Anthony Albanese declares he’s ‘positive and optimistic’ despite interest rate rises

Anthony Albanese has stated that he is “very positive and optimistic” when asked about rate hikes triggering a recession.

The Prime Minister tried to sound optimistic after the Commonwealth Bank declared a recession by Christmas was now a 50 per cent chance.

The Reserve Bank of Australia this week raised interest rates for the 12th time in 13 months, pushing cash rates to an 11-year high of 4.1 percent.

A day later, on Wednesday, RBA Governor Philip Lowe delivered a speech titled “A Narrow Path” in which he warned that “further monetary policy tightening may be necessary” to address inflation.

Sky News political editor Andrew Clennell asked: ‘How is that narrow path to avoiding a recession going?’

Mr Albanese said he was optimistic.

“I am very positive and optimistic about the future,” he told the Economic Outlook Forum in Sydney on Friday.

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The statement was made after the Commonwealth Bank, Australia’s largest lender, said there was a high probability of a recession this year.

Gareth Aird, Commonwealth Bank’s head of Australia’s economy, had blamed the 8.6 percent minimum wage increase, which took effect July 1, for the latest rate hike.

“We estimate the probability of a recession in 2023 to be 50 percent as the delayed impact of RBA rate hikes continues to erode the cash flow of indebted households,” he said Friday.

A 2023 recession would be the first fueled by higher interest rates since 1991, after interest rates hit 18 percent in late 1989.

National accounts data released this week showed the economy grew just 0.2 percent in the March quarter, the weakest since the three months to September 2021, when Sydney and Melbourne were in lockdown.

The annual rate of 2.3 percent marked a significant drop from the 3.1 percent level of a year earlier, figures from the Australian Bureau of Statistics showed.

Gross domestic product growth is slowing, even though inflation rose to 6.8 percent in April, up from 6.3 percent in March.

This meant that inflation was well above the Reserve Bank’s target of two to three percent.

Dr. Lowe had promised in 2021 that interest rates would remain unchanged until 2024, only for the RBA to raise them at its most aggressive pace since 1989.

Despite this, Mr Albanese said it was unrealistic that borrowers had expected interest rates to remain at a record low of 0.1 percent.

“Interest rates started to rise and were expected,” he said.

That was announced before the election. Interest rates would never stay at 0.1. That would never happen.

“It puts pressure on families and it puts pressure on mortgage holders. We recognize that.’

The Commonwealth Bank, ANZ and NAB joined Westpac on Friday in raising their floating mortgage rates to account for the RBA’s latest 25 basis point increase.

The latest 0.25 percentage point increase in the RBA means that a borrower with an average mortgage of $600,000 will pay an additional $97 each month.

Monthly repayments will rise to $3,730, up from $3,633, as a Commonwealth Bank variable rate for a borrower with a 20 percent down payment rose to 6.34 percent, up from 6.09 percent.

The average borrower now pays $17,088 a year more than 13 months ago, when RBA cash rates were still at a record low of 0.1 percent and banks were offering mortgage rates with a “two” in front.

Monthly repayments are now 62 percent higher than at the beginning of May 2022, when they were $2,306.

Despite the gloom, Mr Albanese said Australia’s geographic isolation was an advantage because it is close to Asia.

“Our location has been seen as a disadvantage for so long,” he said.

“This island continent, where we are located, is now a huge advantage and one of the reasons for our international involvement is that we are located very close to the fastest growing region in the world.”