- Decision by the Board to raise the cash rate by 0.25% to 3.1%
- Inflation continues at a rate which is ‘too high’.
- Reasons provided for the continuing inflationary pressure are global issues (not detailed in December statement but covered in earlier statements) and the strong demand in Australia not being addressed as a result of constraints on supply.
- As of the most recent data from the ABS, inflation sits at 6.9% while the RBA’s target is 2% to 3%.
- To achieve this target, the Board notes that a balance of the levels of supply and of demand which is sustainable is required.
- Inflation is still expected to rise more. The Board repeated its forecast for the peak of 8% in this quarter. A fall is forecast for next year as the resolution of supply disruptions on a global level continue and other factors.
- The forecast is for a return to around target inflation in 2024.
- Economic growth in Australia is seen as solid but an easing is expected in 2023. This is given as the global economy slows down and in Australia, as demand and hence consumption ease off as the real effects of financial tightening are realised. Especially higher home mortgage rates.
- The lag between rate rises and their effect was noted.
- Wages growth is seeing a pick-up but labour availability remains tight as the low rate of unemployment indicates.
- The Board will be paying close attention to the behaviour of businesses in price setting to avoid a wages-prices spiral.
- The uncertainties around forecasts and outlooks were once again noted. These being the performance of the global economy which is already showing signs of deterioration. Also the uncertainty around how consumer spending will react when the rate increases are fully implemented.
RBA Continues with Interest Rates Increases
- Decision by the Board to raise the cash rate by 0.25% to 3.1%
- Inflation continues at a rate which is ‘too high’.
- Reasons provided for the continuing inflationary pressure are global issues (not detailed in December statement but covered in earlier statements) and the strong demand in Australia not being addressed as a result of constraints on supply.
- As of the most recent data from the ABS, inflation sits at 6.9% while the RBA’s target is 2% to 3%.
- To achieve this target, the Board notes that a balance of the levels of supply and of demand which is sustainable is required.
- Inflation is still expected to rise more. The Board repeated its forecast for the peak of 8% in this quarter. A fall is forecast for next year as the resolution of supply disruptions on a global level continue and other factors.
- The forecast is for a return to around target inflation in 2024.
- Economic growth in Australia is seen as solid but an easing is expected in 2023. This is given as the global economy slows down and in Australia, as demand and hence consumption ease off as the real effects of financial tightening are realised. Especially higher home mortgage rates.
- The lag between rate rises and their effect was noted.
- Wages growth is seeing a pick-up but labour availability remains tight as the low rate of unemployment indicates.
- The Board will be paying close attention to the behaviour of businesses in price setting to avoid a wages-prices spiral.
- The uncertainties around forecasts and outlooks were once again noted. These being the performance of the global economy which is already showing signs of deterioration. Also the uncertainty around how consumer spending will react when the rate increases are fully implemented.
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