Treasurer Jim Chalmers says RBA move is a “brutal reminder.”
Treasurer Jim Chalmers has been urged to reverse the shocking decision by the RBA to raise interest rates.
Amid fears that the latest increase could lead to a recession, the government has been urged to take the unprecedented step of direct intervention.
“The RBA’s decision to raise interest rates again is implausible and will crush tenants and mortgage holders even harder than they have already been crushed,” said Greens Senator Nick McKim.
“The RBA is out of control. Jim Chalmers must use his powers and intervene to reverse this terrible decision.
Senator McKim, by the RBA’s own admission, said rate hikes are the wrong response to an inflation spike caused by corporate profit-seeking and supply-side problems.
“If Dr. Chalmers refuses to act, it will be tacit approval of the RBA’s decision and will mean that he supports rate hikes,” he said.
Earlier, the treasurer evaded the question of whether the Reserve Bank’s “brutal” rate hike could plunge Australia into a recession.
As the Albanian government prepares to finalize Tuesday’s budget, including cigarette tax hikes, the RBA has stunned pundits by passing another rate hike to address inflation.
The treasurer admitted it was a “brutal reminder” of the inflation challenge, but stopped short of reassuring homeowners that a recession was not imminent.
“I think the rate hike is a really pretty stark, pretty brutal reminder of the tough economic conditions,” Dr Chalmers said.
“And I think people are generally aware that we have an inflationary challenge in our economy. People feel it every day.”
Australians will suffer more financial pain after the Reserve Bank of Australia decided to raise interest rates by 0.25 percent to 3.85 percent.
It means those with an average loan of $586,000 will spend about $14,000 more annually compared to what they paid around this time last year.
“Are you concerned that the RBA will tighten rates enough that the country could slide into a recession?” the treasurer was asked.
In response, the treasurer said he had no intention of “re-guessing the decisions made independently by the Reserve Bank.”
“As you know, my work is different. It is to hand over a budget that is carefully aligned with the economic conditions we are facing now,” he said.
“The Reserve Bank, the Treasury, I think almost everyone expects the Australian economy to slow significantly later this year.
“I think that is the inevitable consequence of higher interest rates combined with the global slowdown. And so the Reserve Bank’s projections reflect that the Treasury’s projections reflect that as well.
“And inflation is coming down from the peak around Christmas, but it’s still higher than we’d like for longer than we’d like and the projections will reflect that.
“Our job is to provide a responsible cost of living, to do what we can without adding substantially to this inflationary challenge that we have in our economy.
“And the best way to do that is to prioritize the most vulnerable and the best way to do that is through ways like the help with the energy bills, which I’ll flesh out in the budget, which is all about getting of electricity prices, not to rise as high as possible.” as much as what they expected the previous budget to do.
Cigarette tax up
Tax increases are expected in the budget.
Health Secretary Mark Butler has announced a five percent increase in tobacco taxes in a bid to curb smoking and raise $3.3 billion over four years.
Speaking at the National Press Club, Mr. Butler said some of the money would be plowed back to help smokers quit.
“While we eradicate the growing black market for illegal vaping, we must also prevent young people from trading their vapes for cigarettes,” he said.
“That is why this budget will also include measures to reduce the number of smokers, to prevent people from taking up smoking and to provide extra support to (former) smokers to look after their health.
“Today I am announcing that from September 1, excise duty on tobacco will be increased by 5 percent per year for the next three years.
“We know that a more expensive cigarette is a more unattractive cigarette.”
“Together, these changes will generate an additional $3.3 billion over the next four years, including $290 million in GST payments to the states and territories, helping support our health system and the health of current and former smokers and vapers,” said he.
There are also super changes coming
Meanwhile, millions of Australians will be better off with a budget plan to finally force penny-pinching employers to superpay on payday rather than hoard the money.
Among the major changes, employers will have to pay super premiums in addition to wages.
Currently, employers are only required to make retirement payments every three months, allowing employers to hoard the money and keep it out of employees’ retirement savings accounts where it could earn money.
But from July 1, 2026, employers must pay their employees’ super at the same time as their salary and wages.
“This simple change will strengthen Australia’s pension system and contribute to a more dignified retirement for more Australian workers,” said Treasurer Jim Chalmers.
By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and biweekly wages would be about $6,000 or 1.5 percent better off in retirement.
“More frequent super payments will make employers’ payroll management smoother and there will be fewer liabilities on their books.
“Payday super will also make it easier for employees to keep track of their payments, and harder for them to be exploited by disreputable employers.”
Industry Super Australia said moving super payments to align with wages could save millions of Australians $50,000 more in retirement.
Quarterly superpayments will also make it easier for the ATO to monitor compliance in real time and act quickly when a complaint is made about unpaid superpayments.
“This is a big win for the three million mostly young and lower paid Australians. It will give them a better chance of building a good nest for retirement,” said Bernie Dean, Chief Executive of Industry Super Australia.