Reserve Bank of Australia Governor Philp Lowe issues apology to Australian home borrowers

Reserve Bank Governor Philip Lowe has apologised to borrowers who took out a mortgage expecting interest rates to stay at a record-low of 0.1 per cent – only to cop seven monthly hikes.

‘I’m certainly sorry if people listened to what we’d said and acted on what we’d said and now regret what they had done,’ he told a Senate economics hearing on Monday.

‘That’s regrettable and I’m sorry that happened.’

Reserve Bank Governor Philip Lowe has issued an apology to borrowers who took out a mortgage expecting interest rates to stay at a record-low of 0.1 per cent

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Dr Lowe last year repeatedly promised the cash rate would stay on hold at 0.1 per cent until 2024 ‘at the earliest’ but since May, borrowers have copped seven consecutive interest rate rises. 

The cash rate is now at a nine-year high of 2.85 per cent with economists expecting another 0.25 percentage point rate rise in December.

Of those seven hikes, four of them were of 0.5 per cent, marking the most severe monetary policy tightening since 1994. 

A borrower with an average $600,000 mortgage has seen their monthly repayments skyrocket by $839 just six months, to $3,145. 

The inflation rate of 7.3 per cent is more than double the RBA’s 2 to 3 per cent target and was expected to remain outside that range until 2025. 

Dr Lowe said the RBA was unable to have predicted the supply constrains that have pushed up inflation.

‘We didn’t predict Covid and we didn’t predict Russia’s invasion of Ukraine,’ he said. 

The high inflation has meant Australian workers are effectively suffering a cut in real wages. 

The wage price index in the year to September grew by 3.1 per cent, a level less than half the consumer price index of 7.3 per cent for the same period. 

Wages are nonetheless growing at the fastest pace since 2013 after minimum wage workers in retail received a 5.2 per cent pay rise.