Coalition finance spokeswoman Jane Hume and Social Services Minister Amanda Rishworth have clashed on inflation, with the Liberal senator saying “domestic policies” were to blame for Tuesday’s interest rates hold.
The Reserve Bank decided to keep the official cash rate at 4.35 per cent in a seventh consecutive hold because inflation was “still too high”.
The decision means homeowners will be slugged with the 13-year high cash rate until at least 5 November, when the board is set to meet next.
The government has been accused of fuelling inflation with big cash splashes on cost-of-living relief and infrastructure.
Asked by Seven’s Natalie Barr on Wednesday if some of the government’s assistance was “actually not” helping, Ms Rishworth said the government had a responsibility “to support and help people.”
“I would say when it comes to the RBA’s job, their job is to look at monetary policy, our job is to make sure we’re responsible with our fiscal policy,” the federal minister told the Sunrise host, appearing live with Senator Hume.
She said the government was balancing alleviating cost-of-living pressures, such as rent assistance and energy bill relief, while trying to bring down inflation.
“These are really important measures to support people that aren’t adding to the inflation challenge,” Ms Rishworth said.
But Senator Hume disagreed, saying inflation was “home grown” and that government spending was making it “sticky”.
“It’s not imported from overseas, it is a problem with our domestic policies,” she said.
She said Reserve Bank economists had told the senate committee she chairs that rates could not drop until “they see a reduction in public sector expenditure”.
“They’ve now pushed out their forecast to say that they don’t expect inflation to come sustainably back the band in which they could lower interest rates in 2026,” she said.
“That’s going to be cold comfort to mortgage holders that are really feeling the pinch of those high interest rates.
“That’s a real shame. So, the government can’t just say we’re not making a problem worse.”
But fresh inflation figures released later on Wednesday showed monthly headline inflation fell to 2.7 per cent, within the Reserve Bank’s cut range.
Following its rates decision, the central bank’s board acknowledged inflation had “fallen substantially” but that underlying inflation was the key.
The board again indicated further rate rises could be in play, saying it was not ruling anything in or out.”
“Policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range.”
It warned there was a “high level of uncertainty” on future rate decisions, and while other central banks had begun cutting rates, they remained “alert to risks” and “geopolitical uncertainties remain pronounced”, contradicting Senator Hume’s claim that the decision was purely domestic.
