Treasurer urged to overturn shock RBA call

Amid fears the latest hike could result in a recession, the government has been urged to take the unprecedented step of direct intervention.

“The RBA’s decision to raise interest rates again beggars belief and will smash renters and mortgage holders even harder than they were being smashed already,” Greens Senator Nick McKim said.

“The RBA is out of control. Jim Chalmers needs to use his powers and step in and overrule this terrible decision.

Senator McKim said by the RBA’s own admission, interest rate rises are the wrong response to an inflation spike driven by corporate profiteering and supply side issues.

“If Dr Chalmers refuses to act it will be a tacit endorsement of the RBA’s decision and will mean that he supports the rate rises,” he said.

Earlier, the Treasurer sidestepped questions over whether the Reserve Bank‘s “brutal” interest rate rise could plunge Australia into recession.

As the Albanese Government prepares to put the final touches on next Tuesday’s budget, including tax increases for cigarettes, the RBA has stunned experts by handing down another rate rise to tackle inflation.

The Treasurer conceded it was a “brutal reminder” of the inflation challenge but stopped short of reassuring homeowners that a recession was off the cards.

“I think that the rate rise is really a pretty stark, pretty brutal reminder of the difficult economic conditions,” Dr Chalmers said.

“And I think people are broadly aware that we‘ve got an inflation challenge in our economy, people feel it every day.”

Australians are set to endure more financial pain after the Reserve Bank of Australia decided to lift rates by 0.25 per cent to 3.85 per cent.

It means those with the average loan size of $586,000 will be forking out around $14,000 more annually compared to what they were paying this time last year.

“Are you worried that the RBA is tightening rates so much that could drive the country into recession?” the Treasurer was asked.

In response, the Treasurer said he wasn‘t about to “second guess the decisions taken independently by the Reserve Bank”.

“As you know, my job is different. It‘s to hand down a budget, which is carefully calibrated to these economic conditions that we confront right now,’’ he said.

“The Reserve Bank, the Treasury, I think almost everybody expects the Australian economy to slow substantially later this year.

“That is the inevitable consequence, in my view of higher interest rates combined with the global slowdown. And so the Reserve Bank‘s forecasts reflect that the Treasury’s forecasts reflect that too.

“And inflation is moderating off the peak around Christmas time, but it‘s still higher than we’d like for longer than we’d like and the forecast will reflect that as well.

“Our job is to provide responsible cost of living relief, to do what we can without adding substantially to this inflation challenge that we have in our economy.

“And the best way to do that is to prioritise the most vulnerable and the best way to do that is through ways like the energy bill assistance, which I‘ll detail in the budget, which is all about getting electricity prices, not rising as much as what they were anticipated to do last budget.”

Cig taxes up

Tax increases are expected in the budget.

Health Minister Mark Butler has announced a five per cent increase on the tobacco tax in a bid to clamp down on the smoking rate and raise $3.3bn over four years.

Speaking at the National Press Club, Mr Butler said some of the money would be ploughed back into helping smokers quit.

“As we stamp out the growing black market in illegal vaping, we also need to prevent young people from trading their vapes for cigarettes,” he said.

“That is why this budget will also include measures to bring smoking rates down, to protect people from taking it up and additional support for current and former smokers to look after their health.

“Today I announce that tax on tobacco will be increased by 5 per cent per year over the next three years starting on September 1.

“We know that a higher price cigarette is a more unattractive cigarette.”

“Together, these changes will raise an additional $3.3bn over the coming four years, including $290m in GST payments to the states and territories, helping to support our health system and the health of current and former smokers and vapers,” he said.

Payday Super Changes

Meanwhile, millions of Australians will be better off under a budget plan to finally force penny-pinching employers to pay super on payday instead of hoarding the cash.

Under the big changes, employers will be required to pay super contributions at the same time as wages.

Currently, employers are only required to make superannuation payments every three months, allowing employers to hoard the money and keep it out of workers retirement savings accounts where it could be making money.

But from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages.

“This simple change will strengthen Australia’s superannuation system and help deliver a more dignified retirement to more Australian workers,‘’ Treasurer Jim Chalmers said.

“By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5 per cent better off at retirement.

“More frequent super payments will make employers’ payroll management smoother with fewer liabilities building up on their books.

“Payday super will also make it easier for employees to keep track of their payments, and harder for them to be exploited by disreputable employers.”

Industry Super Australia said that moving super payments to align with wages could give millions of Australians $50,000 more at retirement.

Quarterly super payments will also make it easier for the ATO to monitor compliance in real time and act quickly when a complaint is lodged over unpaid super.

“This is a big win for the three million mostly young and lower paid Australians. It will give them a better shot at building a good nest egg for retirement,” Industry Super Australia Chief Executive Bernie Dean said.