James Stevens (Sturt, Liberal Party) Share this | Hansard source

Well, it has been a tough couple of weeks for anyone who holds a mortgage—or any loan, frankly—within our economy. Two weeks ago we had the federal budget and then a little over a week later the Reserve Bank made their decision to increase interest rates by another 25 basis points. Both documents had updated macroeconomic forecasts. A consistent pattern seems to be emerging where, each time forecasts are updated, the outlook on inflation looks worse and worse. The Reserve Bank now predicts that inflation is going to peak at eight per cent. Recently the ABS statistics for the September quarter had inflation running at 7.3 per cent. So if people are feeling that things are tough now, unfortunately the Reserve Bank and the budget papers are predicting that it is only going to get tougher.

We know that as inflation increases a lot of terrible things happen in our economy. But when it comes to this motion, when it comes to mortgages and particularly homeowners, there are two significant impacts of inflation. The first is the real-value destruction of the value of the asset, because the market is certainly not moving up at all. The market is moving down, but even if it was staying the same, if inflation is running at eight per cent then the value of that asset is decreasing by that amount, if its value isn't changing with that amount.

Even more significant is that as inflation goes up the Reserve Bank needs to fight that from a monetary policy point of view. Ordinarily you would hope that the government would equally do so from a fiscal point of view. On the monetary side, that means increasing interest rates. They've gone up consistently, at every meeting of the Reserve Bank since May, and unfortunately most commentators are predicting that they will continue to go up. There's a meeting in a few weeks, in the first week of December, and then of course the RBA won't meet in January, but they'll start meeting again from February. One commentator indicated today that he thinks there'll be four to five more interest rate rises and that the cash rate will go to 4.1 per cent. That means add at least three per cent for what the retail rate will be—interest rates at over seven per cent for the average homeowner. This is a devastating outlook if you've got a mortgage.

Let's not forget that most people would have locked in a fixed rate mortgage for around three years, but, when that mortgage matures, they're probably going from that rate, which was based off a cash rate of 0.1 per cent, as it was until May, and they'll be refinancing with an increase of, potentially, four per cent in their interest rate. That is the outlook for mortgagees in this country. It's also the outlook for anyone who borrows money. It's the outlook for businesses. The cost of capital in our economy is going up dramatically. In light of all that, in the budget two weeks ago we saw no attempt from the government whatsoever to provide any fiscal policy medicine to the challenge of inflation in our economy. Not only are they leaving the entirety of the job to the Reserve Bank; they making it worse by adding $115 billion of new expenditure in this budget, which is only pumping more money from the government into an economy that is already overheating. It's predicted, in the government's own budget papers, for inflation to peak at eight per cent at least.

So we have a government that is not providing any help to the Reserve Bank. In fact, they're making the Reserve Bank's job even harder. What we know is that, as the Reserve Bank is continuing to increase interest rates, that is the responsibility of a government that is not providing any fiscal policy support to the Reserve Bank's monetary policy changes that they have to make month after month to combat inflation. We must defeat inflation. It is vital. It destroys wealth, and the people it hurts the most are those that have the tightest fixed incomes, who've got no ability in their household budget to make changes to accommodate these growing costs. Fighting inflation is critical. Not helping the Reserve Bank is what the government have done in this budget, and they will be held to account for it. As your mortgage goes up, like every other price on the economy, it's the Albanese government that will be held to account and be held responsible by the voters for that.

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