“We think inflation has peaked,there are encouraging signs ... but we think it has,and inflation will moderate over the course of the next 12 to 18 months,” Chalmers told RN Breakfast.
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Lowe said by the time the RBA board next meets in April,it will have updated figures on thejobs market and inflation. Those will be vital to the bank’s next actions.
“They are important pieces of data that we can look at before the next board meeting. If they suggest the right thing to pause we will do that,but if they suggest we need to keep going,we will do that,” he said.
Lowe revealed the lift in interest rates is grabbing a huge share of take-home pay for many Australians.
He said based on the past 10 interest rate rises,mortgage repayments are likely to reach a record 9.5 per cent of household disposal income later this year.
Combined with the fall in house prices across the country,the RBA would look closely at trends in household spending at each of its monthly meetings.
A key concern of the bank has been a prices-wages spiral pushing up inflation to even higher levels.
Lowe saidrecent figures,including the wage price index and income data contained within the national accounts,both suggested the risk of a wage spiral was abating.
“These data suggest that the risk of a prices-wages spiral remains low. This is helpful as we navigate that narrow path and it means that Australia is in a better position than some other countries,” he said.
“Notwithstanding this,we remain alert to the risks here given the combination of a tight labour market,the high level of capacity utilisation and the run of high inflation numbers.
“If this risk did materialise,the costs would be very high. In particular,if prices and wages were to chase one another,the end result would be persistently high inflation,even higher interest rates and higher unemployment. It is in our collective interest to avoid this.”
Lowe has agreed to meet representatives from Suicide Prevention Australia after the organisation warned of growing financial and mental health pressure on many people.
He said during yesterday’s board meeting,he went through some of the mail he had received from people outlining the difficulties they were facing because of big increases in mortgage repayments.
“People write to me about how it’s affecting their families and mental health,” he said.
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“In the next month I’m meeting with Suicide Prevention and Lifeline,so we’re very alert to that. It weighs heavily on my heart (and) the hearts of the board members.
“But,at the same time,we know if we don’t get on top of inflation,higher interest rates,more unemployment,more pain.
“If we don’t get inflation down,we’ll be in all sorts of trouble. So that’s - it’s a difficult message at an individual level,and,it weighs on us a lot. I read the many letters,and often I respond to them.”
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