Is a recession inevitable?

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Good morning.

Welcome to AM.

It's Wednesday, the 18th of March.

I'm Melissa Clark, coming to you from Gadigal Land in Sydney.

Financial counsellors are warning yesterday's decision to raise interest rates will hurt

many households as they struggle with rising costs.

The Reserve Bank raised the cash rate by 25 basis points, taking it up to 4.1%.

It's the second rate rise this year, and analysts say more are on the way.

As well as fuel prices, soaring due to war in the Middle East,

many homeowners will now have to find at least an extra $100 for their monthly mortgage payments.

David Sparks reports.

People with mortgages are sweating over interest rates, but they're not the only ones worried.

I rent.

So I mean, for me, it's not a direct flow on effect because I don't have a mortgage.

But certainly in terms of my once a year rent increase in my prospects of owning a home,

then yeah, I notice that.

I pay attention.

I think it's disappointing.

From my point of view, I've got two young children.

One is 18 and one is 21, and I do have concerns about how they will one day get into the market.

It's challenging.

Many banks have already announced they're passing on the full quarter of a percent rate rise.

Financial councillor Claire Takon says it'll hit many Australians hard.

Well, it's really bad news for people who are already struggling with housing stress.

She's assistant director of financial counselling at the Consumer Action Law Centre,

which runs the national debt hotline in Victoria.

Since the interest rate started to rise in 2022,

that's been our the number one reason that people have been calling us, has been housing stress.

And it's something that I've never seen before in the time that I have been a financial counsellor.

Reserve Bank Governor Michelle Bullock says the rate rise is necessary to rein in inflation.

I understand that this is tough news for people with mortgages.

I understand that.

My issue, though, is that and the board's challenge is that if we don't raise interest rates

and we're going to see second round effects coming from petrol prices and fuel prices,

so it's going to be even worse for everyone.

The number of people calling the national debt hotline has been rising.

Last month, it took more than 15,000 calls and online chats.

Claire Takon says that's the most for February since 2020 at the start of the pandemic.

People are struggling with everything.

We find that when they're struggling with their mortgage payments or their rent,

everything else is in crisis, credit cards are maxed out.

People are relying on by now pay later.

Almost half of the people calling the helpline are working.

A third have full time jobs.

It used to be that our most common client was someone who was receiving

a central income or someone who had had some sort of significant, you know, bad luck, I guess.

We're still getting those calls.

But more and more, we're also getting this new cohort of people who they're still working.

You know, there might be two income households, but they're just not able to afford to pay for everything,

including the roof over their heads.

Most economists are predicting more rate rises this year.

David Sparks reporting.

As the federal government tries to tame inflation and improve productivity,

the opposition is calling for public spending to be wound back.

Tim Wilson is the shadow treasurer.

Tim, thanks for joining AM this morning.

Thank you for having me.

Was it the right call for the RBA Monetary Policy Board to raise rates yesterday?

Well, the RBA outlined that they were forced into this decision of the back of data,

inflation data from the second half of 2025.

They outlined that that was the key factor in their decision making

because the government keeps pouring debt petrol on the inflation fire throughout last year.

Their hand was forced yesterday.

The more concerning thing is that, of course, it doesn't fully reflect the costs or the consequences of conflict overseas.

And like most Australians, I'm concerned that there may be more to come.

The RBA did particularly point to those figures from the second half of last year

around business investment being higher than expected and a strong housing market.

Are they the elements that need to be tackled to get inflation under control?

Well, the private demand that's coming through is being stoked by public spending and debt spending from the government.

And that is the challenge you need to address.

Inflation comes from Canberra.

And because we've had continued and consistent public spending that has driven that private demand,

you're seeing this in the inflation data and therefore interest rate rises.

It's time for the government to pair and pull in its belt.

If you do that, you'll get downward pressure on inflation.

The Reserve Bank outlined two risks, really.

The one that the economy continues to run hot and inflation continues to rise.

An economic growth is still pushing forward.

The other that there's an economic downturn and not rolling out the possibility of a recession.

Which do you think is more likely?

Well, it's hard to see where things are going to go because there are a lot of events outside of our control.

But what we know is that Australians are paying around $27,600 more on average on their mortgage

and they were around four years ago.

That's going to put a real bite into household incomes.

That, of course, is going to constrain their spending, which is, of course, what interest rates ultimately are designed to do.

What we need the government to do is stop impriming this problem by continuing to pour debt petrol on the inflation fire.

And then I think it will have much greater clarity that inflation can be tamed.

Well, if you think there needs to be more heat taken out of the economy,

does that mean you would oppose any cost of living relief measures that the government might offer?

Because that could add to more household spending and inflation.

This is one of the reasons it's always flagged that any measures need to not be inflationary

because it's trying to solve a problem today but creating a longer tail later.

But we know that there are so many areas that government can constrain.

It's not even spending.

It's frankly throwing money towards fraud.

The NDIS said 10% of the NDIS is fraud or corrupt.

We know that we've had $15 billion handed to organise crime through the CFMU.

Let's start with fraud and corruption first because you take that out of the economy

or put downward pressure on inflation and will stop throwing taxes towards fraud and corruption.

When it comes to cost of living support though, is your message to households

that they shouldn't expect anything from the government because that would make the inflation problem worse?

It's up to the government to decide what it wants to do.

But it's very clear to me that we've had energy rebates to get the government through

a difficult political cycle and there was warnings that these things would be inflationary.

Of course, they have since been revealed to be inflationary.

The government said they wouldn't be so they continue to create the problem that they're now confronted with.

But the problem is that for them it's just numbers on a piece of paper.

It's the liberality of Australians who are doing it tough, who are going to supermarket and costs are going up.

And of course, they're finding it now on their mortgages as well.

The government is considering changes to capital gains tax concessions.

The Greens want to see those concessions wound back.

You've made it clear that you don't want to see the tax rate go up or the concession reduced depending how you look at it.

Is the coalition willing to countenance tax trade-offs if it leads to an overall reduction in taxation?

Or would you insist on every tax rate either being the same or lower?

Well, my starting position is one, I don't want taxes to go up to fund corruption.

And this is the problem. We have a government that is utterly unwilling to deal with the problem of CFMU corruption.

NDIS corruption, there's now reports of issues with childcare.

And their answer isn't let's stop the fraud and corruption.

Their answer is let's increase the tax on Australians.

I just don't accept that as a solution.

I think that we should start by stopping fraud and corruption.

When it comes to the tax rates, of course, the government at this point has floated about 30 different options

and seem to have no clarity on what it is they're going to do.

Until they put a concrete plan forward, it's very hard to respond to it.

But I don't think it should be hard to say, let's stop the fraud and corruption first before increasing taxes on honest Australians.

Do you not have a principled position of a willingness or not to consider tax trade-offs, a mix of one if it leads to an overall reduction in taxation?

Can you give a principled position of whether an approach like that is something that you could be supportive of?

My principal position always on taxes to give anything, you know, a fair hearing and to wait and see what's actually put out there.

But we don't have anything that's being put out there.

Labor is trying to use the Greens and they're a committee they control to front-run debates.

They won't, they won't outline what their actual plans are.

So we're dealing with the hypotheticals, but it isn't a hypothetical that $15 billion has gone to organise crime to the CFMU Labor Cartel.

Let's stop that first before increasing taxes on honest Australians.

Tim Wilson, thanks very much for speaking to AM this morning.

Thank you.

That's Shadow Treasurer, Tim Wilson.

As just mentioned then, there's been a Greens-led Senate inquiry that has found the 50% capital gains tax discount

may be contributing to wealth inequality, and locking would-be home buyers out of the housing market.

With the federal government considering changes to tax settings ahead of the budget in May,

the committee's findings lay the groundwork for reform.

Political reporter Samantha Dick has the story.

Critics have long argued runaway house prices are partly fueled by tax breaks,

and now Treasurer Jim Charmer's own colleagues have agreed there's a problem.

But these decisions ultimately get taken by the cabinet.

A Senate inquiry has found home ownership is skewed towards investors,

because of the 50% discount on capital gains tax along with negative gearing.

Labor members of the Greens-led committee have signed off on the findings,

including that the benefits are unequally distributed with impacts on intergenerational inequality.

Greens-Senator Nick McKim chaired the inquiry.

This is the first time since 2019 election that Labor has acknowledged the fundamental unfairness of the capital gains tax discount,

including its contribution to the housing crisis.

The Greens have long calls for the scrapping of the discount on capital gains tax for investment properties.

But independent economist Saul Eslike, who gave evidence to the inquiry,

says a 33% discount should be considered instead.

I think it's appropriate that some allowance be made for the impact of inflation on the value of assets.

He also suggested keeping the 50% discount for new builds,

while reducing it for existing houses to encourage investment in new homes.

It would be better if incentives were confined to investors who purchased new housing

or financed the construction of new housing.

The federal government is considering tax reform in this year's budget,

and it would need grain support to pass any changes through the Senate.

Because the opposition's housing spokesperson, Liberal Senator Andrew Bragg,

says the coalition is not interested.

Higher taxes won't deliver any more houses.

You're still going to have the principal issues of a lack of supply,

and not enough support for first homeowners in a sustainable way.

So you could do this, but it won't fix the problem.

The federal government says it recognizes the wealth gap between older and younger Australians is a big problem,

and it's fueling resentment.

Some add the DIC reporting.

The Israeli military claims it has killed Iran's security chief Ali Lojani

and the head of the Iranian paramilitary force, Golem Reza Soleimani.

There's been no word from Iran, but if it's true,

the deaths will strike another blow to Iran's regime.

Ali Lojani is a man widely seen as one of the most powerful figures in the country.

That news comes as Donald Trump's taken a swipe at America's allies,

including Australia, Rachel Milley reports.

Eyewitness video recorded in Tehran shows a vehicle burning on a busy street.

Israel claims Ali Lojani was traveling inside.

It released vision showing the apparent aerial view of the strike.

Lojani was a key figure in Iranian politics.

As analysts believe he's served as a de facto leader since the beginning of the U.S. Israeli strikes.

If confirmed, he'd be the most senior Iranian figure to be killed since Ali Hominay on the first day of the war.

Israel has also claimed to have killed the head of besiege, the Iranian paramilitary, in a separate strike.

Heizim Amira Fernandez is the executive director of the Center for Contemporary Arabic Studies.

He says the deaths of Larajani and Soleimani are unlikely to bring the conflict to an end.

So far, it has proven to be very resilient.

The Iranian political system, the political regime, the military has kept the capacity to respond to acts in a way with a chain of command, apparently.

U.S. President Donald Trump didn't name him but referred to the death, saying he was the man responsible for the deaths of 32,000 Iranians.

Speaking in the Oval Office, he once again criticized NATO leaders for not supporting U.S. efforts in Iran.

But I was surprised to see that NATO, while they agreed that it was a very important thing to do, they agree fully. Nobody said all you shouldn't do it.

So, I think NATO is making a very foolish mistake, and I've long said that I wonder whether or not NATO would ever be there for us.

So this was a great test, because we don't need them, but they should have been there.

Earlier, he'd made mention of Australia in a social media post, where he said the U.S. didn't need the help of NATO countries or that of Japan, Australia or South Korea.

It came as his top counterterrorism official Jo Kent resigned, saying he could no longer support the ongoing war in Iran.

In a statement, he accused Israeli officials and lobbyists of misleading the Trump administration.

I cannot in good conscience support the ongoing war in Iran. Iran posed no imminent threat to our nation, and it's clear that we started this war due to pressure from Israel, and it's powerful American lobby.

In signature style, Donald Trump shook off the news.

Former Prime Minister Malcolm Turnbull says Australia needs to become less reliant on the United States.

And it really just underlines the importance of Australia being more independent, exercising our own sovereignty, and recognizing that the course we have been undertaking really since the Morrison government of becoming more and more dependent on the United States is absolutely the wrong course.

Former Prime Minister Malcolm Turnbull, Rachel Mealy reporting there.

Israel has confirmed its ground invasion in southern Lebanon is expanding, a day after the country's defense minister issued a grim warning about how long it's campaign against Iranian-backed Hezbollah would continue.

Israel Kat said the hundreds of thousands of Lebanese people who've been forced to flee the South won't be allowed to return until Israel deems it is safe.

Hezbollah's decision to enter the broader regional conflict and attack Israel has put immense pressure on Lebanon's government and society with emergency shelters struggling to cope with demand.

Middle East correspondent Matthew Doran reports.

You can smell this place before you see it. The aroma of freshly cooked chicken mixed with vibrant spices pours through the doors and windows.

There are industrial-sized pots in every corner of this makeshift kitchen set up in the shell of an unfinished building which until two weeks ago was a construction site.

Our headquarters in Red Zone was and we moved with our kitchen to this place.

Isam Slim is the co-founder of the Will Association running this facility.

We were as not ready for this war and became everything so quickly.

Thousands of meals a day are being cooked up here supporting people displaced by the war, sheltering elsewhere in this vast building in Shueh Fat and in other locations nearby.

Fatma Al-Hawal is among those living in a tarpaulin tent next door to the kitchen having left Hezbollah's stronghold suburbs in southern Beirut.

We came at two in the morning. We were sleeping and suddenly we woke up to a loud explosion.

We got up, packed our stuff and left and we stayed on the streets.

There are eight people living in her tent and plumbing hasn't been connected to the building yet.

Something the charity World Vision which is helping to run this site is hastily arranging.

How are we supposed to live? We're supposed to live in peace. Our government should defend us to tell Israel to stop their brutal aggression on us and on our children.

Just as we were speaking to Fatma, the rumble of a distant explosion in the area she and her family had fled as Israel continued its attacks on claimed Hezbollah targets in the city and beyond.

The Israel Defense Force's spokesman is Brigadier General Effie Defren.

We are striking Hezbollah forcefully even now and we will continue to strike anyone who threatens your security.

We will not allow harm to Israeli civilians.

The Lebanese Health Ministry says more than 900 people have been killed across the country as a result of Israeli strikes and more than 2,200 injured.

There are now more than 900,000 people displaced with Israel demanding the evacuation of most of the south and Beirut's southern suburbs.

Schools are being used to shelter some of those people, including one housing almost 700 near to where that explosion happened.

Lebanon's Education Minister Rima Karami is touring there.

It is a lot of pressure and we are short on resources, especially if the war is extended and the displacement doesn't end soon.

This crisis is touching a much larger circle than was the case before.

This is Mathidor and In Beirut reporting for AM.

And that's AM for today. Thanks for your company. I'm Melissa Clark.