Reserve Bank Must Stay Independent, Avoid Rushed Rate Cuts: Opposition

Leader of the Opposition Peter Dutton speaks to media, Brisbane, Australia on Dec. 13, 2024. AAP Image/Russell Freeman

As every day mortgage holders wait for the Reserve Bank of Australia’s (RBA) next rate decision on Feb.18, federal Opposition Leader Peter Dutton has called on the RBA governor not to succumb to political pressure, and remain independent.

Dutton said any potential rate cut should be based on economic fundamentals, not external influences.

“She [Michelle Bullock] shouldn’t feel pressured one way or the other, because you can cut rates and then find that they’ve been cut too early and then the Reserve Bank will have to increase rates later on,” Dutton told reporters during a press conference on Feb. 11.

Dutton warned that rate cuts should not come prematurely.

“If interest rates come down prematurely, you don’t want that scenario, because you then see upward pressure within a couple of months or a few months’ time,” he explained.

He expressed his confidence in the RBA governor’s independence, saying she would base her decision on economic factors and professional judgment.

“She will do what is in our country’s best interests, and she'll do that based on looking at the economic settings and what is happening in the economy,” he stated.

People walk past a real estate agency in Melbourne, Australia, on June 6, 2023. William West/AFP via Getty Images

He did say he hoped a rate cut would come, particularly to provide relief to Australian families and small businesses.

“There have been 27,000 small businesses who have closed over the last couple of years under this government, and there are many businesses who are feeling the pinch, because not only has your mortgage interest rate gone up, but people’s overdraft and credit facility rates have gone up, in some cases, to double digits,” Dutton explained.

Labor Responds to Dutton’s Rate Cut Stance

Dutton’s comments quickly became a point of political contention, with Labor MP Andrew Charlton accusing the opposition leader of inconsistency.

Speaking in Parliament, Charlton questioned whether Dutton wanted rates to be cut next week or whether he preferred to see them unchanged.

“Well, unfortunately, today we got an answer to that question. Friends, the Leader of the Opposition admitted today that he does not want to see interest rates cut,” Charlton said.

Charlton also criticised Dutton for not speaking to more families about the impact of rising rates.

“Mr. Speaker, most families know that with inflation coming down, thanks to the Albanese government, it gives more room for the RBA to deliver welcome interest rate cuts,” the member for Parramatta added.

He pointed to the fact that interest rate cuts were now forecast by all major banks and that the National Australia Bank (NAB) had already slashed its fixed-rate mortgages, a move Charlton attributes to the government’s measures in controlling inflation.

RBA Rate Cut Expectations

Australia’s annual inflation showed signs of slowing in December, with the Australian Bureau of Statistics (ABS) reporting a decrease in trimmed mean inflation to 3.2 percent from 3.6 percent in September.

The consumer price index (CPI) also dropped to 2.4 percent, down from 2.8 percent in September, raising expectations that the RBA might consider an interest rate cut.

Meanwhile, the banking sector has already acted.

NAB became the first of the big four banks to reduce interest rates this year, cutting its fixed-rate mortgages by 0.25 percentage points for owner-occupied properties, and 0.3 percentage points for investors.

According to Canstar calculations, the 0.25 percentage point reduction could provide immediate relief for mortgage holders, with a person holding a $600,000 mortgage and 25 years remaining on their loan, seeing a $92 boost to their budget if the full cut is passed on.

As the RBA prepares to make its decision, all eyes will be on the central bank to see how it balances the competing pressures of controlling inflation while providing relief to struggling Australians.