Albanese: prospect of Chinese naval base in Cambodia ‘concerning’
The Australian prime minister, Anthony Albanese, who was visiting Indonesia on Tuesday, said he was concerned about reports of a planned Chinese naval base in Cambodia and called on the Chinese government to be open about its intentions.
“This is concerning,” Albanese told reporters in Makassar, when asked about the prospect of a Chinese naval base within the northern portion of Cambodia’s Ream naval base.
“We are in regular contact with the Cambodian government and we have been consistently assured that no foreign military will be granted exclusive access at Ream.
“We’ve been aware of Beijing’s activity at Ream for some time. We encourage Beijing to be transparent about its intent and to ensure that its activities support regional security and stability.”
Shadow treasurer Angus Taylor says Labor should reduce spending to contain inflation
The shadow treasurer, Angus Taylor, says in response to the rates rise that government needs to reduce spending to contain inflation.
He says the new Labor government has committed to $45bn in off-budget spending and $18bn in on-budget spending. He says this is “unnecessary” spending that will fuel inflation.
He calls for questions but there were none, and so the press conference ends after a very short time.
CoreLogic and Westpac react to rate rise
Tim Lawless, the research director for property group CoreLogic, says the back-to-back monthly rate rises of a combined 75 basis points will add about $200 per month for a $500,000 loan compared with April.
Concerns about higher borrowing costs have already taken some of the steam out of property markets, with “dwelling sales” down almost one-fifth in the three months to the end of May.
Where might you benefit from the higher rates? Well if you’re planning an overseas holiday, your dollar probably got a bit stronger against most currencies, including the US dollar (as noted in an earlier post).
“By opting for the least-forecast choice of hike, a long way north of market pricing, the RBA delivered a jolt of energy to the Aussie [dollar], which jumped from 0.7185 [US cents] to a high of 0.7249 before consolidating around 0.7200/20 in the initial response,” Westpac said in a briefing note. “The bold move should reverberate for some time.”
In case you missed here, here is the main article on the move:
Ardern: Australia is ‘like family’
Just circling back to the earlier announcement of New Zealand PM Jacinda Ardern visiting Australia later this week.
Ardern described the countries as being “like family” with many shared values.
Australia is our closest international relationship and it is traditional to meet the incoming prime minister as soon as possible after their election.
The pair will meet for dinner on Thursday evening, before attending a formal bilateral meeting on Friday.
Top of the agenda will include developments in the region, climate change, the Pacific, Australia’s controversial ‘501’ deportation policy and the rights of New Zealanders in Australia, Ardern said.
We are fortunate to be close neighbours who share common values, history, personal connections, and business relationships….This meeting also comes at an important moment in our reconnecting programme, as for New Zealanders and New Zealand businesses alike, Australia is a source of prosperity, labour, tourism, innovation, science and knowledge.
Asked if he thinks there is deliberate manipulation of the energy market by coal and gas suppliers, Chalmers says this is why he asked the ACCC to dial up its monitoring of the prices in the market.
We want to make sure that there is nothing dodgy going on in energy markets [in] a time where there is an extreme volatility, which is absolutely punishing industry and punishing ordinary households as well. We want to make sure the markets are operating effectively in a competitive way … [which is what] the ACCC is responsible for.
Chalmers: previous government treated the budget as a ‘giant political slush fund’
Chalmers says the budget and the government’s economic plan will be about addressing the economic challenges, without adding to inflationary pressures.
Budgets should always recognise and respond to and reflect the precise combination of economic challenges that exist at the time.
The best thing that we can do as a government is to make sure that we grow the economy without adding these inflationary pressures, that we get real wages moving again and that we actually have something to show for this trillion dollars in debt that our predecessors have racked up, because what really matters here when it comes to the level of government spending – in the context of high and rising inflation – is not just the management of government spending but the quality of that spending as well.
Our economic plan is all about growing the economy without adding those pressures.
He says he and the finance minister, Katy Gallagher, have been going through the budget line by line “auditing rorts and waste” and “for too long now, the best part of a decade, our predecessors have treated the budget as a giant political slush fund”.
Chalmers on the effect of the rate rise on government debt
Chalmers says he will provide an update on how the government paying down the debt will be made harder by the rates rise:
Our commonwealth budget has a combination of different dates for the way that money has been borrowed, and so that combination matters when it comes to servicing costs.
But when you think about the fact that it was already costing around $20 billion a year, give or take, to service that debt we have inherited, part of it will be impacted by these rising interest rates. I will talk more about that when I update the parliament at the end of July or soon after that.
And now we switch to the treasurer, Jim Chalmers.
He says Australians expected higher interest rates today, but that doesn’t make the news any easier:
For an average mortgage of $330,000 remaining, it’s about $87 a month that Australian homeowners will have to find. For an average new mortgage, it’s almost twice that, at about $157 a month.
He says in addition to the cost of living pressure, inflation will also make it harder for the Australian government to pay down the trillion-dollar debt left by the previous government.
We do have some things going for us in the labour market and in terms of relatively strong household demand.
We have an incredibly difficult challenge of combinations. High and rising inflation, rising interest rates, falling real wages at a time when our ability to respond to these challenges is constrained by the fact that the budget is absolutely heaving with Liberal debt.
He says in the October budget there will be a “cost of living package” aimed at getting long-term downward pressure on energy prices and real wage increases.
He says he will speak to the parliament when it returns (in July) about the challenges ahead.
While we are waiting for the treasurer, Jim Chalmers, to front a press conference about the RBA’s rates decision, the prime minister Anthony Albanese is also having a press conference in Indonesia. He says he won’t comment on domestic matters while overseas, when asked about the rates rise.
RBA statement hints at more rate rises to come
The RBA statement accompanying the second RBA surprise in as many months (the first increase last month was also bigger than economists had been tipping) has a few interesting aspects.
“The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead,” Philip Lowe, the governor, said, as a pointer to more rate rises to come.
“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” he concluded. In March, the underlying inflation rate came in at 3.7%, outside the 2-3% band that the bank targets.
This figure is also the one the Fair Work Commission will be looking at, rather than the more alarming headline consumer price index that was 5.1% in May, and heading towards 6%, perhaps far higher.
And what is the expected impact on the property market and mortgage holders?
“Housing prices have declined in some markets over recent months but remain more than 25% higher than prior to the pandemic, supporting household wealth and spending,” Lowe said.
The RBA is relying on the fact the household saving rate remains higher than it was before the pandemic, so they can draw down a bit, while “many households have built up large financial buffers”.
“While the central scenario is for strong household consumption growth this year, the Board will be paying close attention to these various influences on consumption as it assesses the appropriate setting of monetary policy,” it said.
Earlier today, as it happens, we saw the latest evidence that consumers are pulling back.
The ANZ and Roy-Morgan’s latest weekly survey found sentiment has dropped another 4% to the lowest level in about 22 months, or roughly during the first Covid wave.