively crossed its own red line and lifted its official cash rate at today’s monthly board meeting.
The decision, just announced here, to raise the rate from its record low 0.1% by 0.25 percentage points came after the consumer price inflation spike in the March quarter that showed both headline and underlying inflation were at their highest levels in more than two decades.
RBA governor, Philip Lowe, had said he wanted to wait to see both the inflation rate but also the wage price data. The latter isn’t due until 18 May, but the previously “patient” bank chief has obviously seen enough.
National Covid-19 update
Here are the latest coronavirus case numbers from around Australia on Tuesday, as the country records at least 41 deaths from Covid-19:
- Deaths: 1
- Cases: 1,027
- In hospital: 64 (with 4 people in ICU)
- Deaths: 23
- Cases: 9,656
- In hospital: 1,513 (with 71 people in ICU)
- Deaths: 0
- Cases: 334
- In hospital: 37 (with 1 person in ICU)
- Deaths: 0
- Cases: 5,207
- In hospital: 466 (with 15 people in ICU)
- Deaths: 3
- Cases: 3,215
- In hospital: 228 (with 17 people in ICU)
- Deaths: 1
- Cases: 1,096
- In hospital: 49 (with 2 people in ICU)
- Deaths: 12
- Cases: 10,184
- In hospital: 482 (with 25 people in ICU)
- Deaths: 1 (historical)
- Cases: 7,929
- In hospital: 249 (with 8 people in ICU)
AAP is covering the court case a former Manus Island security guard has brought against the commonwealth and security firm G4S:
Commonwealth government failures led to a deadly riot at the Manus Island detention centre, a lawyer has told the Victorian supreme court.
Iranian asylum seeker Reza Barati died and 77 others were injured in the three days of riots from February 16 to 18, 2014.
Former Manus Island security guard Chandra Osborne has brought supreme court action against the federal government and security firm G4S, alleging they were warned about increasing violence but still put her at risk.
Osborne is seeking compensation for loss of earnings after she allegedly suffered serious psychiatric injuries as a result of the riots and unsafe working environment.
Counsel representing G4S Australia, Jack Rush QC, said there was no causal link between Osborne’s injuries and the actions of the security firm.
In his opening remarks on Tuesday, Rush told the supreme court G4S was acting as agents of the commonwealth and therefore should be entitled to indemnity.
Rush said G4S had no control over the Manus Island infrastructure and held no powers to arrest or search detainees.
He said in the weeks leading up to the riot, G4S managers contacted the commonwealth about rising tensions and the need for fences to be improved.
Emails shown to the court on Tuesday outlined G4S’ requests for an additional 100 security guards at the site, warning there was increasing intelligence detainees would try to push down fences.
The emails noted detainees understood they would not be brought to Australia, but they wanted more clarity around resettlement.
Rush said the commonwealth did not communicate with the detainees, which led to the increased tensions.
“It was a complete failure of the commonwealth to identify what was going on in the centre,” Rush told the court.
The commonwealth will give its opening remarks on Tuesday afternoon.
The Greens have also launched a new arts policy today, with a pledge for artists to receive a minimum $250 gig fees at publicly funded events.
Senator Sarah Hanson-Young said:
It’s time the federal government stepped in and our arts and culture policy at this election is streets ahead of any other political party running in this election.
The Creative Australia package includes support for artists, producers and crews in events, major festivals, live performances, including today’s announcement of a minimum $250 fee for publicly-funded gigs.
The arts helped us get through Covid. They helped us get through the bushfires. And it’s time we help them get back and get the show on the road.
The Greens leader, Adam Bandt, entered the rate rise chat:
Whether interest rates go up this month or next month, it’s going to keep getting harder to buy a house and harder to rent, because Liberal and Labor both have policies that push up house prices.
We’ve got to change this broken system that gets billions of dollars every year to make housing more expensive, that gives tax handouts to people who already got 10 houses to go and buy their eleventh.
First-home buyers are locked out, people can’t afford to rent and people are homeless in this wealthy country of ours.
It is time for a different approach to tackle the housing crisis.
Government needs to build a million affordable homes over the next 20 years that people can rent for 25% of their income or buy into for $300,000.
It’s only by government building affordable homes that we will make sure everyone in this wealthy country of ours can have a roof over their head.
Because whether it’s interest rates going up this month, next month or in the future, housing is going to get more and more expensive unless we have a different approach.
AAP has a question and answer on Labor’s home equity share policy:
What if I die?
- There are three options if the owner of the house passes away. The house can be sold and the equity will be passed on after the government takes its cut, depending on how much of a stake it has left in the house. If the person’s descendants want to keep the house, they can either buy out the government’s stake, or if eligible, take over the scheme.
What happens if I get a pay rise and earn above the cap?
- If you begin earning above the cap, there will be a two year grace period where you can negotiate with the government to buy back more of the house’s equity.
What if I want to sell but haven’t paid back the government?
- If you sell the house, the government takes the percentage amount of its stake from the sale price.
Who pays the fees?
- The scheme’s user pays the fees when buying the house. This is offset by the government not charging the homeowner rent on their portion of the house.
What happens if I want to move and rent out my home?
- The scheme is designed for users to live in the house and renting is not permitted. But the government will consider allowing the homeowner to rent the house out in exceptional circumstances on a case-by-case basis.
- Moving interstate can count as an exceptional circumstance for an exemption to be provided.
What if I renovate and the home’s value increases?
- Any renovations will only benefit the owner and an independent evaluation will be undertaken when the property is sold to ensure all capital gains from the renovations go to the owner.
What if the house is not insured and becomes damaged?
- The home must be insured.
There has been a lot of talk about the independents, but the Greens, who have held the climate line years before it went mainstream, are also hopeful of holding the balance of power in a hung parliament.
Josh Butler has this story:
We are less than an hour away from the RBA announcing its rates decision.
Usually, when there is a big change, or something which needs explaining, a press conference is called for after the meeting. I haven’t seen any alerts yet, but it is still early.
The South Australian parliament continues to offer up surprises:
Victoria budget allocates $12bn to repair Covid-battered health system
The Victorian government will spend $12bn to repair its Covid-battered health system with the treasurer, Tim Pallas, confident the worst of the pandemic is behind the state and a return to surplus will happen in the near future.
Pallas’s eighth budget, handed down on Tuesday, includes $2.9bn worth of new health infrastructure. This includes $900m to build a new hospital in Melton, in Melbourne’s west, $500m for Barwon Women’s and Children’s hospital, $300m for regional hospitals and $236m to double capacity at Casey and Mercy hospitals.
About $4.2bn will be spent to support pandemic response, including $522m to support hospitals treating Covid-19 patients, $1.1bn to purchase and distribute free rapid antigen tests this year to schools, hospitals and people with a disability, $284m for personal protective equipment and $258m to vaccinate Victorians against Covid-19.
A previously announced $1.5bn will be spent to help the state reduce its elective surgery list, while the government is also expanding its hospital at home program – of which the premier Daniel Andrews himself was a patient when he suffered a back injury last year – at a cost of almost $700m.
An unprecedented 7,000 new healthcare workers will be trained and hired, including 5,000 nurses and 400 triple-zero call takers.
It comes after several deaths have occurred in the state, with families blaming ambulance wait times, delays in the state’s triple-zero call-taking system and emergency department overcrowding.
Obviously Facebook runs Australia, duh.
Josh Frydenberg told a story at a Liberal event about how he was approached by a woman as he went to dinner with his wife, who said she was voting for him and identified herself as Dr Monique Ryan’s (the independent challenging him) mother-in-law.
To laughter, Frydenberg said the woman told him she was voting for him because he was a nice person who knew what he was doing.
Ryan told ABC News Breakfast yesterday that while her mother-in-law had told Frydenberg she was voting for him, she disputed other parts of the conversation as told by Frydenberg. Ryan also said she was distressed to see families brought into the contest.
Today, Ryan has tweeted this:
For those looking for election costings updates, you can find what the Parliamentary Budget Office has looked at here.
I missed the beginning of Scott Morrison’s interview with Melbourne radio 3AW host Neil Mitchell, but the transcript has just landed.
Here is how the first part played out:
Mitchell: So this dysfunctional system we’ve got with people dying and people suffering, that is the fault of the state government, is it?
Morrison: Well, they run public hospitals.
Mitchell: Not your job?
Morrison: Well, no, no that’s not that’s not fair, Neil. As I said, our funding increases to $32.7bn. We’ve already doubled it and ... our rate of increase in spending on public hospitals has outstripped state governments right across the country. So we’ve increased our heavy lifting on hospitals every single year we’ve been in government and will continue to over the course of the budget.
Mitchell: So does that really mean there’s nothing you can do? We’ve got this crisis in health that is worrying the medical profession and is worrying the patients. And I just keep saying people have died and there’s nothing the prime minister can really do.
Morrison: No, I wouldn’t say that. I mean, I’ve just told you we’re increasing it.
Mitchell: But it’s not working. Why can’t ... you sit down with Daniel Andrews and work out some sort of deal where more money gets spent ... and you fund some of it?
Morrison: But, Neil, I don’t know if you’re picking up my point. We are increasing the spending. The overall amount of spending increases, it’s going to increase from $27 to $32 billion.
Mitchell: When’s it coming?
Morrison: ... was given (inaudible) year. Well it goes to ...
Mitchell: Where’s it going?
Morrison: ... run their hospitals. That’s where it goes.
Mitchell: Well, it’s not working.
Morrison: ... we are there. We are investing. We have increased our investment. Now we don’t run them, but we certainly fund them.
Mitchell: Well, do you remember Kevin Rudd in 2007 famously said on health, the buck stops with me. The buck stops with me. Where does the buck stop on health now?
Morrison: Well, the public hospitals, it stops with the state governments. On issues like Medicare and on mental health and things like that, there’s shared responsibility. And when it comes to funding, you know, the NDIS and aged care and all of that, that’s a federal responsibility and that’s what we fund. But you know, the thing about our federation is we’ve all got to take responsibility for the things we do and we’ve increased our funding for public hospitals, we’ve already doubled it ... Now, that’s on top of the significant investments of over $40bn we put in extra just during the pandemic alone to ensure that our hospital system has survived this pandemic. And I’ve got to say here in Victoria, like in New South Wales and many other states and territories, but particularly in the two big states where the biggest pressure from Covid came, we shared that burden 50/50 and that enabled the Victorian hospital system to come through.
Mitchell: So ... I don’t understand why that can’t be done again? Why you can’t say, OK, we’ll give you this extra money, but it goes straight into hospitals.
Morrison: Yeah, well at the moment we’ve got a plan that takes us out which increases our investment by more than $5bn a year. So I think that’s a very big investment. And the growth in our investment deal, as I’ve said a few times now, has greatly outstripped the increases we’ve seen from state governments. See it’s important we both do our share.
Given all the talk about housing policy, Sarah Martin has put together this helpful explainer:
If you have some burning questions for the former Nationals leader Michael McCormack, here is your chance to have them answered:
The event will be hosted by rural editor Gabrielle Chan on the Guardian’s Rural Network Facebook group. If you are not a member, search Guardian Australia Rural Network on Facebook and ask to join.
You can find that link here.
It is an undeniable fact that wedges with sour cream and sweet chilli sauce should be brought back to all pub menus.
For some, like Jason Clare, obviously the sour cream wedge dream never went away.
Our video team have pulled together the lines from this morning’s line-apoolza – enjoy with your snack of choice.
Simon Birmingham says NSW Icac 'about grabbing headlines'
It doesn’t seem like the Coalition is backing down from its criticisms of the NSW Independent Commission against Corruption anytime soon.
The federal government has repeated its criticism of the NSW independent anti-corruption watchdog after its commissioner called its detractors “buffoons”.
Two NSW Independent Commission Against Corruption commissioners launched thinly veiled attacks on the prime minister during a parliamentary hearing, saying descriptions of the commission as a “kangaroo court” were misleading and untrue.
Finance minister Simon Birmingham stood by prime minister Scott Morrison’s comments, calling the commission a “Star Chamber” designed to grab headlines.
“I’m not interested in name calling,” Birmingham told ABC TV on Tuesday.
“What we don’t want is the type of Star Chamber model that brings down people like (former NSW premier) Gladys Berejiklian before even findings are made.
“We want to make sure that it’s a model that provides procedural fairness.
“Those types of (ICAC) models, that are all about Star Chamber models, headline-grabbing type approaches – they’re not about integrity.
“They seem to be about grabbing headlines.”
(Berejiklian voluntarily resigned. Icac does have closed hearings. Icac does not make findings, but gives a brief to the department of public prosecutions which decides whether or not to take it to court.)
Members of the Chinese-Australian community have expressed disappointment after the Liberal MP for the seat of Chisholm, Gladys Liu, cancelled an appearance at a community forum.
Liu, who holds the Victorian seat by just 0.5%, was invited to the event hosted by the Chinese Interpreters and Translators Association of Australia on Sunday.
It was supposed to be a chance for the local Chinese-Australian community to question both Liu and the Labor candidate, Carina Garland, with translations provided.
Prof Charles Qin, president of the CITAA, told the Guardian that Liu’s manager “apologised profusely”, but said she had an urgent meeting that meant she couldn’t attend.
“When we started the event, I explained to the audience members what happened, and some people did express their disappointment.”
Qin said up to 80 people turned up and questioned Garland for an hour about a wide variety of topics. He said the event provided an opportunity for first generation migrants to engage with the candidates.
“It’s very important that the Chinese community and people who are interested in this are exposed to their policies and opinions as much as possible, so people can make an informed decision when they vote,” Qin said.
Prof Haiqing Yu, who attended the event, said Liu’s failure to appear at this and other events, such as one organised by the Chisholm Climate Forum, had been discussed on WeChat and “the overwhelming response has been disappointment”.
Liu did not respond to a request for comment.
Queensland reports 5,207 Covid cases and no deaths
There’s better news from Queensland today, with the state recording no Covid deaths overnight and 5,207 new cases.
Killer of mathematician Scott Johnson jailed in Sydney
A Sydney man has been sentenced to more than 12 years’ jail, three decades after murdering a US mathematician at a Sydney gay beat, AAP reports.
The jail sentence was handed down Tuesday by justice Helen Wilson, who found that in a hostile act Scott White had punched Scott Johnson at North Head in Manly, causing the doctor to fall to his death.
“[White] did a violent act and that act is the direct cause of Dr Johnson leaving the clifftop in terror,” the judge said.
The fatal assault was done with reckless indifference to human life, with White throwing the punch near the unguarded edge of a high coastal cliff and then fleeing the scene without notifying the police after Johnson disappeared over the edge.
Justice Wilson found there was not enough evidence to show that the murder was a gay hate crime, however, because White had met Johnson at the Brighton Hotel and the pair had willingly gone to the gay beat together.
The outcome ends a long-running ordeal for Johnson’s family who pursued justice for more than three decades, refusing to believe an initial police inquest which found the death was a suicide.
White’s sentence follows an emotional NSW supreme court hearing on Monday where Johnson’s family members described the tragedy and heartbreak that the death and following 33 years had brought.
After the hearing, brother Steve Johnson told reporters that speaking in court was a chance to look White right in the eyes.
“I got to tell [White] what my brother was like. I got to tell him how it felt to hear that he was dead ... I have to think it sunk in. He watched and listened,” he said.
An appeal of White’s conviction has already been filed after his defence team failed to overturn his guilty plea in January.
White was sentenced to 12 years and seven months in jail, and will be eligible for parole after eight years and three months.
While the initial 1989 inquest found Johnson’s death was a suicide, the case was reopened in 2012. Another inquest returned an open finding in 2012, but a third in 2017 found Johnson fell from Manly’s North Head clifftops because of violence by an unidentified attacker who perceived him to be gay.
This is happening in Melbourne at the moment:
Q: Prime minister, do you think that a rate rise today would have been a bit of a blow to your campaign, interesting you are campaigning on economic management? And considering the last rate rise in 2007 saw John Howard lose?
Well, I’ve made this point a couple of times. At that time in 2007, the cash rate was 6.5%. Today, it’s 0.1%. At that time, there was not a war in Europe.
At that time, we had not just been through a global pandemic. And we weren’t seeing the massive supply chain disruptions that we’re seeing and continue to this day including up in China, which has significantly locked down which is putting further pressure on prices. And the transport and logistics issues in terms of international sea freight which is pushing up prices, and of course the impact of floods and natural disasters which has a particular impact on fruit and vegetable prices.
So I think those situations are very different. So what are these pressures about that are impacting on interest rates? The Labor party’s argument seems to be that it has been the government. Well, what is the spending that they disagree with that is putting pressure on interest rates?
Do they think we shouldn’t have cut the petrol tax by half? Do they think would shouldn’t have given pensioners $250? Do they think we shouldn’t have allowed Australians to keep $420 more of what they earn in tax cuts?
Do they think we shouldn’t have tax rates that mean if you’re on $90,000 a day, that you’re paying $50 a week less tax than you would have been on Labor’s? Do they think we shouldn’t have done jobkeeper? Or shouldn’t have had the cashflow boost? Or the instant asset write-off which kept all these businesses in place?
If they think those policies were wrong and have put pressure on interest rates, they should say so. They should be honest with Australians, because Australians know the pressures that we’re facing here in Australia are real.
They are overwhelmingly being determined by things beyond Australia. And what they do know is our government has put up an economic shield for Australians, Australian businesses, Australian jobs, Australian incomes, to get us through one of the worst crises we’ve seen in generations. Thanks very much, everyone.
(Labor has been pointing to the lack of wage rises, not the pandemic spending).
Scott Morrison says 'Australians have prepared themselves' for rising prices
Q: Do you acknowledge there are pressures that will be coming to bear on households as a result of even a small rise in the cash rate today? What do you say to those people? The government has policy levers. Haven’t you failed to use them appropriately to make sure people aren’t under pressure?
Yes, I do acknowledge that any movement in rates is of covers going to put pressure on those who are paying extra. For an average mortgage, for a 25 basis point increase, what you’re looking at there is just over 80 bucks a month. But what I’m encouraged by is Australians have been aware of the pressures and that’s why they have switched from variable mortgages to fixed-rate mortgages.
Q: Not everyone, though.
No, but it’s gone from 20% to 40%. The other thing they’ve done is, if they’ve been on variable rates, is the amount of getting ahead of their mortgage has also doubled during the pandemic. My point about that is Australians have been taking wise decisions as the government has.
We’ve been doing what they have been doing.
Now, on top of that, the other thing we did working with Apra was to ensure that the lending practices of banks was making decisions on loans where they had to be sure that they could be meeting mortgage payments 300 basis points higher than the rate they were being offered. So there’s been prudent lending practices.
Australians, I think, have prepared themselves as best as they can for the pressures that are real and that we will face, the inflation pressures which, while strong here, are far greater in other advanced economies where that shield has not worked for them in the same way as it worked here.
So yes, it is real, and what I’m saying is we need to do everything we can, and are, to continue to shield Australia from these increasing pressures and there’s a very real question. Do you think Mr Albanese, who has never done a budget, who has never held a finance portfolio, is going to be more effective in doing that? Or myself and Josh Frydenberg and our team? I’ve done eight budgets and our economic plan has seen Australia through one of the worst if not the worst economic crisis we have seen since the great depression.
Q: Are you happy to leave this issue with AGL’s demerger to the market, given Mike Cannon-Brookes’ recent acquisition of shares in the company? Or do you favour AGL being able to proceed with its plan and decouple the retail and generation parts of the business?
Well, firstly, that will be in the first instance, a matter for the company to resolve. It’s a matter for the company. But what we have been very clear about in how we’ve been managing these issues is we want to ensure that there is a reliable and affordable energy in the market.
And where we’ve had to make interventions like the Koori Koori gas plant, we have. And we ensure that we take those actions. Why do we do that? Because if you allow electricity prices to rise by having unbalanced emissions reduction targets, then the price of all of this goes up. It just all goes up. I mean that’s the very conversation we’re having.
We’re talking about the cost of living and if you don’t support reliable, affordable energy and don’t have balanced targets on these things, then you’re going to put more pressure on families and households and small businesses.
Now, we’re doing the opposite. We’ve actually seen electricity prices fall under our ... under my government in particular, fall by around 10%, because we did take on the big electricity retailers and big companies. We did put the big-stick regulations in place. We did get rid of those sneaky default deals that forced up people’s prices when they went to the default market offer.
We did do all these things and that happened keep prices down and with the gas security mechanism we ensured we had a memorandum of understanding which guaranteed the supply of gas in Australia, which means that we’re paying about a third to a quarter of the international price on gas now, which is also keeping electricity prices down. Now, these are the things we can do about price increases and it’s the same when it comes to managing the pressures on interest rates.
It’s ensuring you manage your finances well, you keep a strong economy, you maintain your AAA credit rating, you get people off welfare and into work and you have the right tax environment to see businesses grow and prosper as is happening right here.
Prices have dropped – largely because renewables came into the grid.
Q: On the RBA, everyone knows the Reserve Bank is independent but you’ve made a virtue of interest rates being lower under a Coalition government. So why shouldn’t you equally be held responsible if interest rates go up?
Well, I do know that interest rates have fallen to 0.1% ...
... You asked me a question. I’m saying what the facts are. I wasn’t making any conclusions about them. Interest rates are at historic lows. In the last 30 years, the average interest rate is 4.5%, so it’s obviously at a level that is well below what has been conventional and orthodox and we’ve seen that all around the world. I don’t make any great claim about that.
I remember when rates were falling back in 2019, the Labor party attacked us for rates falling and they said that was because of a weak economy. Now they want to make the argument that if rates rise that it’s because of economic management. Well, they can’t have it both ways.
We had the Labor shadow housing minister today saying rates needed to rise to improve housing affordability, so Labor is all over the place. I’m just simply saying this – I’m just saying there is serious pressure on interest rates around the world. I mean in the last 12 months, the IMF has more than doubled their estimates forecast for this year on inflation to well over 7% for this year from about the mid-3s. That’s what’s changed in the last 12 months.
That has changed massively and we know all the reasons why - war in Europe, supply chain disruptions and here for fruit and veg, we will continue to see the impacts of recent floods. We saw a bit of that in the latest inflation data but I suspect we will see more.
There is more pressure than we have seen. Those pressures are coming from those events. So the question is who do you think will be better able to manage those pressures? A government that has had an economic plan, that has taken us through the worst economic challenges since the great depression? Or Mr Albanese, who’s never had a finance portfolio in his entire time in parliament, has never done a Bbdget, and an inexperienced Labor team?
Who is going to be better able to manage those serious, significant pressures that families, households and businesses will face? That’s what this election is about.
Q: PM, pensioners and welfare recipients have just had $250 in their bank account. One lettuce alone is 2% of that pay cheque. When that money inevitably runs out, what shield is available to those people then when inflation is expected to continue and rates rise?
As you know, just this week, we’ve made major announcements which have dealt with the cost of pharmaceuticals for pensioners. We’ve changed the access to the commonwealth seniors’ health card.
We’ve changed the arrangements for the safety net for pharmaceuticals, particularly impacting on pensioners, a strong economy with Australians in work is always going to mean we’re more able to continue to provide support, whether it’s to pensioners or others across the economy.
If you don’t have a strong economy and you don’t manage money well – I’ll give you an example. During the pandemic we had to lean in more than, obviously, governments have had to in the past.
That saved the Australian economy. But we knew when to start and we knew when to stop. If Labor had their way, they would have spent an extra $81bn during the pandemic on top of what had to be spent to save the economy.
Now, that would have only put greater pressure on interest rates, greater pressure on inflation and that’s why this matters. I mean the situation that Australia faces is a situation faced all around the world and I think Australians understand that. How do I know that?
Because as they face the future, they have decided to move from variable interest rates to fixed interest rates, 20% to 40%. They’ve also during the pandemic made the wise decisions to pay as much down on their mortgages as they could and what has happened there is we’ve seen a doubling in the length of time, pre-pandemic to now, about how much further Australians have been able to get ahead of their mortgages. What does that mean?
Australians have been supporting during the pandemic so they can insulate themselves and prepare for the many challenges that are still ahead of us, so that’s why they have a very important choice to make at this election. Do they go with an economic plan that has worked and is continuing to work, which provides for strength in our economy in the future? Or a Labor party that we know can’t manage money, that doesn’t have the experience to deal with these significant challenges, and would lead to a weaker economy?
Q: Prime minister, as you fight to save many inner-city seats against teal candidates, which you’re not visiting, is it embarrassing or damaging for your government, the fact that a tech billionaire is showing more leadership on emissions reduction than you are?
I don’t agree with that at all. Our government, net zero by 2050 with a clear plan, investing $22bn to realise the technologies that are actually going to deal with climate change and to ensure at the same time we keep affordable, reliable energy in Australia which has enabled us to get electricity prices down. They’ve fallen over 10% since I became prime minister.
Those electricity prices is what they pay here to keep the fridges on and keep people employed. We’ve got the balance right when it comes to ensuring we have real net zero by 2050 targets, but a practical, funded plan, focusing on technology, not taxing people, and shutting down energy production which will only cost people more.
Scott Morrison holds press conference
Scott Morrison is in Melbourne, and at another food market, where he is talking cost of living and economic “shields”.
These pressures are putting significant pressure on interest rates, on inflation, on the cost of living. We know that. And we know what’s causing that. And Australians know what’s causing that.
Whether it’s the business here, that was able to be got through the pandemic with jobkeeper and the instant asset write off which enabled them to keep more than 40 employees. The income support that was provided to people in the community so they could come in and get something ... fruit and vegetables over the course of the pandemic.
It was the shield that we put up during the pandemic of good economic management, of well-designed policies, that ensured that Australia has come through this pandemic stronger than most of the advanced economies in the world.
It’s why today, while cost-of-living pressures are very real and families are feeling them, it’s far worse overseas. Now, what does that mean?
Those consequences overseas could have been felt right here, but it’s because of the shield of strong economic management, of a government that knows how to manage money and has been able to maintain our AAA credit rating, during an economic crisis 30 times worse than the global financial crisis of 10 years ago.
So as we’re dealing with these economic pressures and we’re weighing up the choice Australians are at this election, the question is, are you going to let that shield that has supported the Australian economy, protected your incomes, protected your jobs, ensured you’d be able to keep your homes and be able to go through this election and beyond with confidence, that is a shield which is protecting Australians even today, and the choice is to keep that shield or to let that shield drop. And if that shield drops, then what we’ve seen overseas can very much be visited upon the Australian economy and jobs and livelihoods here.
AGL vows to continue demerger despite Mike Cannon-Brookes's effort to block it
Not the biggest surprise but AGL Energy, Australia’s biggest electricity generator, is not on board with billionaire Mike Cannon-Brookes’s effort to derail its planned demerger.
As we reported here, Cannon-Brookes through his Grok Ventures has raided AGL’s share registry to snap up 11.28% of the company’s stock. He’s calling on other shareholders to join him in stopping the plan to split AGL into a mostly coal-fired power unit, and its customer-rich retail arm.
In a statement to the ASX this morning, AGL said its board had considered these developments, and advises shareholders to do nothing.
The board “continues to believe that AGL’s proposed demerger is in the best interests of AGL shareholders as it creates the potential to maximise growth in the value of shares”, it said.
It lists three reasons why, including that the current plan gives each of the new companies “the freedom to pursue individual strategies and growth initiatives”.
“AGL remains committed to progressing the proposed demerger with a view to achieving implementation by 30 June 2022 and a responsible transition of Australia’s energy system,” it said.
Cannon-Brookes, the cofounder of Atlassian, has billions for now to play with. For now, the target date is June 15, when the demerger is supposed to be voted on.
He has told other media this morning that AGL’s board will have to go if he’s successful. You’d have to think they probably won’t want to be hanging around anyway if he is.
In early trading, meanwhile, AGL’s shares are down 0.75% to about $8.55.
At Cannon-Brookes’s last pitch, which was rejected in early March, he was offering $8.25 a share.
That time he was bidding to take over the whole company and had Canadian asset manager Brookfield to help stump up most of the dough in a pitch that valued AGL at $8.5 billion, including debt.
By my calculations, the current value of AGL is about $8.8bn (a lucky number if you’re Chinese, but perhaps in the current environment, not a place Cannon-Brookes should go looking for help).
Big (and devastating, if not unexpected) news from the US – it is based on a leak, so waiting to see what more comes from it.
Q: On interest rates, are you arguing that prime ministers simply don’t have any influence over interest rates. And just back to a question over here as well – why was negative gearing and capital tax gains breaks a bad idea in 2019 and a good idea in 2022?
Well, we’ve found a range of better ideas including this one today, including our housing Australia future fund, including our comprehensive plan on housing.
Q: Just following up on negative gearing and capital gains tax concessions, basically you pursued that, partly to raise revenue and partly to stop or try to curb this phenomenon of first home owners bidding against property investors. What does the current housing policy do to ameliorate that phenomenon?
In terms of our policy, we have made it very clear now that we have a comprehensive plan to assist people to buy, we also have a comprehensive plan to increase supply through social housing, to affordable housing for essential workers. We also have a plan in terms of emergency housing – $100m to assist women and children escaping domestic violence. This is a suite of measures which taken together will take pressure off people who are struggling with housing.
And I think that it represents a comprehensive plan. And stands in stark contrast to a government which is now rejecting this plan they have advocated for so long.
Q: I’ve got a question on supply. Housing supply has come up a couple of times here during the press conference. First of all, do you accept the economic criticism of your current policy and of the government’s policy they’re going to have the effect of pushing up prices because they create those incentives for people to bid a bit higher on the property price?
Have a look at what Brendan Coates from the Grattan Institute told the ABC this morning. He doesn’t think it’s right. He made the point he thinks the existing government schemes, the guarantee schemes, probably have a bigger impact on this and he thinks that’s small. Where are the drivers.
It will go to your second question on supply.
Q: Your plan is set up a supply council. So you’re going to review the issues of supply. You have been around a long time. You know these issues have come up over many years. I’m interested in Mr Albanese’s view of whether states need to [do]. Will you say to premiers Sydney needs to release more land, Melbourne needs to release more land. You’ve got to make it easier for those homes to be built in outer areas or even in regional areas. What’s the plan on that side?
You don’t get this this down through bullying and blaming and berating the states and that’s all we’ve seen from this government over the last few years.
Go back and Google Scott Morrison or Michael Sukkar on this and you’ll see all they do is blame the states. You’ve got to do it with cooperation and coordination. You’ll be amazed, but it’s true, that the housing minister doesn’t meet with housing ministers around the country at the moment. I call it a Gordian knot. This is hard but if you’re going to fix this – release more land, improve planning rules around the country to tackle this. Then you start with getting state governments, local governments and federal government to work together. That’s what this council will do and that’s why you’ve seen this backed by the Property Council, the UDIA and the HIA. They’ve been screaming for this for years and if we win, we’ll do it.
Q: If you’re PM in a few weeks, what do you do to national cabinet?
One of the first things I will do, and I said this to various premiers is to convene a meeting with all state premiers and chief ministers and talk about how we move forward. I will involve also local government in that process, and that’s our policy.
Q: Scott Morrison says he’s been involved in delivering eight budgets and you’ve never been involved in delivering one. Are you up to the job of steering the economy?
I’m absolutely up to the job and so is my entire team.
Q: Are you better qualified than him to do this?
We have a prime minister who doesn’t actually have a plan. This is a prime minister who was elected in 2019, promising not too much, but he did promise some things, and he hasn’t delivered them.
Today, on the issue of a national integrity commission, you had an Icac commissioner come out and slam the prime minister for his outrageous comments about a kangaroo court. They’re quite extraordinary comments he made and he’s been rebuked by a member of the judiciary.
Scott Morrison has presided over a circumstance whereby our debt had doubled before the pandemic ... Whereby we’ve had increased debt, increased government spending, and increased taxation as a proportion of GDP.
This is a prime minister whose economic record we’re quite happy to debate on, because we have a plan to go forward. We outlined that again in our campaign launch in Perth. I have more than 25 years’ experience in the parliament. I will lead the most experienced incoming Labor government in our history since federation. And we’re ready. We’re ready to govern. And this government are out of puff and out of time and out of ideas.
Q: On AGL... and Mike Cannon-Brookes’s attempt to disrupt that, the demerger operations. Would you stand in the way of a faster transition to renewables, as Mike Cannon-Brookes envisages? And what does it say about the state of politics when it takes a tech billionaire to show more leadership on climate change and reducing emissions than politicians?
We’ve got a plan. It’s a plan I have discussed broadly here and with the business community. Our plan for powering Australia will make a difference at reducing emissions by 43% by 2030, it will create 604,000 new jobs. It will reduce power prices by $275. It’s been fully modelled .... It will create investment on top of the government equity contribution to fix transition.
... I’m not going to comment in the middle of a commercial process.
Q: We still haven’t heard a specific figure. How much better off will people be? What do people who don’t have children, how do they tackle the cost of living under your policy, and for one follow-up for Jason, on thresholds, $950,000 is the Sydney threshold. The house we’re here today in east Gosford, the median house price is pushing 1 million, does the threshold need to be higher so people can buy into the market?
On the first question, here, they pay electricity bills. Here, we have a plan for cheaper electricity. We have a plan whereby pushing downward pressure on wages won’t be a key feature of our economic infrastructure. We recognise we need to do something about wages as well. So, it’s a matter of your inputs and your outputs. With regard to properties, there’s currently 66 properties on domain in the Gosford area for sale under $950,000 right now
This is not about any individual, this is actually a part of our entire program in terms of assisting housing policy in this country.
Remember that the government forgot to appoint a housing minister. I know that when ... I appointed a housing shadow minister, I said I wanted it to be one of the priorities that I had as Labor leader, to come to the election in areas like childcare, aged care and housing. I identified ... three big gaps. Since then, we have announced a policy for public housing. A policy for affordable housing for essential workers. A policy for emergency housing and now this help to buy program with a housing supply and affordability council ... It’s a comprehensive plan that we have.
Q: Just back on housing. Given Labor’s focus on affordable housing, wouldn’t a fair way of dealing with it be for people like you, Mr Albanese, who own three or four properties, to sell two, to create a bigger pool of housing which would lower prices, at the moment you and others are getting tax breaks on properties?
Yeah, sure ... This is not about one individual, right? This is the structural thing we’ve got to grapple with here. You ask about affordable housing. Which party in this election do you think is willing to build affordable housing for Aussies who need it? It’s the Labor party.
Which party is going to build social housing for Aussie who don’t have a roof over their head at the moment? It’s the Labor party.
We’re talking today about our plan to help Aussies to buy a home on modest incomes, but there’s another part of our housing plan as well.
A $10bn housing Australia future fund, that will build 30,000 social and affordable homes for Aussie who need it in the first five years – 10,000 of them affordable homes, below market rent, for people like nurses and cleaners and ambos.
The research shows that people who get up early in the morning put a uniform on and go to work, the frontline workers who got us through the pandemic, on average, live further away from work than the average Aussie.
Q: You didn’t answer the question.
I think I did at the start. [Clare continues speaking about social housing]
Q: I was asking the opposition leader directly.
Let’s go to supply. The boss [will answer] after this. This is the Gordian knot we need to undo. We need to release more land, we need to fix the planning systems.
The announcement we made on the weekend was not just a rent to buy plan.
... If you pick up the phone and talk to anyone who works in this sector, what they’ve been screaming out for is a national housing and homelessness plan. Hang on ... Just hang on a second. The sentence isn’t finished. Not only will we do help to buy, keep what the government is already doing, not only will we just build more social and affordable housing, set up the supply council, but we’ll develop and implement a national housing and homelessness plan.
Q: In relation to electric cars, you said at your launch, imagine a future where you don’t have to worry about petrol bills. What would you do to make up the cost of – or the revenue from all the petrol excise the government wouldn’t be getting if people aren’t paying petrol bills. Would you look at a road user charge?
No, Paul Fletcher initiated a review as the minister as a road user charge. The government did that. I was transport minister. I didn’t have any reviews of that. That was Paul Fletcher’s policy.
Q: You say this is a cost of living crisis under Scott Morrison. With warnings though that interest rates will rise repeatedly over the next 12 months. Would there not be a cost of living crisis under your government, and do you accept under your government if you’re elected, Australians will be paying more on their mortgages?
The reserve bank are said they expect interest rates to increase, that will occur regardless of who is in government.
The question here is, the whole range of factors that impact on people’s cost of living, their ins and their outs, their income and their expenditure. This government is doing nothing to increase people’s income in terms of wages. They’re also doing nothing in terms of reducing the cost of living across a range of areas.
Q: You said under Scott Morrison’s watch, there would be triple whammy. Interest rates would rise today. So under your watch ...
I haven’t said that interest rates will rise today.
Q: You say if interest rates rise [it] will be a triple whammy.
That’s just a fact.
Q: Under your watch, wouldn’t it be a whammy if interest rates rise?
Under our watch, what we have is a plan to reduce cost of living on working families.
Q: You start paying it back, that two-year grace period. Can you explain?
It depends on a person’s income and their capacity to pay. They talk to the bank about it. In Victoria, they have been running this scheme for a while. I was talking to the Victorian government about this the other day. They tell me one in six people who signed up to the scheme have already paid the government out. And bought it out. Of course Aussies want to own their own home outright. This is about making the dream a reality.
'They don't have legislation, they have wedge-islation': Albanese
Q: Your view on a couple of things. So, Scott Morrison said yesterday that interest rates aren’t political, I want to get your view on that. Secondly, he says that your equity sharing scheme will operate in the way if the principal owner passes on and it hands it down to their children, they will need to sell the house that makes it an effective death tax.
He’s getting desperate, isn’t he? That’s what it shows. This is a prime minister who is getting really, really desperate and the comments are getting more and more extreme ... This is a guy who gets up in the morning and what he has for breakfast is political.
This is a guy, when he was in the Lodge, quarantining, didn’t take his economic policy advisor, he didn’t take his national security advisor, he took his photographer. He took his photographer.
Everything that think this guy does is political. It’s nothing about the national interest. Nothing is exposed by his opposition to this scheme.
This what is he had to say. Kevin Rudd and the treasurer should now move to invest in shared equity. He went on to say, ‘That shared equity is a very good opportunity. It’s a good suggestion.’
... When we see a good idea, it comes from someone else, we say it’s a good idea. This guy, everything is an opportunity to play politics. He doesn’t have legislation, he has wedge-islation. They didn’t think about the national interest, they think about how can we wedge Labor on this issue?
I reckon in the cabinet room there’s sour cream and sweet chilli sauce, there’s so many wedges there. You remember that scene in Happy Days when Fonzie jumps the shark? This is more baloney than a New York deli.
What we’re doing here is helping Australians to pass on their wealth to their kids rather than passing on nothing because they’re renting for the rest of their life. My grandfather rented all this life. Never owned a home. When he died, he died in intensive care, and he was in intensive care for three weeks.
Now, the only reason we had enough money for the coffin and for the funeral is because he was in intensive care for three weeks and his pension accumulated. This is good policy.
For people to own their own home and pass it onto their kids. If they qualify under the eligibility rules, everything is sweet. Nothing changes. If they earn more than that, they start to buy back the government’s equity. That’s the way it works in the Victorian model. It’s the way it works if you go from earning $90,000 to $150,000, there’s a two-year grace period and you start to pay it back. This is sensible. This is about helping Australians who need little bit of help.
Q: [Will] electricity and childcare be eaten up by any sort of interest rate rise?
What we know is that interest rate rises will put more pressure on families. We know that’s the case. And we know that Scott Morrison has failed on increasing wages. We know that low wages is a key feature of their economic architecture. It’s a design feature. It’s not bad luck, it’s bad policy to have low wage growth. We have high inflation and potentially increasing interest rates. Now that will put more pressure on families. What is the government’s response?
Have a look at their whole campaign. It implies that things are easy right now. Well, for Lydia, and her partner here, struggling to get by in terms of paying a mortgage, Lydia told us inside, she’s a student, she has to have three months practical placement last year as part of her honours degree.
These are practical issues that people are dealing with.
Now, government – government needs to try to lend a hand where it can. We’re putting forward practical measures. This is just one of them.
Q: There could be multiple hikes over the coming months. Westpac [says] by May next year [the cash rate] could be 2%. On an average mortgage of $500,000, that’s about $500 a month extra. Does your cost of living package factor in the interest rate hikes over the next 12 months? And will it be effective in that case to put downward pressure on prices?
What we know is 3.4 million Australians have mortgages at the moment and the average new mortgage is around $595,000. (Those numbers are from the transcription).
A 0.25% increase, which is one of the possibilities being speculated about today, will increase payments by $124 a month. What that does is it just shows the need for a whole of government approach.
This government isn’t even trying to address cost of living pressures. We have a plan for cheaper childcare. Now, Lydia and her partner, [the people whose rental house they are using for the press conference], if they’re planning to start a family at some time down the track, families want that security. They need to know about where they’re going to live.
They need to know about the costs of childcare and factor all of that in. Jodie is here with me today. She grew up and spent the first half a dozen years of her life just a couple of blocks away. A couple of streets away in Wells Street. You would have come here on the way.
Now, her brother and partner and they’ve got a little 2-year-old, they’ve just moved up to Umina. They found it difficult. They’re not buying because they can’t afford to at this point in time, but they found it difficult to find a place to rent that they could afford. These are real issues out there, which is why we have practical plans.
This is a practical plan, like cheaper childcare, cheaper electricity bills ... These are all measures aimed at making life better for people because we can do better.
Labor accuses Morrison of 'backflip' on housing policy
So a scheme like this helps, because you get to live in a home that you own with a smaller deposit, a smaller mortgage and smaller mortgage payments. And that’s why this has been backed, as Albo said, by everybody from the Master Builders, to the Property Council, to the UDIA, to the Grattan Institute, to Acoss, to National Shelter. It’s even been backed by the Liberal party. The Liberal party are doing this right now. They’ve been doing it in WA for years. You know, this is bipartisan in WA.
Labor governments and Liberal governments have been doing this and making a difference to people’s lives for years. The Gutwein government was doing this in Tasmania. Before the Premier retired in February, they announced that they were doing that. And we were doing a similar model, 40% equity to create extra incentive to build rather than just buy. And as Albo said, premier Perrottet flagged it here. Have a look at the front page of the Sydney Morning Herald on the day of the by-elections back on February 12. This will be in their budget in June.
Even Scott Morrison has backed this. You saw that video that went viral last night where he was calling on the government back in the Rudd days to do this.
But not just that. He’s been admiring and supporting what the Victorian government has been doing for years here. And now on the eve of an election, he’s doing a backflip. Well, Scott Morrison, instead of doing a backflip worthy of Nadia Comaneci, you should be backing hardworking Aussies who want to own their own home.
Labor's Jason Clare says society 'moving apart' between homeowners and renters
Jason Clare is also at this press conference. He says “it’s not an overstatement to say that we’ve got a housing crisis in Australia”.
It’s harder to buy than ever before. It’s harder to rent than ever before, and there are more homeless Aussies than ever before. House prices have jumped by 25% in the last year nationwide. Here on the Central Coast, it’s more than that. About 31%.
And in some places, it’s in the 40s. And rent has jumped by about 15%. It’s getting harder and harder, not easier.
Now, lots of Aussies are still making the plunge.
Lots of Aussies are still doing their absolute most to make the great Australian dream a reality.
But for more Aussie, it’s getting harder and sometimes impossible. Think about this – if you go back almost 40 years to when Bob Hawke was the prime minister of Australia, you’d find that about 60% of young Aussies owned their own home. Think about that – 40 years or so, 60% of Aussies on low incomes owned their own home. Today that’s 28%.
That’s a big change for the worse. It means that our society is moving apart between people who own their own home and think that they can own their own home and people that think that they’re going to rent for the rest of their life.
Anthony Albanese holds press conference
The Labor leader Anthony Albanese is on the NSW central coast, where he is talking Labor’s shared equity housing scheme.
This is a practical measure to assist with a cost of living measure. Because when people have a secure roof over their head, they have that sense of belonging. That sense of ownership and the sense of security that comes with that and Labor is determined to do all that with to give people a more secure future
Consumer sentiment drops sharply
Just as the RBA board sits down this morning to weigh up raising rates, the ANZ- Roy Morgan weekly gauge of consumer sentiment has landed, and it’s not pretty:
The 6% drop is the most since mid-January’s 7.6% slump when Omicron was busy snarling supplies and ruining more than a few Christmas-January holidays. (And worse. The 23 Covid-related deaths alone in NSW overnight tells us the problem hasn’t disappeared.)
The RBA board members will already have a lot of data, but this isn’t a sign that the government will be happy to see, given a grumpy electorate is not what they want just now.
David Plank, the head of ANZ’s Australian economics team, said the surprise consumer price index number was to blame for sentiment sinking as people brace for rising interest rates.
Indeed, “confidence dropped 9.6% amongst people ‘paying off their home loan’, while for people who already own their home or are renting confidence dropped by 4.7% and 4.2% respectively,” Plank laid out.
The RBA, though, is also watching out for people expecting inflation to rise because that’s the thing they would rather stamp hardest on.
On that score, the arrow has tilted up again, the survey found. The weekly gauge is up 0.2 percentage points to 5.3%. The rolling four-week average is slightly down because of that 22.1-cent cut in the excise for fuel that happened just over four weeks ago.
The fuel price meanwhile has been quietly creeping up, and is hovering around $1.81 in NSW today at least.
There are much better people to explain this than me (taps the *I am not an expert* sign) but they are very busy, so you are stuck with me.
There have been a few questions about what is going on with inflation and how it is different if its driven by supply pressures (rather than demand, which is what we are used to).
When demand outstrips supply (which is what we are seeing happening) people want to buy, but can’t. So the cost of the available goods goes up (which has been compounded by transport costs)
And central banks can’t really do a lot about that, because it’s not a spending issue, it’s a supply issue.
Now, raising rates could cut spending so that demand *matches* the supply, which can slow it down, but that won’t help the long-term goal of getting unemployment down (now that borders are open, the labour force will change again) and wages up.
In that sense, this isn’t something the government can control either.
But – the lack of real wage growth over the last decade has compounded the issue. Because costs have gone up, but in a real sense, wages have not. The cost of living has outstripped your pay. And that is something the government has *some* influence over – there are levers it can pull to encourage wage growth (increase public sector wages, supporting wage increases with the Fair Work commission, supporting minimum wage increase).
The reserve bank could wait until the wages data comes out before making a decision because it would want to see how much people are earning. If a decision to raise rates doesn’t come today, it would be hard to see how it couldn’t come next month. Either way, it is coming.
(Apologies to Ms Driver, my high school economics teacher, for the whoosh- whoosh explanation.)
Simon Birmingham responded to some of those claims from Labor on Sky News this morning:
I don’t accept that thesis when, in the last budget, we made the biggest improvement in a budget bottom line in some 70 years.
The vast majority of the improvements we put towards reducing deficits, as I said before, by $103bn, compared with what they’d been projected to be.
Our policies have got Australia to have the lowest unemployment rate in around 50 years. They’ve got us to a point where we’re in a position of economic strength relative to other countries. But that doesn’t mean we’re immune from global shocks.
And when you’ve got a war in Ukraine, oil price spikes, energy crises in parts of Europe, continued after-shocks from Covid-19, closure of large parts of China’s economy at present due to Covid, all of those pressures are going to put shocks right around the world. Thankfully, here in Australia, we’ve been withstanding them better than most other countries, and our inflation rate remains lower than the US, or UK, Germany or Italy, Canada or New Zealand.
But we’re not completely immune, and the choice at the next election is one very much between a Coalition government that’s driven people into jobs and created that strong economic environment better able to withstand these positions, and a Labor government with risky policies and big spending ideals, all of which would create the risk of even more pressure on inflation and interest rates than we’re getting from overseas.
Katy Gallager was asked about the possibility of an interest rate rise this morning on ABC radio RN and who was to blame for Australia’s situation:
Q: Now the prime minister is essentially saying that an interest rate hike has nothing to do with him. Is he right about that? Or will you be blaming Scott Morrison if the official cash rate goes up today?
We’ve been responsible and reasonable about this and always accepted that there are a number of causes, you know, factors at play here. But I think what we saw from the prime minister yesterday is an attempt to shift responsibility elsewhere, which we’ve seen him do in a number of areas. Where things are going good he’s – you know, you can’t get between him and a camera, frankly, but when things are not going so good, it’s always someone else’s issue. I think the point we’ve been making is the triple whammy people are facing now. So wages are going backwards, things’ prices are going up and now, you know, we’re getting the potential for interest rates to rise and that affects this cost of living crisis that is front and centre of this election campaign.
Q: So you will hold him responsible?
Well, that is the prime minister’s responsibility. The cost of living crisis, frankly, is something that the prime minister should have a plan to deal with and should have had a plan to deal with not just in the last month, but over the last few years. And that is the critical point and a point of criticism that we’ve been making about him.
Q: And the interest rate rise, if it does occur, certainly [it] will imminently whether it’s today or soon. That’s his responsibility too?
Well, I think I said at the beginning, you know, we have always accepted that interest rates are at record lows, that the Reserve Bank is the institution that makes the decision about that. The point we’re making is the prime minister doesn’t have a plan to deal with his own cost of living crisis that has occurred on his watch. And when we have interest rates rising and that will affect household budgets, without a doubt, the prime minister can’t just walk away and say this isn’t my fault. He’s been in charge of this economy for nine years. You know, this is the reality for people, it’s front and centre in this election campaign. And I don’t think anyone thinks that it’s reasonable for the prime minister to put his hands up and say, ‘well, this is not my problem, sorry, everybody. Hope you’ve saved some money. You know, because that’s all I’m going to do about it.’
There was also a lot in that interview about Labor’s shared home equity scheme (Labor calls it Help to Buy). Richard Marles did an interview on Sky News which has led to a lot of these criticisms today (Marles is not the best person to have communicating policy, outside of his specialties at the best of times, but he is also the deputy leader, so here we are)
Scott Morrison is very critical of the policy, claiming you’d have to ‘check with Canberra’ before going to Bunnings for home improvements as well as:
If you’re one of the lucky ones who get some of these 10,000 places where the Labor government can own 40% of your house, if your wage goes above your household income goes above $120,000 a year, Anthony Albanese will put a for sale sign on your lawn.
You actually have to dispose of the asset and pay back the government.
I mean, this is insane. I mean on top of that, if something terrible happens, and your property is passed to your children, and children have to sell the house if their income is not eligible for the scheme, and then on top of that, you’ve got the situation that you know, where do you sit in the conga line? When it comes to owning your own house? Firstly, the bank. Then there’s the Labour government. And then there’s you.
There is a lot there from someone who was in support of these schemes until he wasn’t.
According to Labor’s policy which is based on schemes already running ion Australia in some states, any renovations will benefit the homeowner if the property is sold.
An independent evaluation will be carried out and value of the renovations goes to the home owner.
On the children point, Labor says the scheme ‘works like a mortgage, people will keep the share of the home they own.
If your kids earn more than the eligibility of the scheme, they can buy out the share held in equity by the government if they wish, just like a reverse mortgage (which some people use to fund their retirement)
Labor expects, as ha happened overseas, that older people who used the scheme while younger would have bought their equity back, as has happened in other markets such as the UK.
Neil Mitchell asks Scott Morrison why he takes credit when things go well, but is not to blame when things go badly. He also asks about whether the RBA should have been more prepared, given it said it wasn’t planning on raising rates until 2023.
Well, let me tell you what’s happened the last 12 months. The IMF, the International Monetary Fund a year ago, was predicting inflation globally would be 3.2%.
The most recent estimate is 7.4%. And that’s happened in the last 12 months.
Now the reason for that is, of course, the global energy price shock that we’ve seen coming out of Europe, with the war in Europe. And in addition to that, there are other factors such as the Covid situation in China, which has severely constrained in supply chains, and then you’ve got the broader hangover of the pandemic affecting transport costs and supply chains all around the world.
So the issue in terms of – what Australia has been able to achieve over the last few years, is we put up a very strong economic shield and protecting the Australian economy from the worst of the impacts of these pandemics.
That’s why inflation is higher in Europe, New Zealand, North America, Canada and United States and UK.
It’s why we’ve been able to get employment up and unemployment down and as we go into this election, this is – this is a reminder, I think [of] the pressure that’s on interest rates right now. It is a reminder of why the economy is so important, and it was only three weeks ago, the bloke who wants to be prime minister didn’t even know the cash rate.
Q: Yeah, but again, you’re telling me that the the interest rates have been low because of you and now they’re going up? It’s not because of you.
I didn’t say that. What I said was, was we have been in a rather extraordinary global environment.
If you’re interested in finding out what rural voters want and how are they changing this election, be sure to catch Guardian’s rural editor Gabrielle Chan’s Q&A with former Nationals leader Michael McCormack this lunch time.
The event will be hosted live at 1pm today on the Rural Network Facebook group. If you are not a member, search Guardian Australia Rural Network on Facebook and ask to join. Then you can send Gabi a question and watch the event live. NB: sharp questions welcome, but no abuse tolerated
NSW reports 23 lives lost to Covid, Victoria reports 12
A bracing figure from NSW Health today.
Victoria has also reported 12 deaths.
Scott Morrison doesn’t get sick of the “silly” photo ops [silly photo opportunities being how the question was framed], he tells Melbourne radio’s Neil Mitchell, because he “doesn’t see them that way”.
He then gives a hero-gram to tradies.
I don’t fit in those ways, what I see is [being] out and about and doing what Australians do every day.
... What I enjoy doing is standing there with an apprentice who shows me what they’re learning, and then I’d have a go at it.
That’s really what I’m saying. They’re learning. I’m trying to understand what they’re learning, and I’m really proud of what they’re doing because you’re getting a trade in this country, you’re setting yourselves up for a strong future in our country with a strong future.
So all those young people and not just young people, all those middle aged apprentices and later in life transition apprentices, thank you for doing what you’re doing. You’e making Australia’s stronger and we’re very proud of you.
It’s been a long time since the Reserve Bank of Australia changed its cash rate target. Its most recent move was to lower it from 0.25% to its record low 0.1% in November 2020. And it’s more than a decade – November 2010 – since the central bank raised the cash rate.
Back then, it went up 25 basis points (another way of saying 0.25 percentage points) to 4.75%. That’s partly why today feels a bit novel.
The other, more pressing drama, of course, is that there’s an election campaign underway and a rate rise today would be more than a bit embarrassing for the government.
The last time we had such an RBA “intervention” was in November 2007, and the rate lift from 6.25% to 6.75% did no favours for John Howard, who went on to lose both his seat and the election.
We look here at how the board decision is made and why we should not be entirely surprised if the RBA did NOT raise the cash rate today.
Warwick McKibbin, an Australian National University professor and former RBA board member, tells us this morning a few extra interesting details. In his time, members would get the RBA’s briefing on the Friday, giving them the whole weekend to mull their move.
Assuming the same practice applies today, the nine board members would have had days of media hype more or less demanding a rate rise after the March quarter CPI shock (5.1% for the headline, 3.7% for underlying inflation, both the highest in two decades-plus.) Like a jury, could they have shut it out?
McKibbin, unlike any of the current board members other than the two from the RBA, was a macroeconomic expert, and brought his own model to the meetings. (He also used to chat to the RBA staff on the sly before meetings until that bit of enterprising research was shut down.)
Anyway, McKibbin reckons that even though the RBA has not signalled any change of direction – which they normally would have, had they not been in some sort of witness protection since 22 March – they should move today.
He notes the US is about six months ahead of the RBA in terms of countering inflationary pressure. Now the US Federal Reserve (effectively their central bank) has been apologising for acting too late as inflation has soared.
As Scott Morrison has been happy to highlight, the US CPI has soared to 8.5%, much higher than Australia’s. (The underlying rate is at about 5%, or 2.5 times the Fed’s 2% target.)
In other words, McKibbin says the RBA should raise rates today: better to be safe than sorry.
Scott Morrison, speaking to Melbourne radio 3AW is now saying on Labor’s home equity scheme:
Every time you go to Bunnings and you want to do an improvement on your house, you have to check with Canberra.
This, it should not have to be said, is not true.
Speaking of Scott Morrison, yesterday, he had this to say about Labor’s shared equity scheme:
Labor has a plan where they want the government to own your home, and not only that, you’re last in line when it comes to your home. The bank has the first call over it, the government has the second call over it, and you come last when it comes to your own home.
So when you design these policies, you need to understand the housing market and you need to understand the economy and you need to understand the banking and financial system. And that is how you can run plans and programs, as we have had that has seen over 300,000 Australians get into their own home.
Not one that the government owns.
Reminded he did once support these schemes, Morrison said:
Well, I had no plan for a government owning people’s homes. Shared equity schemes have been around a long time, they’ve been around a long time, and some people choose to do them in the private sector. And during the course of the global financial crisis, there was a credit squeeze and there was a real problem being faced, particularly by regional banks, Bendigo Bank being one in particular because of the the lack of liquidity in the the debt market that was enabling them to provide the products that they wanted to provide and that people were providing and seeking. So that was a very different set of issues.
But then there was this in 2008:
Labor is trying to walk the line between acknowledging that there are a variety of factors at play for the hits to Australia’s economy, as well as trying to make sure that part of the blame sits at Scott Morrison’s feet.
That’s easiest when they can use his own words
Here is that “keep it together” campaign Peter Hannam reported on:
Qantas CEO Alan Joyce has *kinda* apologised for the baggage issues passengers are experiencing in an interview with ABC News Breakfast:
Q: You talked about the Qantas turnaround yesterday. Expected to reach profitability again in the 2023 financial year. Lots of demand for people to travel after the worst part of the pandemic, hopefully. But again we’re seeing these long queues and issues at airports. When will there will be the appropriate Qantas staff levels to match this customer demand?
Well, Michael, this is not just a Qantas issue. The queues at our airports. This over Easter was an issue that was created by long queues at security, which are run by the airports. It was an issue for Virgin, for Rex, for Qantas. It’s an issue for airlines around the world.
It was caused by a Covid issue with people being absent from work because of close contacts, because of catching Covid. It’s dramatically improved, even as we speak. We’re gearing up for a big expansion of our international operation. We’re recruiting 2,500 people at the moment. We have over 20,000 applicants for those jobs. And while we get into the school holidays in July we should be back to normal for those big peak requirements. But who knows what happens with Covid. This time last year we never knew there would be a Delta strain, an Omicron strain, we’re putting the resources in to manage a big expansion of our operation going forward.
Q: To be fair, it’s not just the airports. There’s still issues faced by Qantas passengers ... that’s not good enough, is it? We’re out of school holidays. We’re out of peak – supposed peak periods.
Yeah, we do apologise when these things go wrong. This happened before Covid as well as after Covid. It happens to every airline around the globe. The statistics show that over 99.5% of people’s bags are going with the customers. There were similar stats to what we had before Covid. There is some mishandling of bags that take place again on ever airline on the globe. We apologise when that happens. It’s the nature of the industry. It’s a huge complex industry. And things can go wrong at times. We aim to be perfect. We aim to get every customer’s bag with them. We aim for every flight to be on time. But the nature of the industry … Sometimes there’s things outside the airline’s control – any airline – and the airline has to do its best.
Q: Qantas sacked 2,000 ground staff, including baggage handlers. Have you given any thought to rehiring some of these full time baggage handlers to prevent some of the issues we’re seeing?
We’re using specialist baggage handling companies.
Q: I’m asking about the staff you got rid of.
Maybe I can answer your question, you’re giving the impression that staff are missing. They’re not. There’s people doing those jobs from the specialised baggage handling companies. All the airlines around Australia have recruited staff, they have staff, there’s people there doing these jobs.
Peter Hannam has the latest on Mike Cannon-Brookes and AGL:
AGL Energy, Australia’s biggest electricity generator, says it remains determined to pursue its plan to split despite a bid for a blocking stake by technology billionaire Mike Cannon-Brookes.
In a second tilt at the company in three months, Cannon-Brookes bought 11.28% of the AGL shares through his family’s Grok Ventures firm, making him the largest single shareholder.
“We have purchased this substantial interest in the company because we fundamentally believe there can be a better future for AGL,” Cannon-Brookes said in a letter to AGL.
“A future that delivers cheap, clean and reliable energy for customers. A future that accelerates the transition to net-zero, and a future that creates opportunities for AGL and value for its shareholders along the way,” he said.
“We firmly believe the proposed demerger is a flawed plan that will fail to achieve these goals. As a result, we intend to vote every AGL share we control at the relevant time against the demerger, and will actively encourage all AGL shareholders to do the same,” Cannon-Brookes said.
There is polling today, released by the Australia Institute, showing Liberal MP Tim Wilson is in danger of losing his seat to independent challenger Zoe Daniels.
Wilson has been running very hard on the “fake independent” line.
Today he has had an op-ed in the Australian where he claims independent candidates (he uses scare quotes around independent) are trying to override democracy.
Happy 23 day – number of choice for Michael Jordan, Shane Warne and any sporting wonder who thinks they have a shot.
It’s RBA meeting day where the reserve bank will decide whether the underlying rate of inflation (inflation when you take out the stuff that fluctuates in price) of 3.7% is enough to force it to move the cash rate target.
The RBA has previously said it wants inflation to be between 2% and 3%. So it’s above that. But it also doesn’t want to cause inflation in Australia to become a self-fulfilling prophecy. Economists who know a lot more than me about this say Australia is facing a supply-side inflation issue. Not demand side, which is what we usually think of when we think inflation. So you don’t want to panic people into thinking their money will be worth less, because then they go out and spend while they can, buying what they believe which in turn, increases inflation. It’s a delicate balance for the RBA and one that has probably given governor Phil Lowe a couple of sleepless nights. If interest rates move, it’ll be the first time since 2007 that there has been an interest rate increase in the middle of an election campaign.
The RBA could signal it’s about to move rates. Or it could move them a smidge to show it’s willing to move rates. Either way it’s a pretty big stress for people who are already on the bubble.
It’s also of concern to Scott Morrison who has tried to build his re-election campaign around being a better manager of the economy. He wanted to talk about cost of living but now it’s an election issue because it’s an issue for millions of people, and that makes the narrative much harder to control. Morrison has started the rebrand – telling reporters he doesn’t see these things “through a political lens”. It’s all about people, you see. And the choice they have about who is better to manage the coming economic changes (which of course makes it about him, but that’s just details).
Sarah Martin has the latest Essential poll which shows that choice is not quite as cut and dried as Morrison would like it:
At the mid-point of the six-week election campaign, the Guardian Essential poll of 1,500 respondents finds the primary vote for both Labor and the Coalition largely unmoved, despite billions of dollars in election promises being made as voters tune into the contest.
But while primary support is flatlining, Labor retains a lead over the Coalition of 49% to 45% on a two-party preferred “plus” measure.
The challenge to connect with disengaged voters is also highlighted by the fact that 17% of people say they have not been paying any attention to the news, advertising or updates from the federal election campaign, and 33% saying they have only been paying little attention.
… On the cost of living, 40% of voters judged that Labor was best placed to manage the issue, compared to 30% who trust the Coalition on the issue, and 30% who deemed both parties to be no different.
We’ll bring you the blow by blow of the day. As usual you have the Guardian Canberra crew of Katharine Murphy, Sarah Martin, Paul Karp, Josh Butler and Daniel Hurst with Amy Remeikis on the blog.
It’s a mint slice for breakfast kinda morning.