The cost-of-living boast that has come back to haunt Anthony Albanese

Anthony Albanese’s boasts about Australia’s superior economic position have come back to haunt him after New Zealand cut interest rates to make them lower than here.

During the cost of living crisis, Labor has made the case that Australia’s 4.35 percent interest rate is lower than other developed countries that have cut rates this year.

But that argument is weakening after the Reserve Bank of New Zealand cut the cash rate by 50 basis points to 4.25 percent on Wednesday – marking the third cut in 2024.

Just three weeks ago the Prime Minister crowed that Australia still had lower interest rates than New Zealand.

“We are in difficult global economic times,” Albanese told reporters at Parliament House in Canberra.

“This is the, you know, interest rates are higher in the United States, New Zealand and Britain than here.”

In contrast to Australia, New Zealand has much lower inflation, which the central bank pointed out when it announced an interest rate cut of half a percentage point.

“Annual consumer price inflation has declined and is now close to the middle of the Monetary Policy Committee’s range of one to three percent,” the Reserve Bank of New Zealand said.

New Zealand’s central bank even suggested it would continue to cut interest rates into 2025.

‘Inflation expectations are also close to the target and core inflation is converging towards the midpoint. “If economic conditions continue to develop as expected, the committee expects to further reduce the OCR early next year,” the committee said.

The RBNZ’s optimistic tone on overnight rates is in stark contrast to the Reserve Bank of Australia, which has hinted at another rate hike by “not ruling anything in or out”.

During the September quarter, New Zealand’s inflation rate of 2.2 percent was much lower than the equivalent level in Australia of 2.8 percent.

Australian borrowers are unlikely to get any relief until next year.

The futures market does not expect the Reserve Bank of Australia to cut rates until May next year – a forecast shared by Westpac and NAB.

Australia’s underlying inflation of 3.5 percent in October was still above the RBA’s target of 2 to 3 percent, when volatile and one-off price items such as $300 electricity rebates were excluded.

RBA Governor Michele Bullock suggested this month that too much government spending was fueling inflation.

During the cost-of-living crisis, Labor has made the case that Australia’s 4.35 percent interest rate is lower than other developed countries that have cut rates this year.

“I have to emphasize here that it’s not just about the federal governments, it’s about the state governments as well,” she said.

“So the fact that we’ve had to revise our public demand forecasts reflects the fact that there have been more announcements and more things have happened.”

But Treasurer Jim Chalmers on Wednesday took advantage of volatile monthly data showing headline inflation rose just 2.1 percent.

“This is another very encouraging sign that our policies are helping to reduce inflation after it was higher and rising under the Liberals,” he said.

‘Today’s figures show that monthly inflation has remained within the Reserve Bank’s target for three months in a row for the first time in almost five years.’

He left out the fact that thanks to the federal government’s $300 electricity rebates, energy prices fell 35.6 percent over the year, while gasoline prices fell 11.5 percent.

The Reserve Bank expects headline inflation – known as the consumer price index – to rise again to 3.7 per cent by the end of 2025 after Labour’s electricity cuts end.

New Zealand is far from the only advanced economy with lower interest rates than Australia.

The Bank of Canada’s policy rate is even lower, at 3.75 percent, after cutting rates four times this year.

The European Central Bank has an even lower interest rate on the marginal lending facility of 3.65 percent – ​​after three cuts in 2024.

The US Federal Reserve and the Bank of England have both cut interest rates twice in 2024.