Shemara Wikramanayake says Australian inflation is six months behind countries where rates have already been cut, but the economy is stronger in other areas.
, says she expects the Reserve Bank will not cut interest rates for another six months because inflation in Australia remains “sticky” compared to other developed economies.
Wikramanayake told an infrastructure conference in Sydney on Friday the group’s “latest guess” was for a cut to the cash rate from its current level of 4.35 per cent around March next year, because of persistent inflation. The latest consumer price index datain the year to July 2024, and Wikramanayake said this showed Australia was “running at a slightly different speed to the rest of the world”., has indicated rates are unlikely to start coming down until next year.
Wikramanayake said the economy still showed positive signs, saying though annual domestic growth of around 1 per cent was “sluggish”, the figure was “actually stronger than just about every other G7 economy except the US”. “The RBA didn’t hike rates as much as some of our peers around the world, and that was because I think they were trying to sustain the employment pick-up that we had post-COVID. And frankly that seems to have worked,” she said.“That’s why their economies are slowing more, and their inflation is slowing more, and this is whyTensions between the independent central bank and the federal government reached a head this month when Treasurer Jim Chalmers said rate hikes were “smashing the economy”.
“Private capital has a role to play, but the public side, as we all know, has to create the environment for that money to come in, which is a reliable framework.”
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