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Under fire Philip Lowe warns even more rate rises are coming as he admits the Reserve Bank has still not done enough to control inflation – here’s his message to mortgage holders struggling to pay off their loans
- Reserve Bank chief appeared before Senate hearing
Philip Lowe has warned the Reserve Bank will keep putting up interest rates because it hasn’t done enough to control inflation.
The RBA governor told a Senate hearing in Canberra this month’s ninth consecutive increase – taking the cash rate to a 10-year high of 3.35 per cent – would be far from the last.
‘There is a risk we haven’t done enough with interest rates,’ he said.
‘If inflation worsens it will lead to higher inflation and higher unemployment and will lead to devastating consequences.’
Dr Lowe noted that unlike politicians, he could make unpopular decisions to tackle inflation running at a 32-year level of 7.8 per cent to avoid a repeat of 1990 when wages failed to keep pace with price rises.
‘It’s easy for me to do unpopular things unlike some of you,’ he said.
The board he leads voted on Tuesday last week to raise the cash rate for a ninth successive month to a new 10-year high of 3.35 per cent, adding another $93 to an average $600,000 mortgage.
‘I know it’s really hard for people to pay more on their mortgages, but it will be harder still if inflation gets higher,’ Dr Lowe said.
The typical Australian borrower with a 30-year loan is now paying 43 per cent or $997 more a month on their variable home loan compared with early May last year.
Philip Lowe has warned the Reserve Bank will keep putting up interest rates because it hasn’t done enough to control inflation
Their annual repayments are already $11,964 higher than they were nine months ago, despite Dr Lowe vowing in 2021 to keep interest rates on hold at a record-low of 0.1 per cent until 2024 ‘at the earliest’.
Dr Lowe on Tuesday last week suggested the RBA would keep raising rates in 2023 to deal with inflation running at 7.8 per cent, the highest level in 32 years that is also well above its 2 to 3 per cent target.
He caused more controversy on Friday when he told bankers in a private briefing organised by Barrenjoey Capital the RBA would take a hard line on inflation, leading to a sharp rise in bond yields.
But Dr Lowe said it was important he met with people outside the Reserve Bank and hear from financial market players.
‘I can’t live in a bubble,’ he said.
‘It’s a longstanding practice to talk to market participants, to business, to journalists, to politicians, to civil society.’
The RBA is expecting unemployment in 2024 to hit 4.25 per cent by the end of 2024, up from an existing 48-year low of 3.5 per cent.
‘If we can do that, it would be a good outcome for the country.’
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