'These interest rate rises will sting': Treasurer issues grim warning as RBA review looms
Treasurer Jim Chalmers has warned mortgage borrowers that economic conditions will get worse before they get better as he revealed the terms of a wide-ranging review into the Reserve Bank of Australia.
Reserve Bank of Australia, will seek to understand why the central bank slashed interest rates to emergency levels before reverting to month-on-month interest rate increases.
Chalmers' comments come after the RBA deputy governor, Michele Bullock, yesterday said that households will be able to cope with a major increase in interest rates because they were able to get ahead of mortgage repayments during lockdowns.
READ MORE: COVID-19 linked to sudden spike in dangerous diseases, study finds
Treasurer Jim Chalmers has warned borrowers that household budgets would tighten even further. Nine
"I think Australians are finding it difficult to make room in their household budgets for rising interest rates at the same time as the other costs of other essentials have been going through the roof," Chalmers said.
"These interest rate rises will sting. Every dollar that a household spends in servicing their mortgage is a dollar they can't spend on meeting some of the other skyrocketing costs of essentials.
"The point that the Reserve Bank deputy governor was making is that a number of people, thankfully, have some room in their mortgage. They have been able to build a buffer.
"But the point I would make about that is that not everybody has a buffer, particularly in the teeth of this cost-of-living crisis. We need to recognise that as well."
READ MORE: Heavy rain and damaging winds to make a return on east coast
Property prices soared and auctions were packed when interest rates were at the record-low level of 0.1 per cent. LOUIE DOUVIS
The treasurer said the review into the RBA was needed because the economy was facing "very difficult" challenges in the medium and long terms.
"This is our opportunity to ensure that the monetary policy framework is the best it can be to make the right calls in the interests of the Australian people and their economy," Chalmers said.
"This review will consider the RBA's objectives, mandate, interaction between monetary, fiscal and macro credential policy, its governance, culture, operations and more."
READ MORE: Three children found dead after horror house fire in WA
The RBA widely said it was not interested in raising rates until 2024 - and then was forced to introduce multiple rate hikes in 2022. AAP
Chalmers insisted the government was taking an open mind into the RBA review.
"I don't want it to be an exercise in potshots or second-guessing, I don't want it to be exclusively focused on a backward-looking blame-shifting exercise," he said.
"I want to genuinely see it be about how we have the world's best central bank into the future."
Chalmers said a panel of three experts from Australia and overseas - who are independent of the Treasury and RBA - will lead the review.
READ MORE: Beef prices up 14 per cent in a year as groceries surge, research finds
Share a tip-off, video or photo with us
