Treasurer Jim Chalmers hopes landlords will give rent relief to tenants following the first official interest rate cut in more than four years.
The Reserve Bank eased the cash rate by 25 basis points to 4.1 per cent on Tuesday.
It was the first downward move since November 2020, following a run of 13 punishing increases for mortgage-holders in 18 months, designed to tackle inflation.
At the same time, renters across Australia have been struggling with record low vacancies and spiraling rents.
Dr Chalmers welcomed the Reserve Bank’s move, noting that it was ‘very clear that the worst of the inflation challenge is behind us’.
But the Treasurer said it should not only be borrowers who benefit.
‘When interest rates are cut, that has a broader impact than just people with a mortgage,’ he told ABC Radio National on Wednesday morning.
Treasurer Jim Chalmers (pictured) has said he hopes landlords will give relief to renters following the first official interest rate cut in more than four years
The Treasurer noted that ‘renters are doing it tough as well’ (pictured: prospective tenants queue to view a property in the Sydney suburb of Bondi)
‘It has a broader impact in our economy, and it changes housing costs as well.
‘And so we want to make sure that landlords take this into consideration as well. Renters are doing it tough as well.’
Dr Chalmers refused to be drawn on whether the rate cut would prompt the Prime Minister to call the election, which must be held before 17 May.
‘My job is to focus on the economics of it, the economy,’ Dr Chalmers told Channel 9’s Today.
‘The combination of factors playing out in the economy gave the Reserve Bank confidence that they could cut interest rates. And that’s a good thing for millions of Australian homeowners.’
Shadow Treasurer Angus Taylor welcomed the rate cut but said there was a ‘lot of pain to go’.
‘It’s obviously welcome relief, but for many Australian families it’s too little, too late,’ Mr Taylor told the Today Show.
He said that updated forecasts from the Reserve Bank yesterday predicted that Australia’s standard of living won’t return to 2022 levels until at least 2031.
‘We’re seeing record levels of government spending. So households have had to tighten their belts, and that’s the only way this has been achieved. It should really not be on households to do all that hard work,’ Mr Taylor added.
‘The government should be doing its bit and this government has failed to do that and that’s why we’ve only had one cut.’
On Tuesday, Reserve Bank Governor Michele Bullock urged Aussie mortgage holders to ‘be patient’ after the first official interest rate cut in more than four years.
‘Some of the upside risks to inflation appear to have eased and there are signs that disinflation might be occurring a little more quickly than earlier expected,’ the RBA board said.
However, Ms Bullock declared the fight against inflation was far from over, and cautioned borrowers against expecting more rate cuts in 2025.
‘We cannot declare victory on inflation just yet,’ she told reporters in Sydney.
She had a warning for homeowners who had struggled to cope with the most aggressive rate hikes since the late 1980s, that had been unleashed in 2022 and 2023.
‘I understand you are hurting, and I understand mortgage rates have increased a lot … but we need to get inflation down because that is the other thing that is really hurting you,’ Ms Bullock said.
‘If we don’t get inflation down, interest rates won’t come down, and you’ll be stuck with inflation and high interest rates.
‘So, we have to be patient. I understand it hurts. But it’s really important that we get inflation down.’
Financial markets are expecting another three rate cuts in 2025 and 2026 – but Ms Bullock believed there would need to be persuasive evidence to go beyond one.
‘Our feeling at the moment is that is far too confident that that’s as many rate cuts as we’ll be having,’ she said.
‘I can’t say “one and done” – what I can say is that we’ve done one, we’ve moved a bit of restrictiveness, we are still restrictive, and we are waiting for more evidence that we’re getting inflation sustainably back in the band before we are willing to move again.’