OPINION: The shock of the first 0.5 of a percentage point interest rate rise in 22 years is a signal the RBA is nervous about the government, unions and workers demanding that wages keep pace with inflation.
It’s a huge pivot from a few months ago when governor Philip Lowe was worried about weak wages growth.
The new cash rate of 0.85 per cent will keep rising. The bank is readying further consecutive rate rises of at least 0.25 of a percentage point – and possibly 0.5 of a percentage point again – in July, August and plausibly beyond.Inflation is tipped to rise above the 6 per cent forecast only a month ago, probably to about 7 per cent due to a further jump in the oil price.
“Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago.” While it is understandable the government wants to protect the relatively small number of minimum wage workers earning $20.33 an hour, the danger is that the mindset shift spreads across the labour market.
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