PETER STEFANOVIC:
Back to Canberra now. Joining us is the Assistant Treasurer, Stephen Jones. Stephen, good to see you. Thanks for your time. So, have you any concerns about the RBA’s aggressive posture?
STEPHEN JONES:
The impact of these rate rises are having on households, you quoted the cost in your introduction, Pete, households are feeling it. We know that, which is why our plan, our fiscal plan, to provide targeted relief to households and to ensure that through government programs and government spending we aren’t making a bad situation worse is more important than ever. So our plan for putting a cap on energy prices – which the Coalition voted against, regrettably – our plan for cheaper medicines and our plan for child care, all critical to provide some targeted relief to households.
STEFANOVIC:
Philip Lowe was too slow to drop rates then made shockingly inaccurate forecasts. Critics now claim he’s overcompensating and going too hard by not allowing for lag time. Meanwhile, as you just mentioned there, households are suffering. So do you have full confidence in Philip Lowe and the board?
JONES:
Look, Philip Lowe, the Reserve Bank Board, they’ve all got a tough job to do. I’m not going to sit here and take pot shots at the governor. What I will say is that the government thinks that inflation has peaked. We think those higher numbers in the December quarter were seasonal. They were about the holiday season, about people going on holidays, having some holiday relief and that’s going to be reflected in the next quarter.
STEFANOVIC:
So on that specific point, was there a need to be aggressive after that? Should more lag time have been allowed?
JONES:
Well, the second point I was going to make, Pete, the full impact, the full brunt of the rate rises that have already been introduced by the independent Reserve Bank haven’t been yet felt by those 800,000 households that are still on their fixed rate mortgages. So, I think all of this sends a message that we think inflation has peaked. We think what’s already in the system should do the job to ensure that we can dampen down demand. I’m hoping that if this is not the last it’s near the last of the rate increases. We’ve been very clear as a government that there’ll be fiscal restraint. There won’t be a big‑spending budget. The new spending will be very much targeted at things we’ve already announced – energy relief.
STEFANOVIC:
Right.
JONES:
We’re doing everything we can as a government to ensure that the Reserve Bank can see its way to ensuring That these are the last if not nearly the last interest rate increases.
STEFANOVIC:
Those policy aren’t working, though. Cost of living is going up.
JONES:
Well, as I said, the increases in the CPI in the December quarter, we think they’re seasonal. We think that inflation has peaked, and it is starting to turn around. So, we’re hoping that this if not the last it’s nearly the last of the interest rate increases. And there are already signs in the system, I’ve got to say, Pete, that our energy package that we put through in December last year – that the Coalition voted against – which will cap the price of electricity generated from coal and from gas, that those policies are already working and they’re flowing their way through to the wholesale contracts that have been signed up now.
STEFANOVIC:
Okay.
JONES:
So early signs that our policies are working. Number one job of the government is to ensure that we don’t make a bad situation worse.
STEFANOVIC:
So, yeah.
JONES:
Number two, to respond to the energy crisis and provide targeted relief where we can.
STEFANOVIC:
So no more cash handouts when the Budget rolls around?
JONES:
We’ve announced that we’ll be providing $1.5 billion worth of temporary relief in relation to households and small business for energy.
STEFANOVIC:
Yeah, but nothing more than that?
JONES:
But you will not expect to see a big splash spending budget. Spending restraint. Any new spending has to be offset and ensuring through our fiscal policy we aren’t adding to inflationary pressures.
STEFANOVIC:
Okay. You blamed the former government for the first rate rise. Do you have to accept some blame for the eight rises that followed?
JONES:
Certainly not, Pete. This is not about us issuing blame. I think Australians know – and this is reflected in the polls – Australians know that overwhelmingly the inflationary pressures are being caused by a hangover from what happened through COVID and the war in Ukraine, which is pressing – which is pushing up commodity and energy prices. Australians understand that. They’ll mark the government down if it’s not seen to be responding and if it is seen to be making a bad situation worse, which is why we’ve put so much effort into ensuring that through our spending policies we’re not adding to inflation. And I think if Australians thought that we were doing that, then they would mark us down. But I think they understand we’re managing a very, very difficult situation – a narrow path to avoid recession. But we think we can do it.
STEFANOVIC:
Okay. The Greens made quite a bold claim yesterday to override the board’s decision. Do you have any plans to support that at all?
JONES:
I think an important piece of economic policy in Australia for close to 30 years now, 40 years now, has been an independent Reserve Bank which sets interest rates and determines monetary policy. It provides checks and balances. I think if we were to start overriding the independence of the Reserve Bank in its decision‑making that would create economic chaos, and we’re not going to do that. Of course, we have opinions, we’ve got views, I’ve expressed them. We think inflation has peaked. We think the need for – we think we should be at the top or near the top of any tightening of monetary policy because we think households are doing it tough. We think we’ve hit the top of inflation. We should start to see it coming down over the next quarter. But we’re not going to be in the business of either directing or setting monetary policy. That would be winding the clock back 40 years, and we’re not going to do it.
STEFANOVIC:
Okay. That’s the Assistant Treasurer and the Financial Services Minister, Stephen Jones. Thank you, Stephen.