RBA interest rates: Chalmers insists cut doesn’t bear on election, says decision on ‘economics, not politics’

Treasurer Jim Chalmers has appeared relieved the Reserve Bank followed wide expectations and cut interest rates — swiftly followed by the big four banks — but has gone out of his way to avoid commenting on the political implications of the decision on the eve of an election.

Dr Chalmers at a press conference on Tuesday credited Australians working together with making progress in the three-year fight against inflation while refusing to declare it was “mission accomplished”.

The Reserve Bank cut rates by 0.25 percentage points, down to 4.1 per cent, after keeping them on hold for 15 months as it waited to see inflation come down and stay there.

The big banks moved quickly to pass this cut on, which Dr Chalmers applauded.

“This is the rate relief that Australians need and deserve,” he said after the decision.

“We know that it won’t fix every challenge we have in our economy or in household budgets, but it will help.”

But asked whether he was prepared to tell people things would get better from here, Dr Chalmers said, “I wouldn’t go near any of that sort of language.”

“The worst of the inflation challenge is now a couple of years behind us, but we have to stay vigilant. We can’t be complacent. You won’t hear … anything other than recognition from us that people are still under pressure,” he said.

There is still significant uncertainty about the global outlook in the longer term — in part because of concerns about the effects on both growth and inflation of a trade war sparked by Donald Trump’s enthusiasm for tariffs.

There are widespread expectations the rate cut will spur Prime Minister Anthony Albanese to head to an election sooner rather than later.

“Today’s decision was about economics, not politics,” Dr Chalmers said.

“The only … senior person who’s tried to inject a political lens to this, or a political angle to this was Peter Dutton who was last week making the case for higher interest rates.”

Cabinet’s powerful expenditure review committee met for several hours on Monday and Tuesday working towards a budget in March, although this could still be abandoned.

Dr Chalmers insisted waiting until the final due date in May, rather than heading to the polls in late March or early April, would have little broader impact on the economy.

“We know, observing history, that typically people put their hands in their pockets around election time and wait to see what the outcome is.

But we’re not talking about an election in six or nine or 12 months time – regardless of the decision the Prime Minister takes, an election is more or less imminent, and it’s not a surprising timetable, because we are more or less full term then.”

More to come