Treasurer Jim Chalmers welcomes third rate cut in six months as ‘good day' for homeowners

News.com.au

11 hours ago

Jim Chalmers has welcomed the Reserve Bank's third rate cut in six months, after the cash rate was cut by 25 basis points to 3.6 per cent, the lowest level in 28 months.
The Treasurer said households would receive $109 a month for every $700,000 owed, with this year's three cuts amounting to $330 a month, or nearly $4000 a year.
'We know there's more work to do, but we also know that when interest rates are cut three times in the space of six months that provides meaningful relief to millions of people,' he said.
'And that's why today is a good day.'
However, he declined to say what he thought should be the 'neutral cash rate', where the economy is growing at a healthy pace without causing inflation to rise too quickly or unemployment to increase.
'That's not something that I focus on. We know that interest rates have been restrictive for some time … that's why it's so welcome that we've had these three rate cuts in six months,' he said.
'(We're) getting closer to neutral, however you want to define neutral interest rates.'
RBA governor Michele Bullock said on Tuesday the bank's estimate for a neutral rate sat in a 'very wide range' of between 1 to 4 per cent.
She also declined to says where she thought the cash rate 'might end up'.
'You'll note that in the forecasts we have inflation coming back down to target and the unemployment rate remaining where it is with a couple of more cash rate cuts in there,' she said.
'That's the best sort of guess but things can change, and the board has to be taking things meeting by meeting and absorbing the data and thinking about … whether or not we're on track to achieve our goals.'
The nine-member RBA board voted unanimously to cut rates on Tuesday, however warned in an accompanying statement that it remained 'cautious about the outlook' due to a 'heightened level of uncertainty about both aggregate demand and potential supply'.
'It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia,' the statement said.
However it also said the cut came at an 'appropriate' time.
'With underlying inflation continuing to decline back towards the midpoint of the 2-3 per cent range and labour market conditions easing slightly, as expected, the board judged that a further easing of monetary policy was appropriate,' it said.
While Mr Chalmers acknowledged that there were still 'structural issues in our economy' – especially around productivity – and an uncertain international outlook, he said the 'interest rate decision puts us in good stead'.
'It gives us confidence that we're on the right track when it comes to dealing with these cost of living pressures in our economy, primarily inflation,' he said.
'And it gives us confidence that this progress that we've made together on some of the cyclic issues that we can now use that as a foundation to deal with some of the more structural issues in our economy.'
Shadow treasurer Ted O'Brien said despite the cash rate cut, Australians were 'becoming poorer' and they were 'feeling poorer for a reason'.
'Living standards will continue to be a problem in Australia as the cost of everything goes up,' he said from Maroochydore on Queensland's Sunshine Coast.
'There was some slight relief for mortgage holders who, under the new cash rate will be paying around about $1800 more every single month in interest payments, compared to when the Albanese government first came to office.
'This is some slight relief, but still, they are copping it.'