Al-anwar Newspaper English news in Australia
Reserve Bank Governor Philip Lowe has issued a grim update on Australia’s battle with rampant inflation, after the RBA lifted rates for a tenth consecutive time to 3.6 per cent on Tuesday.
The expected 25 basis rise was confirmed after the Reserve Bank board met on Tuesday afternoon, with the cash rate at its highest since June 2012.
Mr Lowe flagged more “tightening of monetary policy will be needed” to bring inflation down to the goal range of 2 to 3 per cent – and revealed when that might first be achieved. As of the December 2022 quarter, the consumer price index was at 7.4 per cent. The central forecast is for inflation to decline this year and next, to be around 3 per cent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case,” he wrote. “The board’s priority is to return inflation to target. High inflation makes life difficult for people and damages the functioning of the economy.
“The board is seeking to return inflation to the 2–3 per cent target range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.”
Analysts from the big four banks have predicted a peak cash rate of 3.85 to 4.1 per cent, indicating a potential two further 25 basis point hikes, before rates are paused.
According to Finder, the average monthly repayment on a $604,346 home loan has increased by $1111, from $2697 in April 2022 to $3808 in March 2023. If a predicted cash rate peak of 4.1 per cent does occur, the average monthly repayment will hit $4009, or an annual increase of $15,744. Treasurer: ‘This was expected, but it will still sting’
Treasurer Jim Chalmers conceded the latest interest rate rise would “make life harder for many Australians already under the pump”. “This was expected, it was flagged, the markets anticipated it, but it will still sting,” he said during Question Time.
“The Reserve Bank takes its decisions independently and that independence is an important feature of our system. The government’s job is to take responsibility for those things that we have an influence over.”
Dr Chalmers said Australia’s economy had been hit by a range of global inflationary pressures, while also being exascabated by local supply chain issues.
“Australians understand that a lot of this inflation is coming at us from around the world, and they understand that broken supply chains here in Australia have been part of the problem as well,” he said. “We take responsibility for working through this inflation issue in a responsible and a methodical way to address inflation in the ways that we can.”
Mr Lowe also acknowledged that rate hikes were having a “painful squeeze” on household budget sheets, however flagged a period of financial uncertainty. “Household balance sheets are also being affected by the decline in housing prices,” he wrote. “Another source of uncertainty is how the global economy responds to the large and rapid increase in interest rates around the world.
