Speculation of RBA raising rates is topic for "economist picnics", not for mums and dads for now: Scott Morrison

Speculation of RBA raising rates is topic for "economist picnics", not for mums and dads for now: Scott Morrison
Staff ReporterDecember 7, 2020

Treasurer Scott Morrison said this week's central bank’s possible hint about rate increases doesn’t indicate the bank is heading there anytime soon.

Morrison was responding to Ross Greenwood’s questions on his show on Money Show on 2GB.

The Reserve Bank of Australia estimated the neutral nominal cash rate would be around 200 basis points above its current level in comments contained in minutes of the RBA’s July 4 policy meeting.

The RBA’s estimate suggests the cash rate target will need to rise from 1.50 per cent currently to 3.5 per cent over an unspecified time, but Treasurer Morrison was keen not to alarm mums and dads.

Asked about the implications for households that have significant debt at the moment and also potentially for the future of the Australian economy, while also considering the budget’s deficits and surpluses and therefore the government’s debt, Morrison said he didn’t think there “are any real implications to that in the short term, or in the medium term or even beyond that”.

He said these sorts of things are “topics for economists’ picnic most of the time”, they are important no doubt, but mainly relate more to analysts who take a keen interest in key technical issues rather than the mums and dads or small businesses.

Morrison said he wouldn’t jump to any conclusions yet about the implications.

"I wouldn’t be leaping into any sort of early conclusions about having any indirect implications as we speak. These are important analyses to be undertaken but they mean more for the analysts taking a keen technical interest in these issues than they do for mums and dads or small businesses," he said.

He said the Reserve Bank had showed tremendous patience and discipline, referring to central banks cutting rates across the world, while the RBA didn’t take them down as far as the rest of the world. He said that while there was some movement with the Fed and in Europe, they are still “well below where we are today”.

Referring to RBA's minutes, Morrison said, "What that analysis that became public in the minutes in any way indicates that the bank is heading there anytime soon. Obviously, that’s a position for them. They’re an independent bank. But they will continue to have regard to the employment market, where inflation is and all of these issues.”

Morrison said the RBA had taken astute judgments in this regard, and commended both former RBA Governor Glenn Stevens and current chief Philip Lowe.

On the question of APRA raising capital requirements for banks to 10.5 percent, he said it was part of the move to build an unquestionably strong financial sytem.

The Treasurer struck a positive note on banks’ resilience and the regulatory framework, saying “we have arguably one of the strongest, most stable banking and financial systems in the world” and said the new bank levy as announced in the budget was still modest.

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