Treasurer says RBA is ‘smashing the economy’ with interest rate hikes

Treasurer Jim Chalmers has said the Reserve Bank is "smashing the economy" with interest rate hikes as Australians continue to endure the cost of living crisis.

Chalmers told 9News.com.au it's "just a fact" that households are getting hammered with hikes and said it was a priority to get on top of inflation.

"This is not a new point I'm making, l've said it before," he said.

"Global uncertainty and higher interest rates are smashing household budgets and slowing the economy, that's just a fact and we see it in the data."

Chalmers said the RBA should have the same goal as the federal government, which is to ease the inflation pain on Australian families.

"We have different responsibilities to the Reserve Bank but the same objective, to get on top of inflation without hammering an economy which is already very soft," Chalmers added.

"We are working well with the independent Reserve Bank and making progress on inflation which has halved since it peaked in the year we came to office.

"The Liberals and Nationals want higher interest rates because they think the more people are hurting the more it will help them politically."

It comes as new GDP figures, set to be released on Wednesday, are forecast to reveal a slow 0.2 rise in the Australian economy in the June quarter.

Chalmers made the remarks on Sunday after weeks of whispers of dissent between the RBA and the federal government.

"With all this global uncertainty on top of the impact of rate rises which are smashing the economy it would be no surprise at all if the national accounts on Wednesday show growth is soft and subdued," the Treasurer said on Sunday, The Australian reports.

"We anticipated a soft economy at budget time and that's what most economists now expect to see in these new numbers for the June quarter."

The cash rate has stayed at 4.35 per cent since November 2023. This is the highest level it has sat at for 13 years.

Chalmers said the federal government was battling inflation with cost-of-living relief in an "economy already being hammered by higher interest rates and global volatility".

During a parliamentary inquiry last week, bosses of Australia's big four banks predicted interest rates would start to slow.

However, RBA Governor Michele Bullock said it was a "premature" hope.

Interest rates were not hiked in August and the RBA board said it did not expect inflation to return to 2-3 per cent until December 2025.