Federal Member for Parkes Jamie Chaffey says people across his electorate are “already at breaking point”, after the Reserve Bank lifted interest rates for the fifth time this year to their highest level since 2008.
In a split 6-3 decision on Tuesday, 3 November, the Reserve Bank of Australia (RBA) board lifted the cash rate by 25 basis points to 4.85 per cent.
“This means interest rates are at an 18-year high,” Mr Chaffey said.
“It’s another huge kick in the teeth to people across the Parkes electorate who are already at breaking point.”
“At 4.85%, Australia’s cash rate is higher than any major advanced economy.”
Mr Chaffey said a family with a $600,000 mortgage would now have to pay another $125 a month in interest.
Across all five rate rises this year, more than $450 has been added to monthly repayments for the average mortgage holder with a $600,000 loan, according to comparison site Canstar.
Property prices have already fallen by 6.7 per cent nationwide since the first hike in February, according to data provider Cotality.
Mr Chaffey said young home buyers had been caught out.
“Young people – particularly those who took up the Labor Government’s 5% Deposit Scheme – have been caught in a trap of negative equity,” he said.
“They are trapped in debt with no way out and that causes enormous stress.”
RBA governor Michele Bullock said overseas factors were driving up inflation, but domestic capacity pressures were also higher than previously thought.
While the bank did not anticipate a recession, Ms Bullock acknowledged higher interest rates would make many Australians feel poorer, and would not rule out further hikes if inflation stayed too high.
“It is critical that we stop expectations for high inflation from becoming embedded in price-setting decisions across the economy, or the problem will only get worse,” Ms Bullock said.
“Some pain now will prevent even worse pain down the track.”
The RBA also revised its unemployment forecast up to five per cent by 2028, and now expects real wages to go backwards by one per cent in 2026.
Mr Chaffey blamed government spending.
“This is happening because inflation remains too high and, as economists and the Reserve Bank have warned, government spending is adding to inflation, further driving interest rates up,” he said.
Treasurer Jim Chalmers said budgets were not the primary driver of prices in the economy, but the government took responsibility for its part in the fight against inflation.
“We’ve found almost $180 billion in savings since coming to government,” Dr Chalmers said.
“There have been savings in all eight of our budget updates so far, and there will be more savings in the mid-year budget update in December.”
Business groups have called on the government to cut spending and lift productivity.
“It’s hard to ask Australians to tighten their belts when the federal government isn’t tightening its own,” said Business Council of Australia chief executive Bran Black.
Mr Chaffey also pointed to the pressure on small businesses.
“The rate of insolvencies in Australia is at the highest level it has ever been – 46 insolvencies every day since the May Federal Budget was handed down,” he said.
“We need small businesses. They make up the bulk of our economy, and employ more than five million Australians.”
KPMG chief economist Brendan Rynne said the RBA would likely pause in December, but could consider more hikes in the new year if conditions did not improve over Christmas.
HSBC Australia chief economist Paul Bloxham put the risk of a recession at one in two.
“In our central case, a faster weakening of growth keeps the RBA from hiking further,” Mr Bloxham wrote in a client note.
“If growth does not weaken as fast as we expect, there remains a risk the RBA may have to hike further yet.”
“It doesn’t have to be this way,” Mr Chaffey said.
“The Liberals and Nationals have already found $31 billion in savings, with more to come. This would help take pressure off inflation and interest rates.”
“We will fix the economy by cutting taxes, backing small business, and reducing red tape.”
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