Treasurer Jim Chalmers said the global economic forecast is gloomy.Credit:Alex Ellinghausen
Shadow Treasurer Angus Taylor said higher interest rates would add pressure to mortgage holders who are also facing high inflation. He said the government should produce a “sensible budget” in three weeks’ time to help.
“While the Reserve Bank of Australia makes its decisions independently,the government can and should use its fiscal levers to reduce pressure on households,” he said.
Major banks moved quickly following the Reserve Bank’s announcement,with NAB and Westpac passing on the rate hike to mortgage customers in full within on Tuesday afternoon followed later by ANZ and Macquarie Bank.
Chalmers said rising interest rates,combined with high and rising inflation and a gloomy global economic outlook would affect the government’s first budget later this month.
“This will be a budget which is about difficult decisions in difficult times,” he said.
Deutsche Bank’s chief economist for Australia,Phil O’Donaghoe,said the Reserve Bank’s comparatively small hike was the wrong move as local inflation and wage pressures are similar to other wealthy nations.
“Rather than signalling ‘almost done’,we think the risk behind today’s decision is that it eventually looks more like a detrimental delay,forcing the RBA to ‘chase’ higher than expected inflation and wage prints though a prolonged hiking cycle that stretches into 2023,” he said.
Loading
Callam Pickering,Asia-Pacific economist for online job site Indeed,said Australia’s economic resilience could force the Reserve Bank to “do more to combat inflation”.
“To bring inflation back towards the 2-3 per cent target requires the demand for goods and services to soften. There are few signs,outside of the property sector,that demand has meaningfully changed,” he said.
But CommSec chief economist Craig James said the bank needed to tread carefully from here.
“The Reserve Bank has also achieved a major milestone in getting the job market to full employment,” he said. “And it doesn’t want to risk that tremendous achievement by pushing the economy into recession.”
Cut through the noise of federal politics with news,views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weeklyInside Politics newsletter here.