MATTERS OF PUBLIC IMPORTANCE: Economy

Across every front, this government is pursuing economy-destroying policies which are hurting Australian families and small businesses, policies which are driving up interest rates. The most urgent challenge facing millions of Australians is the steady drumbeat of rising interest rates making it ever harder for them to repay their mortgages and hold onto their homes. The current Prime Minister, when in opposition, promised Australians cheaper mortgages, but the reality has been so very different. Today the cash rate sits at 4.1 per cent, after 11 rate rises since this government came into office. Of course, the actual rates that households are paying are so much more than that. Economists—certainly economists who observe the work of the Reserve Bank—and the Reserve Bank are opining that there are even more rate rises to come. Indeed, the Governor of the Reserve Bank recently warned that the central bank may need to lift rates again in coming months to get inflation down to its two to three per cent target. In other words, the Reserve Bank is warning embattled mortgage holders of more pain to come. Economists are pointing out the same risk. Westpac now expects another two rate rises. The NAB chief economist, Alan Oster, believes that the Reserve Bank will lift official interest rates to 4.6 per cent by the end of winter. He has said that the economy is now facing its worst back-to-back years since the 1990-91 recession. According to the latest report from Westpac, household sentiment is stuck at recessionary levels. According to the NAB Monthly Business Survey, the pipeline of future economic activity is shrinking and business confidence is diving. According to the Centre for International Economics, there is flatlining productivity in the mining sector and its supply chains. According to the budget, interest rates were going to stay at 3.85 per cent until early 2024 and then fall. Already, after just over a month, that prediction is sadly out of date.

The grim reality, in contrast to what was forecast in the budget, is that the latest interest rate decision adds another $75 a month to repayments on a typical $500,000 mortgage, making monthly instalments $1,130 higher than when this government came to power. A family with a mortgage of $750,000—an entirely typical mortgage in many parts of Australia today—is now paying $22,000 a year more in repayments than a year ago. It is no surprise that, as a result, a record number of homeowners are now struggling to pay their mortgages. According to new research by Finder, 40 per cent of Australian mortgage holders said that they struggled to pay their home loan in May. That is the highest recorded percentage since that survey began, and is up from 24 per cent 12 months ago. Canstar, the respected website that surveys pricing in many areas of the financial markets, has analysed the impact of the widely expected further increase in the cash rate to 4.6 per cent. As I mentioned, the NAB chief economist, Alan Oster, is among many who is predicting that. According to Canstar, the outcome of that grim increase will be that, for the median home, the typical household will be paying up to half its before-tax pay in mortgage repayments. Is it any surprise that, among young, growing families with a mortgage, 88 per cent are now in mortgage stress?

This government, as well as bringing in policies which are driving up interest rates, is also enthusiastically pursuing ill-judged policies that are driving up the cost of living. Our core inflation is now higher than any G7 nation other than the United Kingdom. In March inflation lifted to 6.3 per cent, with an annual rate, through to April, of 6.8 per cent. That inflation is not coming from the Kremlin, despite the Prime Minister's repeated attempts to point to any possible kind of excuse. It's coming from Canberra. It's about time that this government took responsibility for the cocktail of ill-judged policies they have put in place, which are making the situation worse. There is $185 billion in new spending since this government came to office. There's $2 of new spending initiatives for every dollar of revenue initiatives. There is poorly planned migration that the budget papers say will drive up housing costs. There's of course the truckie tax. There's the $153 million tax on our farmers. There's a fiscal strategy described by economist Steven Hamilton as the weakest fiscal strategy in living memory and a failure to restore the fiscal guardrails that have been in the fiscal strategy since 1996.

Just over the weekend, we saw this ill-disciplined spending continuing, with $2 billion splashed around on top of what was in the budget in a panicked response by this government as its highly dodgy Housing Australia Future Fund failed to get support in the Senate. Of course, the rising taxes that this government is enthusiastically introducing across the spectrum are also adding to the cost of living, whether it's that farmers tax I mentioned, whether it's Labor's franking credits and super taxes, which will be directly felt by self-funded retirees and pensioners alike. Indeed, over the next five years, the tax paid by Australians will increase by more than $300 billion.

What stands out is the way that respected commentators and economists are very clear in their assessments that the government's budget and spending decisions are driving inflation. Despite all efforts by the Treasurer to walk away, to decry responsibility, by the Prime Minister saying, 'nothing to do with me,' by the constant litany of excuses that are rolled out by those in government, the fact is that respected observers and former participants, such as former Reserve Bank of Australia Governor Dr Glenn Stevens, say inflation is way too high and that interest rates could remain elevated for some time yet.

ANU economist Ashley Craig confirmed that the government is making the Reserve Bank's job harder, saying, 'The present government decided to take an expansionary position,' and went on to say, 'If the government's spending and taxation choices are too expansionary, the RBA must act by raising interest rates.' It is this government's decisions which are putting the RBA into the position where it needs to keep raising interest rates, because there is no fiscal discipline being shown by this government.

Steven Hamilton has said the budget is expansionary. In Senate estimates, the RBA governor confirmed that the discretionary spending in the budget was expansionary. Betashares chief economist, David Bassanese, called the budget 'unambiguously expansionary'. What did Rich Insight's director Chris Richardson say? He said that he had thought that the Reserve Bank was done and dusted, but this—namely, the budget—has notably raised the chance that they will do another swing of the baseball bat.

S&P Global Ratings had this to say of the budget 'we expect inflation to be stubbornly higher than the Reserve Bank of Australia's targets until fiscal 2026,' and, 'handouts in today's budget may add to inflationary pressures.'

Policy decisions are increasing the cost of living, policy decisions are increasing interest rates and, of course, let's not forget policy decisions are driving up energy costs. Over nine years of coalition government, power prices rose on average by a mere 0.3 per cent a year over nine years. What has this government delivered for just one year? They delivered 12.9 per cent. This is not a race you want to win. There's more pain to come. New power price increases are up to 25 per cent for households, 29 per cent for small businesses from 1 July with the increase in the default market offer, the Victorian default offer and Queensland regulator prices. Small businesses struggling so hard to keep their noses above water will see electricity bills increase by up to $1,310 a year. This from a Prime Minister who promised 97 times prior to the election that those power bills would go down by $275. In area after area, it is the policy decisions of this government which are destroying the economy and hurting families and small businesses.