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Higher cost of living stays the RBA's hand in delivering further interest rate relief



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MEDIA RELEASE

THE HON JOE HOCKEY MP

SHADOW TREASURER

Tuesday, 6 November 2012

HIGHER COST OF LIVING STAYS THE RBA’S HAND IN DELIVERING FURTHER INTEREST RATE RELIEF

The Reserve Bank today left the cash rate unchanged at 3.25%. The markets had been split 50/50 on whether the Reserve would cut rates.

The accompanying statement was unusually long, indicating that the Reserve felt compelled to explain its actions (or inaction).

The Reserve made it clear that recent inflation data was a key consideration for not lowering the cash rate. It noted that:

“with prices data slightly higher than expected…the Board judged that the stance of monetary policy was appropriate for the time being.”

The September quarter inflation data came in significantly higher than expected on both a headline and underlying basis. This reflected, amongst other things, massive increases in electricity prices - linked to the carbon tax (with more to come) - and a large increase in medical and hospital services, which the ABS stated was mainly as a result of Government changes to the Private Health Insurance rebate.

This shows it is now manifestly clear that it is the policies of this Government which are pushing up the cost of living and staying the Reserve’s hand in delivering further interest rate relief to home buyers and small businesses.

Whilst the Reserve recognises that growth in Australia has been running close to trend over the past year, there are clearly concerning signs on the national and international economic scene.

The Government’s failure to articulate an economic, fiscal or taxation strategy for Australia continues to undermine business and consumer confidence and leaves our non-mining economy with a sense of malaise.

[ENDS]