After Reserve Bank of Australia governor Philip Lowe repeatedly vowed to hold interest rates steady until 2024 last year, Sunrise anchor David Koch has exploded on the bank.
‘Late last year, November December, the Reserve Bank, Philip Lowe, was telling Aussies to go out and borrow, go out and borrow as much as you like, on the understanding. I’m not going to put up official interest rates ’til 2024,’ Koch said.
‘A couple of months later, they started putting up rates.
‘Was that advice to average Australians negligent?
‘Were they derelict in their duty to lead average Australians up the garden path to get themselves in debt?’
Banking giant ANZ is now predicting the RBA will raise rates by 0.5 of a percentage point in August, September, October and November.
This would see the cash rate more than double from a three-year high of 1.35 per cent to a 10-year high of 3.35 per cent.
The rate increases for Australian borrowers in May, June, and July totaled 1.25 percentage points, which is the highest percentage increase since 1994.
If ANZ’s forecast proves accurate, borrowers with an average $600,000 mortgage would experience a $46 per cent increase in monthly mortgage payments by November compared to early May, when the cash rate was still at a record-low 0.1 per cent.
Before the RBA increased rates for the first time since November 2010, a popular Commonwealth Bank variable had a rate of barely 2.29 per cent in early May.
However, if the cash rate increased to 3.35 per cent, as predicted by ANZ, a CBA variable rate would increase from the current 3.39 per cent to 5.39 per cent.
Prior to the RBA meeting in July, when the cash rate was increased by 0.5 percentage points, the Commonwealth Bank cut its variable rates by 0.15 percentage points in late June.
When Today host Karl Stefanovic asked Treasurer Jim Chalmers whether he had a “Philip Lowe voodoo doll,” Chalmers, who has started a probe of the Reserve Bank, awkwardly laughed.
“No, not at all. I think the world of Phil Lowe,” he stated.
‘He’s capable of defending the decisions of the board himself.’
Dr. Lowe consistently pledged in a number of monthly monetary policy comments made last year that the cash rate would remain at 0.1 percent until 2024, “at the earliest.”
But in June, Dr Lowe defended his statements, telling former 7.30 host Leigh Sales they were based on inflation at the time.
‘We thought interest rates would need to stay where they were until 2024,’ he said.
‘So sometimes my comments get interpreted as me having made a promise or a very strong statement that interest rates would stay where they were to 2024.
‘In our own communication, our own way of thinking, it was very much a conditional statement – if the economy evolved as we’d expected, we’d keep rates where they were until 2024.
‘But the economy didn’t evolve as we expected. It’s been much more resilient and inflation has been higher. And we needed to respond to that.’
The rate of inflation rose by 5.1 per cent in the year ending in March, which is the highest rate since 2001.
The consumer price index is predicted by ANZ to climb by the most since 1990 at an annual pace of 6.3 percent in the June quarter.
However, inflation soared in the June quarter of 2021 at an annual rate of 3.8 per cent, more than double that of the March quarter’s pace of 1.1 per cent and reaching a level significantly higher than the RBA’s target range of 2 to 3 per cent.