ANDY PARK:
Well, let's turn to the story of the day. If you have a mortgage I know I do, a lot of Australians do, and if you aren't on a fixed rate then you would have felt the impact of rising interest rates. The cash rate has today increased again by 0.25 of a per cent to 3.6 per cent. That means if your mortgage is half a million dollars, it's another $77 added to monthly payments. So for example, someone with a loan that size, it's well, an extra $983 a month since the first rate rise in May 2022 or 42 per cent. That's a huge hit for most people's budget, I'm sure mortgage brokers phones are ringing off the hook. Federal Assistant Treasurer Stephen Jones welcome to you.
STEPHEN JONES:
Good to be with you.
PARK:
Are you disappointed that the RBA has increased the cash rate today?
JONES:
We're really feeling for the households and the small businesses who are doing it tough. This is the 10th consecutive increase since the beginning of May last year and an average household could be paying as much as $1,000 more per month for their mortgage. That's a big hit. So it's our job to ensure the Reserve Bank, independent, sets monetary policy and interest rates independent of the government. But it's important that from our point of view, we do our best to ensure that we don't make a bad situation worse and that we put downward pressure on interest rates, through spending constraints, and by ensuring that, where possible, we're providing relief to households, particularly in the area of energy relief, which is a big priority for us.
PARK:
I do want to come to that in some more detail in a moment but what is interesting, this time around the 10th time, there's been calls from the ACTU and the Australian Chamber of Commerce and Industry for the RBA to pause rate rises. Is that something that you'd like to see?
JONES:
Nobody wants to see interest rates go any higher than they absolutely need to, to deal with inflation and I'm sure the Reserve Bank is not doing this for no reason. We know that we have a national interest in ensuring that we bring inflation down. Inflation is a tax on households and it hits poor households more than anyone else. So we have a national interest in ensuring that inflation is brought under control. Now what we're starting to see in the national figures is that it looks like we might have peaked and hopefully we'll start to see that turnaround sometime over the course of this year. Important for government to do its job, let the independent Reserve Bank do its job. Nobody wants to see interest ‑ nobody wants to see anyone paying any more than on their mortgage than they absolutely have to.
PARK:
You use the words higher than necessary there. What if the RBA has overreached? Are you concerned about that?
JONES:
Look difficult job monetary policy is very, very blunt instrument, so the Reserve Bank is doing a difficult job in really difficult circumstances. There's a big risk in either undershooting or overshooting. You undershoot and the inflation numbers get away from you and that hurts everyone. It hurts investment, it hurts households are paying more in basic cost of living. And if you overshoot, it means the economy has slowed quicker and more money is sucked out of the economy than is absolutely necessary so, difficult job in getting the balance right. Acknowledge that.
And important for the government to ensure that we don't have the Reserve Bank with a foot on the brake and the government with a foot on the accelerator which is why we're putting so much into our restraint in terms of what we're spending money on in the budget and ensuring that where we are investing, it's around dealing with some of those things that are adding to inflation repression. So, we don't have enough skilled workers ensuring that we're investing more in skills. We've got problems with energy prices, ensuring that through our $1.5 billion household and small business energy relief package, we're bringing down the cost of energy and the impact of energy on households. The Reserve Bank has acknowledged that this will make a difference in the inflation outlook as well. And in other areas right across the economy, we're looking at what we can do to deal with these supply‑side issues that we've inherited. That's not to take away for one moment from the difficulty that households are going through right now.
PARK:
There has been a lot of criticism of RBA Governor Philip Lowe. It's like he's got a dartboard on his back, certainly for the average Australian. But would replacing him solve anything at all? Isn't this more of a systemic issue? I mean, Ross Gittens has written that it's basically a rotten system, let alone anything to do with who's currently the governor of the RBA.
JONES:
Yeah, frankly, it's not about any individual. The Reserve Bank Board meets and makes a decision as a collective. It's just falls to the governor to announce the decision of the collective. So it's not about any individual. And of course, when you're going through a situation that we're going through now and coming out of the back of the COVID crisis and the international turmoil that we're all experiencing, it does require us to reflect upon monetary policy and upon all of those things.
PARK:
So, yes ‑
JONES:
Our job right now though ‑ our job right now and the job of the government is to ensure that fiscal policy is heading in the right direction and ensuring, as your listeners would well know, that we aren't adding through government spending to a problem which makes inflation worse.
PARK:
Assistant Treasurer Stephen Jones do you think we need to reassess our target inflation rate? I mean, a number of economists have suggested we could tolerate a higher rate of inflation, particularly given where rates are globally as we speak.
JONES:
Look, I don't think it's helpful that I make comments in that area now when we're in the middle of dealing with a very, very difficult set of circumstances. Quite apart from that, one of the first acts that the Treasurer did when we came into government was to announce a review of the Reserve Bank and its governance arrangements to ensure that what we have is settings that are fit for the circumstances that we're facing now and into the future.
PARK:
When will the public find out about that Reserve Bank review? Shouldn't it be this month?
JONES:
Can I just make my ‑ yeah sure, it's not specifically about monetary policy settings, but about the Reserve Bank as a whole and governance arrangements as a whole. It's not about any one individual or any specific policy decision. And, yes, when cabinets had the opportunity to go through, and when the Treasurer and the Cabinet had the opportunity to go through the recommendations and the outcomes of that report, then of course that will be made public and I'm sure it will set off a lively public discussion. But between now and then, it's important that we deal with the cards that we've got, responsible fiscal strategy, ensuring that it works in tune with monetary policy and doesn't make a bad situation worse.
PARK:
Well, the other lively discussion that's happening across the country at the moment is really about the big banks. Westpac's chief Economist Bill Evans will join me after 5 o'clock today. Aussies will point to record profits and ask the question, do they need to pass on the rate rises? What do you think?
JONES:
We've got the ACCC looking at a related issue at the moment, and that is the gap between, and the time gap between ‑ the lag, if you like, between interest rates going up and being passed on to people with mortgages and interest rates going up but not being passed on to deposit holders, particularly people who are reliant on fixed term deposits. It's called a lag profit inside the banking system. We think there's an issue here to be looked at. We've asked the independent ACCC to do an analysis of it because it's something I can tell you I hear complaints from Australians, particularly retirees all the time. That interest rates go up, but the amount of money they earn on their deposits and the fixed‑term deposits aren't going up.
PARK:
If you just joined me. Federal Assistant Treasurer Stephen Jones is here on RN drive on the news of a 10th consecutive rate rise by the Reserve Bank of Australia today.
I do want to move to super, Stephen. Well, there's new modelling that's found that one in ten Australians retiring on 30 years time, or in 30 years time, will be impacted by Labor's plans to double the concessional tax rate on super balances above 3 million from 15 per cent to 30 per cent. This was modelling that was done by the Parliamentary Budget Office. Did Labor seek to hide that modelling about the indexing.
JONES:
Absolutely not. It's about as meaningful as saying that we've got modelling that says if real wages don't go up sorry, if wages don't go up over the next 30 years, then Australians, all Australians, including those on $100,000 salaries, are going to be on the poverty line. It's about as meaningful as saying that.
PARK:
Just lastly, Labor is planning changes to franking credits. The opposition says between franking credits and superannuation, that's twice the Prime Minister has broken an election promise. Do they have a point here?
JONES:
No, the policy or the proposition that we're going to put before the Parliament over the next fortnight in this area is something that was announced by none other than Scott Morrison when he was the Treasurer and he did it in the 2017 Mid‑year Financial and Economic Outlook. He announced it, he said that it would apply, in fact, said it would apply retrospectively, but didn't get around to legislating it. And there are lots of measures like this that are announced by one government, they don't get around to doing it and then they are implemented by a subsequent government. So if the Liberal Party and the Coalition are against this proposition, they're actually against an initiative that was announced by their own government. It has nothing to do with the policy that the then Labor Leader and then Labor Opposition took to the 2019 election.
And here's a guarantee that I can make. Overwhelmingly, everybody who is getting those franking credit distribution cheques today, all of those mum and dad investors are getting them today. We'll get them after this measure is put in place because it is something which affects institutional investors. And the question that your listeners need to ask themselves, is when was the last time I engaged in an off‑market share buyback? And the answer, they will say, is never. I wouldn't even know what they are. And this is only a measure that applies to off‑market share buybacks, which is something that is conducted between large businesses and almost exclusively large institutional investors.
PARK:
Well, we'll hold you to that promise. Federal Assistant Treasurer Stephen Jones. Appreciate your time. Good afternoon to you.