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The 95% Mortgage Cliff

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During this session with Housing Australia, I call out the lack of transparency and the questionable math behind the home deposit guarantee schemes.

I asked Mr Langford why it took nine weeks to get an answer to a simple question: how many borrowers have exited the scheme? They finally admitted that of the 185,000 guarantees issued since the scheme was launched, over 45,000 have already been discharged.

I’m highly sceptical of their reported “success” rates. They previously claimed that there were only 11 defaults out of 250,000. The actual arrears rate on bank loans is around 1% – 227 times higher than the claimed arrears rate of 0.0044%. Therefore, it’s statistically impossible!

My point is simple: they don’t actually track people once they exit the scheme, so they’re essentially flying blind when it comes to the data.

Despite Minister Ayres’ attempts to paint every exit as a “success story,” the data proves it’s not that simple.

As at the end of December 2025: ❌ 0.3% or 336 of borrowers are 90+ days in arrears, ❌ 0 .8% or 1000 are currently under hardship arrangements and ❌ 347 are in early-stage arrears (30–90 days).

While they boast that many are ahead on payments, I’m concerned about the “cliff” ahead.

When I asked for modelling on what happens to these 95% mortgages if interest rates rise three more times this year, they admitted they have no modelling for that scenario.

Ms Jarman has committed to providing me with a copy of the information guide for first-home buyers. I want to see for myself if it properly warns Australians about the massive risks of a 95% mortgage in a rising-rate environment.

— Senate Estimates | February 2026

Transcript

CHAIR: I’m going to rotate the call. Senator Roberts.  

Senator ROBERTS: Thank you, Chair. Thank you for appearing again today, Mr Langford. You undertook at the last hearings to answer on notice how many borrowers under your two and five per cent deposit guarantee scheme have exited since the program started. That was question on notice 458. That should be a number you have to hand very easily. You haven’t answered it in the nine weeks since the hearing. Why not?  

Mr Langford: I’ll ask my colleague Ms Jarman, who has just come to the table, if we have that information to hand. As to the delays, we apologise. There may have been some delay if we didn’t have that information to hand.  

Ms Jarman: Sorry, Senator—can you repeat exactly what information you’re after?  

Senator ROBERTS: You undertook at the last hearings to answer on notice how many borrowers under your two per cent and five per cent deposit guarantee scheme have exited since the program started. That was question on notice 458. I’d like the number, please.  

Ms Jarman: Yes, we do have the number that have exited. Of the 185,000 guarantees that have been issued since the launch of the scheme, 45,837 of those have discharged.  

Senator ROBERTS: You told me at the last hearing that there were only 11 defaults out of 250,000 guarantees issued. The actual arrears rate on banks’ loan books is around one per cent. That’s 227 times higher than your claimed arrears rate of 0.0044 per cent. Do you accept that your number is almost statistically impossible and only appears good because you don’t actually track the people who exit the scheme? Once they’re gone, they’re gone.  

Senator Ayres: Exiting is good.  

Senator ROBERTS: You don’t track them once they’re gone.  

Senator Ayres: These are people who have bought a home—  

Senator ROBERTS: Don’t try and change the topic. I’m asking the question. I want to know—  

Senator Ayres: under the scheme, then sold their home and moved on to their next home. That is the foot on the ladder that the scheme is designed to provide.  

Senator ROBERTS: Minister Ayres, at the last hearing, you said—  

Senator Ayres: That’s what it’s for.  

Senator ROBERTS: that people who are facing hardship can’t refinance. Do you know that that’s false?  

Senator Ayres: What do you mean?  

Senator ROBERTS: ‘People who are facing hardship can’t refinance,’ you said. That’s false.  

Senator Ayres: I said that people who are facing hardship can’t refinance?  

Senator ROBERTS: That’s what you said. 

Senator Ayres: I don’t know what context I said that in. You’re moving—  

Senator ROBERTS: Can you update me on—  

Senator Ayres: from one proposition, demonstrably not the case—  

Senator ROBERTS: And you’re changing my proposition. I’m trying to get on with it.  

Senator Ayres: which is that it’s a bad outcome.  

Senator ROBERTS: Why are you running from this, Minister Ayres?  

Senator Ayres: No. I’m running to this. I’m running to this. This is a good outcome.  

Senator ROBERTS: You changed my first proposition.  

Senator Ayres: This is a good outcome. I’m sorry if you’re confused about it. This is a good outcome for young Australians. 

Senator ROBERTS: I think you’re misleading.  

Senator Ayres: Buying a home, selling a home, buying a new one—this is a good outcome.  

Senator ROBERTS: Can you update me on your latest percentages for in advance, on schedule, in arrears and hardship?  

Ms Jarman: I can do that. As at the end of December, 0.3 per cent of the portfolio were 90 days plus in arrears, 0.8 per cent were under hardship arrangements, 26 per cent of the portfolio were on schedule with payments and 73 per cent were in advance of their repayment schedule.  

Senator ROBERTS: Do you also have the actual numbers each of these percentages represent?  

Ms Jarman: I do.  

Senator ROBERTS: Could we have them please?  

Ms Jarman: Sure. We had 33,134 on schedule, 93,104 in advance, 336 ninety days in arrears and 1,000 in hardship. There is another category, for completeness. If you’re adding up to the total number of guarantees, in arrears of 30 to 90 days—so early arrears—there are another 347 customers there.  

Senator ROBERTS: How many total guarantees are those percentages of—is it less than the 250,000?  

Ms Jarman: The 250,000 is the number of Australians supported under the scheme. We’ve only ever issued 185,000 guarantees, but only 127,000 of those are active in the book at the moment. The rest of those have already discharged out of the scheme.  

Mr Rimmer: I gave evidence earlier in the day that the 0.3 per cent 90-day arrears rate is better than the other relevant arrears.  

Senator ROBERTS: Thank you. I heard that.  

Senator Ayres: I also should have said, Senator, again for the sake of completeness, that people exit the scheme if they sell their home. They also exit the scheme when they hit the 80 per cent loan-to-value ratio. That is, they come in at five per cent and make repayments that pay the 15 per cent gap over time, and then they’re considered to have exited the scheme. That’s also a good thing.  

Senator ROBERTS: How many five per cent mortgages that you got first home buyers into do you expect a default if interest rates are raised three times this year?  

Senator Ayres: Your One Nation colleague asked the same questions about an hour and three-quarters ago.  

Senator ROBERTS: He actually said ‘if we are entering a cycle’. I want to know what would happen with three interest rate rises.  

Mr Langford: I don’t believe we have modelling for that proposition that you’re putting forward.  

Senator ROBERTS: Do you, as the administrator of the five per cent deposit guarantee, provide first home buyers with any warnings about the risk of a 95 per cent mortgage?  

Ms Jarman: Yes, we do. As part of the application process, we’ve got an information guide. That guide clearly outlines what the guarantee is and how the guarantee is there to protect the lender and not the borrower. It also outlines the obligations of the borrower in terms of repayment of the mortgage and the circumstances in which the borrower is still liable.  

Senator ROBERTS: Could I have a copy of that on notice, please? 

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One Nation’s Housing Fix

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One Nation backs Senator Bragg’s Housing Investment Probity Bill to stop public funds flowing to CFMEU-linked projects via Cbus.

We would however go further. One Nation would:

✅ Shut down the Housing Future Fund and the federal Department of Housing.

✅ Cut $50K off home costs by fixing the Building Code and suspending GST on building materials.

✅ Create a People’s Bank for 5% fixed-rate mortgages.

✅ Allow a person’s super account to invest in their first home.

✅ Deport visa violators to free up housing.

✅ Stop foreign ownership of houses.

Australia needs homes and jobs — not government waste.

Transcript

Senator Bragg has advanced the Housing Investment Probity Bill 2024, which modifies the charter of the Housing Australia Future Fund to prevent financing of projects that Cbus owns. Cbus is a superannuation fund with legal affiliation to the CFMEU. The CFMEU are currently under a federally appointed administrator, a move that was a long time coming. Queensland Premier Crisafulli has called an inquiry into the CFMEU’s systemic violence, intimidation, misogyny and bullying. This bill from Senator Bragg is common sense—to prevent cash leaking through Cbus to the CFMEU until the CFMEU clean up their act and get back to representing Australian workers and to working constructively with industry to create secure, well-paid jobs at scale for all Australians.  

Australia needs housing, and we need breadwinner jobs. We have a responsibility to ensure infrastructure is built on time and on budget. One Nation does, though, propose a better alternative to Senator Bragg’s bill. We would shut down the housing future fund and the federal department of housing. Housing is a state responsibility, a state power. Government has no role in building houses. Its presence in the market drives up prices and slows down production, displacing private builders and monopolising building products. We will wind the building code back to remove the woke nonsense and the net-zero nonsense which were recently introduced into the code, and suspend the GST on building materials. Together these will cut $50,000 off a new home’s construction cost. Independently assessed, around $49,000 of that comes out of the modifications to the building code, which are rubbish. We will take the $11 billion in funds under management at the housing future fund and roll that into a people’s bank, accessed through Australia Post, offering mortgages for first home buyers who are Australian citizens. It’s been proven here in the past in Australia. It’s been proven in North America. It’s been proven in Japan and New Zealand.  

Mortgages will be on five per cent interest with a five per cent deposit, fixed for up to 30 years. The five per cent deposit can come from the first home owner grant and then be topped up using the applicant’s own superannuation account, protected with a lien. Notice I said ‘account’, not ‘fund’. This will not be a drawdown from super. Super is useful for retirement. Our policy simply replaces super funds investing in housing with the person’s own super account investing in their own house. As the house grows in value, so too does the value of the lien held in the person’s own superannuation account, protecting their retirement. Someone who has been working in the workforce for five years on average, and who is entitled to a first home owner’s grant, may be able to move into their own home straightaway.  

We must do more for the young Australians who this government, and other recent governments, have sold out. Young people who did everything society asked—they studied hard, stayed out of trouble, got their degrees, got their high school qualifications—now have a HECS debt, rent and a grocery bill they can’t afford. And they are in despair, right across Australia. 

The government’s housing measures are complete rubbish. They are an insult to Australians. The government’s own incoming government report stated clearly that their construction targets would not be met—bloody hopeless. Canberra, as I’ve said many times, is the source of every major problem in this country, and one of the biggest problems we have in this country right now is a homelessness crisis—an inhuman homelessness catastrophe.  

In my state of Queensland, going from the north in Cairns, every major provincial city has a homelessness crisis, a housing crisis. In Cairns, Townsville, Mackay, Rockhampton, Gladstone, Bundaberg, Maryborough, the Sunshine Coast, the Gold Coast, Brisbane—the capital city of what should be the wealthiest state in the world has got homeless people sleeping on the riverbanks, under bridges, in tents and in caravans—Ipswich, Boonah, Toowoomba, in every major provincial city, there are homeless.  

If you drive into Gympie, in a concrete car park, there are homeless people in tents. Parents come home at night—working mothers and fathers—wondering if their kids are still in the car and then sleeping in the car. Where do they go to the toilet? Where do they have showers? These are good people. And then the councils just put the bulldozer through the tents, put the bulldozer through the cars and that’s it: gone.  

Why is that happening in Queensland? It’s because we’ve got so many people leaving Victoria to come up to Queensland. In particular, we have got catastrophic, inhuman immigration levels that this government and the previous government have perpetuated. Catastrophic immigration started with John Howard’s government when he doubled immigration. Every prime minister since has been on the trend of increasing immigration.  

We’ve got so many foreigners owning houses. Some of them are locked up as an investment, not being used. We’ve got 75,000 people here on residence visas illegally. One Nation says, ‘Deport them immediately.’ We’ve got students here in contravention of a student visa—up to 100,000 of them. Get rid of them. Free up some houses. We’ve got accommodation capacity for 100,000 students; we’ve got about 600,000 overseas students in the country. That can’t continue. One Nation says: start with the demand and deport people who are here illegally or in contravention of their visa—deport them. Stop foreign ownership of housing, which will increase the supply. And, regarding the construction costs that I’ve mentioned, our policy goes beyond what I’ve mentioned briefly. We’ve also mentioned the finances. Our One Nation policy fixes demand, supply, construction and finance. Senator Grogan said that housing cannot be fixed overnight. It can be fixed close to overnight, just by doing the things One Nation has said: address demand, supply, construction and finance. We must do better. It takes several months to build a house; it takes several months to build an apartment complex. It doesn’t take long, though, to deport people who are here illegally. It doesn’t take long at all. That frees up supply and reduces the demand. 

Canberra, as I said, is the cause of every major problem in this country, and it comes from both Liberal and Labor governments—every major problem. The government’s housing measures—I repeat—are rubbish. Their own incoming government report stated clearly that their construction targets would not be met, yet they perpetuate the nonsense. We must do better. One Nation are in support, and I thank Senator Bragg for this legislation. 

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Gold Coast Town Hall: One Nation’s Vision for Queensland

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Candidates from the Gold Coast electorates are joining together to outline their plans if elected in October. This is your opportunity to ask questions and explore One Nation’s solutions to the key issues facing Queenslanders.

Enjoy FREE tennis, plus refreshments and pizza!  🍕

Please RSVP 👉 here to assist with catering numbers.

🗓️ Saturday | 5 October 2024 

🕔 3 PM to 5:30 PM 

📌 GCA Tennis – Function Room

      111-135 Christine Avenue

      BURLEIGH WATERS QLD 4008

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Free Community Event in Tingalpa

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🌟 Join us for a FREE community forum hosted by David White, your One Nation Candidate for Lytton in the Queensland State election.

📅 Thursday, 8 August 2024
🕒 5:30 pm to 8:30 pm
📍 Tingalpa Hotel, 1563 Wynnum Road, Tingalpa

Are you feeling the pinch of rising costs, mortgage stress, and house affordability? You’re not alone!

📢 Voice your concerns in our Q&A and connect with your community!

RSVP here: https://qld.onenation.org.au/community-forum-cost-of-living-and-housing-crisis

Dining in? Please book direct with the hotel on 07 3213-9660 or online here: https://tingalpa-hotel.resos.com/booking

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Government Guaranteed Mortgages Not Under Stress!

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Since 2020, the government has guaranteed mortgages with only a 5% deposit. 

Given 150,000 Australians were unable to afford a 20% deposit, I was concerned many of them may have been hit especially hard by the RBA’s interest rate rises.  Based on the figures provided here, it looks like most of these households are coping well so far. 

The full data put on notice should clarify this further, but if what I’ve been told here is true, it’s good news for those homeowners.

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PM Partying Instead of Running the Country

I called out the Prime Minister’s jet set lifestyle during parliament. Australians can see how out of touch and ineffective Anthony Albanese is as a leader.

The Prime Minister has spent too much time rubbing shoulders with pop stars, sucking up to billionaires and flying around the world in long overseas trips and too little time talking with everyday Australians.

Meanwhile Climate Change Minister Chris Bowen and his Ministry of Misery is making life harder for everyday Australians with every new net zero measure.

This is a PM who clearly cares more about globalists and celebrities than he does for the people of the country he was born into.

If ever the comparison to ‘Nero Fiddling While Rome Burned’ was appropriate for a political leader, it is Anthony Albanese.

Transcript

In a speech earlier this year, I made the point that one can judge a man by the company he keeps. I observed that one of Prime Minister, Anthony Albanese’s first orders of business was a private meeting with globalist billionaire and manipulator extraordinaire Bill Gates. And I spoke to a more recent meeting the Prime Minister had with Larry Fink, chairman of BlackRock, the merchant bank that now owns Australia and tries to control Australia.

In the break, the Prime Minister once again used taxpayers money and a taxpayers plane to hobnob at concerts, exhibition openings and attend a billionaire’s birthday soiree. In so doing, the Prime Minister has demonstrated he will show fealty to anyone he needs to, in order to keep swanning around as though the weight of responsibility of running this beautiful country of ours was somehow not on his shoulders.

It’s not the job of the Prime Minister to party at a time when everyday Australians are struggling to pay their rent, pay their mortgages, find a roof to put over their heads and pay their electricity bills. Especially because of his government’s policies. Can someone on the Government benches remind Prime Minister Anthony Albanese the word party in Labor Party doesn’t mean what he seems to think it means.

All the while, Chris Bowen MP, Minister for Climate Change and Energy, and now known as the Ministry of Misery, has been out there destroying our productive capacity, making people’s lives harder. His latest policy is a tax on commercial vehicles, including utes that tradies need to be a tradie. How can a so-called party of working Australians introduce a ute tax that will make it harder for tradies to own what is an essential tool of their trade?

Have you considered what that tax will do to housing construction? It will cut house production and raise house costs. If ever the analogy of fiddling while Rome burns is appropriate to a modern leader, it’s now: Prime Minister, Anthony Albanese. What a bloody disgrace!

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Reserve Bank Rate Decision

Why does the Reserve Bank want to send everyone broke?

The RBA will make its interest rate decision shortly.

In this video from the last interest rate decision, I explain how crazy their plan is and how it’s a problem they created.

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Air Albotross: Australia’s Only Reliable Airline

The PMs frequent visits to foreign countries is a way of avoiding responsibility. The PM does not understand that leaders lead from the front, not from 30,000 feet. PM Albanese needs to pick up his leadership game instead of his carry-on baggage.

Australia desperately needs leadership. We have the worst outcome for real wages of any OECD country. Housing is unaffordable and our inflation is now home-grown. Two million new migrants is driving demand-inflation, making staples harder to get and more expensive. This situation will become worse after the passage of Minister Plibersek’s new bill to nobble agriculture in the Senate today, which reduces water available to farmers and will without doubt drive up food prices.

The PM needs to stop dodging responsibility and get back here to clean up the mess he’s made.

Transcript

As a servant to the many different people who make up our one Queensland community I started this week with my usual check to see if the Prime Minister is in the country today. He is. Hitting ‘home’ on his GPS still brings him back to Australia. What a memory that device has. Prime Minister Albanese clearly doesn’t suffer from airsickness, yet he has managed a medical first—spreading airsickness to the rest of the country. We are all thoroughly sick of his air travel. The Prime Minister doesn’t get that and with every flight he is crashing the government’s poll numbers. It’s why the internet has unkindly, though accurately, given the Prime Minister’s plane the new name—’Air Albatross’. 

Leaders lead from the front, not from 30,000 feet. Australia needs leadership. Inflation can no longer be blamed on world events beyond our control. All along our inflation has been and is homegrown—demand driven from this government’s record new arrivals. There was a time when Australia could have ramped up manufacturing and agriculture to meet demand from the 2.2 million new long-stay arrivals in just the last 12 months, but not anymore. The Hawke-Keating Labor government and the Howard Liberal government sent manufacturing to China. Now we’re at the mercy of the Chinese and world markets to source goods, including building materials, to meet the needs of new arrivals.  

Minister Plibersek is deliberately nobbling agricultural expansion, with another bill in the Senate today to take away farmers’ ability to grow food and fibre for new arrivals. Per capita income has gone backward faster than in any other developed nation in the world, as national wealth is spread across more and more people. A looming federal deficit will force interest rates up and steal even more wealth and opportunity from everyday Australians. Prime Minister, stop dodging responsibility, hang up your Biggles hat, get to work and clean up your mess. 

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Watt a Clown Show

When will this Labor government make the decision to cut unsustainable, record high immigration? This is a government that is halfway through its term, yet it’s still blaming the previous government. Are we really supposed to swallow this fairy-tale?

Australia’s immigration levels have been allowed to escalate under the Albanese government and they’re driving both the housing crisis and the high cost of living. These two issues have worsened exponentially under Labor.

I had to remind the Minister to answer the question because he was determined to use up the time allotted for answering in banter with others in the chamber, or to deliberately twist my words. When I pressed him to answer he could only pass the buck, talk up Labor’s grossly inadequate housing fund and it’s clear he is not prepared to accept any responsibility. The arrogance and lack of respect he shows to his position and by default, the Australian people, is deplorable.

Failure to take responsibility is a symptom of the ways in which Labor is failing the Australian people. A recent Weekend Australian article has reported that the migration surge is fuelling inflation, and the Reserve Bank backs that up.

The recent tsunami of new arrivals is under Labor’s watch and Senator Murray Watt needs to own it. These performances in parliament he’s indulging in, rather than taking his position seriously, do nothing to restore the people’s trust in government.

Transcript

My question is to the Minister representing the Minister for Immigration, Citizenship and Multicultural Affairs, Senator Watt. With Labor embarking on the largest immigration program in Australian history, bringing in more than 500,000 people this year alone, more and more economists are warning these numbers are driving inflation and hurting everyday Australian families. Following yesterday’s 12th interest rate rise since Labor was elected, when will the government acknowledge they are completely wrong about high immigration and cut the numbers to sustainable levels?

Senator McKenzie interjecting—

Senator Dean Smith interjecting—

The PRESIDENT: Senator McKenzie and Senator Dean Smith!

Senator WATT: Senator Smith, that’s most unlike you! I’m very disappointed in you! I’m very disappointed. Thank you for the question, Senator Roberts. I hear, again, in response to your question, Senator McKenzie demanding more spending for infrastructure. So I guess we’re back to, ‘Spend more in the economy, and drive up inflation!’ That’s where the opposition was at today—

Senator Rennick interjecting—

Senator WATT: Senator Rennick’s jumping up and saying no. The Liberals disagree. Okay!

The PRESIDENT: Senator Watt, please resume your seat. Senator Roberts, I am going to direct the minister to your question, and I will remind those in here that the crossbenchers are entitled to be heard in silence and are entitled to have their questions answered. They get less time than others in this place. I would expect everyone to be sitting in respectful silence. Minister Watt, I refer you to Senator Roberts’ question.

Senator WATT: Thank you. Senator Roberts, I think I answered a very similar question from you the other day. I did acknowledge that Australia’s migration system, after 10 years of Liberal and National government, mainly overseen by the now opposition leader, Mr Dutton, is in utter 	disarray. We have acknowledged that. I know that the minister—

The PRESIDENT: Minister, please resume your seat. Senator Roberts.

Senator Roberts: On relevance—I’m asking when he will cut the numbers to sustainable levels.

The PRESIDENT: Thank you, Senator Roberts. I will remind the minister of your question. Minister Watt.

Senator WATT: Thank you, Senator Roberts. It is important to put this in context, and we have acknowledged that the migration system that we inherited, overseen largely by Mr Dutton, the now opposition leader, is a mess. It is a completely broken system. We have already taken a number of measures—

The PRESIDENT: Minister Watt, please resume your seat. Senator Roberts?

Senator Roberts: When will they acknowledge they are completely wrong about high immigration and cut the numbers to sustainable levels? That’s simple.

The PRESIDENT: I believe the minister is going to your question, and I will continue to listen carefully. Minister Watt.

Senator WATT: We have taken a number of measures already since being elected to fix the mess of the broken migration system we inherited. For example, this government has ended the Pandemic Event visa, which was being abused in some cases—in many cases. We have changed the previously unlimited working hours that were available for international students, a system that was engineered by the former government, and we’ve also made changes to work exemptions for working holiday visa holders. We’ve also increase the temporary skilled migration income threshold from $53,900 to $70,000, and that is the first increase in a decade.

The PRESIDENT: Minister Watt, please resume your seat. Senator Roberts?

Senator Roberts: When will he deal with cutting the high numbers?

The PRESIDENT: Senator Roberts, I think he’s being relevant to your question. Thank you, Minister.

Senator WATT: Senator Roberts, it’s up to you to choose whether you want to listen to my answer or not. But I’ve already outlined a number of measures that we have taken to fix the migration system, thoroughly broken, overseen by Mr Dutton, and to try to put in place a more manageable migration system and more manageable immigration numbers. We are conscious that this is an issue that needs to be addressed, and we’ll keep working on it. (Time expired)

The PRESIDENT: Senator Roberts, your first supplementary?

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Reserve Bank Uses “Blunt Tool” on Inflation

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The new Governor of the Reserve Bank is not ruling out raising the cash rate again to further control inflation. She refers to these measures as part of a tightening phase.

The Reserve Bank is unwinding the massive expansionary monetary policy it took during the COVID response which created $500 billion out of thin air. Meanwhile the States and the Federal ALP are spending money like it is play money.

This spending acts against the Reserve Bank’s rate rises. This is why I say this Government is hitting the brake and the accelerator at the same time.

The high rate of immigration is expanding the economy and that also acts against the dampening effect of rate rises. The pain and stress of mortgage rate hikes can be attributed to the costly COVID response and to immigration. That is all on Prime Minister Albanese and Treasurer Chalmers.

One Nation will reduce immigration to reduce rents and take the heat of the property market, removing the need for further rate rises.

Transcript

Senator ROBERTS: Congratulations on your appointment.

Ms Bullock: Thank you, Senator.

Senator ROBERTS: How does it feel being in a highly complex job which is affecting so many people’s lives and livelihoods?

Ms Bullock: I do feel a great deal of responsibility, Senator.

Senator ROBERTS: Thank you. Inflation has gone from 7.8 per cent, peak, to 5.4 per cent. In your speech yesterday you went on record to say the Reserve Bank will not hesitate to raise rates again if it looks like inflation is not coming under control. Is inflation coming under control? I’m guessing from your comments so far that you’re wary and there are signs that it’s not.

Ms Bullock: I’d say what I said earlier, which is that we got an important piece of information yesterday. We need to take that away, analyse it and figure out what it means for our forecast going forward. That’s no different to the comment we’ve been making to date, which is that we are—’wary’ is a good word. We’re looking at some of the more persistent parts of inflation and asking ourselves: are there signs that those might be coming down in the future? So, yes, we are wary. We don’t know if the job is done yet, and we’ve made that very clear. Even though we haven’t raised interest rates since our last interest rate rise in June, we’ve made it very clear that we might need to go again. We had not ruled that out, and we’re in the same position now.

Senator ROBERTS: When debating the need for a rate rise, is the effect on mortgage affordability, especially mortgage stress, taken into account? If so, what measure do you use, and what is that measure telling you about how hard life is getting for mortgagees?

Ms Bullock: We do understand that there is a distribution—let me step back for one moment. Higher interest rates and monetary policy work through a number of channels. The one that gets the most attention is what we call the cash flow channel, which is the impact on people who have debt. That gets a lot of attention, particularly in Australia, because, as Chris already mentioned, most of the debt of households and businesses is variable rate debt or very short fixed-rate debt. That’s why that channel gets the most attention, but there are other channels. In fact, Chris gave a speech on that fairly recently. One is the intertemporal channel, which basically means: as interest rates go up, people are incentivised to save rather than to spend, and in fact we are observing that. We are still seeing people in aggregate save, and there’s an incentive even for mortgage holders to save. Their interest rates have gone up, so, for them, there’s an incentive now to try and put even more away into their offset and redraw accounts if they can. That’s the other way that it works. Another channel is the exchange rate channel. The way that works is: as interest rates rise, the exchange rate—if everyone else wasn’t raising their interest rates the exchange rate would rise, but at the moment it means that it hasn’t fallen very much. It has been reasonably stable over the last year. We’re not getting inflation through that particular channel. There are other channels as well.

Senator ROBERTS: Do you measure the stress?

Ms Bullock: No. We can’t very precisely say: particular channels contribute X to inflation. We can’t do it that way. But they’re all the channels that we’re watching and trying to understand how they might impact.

Senator ROBERTS: How do you assess whether or not people are under mortgage stress? Ms Bullock: We don’t do individual mortgage stress assessments. What we can observe is data we get from the banks on hardship calls that they’ve got, arrears rates and those sorts of things. We can observe those at aggregate level. The feedback we’re getting at the moment, from the banks and from the data we see, is that that has risen but it’s still at very low levels.

CHAIR: Last question.

Senator ROBERTS: Surely the inflation that’s still hitting Australians has something to do with the Reserve Bank creating $500 billion out of thin air—or, as Dr Debelle said, electronic journal entries—over COVID. Have you thought about that? Your predecessor admitted it was a cause of the inflation problem, creating that $500 billion out of thin air.

Ms Bullock: Basically, you’re referring to the massive expansionary monetary policy that we undertook during the pandemic?

Senator ROBERTS: Yes.

Ms Bullock: I think my response would be that, at the time, we were facing a very, very dire economic situation, and the appropriate response at the time was to run a very expansionary monetary policy. We have now unwound that and we’re in a tightening phase, so, yes, the purpose of the expansionary monetary policy was in fact to encourage demand and encourage growth. That was very much the intention. To the extent that we look back and now say, ‘Well, demand is too strong,’ we are now in a tightening phase to wind that back. But I wouldn’t say it was the sole reason for the increase in inflation. You might remember that there were very big supply chain issues as well, and when constrained supply meets high demand, you get inflation.

Senator ROBERTS: Building on that, you have a very blunt tool to attack inflation, don’t you? Because the cash rate for the entire country is a very blunt tool to try to bring down inflation.

Ms Bullock: Yes, it’s a blunt tool.

Senator ROBERTS: Thank you.

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