OPINION: The RBA surprised the market with its 0.5 per cent rate rise. But will even this prove to be too little too late to suppress inflation?
Jim Chalmers is right that an interest rate rise of half a percentage point is “tough news” for homeowners. It is also tough for a new treasurer.
Since then, inflation warning signals have only become more pronounced. The size of the bank’s response still surprised the market – although probably not Treasury or Chalmers. Many analysts had thought the acute sensitivity of Australian households to rising variable rates, thanks to super-high house prices, might even lead the RBA to apply less urgent braking power than central banks elsewhere. More tap, tap than slam, slam.Lowe’s statement instead declared that the resilience of the Australian economy and higher inflation meant the “extraordinary monetary support” put in place during the pandemic was no longer needed.
All the talk of household financial buffers or small businesses enjoying booming customer demand won’t make finding that extra money feel any easier. The certainty of more pain to come is even more ominous.that always risk higher wages turning into a vicious circle of rising costs and rising inflation.
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