Anthony Albanese’s economic balancing act looks set to collapse as leading economists warn that rising inflation could trigger another interest rate rise, the 14th in two years.
Inflation jumped to four per cent in the year to May, up from 3.6 per cent the previous month, prompting NAB analysts to warn that any rate cut could be delayed until after May next year.
A cocktail of rising energy bills, higher petrol prices and soaring rents have helped push consumer price growth to a six-month high, well above the Reserve Bank’s 2 to 3 per cent target. .
UBS and Deutsche Bank analysts have joined Judo Bank chief economist Warren Hogan in predicting a 14th rate hike in August, according to The Australian.
The prediction could be a crushing blow to troubled mortgage holders who have endured 13 rate increases between May 2022 and November 2023.
Anthony Albanese’s economic balancing act looks set to collapse as top economists warn that a rise in inflation could trigger another rate hike.
NAB analysts have warned that any interest rate cut could be delayed until after May next year in a bid to keep inflation down. Pictured is a shopper at Coles.
The prime minister is expected to speak in parliament about his government’s cost-of-living measures and its economic management record on Thursday morning.
But some economists warn Albanese’s cost-of-living measures risk keeping inflation high and therefore hurting struggling Australians.
‘Governments are spending a lot of money on the symptoms of the cost of living crisis, but this makes the cause of it worse. And the cause is that there are too many dollars chasing too few things,” independent economist Chris Richardson told the publication.
‘Governments have abandoned the battlefield in the fight against inflation. “We are fighting inflation with one hand.”
In news that will spark anger in the hearts of struggling households, Richardson warned that “Mortgage relief is a long, long way from here.”
Troubled mortgage holders have endured 13 rate hikes between May 2022 and November 2023
EY chief economist Cherelle Murphy also said another rate hike was now a strong possibility when the RBA meets again in August.
“The monthly consumer price index has rattled financial markets, which are now once again seriously considering the possibility of another rate hike by the Reserve Bank at its next meeting,” he said.
The bad news was delivered just a week after RBA Governor Michele Bullock confirmed a rate hike was more likely than a rate cut, with the cash rate this month held at a 12-year high of 4 .35 percent.
“Yes, at this meeting the council discussed the need to increase interest rates,” he told reporters.
“No, the possibility of a cut has not been considered.”
RBA Governor Michele Bullock (pictured) confirmed that a rate hike was more likely than a rate cut.
Despite fears that Labour’s cost of living policies, such as the $300 energy bill rebate and stage three tax cuts, are contributing to higher inflation, Albanese is set to say “inflation has gone down” in parliament on Thursday.
In a speech to a CEDA conference, he will boast that his policies have been introduced “to relieve pressure on people, without putting pressure on inflation”.
‘Inflation has gone down. Annual growth in real wages is back,” Mr Albanese will say.
“Unemployment remains at its lowest level in almost 50 years and the gender pay gap is at an all-time low. My colleagues and I are proud of this record.”
The monthly measure of inflation is now back to the highest level since November 2023, when the Reserve Bank last raised interest rates.
But Treasurer Jim Chalmers said the monthly consumer price index was volatile and therefore less reliable than the quarterly inflation measure.
“As we have said many times before, the monthly CPI figure is volatile and can vary because not all items in the basket are updated each month,” he said on Wednesday.
“Today’s annual figure was dragged up by fuel prices and the impact of base effects, which are the result of a large drop in monthly inflation in May 2023 that impacted the May 2024 annual figure “.
