Finance Minister Katy Gallagher states that despite the recent rate cut, Australia’s interest rate remains lower than that of the United States.
The decision by the United States Federal Reserve to reduce interest rates had a ripple effect in the Senate, prompting the opposition to seek clarification from the government regarding its approach to managing inflation.
Liberal Party Senator Jane Hume questioned Finance Minister Katy Gallagher about Australia’s inaction in effectively addressing inflation, which has kept interest rates at elevated levels.
Hume highlighted that Australia’s core inflation is higher compared to similar economies like the United States, the UK, and Canada, all of which have already started reducing their interest rates after controlling inflation.
In response, Gallagher explained that inflation peaked when the Labor government first took office, and Australia’s interest rates have halved since their peak in 2022.
“Even with today’s rate cut, our rates are still lower than those in the U.S.,” Gallagher emphasized.
On September 18, the U.S. Federal Reserve announced a half-percentage point cut in interest rates, bringing the key lending rate to between 4.75 and 5 percent after a two-day meeting in Washington.
In addition to the U.S., several central banks, including those in Canada, the UK, the EU, and New Zealand, have been lowering their official interest rates since last year.
Gallagher stressed the importance of considering the complete context when making international comparisons for political purposes, noting that inflation in the U.S. peaked higher and later than in Australia.
“Interest rates in the U.S. were higher than they ever were here. Currently at 4.3 percent, they were over 5 percent in the U.S. So let’s be transparent in our international comparisons,” Gallagher urged.
Hume also raised concerns about recent Australian Bureau of Statistics data showing a significant decrease in real disposable income since the Albanese Labor government took office.
Gallagher acknowledged the challenges faced by households due to inflation but emphasized that similar challenges exist globally.
She defended the government’s support measures, stating that households were receiving more assistance compared to what they would have received under the Coalition’s economic plans.
“Our economic plan aims to address the inflation challenge, support households, create jobs, and boost wages. On the other hand, your plan involves cutting $315 billion from Commonwealth spending in a sluggish economy,” Gallagher responded.
Referring to ABS data, she highlighted that the Albanese Labor government’s economic strategy had generated nearly one million jobs and led to record-high workforce participation and a historic low gender pay gap, with inflation in Australia showing signs of moderation.
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