Albanese distances Labor from RBA, calls rate hikes a ‘blunt instrument’

Anthony Albanese has labelled Reserve Bank of Australia rate hikes a “blunt instrument” hurting people with mortgages, while pivoting to pro-growth economic rhetoric as he braces for a fifth interest-rate rise this year amid mounting criticism of near-record government spending and poor productivity.

On Thursday, the under-pressure prime minister spoke to this masthead candidly about the treacherous domestic and global political environment. On Friday, he surpassed post-war reconstruction leader Ben Chifley to become the longest-serving Labor PM after Bob Hawke and Andrew Fisher.

Fisher served three separate terms between 1908 and 1915, making Albanese second after Hawke for continuous time steering the nation.

Albanese, who has faced weeks of scrutiny over a $6 million grant to a golf club in his seat, declared the “unprecedented” stability of his four-and-a-half year-old administration was an antidote to upheaval in countries such as France and Britain.

“No,” was his response to a question on whether he would step down this term if polls worsened amid a populist-right surge led by One Nation, flagging a cabinet reshuffle but arguing: “I think I have the right people in the right jobs.”

Conditioning voters for prolonged pain, he added: “We are in a difficult economic period. We need to be straightforward about that.

“Whilst ever the war in the Middle East is continuing, that pressure will be there. How do you navigate that? You don’t take your eye off the future. And if people can do that at much darker times under Chifley and [wartime leader John] Curtin, we can certainly do that as well.”

Albanese linked today’s economic and social disruption to the hardship of wartime as he prepares to spend several weeks at overseas summits, just as the Reserve Bank gears up to lift rates to 2008 levels and Labor scrambles to find cuts to offset new spending in the December budget update.

“Interest rates are a blunt instrument,” Albanese warned. “They have an impact on people who have mortgages.”

Albanese has never used the phrase “blunt instrument” in his prime ministership. The sharp comment suggests he is trying to distance himself from the RBA as he struggles to lift his low approval ratings and economists warn of a possible recession. The opposition is likely to argue that Albanese is blaming the bank for cost-of-living pain when Labor is spending at record levels outside the COVID emergency.

The RBA itself uses the term to explain that it only has one tool to bring down inflation, which increases costs for people with mortgages and lowers prices by raising the exchange rate.

But Monash University Emeritus Professor Paul Strangio said Albanese’s use of “blunt instrument” was significant and reflected a sense among voters that continued rate rises may not be the right tool. Most economists, however, reject the idea that rate hikes are not effective, after the bank kept rates lower than other nations before this current hiking cycle.

“I would imagine he would use those terms deliberately and consciously,” Strangio said. “He is articulating something that I suspect is alive inside the government and definitely has currency in the community.”

Strangio said Albanese must offer alternatives on how to reduce inflation. RBA boss Michele Bullock says runaway prices are driven by long-running domestic pressures, including low productivity and high levels of state and federal spending, and exacerbated by the war.

Albanese told this masthead that public spending was not to blame and said Labor would not cut pensions, education, or health.

“There’ll be savings,” Albanese said of the upcoming budget update, swerving a question on whether there will be more cuts than spending announcements. “We’ll do things responsibly because we’re a Labor government; no one held back, no one left behind.”

After months of criticism from Labor luminaries and MPs including Ed Husic over Labor’s economic settings, Albanese used new language to talk up a “growth agenda”.

“We are completely focused on the growth agenda,” he said, citing the EU trade deals, the energy transition, Future Made in Australia subsidies, and big investments in skills. It is unclear if his growth agenda, which does not contain new policies, will be enough to unshackle the economy.

Albanese elevated AI and Australia’s land and energy advantages to host data centres, alongside critical minerals, as points of leverage before meeting Donald Trump and Xi Jinping over the next month.

“It’s a big plus,” he said.

Cabinet is resolving copyright laws to attract AI labs, which ministers argue is vital for future growth and security.

Albanese, who has advocated for global standards on AI, said the technology would be “front and centre” of the talks with Trump and Xi at the APEC summit in China in mid-November.

Talking about his longevity, Albanese said his time served “makes engagement [with leaders] easier”. Albanese has stabilised relations with China, minimised flare-ups with Trump, and struck security deals with Pacific nations.

He argued: “Domestic politics and interests can’t be separated from international engagement in today’s world. They’re interconnected.”

He said he will meet UK and Canadian leaders Andy Burnham and Mark Carney, in what Albanese argued was an important troika of centre-left leaders.

Halfway through his second term, Albanese still has a lead over a fractured right-wing opposition despite Labor’s primary vote falling 8 points since the election to 26.5 per cent, according to an average of all polls.

The prime minister predicted his politically contentious budget would ultimately be seen as a “good reform” that reduced rapid house-price growth. This masthead revealed on Friday that cabinet pushback stymied Chalmers’ push for deeper spending cuts.

Insisting cabinet unity held, Albanese said he wasn’t “getting ahead” of himself regarding overtaking Hawke as longest-serving Labor prime minister.

“We live in difficult times and every election is hard. We did very well last time round. I do think we’ll be able to present a good case for us continuing to govern at the next election,” he said.

Strangio, who this year published an award-winning book on modern prime ministers, said Albanese’s staying power was a “signal achievement” that set him apart from predecessors at a time when the term “ungovernability” was entering the political lexicon of peer democracies such as the UK.

“Surfing the wave of disruption and turbulence, yet staying upright, may be the biggest thing he leaves us with, in terms of legacy.”

However, Strangio noted that time served did not necessarily equate to consequential leadership. Of Labor’s rocky period since the Bondi massacre, he said Labor might be either going through midterm blues, as Albanese did last term, or the government might be facing a more profound problem.

Either way, Strangio said the prime minister arguably needed to pivot both philosophically and rhetorically to “meet the moment”.

“I think the government has got to be more creative at this moment. I’d emphasise it is difficult. But that’s the challenge for them, to be more creative with ideas, but also rhetorically as well. You’ve got to meet the challenge.”

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