Treasurer Jim Chalmers said the inflation target band would likely be the main focus of the landmark review into the Reserve Bank of Australia.
National Australia Bank chief executive Ross McEwan said he would be”very surprised” if the target was dumped, while BHP chief financial officer David Lamont said he supported the existing interest rate framework.“Having that certainty gives us a lot more certainty to plan what we invest back into the country,” Mr Lamont told a business forum on Wednesday., Dr Chalmers backed the inflation target but acknowledged it would be the main focus of inquiry.
For someone with a $1 million mortgage, repayments could rise by a total of $1818, according to interest rate comparison website RateCity.well below where it needed to move, but households were well-placed to manage further increases. “If people setting prices and wages believe higher inflation will persist, they are more likely to push prices and wages up,” he said. “This could result in a self-reinforcing cycle: one in which higher inflation leads to firms being more willing to put their prices up and agree to larger wage claims.”
With the review set to be handed to Dr Chalmers next March, Dr Lowe was resistant to changing the target and said he would need to assess any such recommendation and discuss it with the government. The broad terms of reference for the review released by Dr Chalmers show it will be charged with ensuring monetary policy arrangements and the operations of the bank further support strong economic outcomes.
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