BUSINESS

Jim Chalmers responds to question that's on the minds of every Aussie with a mortgage

January, 10, 2025-03:38

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Jim Chalmers responds to question that's on the minds of every Aussie with a mortgage:

Mortgage holders in Australia are looking to the central bank to potentially mirror the recent cash rate cut by the US Federal Reserve. However, Treasurer Jim Chalmers has indicated that the economic circumstances in Australia are distinct. The Federal Reserve recently implemented a significant 50 basis point reduction, marking the first such move in four years, which has left Australian mortgage holders questioning whether the Reserve Bank of Australia will take similar action. Chalmers emphasized that the economic landscape faced by the US central bank is not the same as that of Australia. "What we observed in the US was largely anticipated," he stated during an appearance on Nine's Today show on Thursday.

"When the Reserve Bank convenes next week, they will evaluate a variety of factors, including this development, but their primary focus will remain on inflation, as is the case with the Government." The federal funds rate in the US had increased beyond Australia's cash interest rate and continues to be higher even after the recent cut. The Fed's target range now sits at 4.75 to 5.0 percent, compared to Australia's cash rate of 4.35 percent. Chalmers noted that the recent interest rate cut in the US was expected and does not necessarily imply that Australia should also lower its cash rate.

The last time the Reserve Bank adjusted rates was in 2020, when the cash rate was reduced to 0.10 percent. The US's decision is just one of many elements, including inflation, that the Reserve Bank will take into account in its monetary policy deliberations. "The global economy is quite uncertain, which is one reason we are witnessing rate cuts in countries like the US," Chalmers remarked. "In Australia, we are seeing a significant decrease in inflation, which the Reserve Bank will weigh carefully." Senate Deputy Opposition Leader Michaelia Cash expressed concern, stating that there appears to be "no good news in sight for Australians" regarding the domestic economic situation.