A senior economist has warned that Australia could fall into recession if inflation is not controlled and interest rates are not raised.
Judo Bank chief economic adviser Warren Hogan has warned the Reserve Bank of Australia could raise interest rates this year, dealing a blow to mortgage holders.
He said Australia had not raised rates as high as other countries and “that last little bit” could rein in inflation and the cost of living crisis.
However, Hogan was also tired of rates rising too high and sending the economy plummeting into recession.
An increase would be another blow to mortgage holders after they rose 1.25 per cent throughout 2023 and are forecast to rise another three times this year.
Judo Bank chief economic adviser Warren Hogan (pictured) warned the RBA could raise interest rates throughout the year to try to control inflation and the cost of living crisis.
Hogan said Australia had not raised rates as high as other countries and “that last little bit” could control inflation and the cost of living crisis (file image)
Speaking to Channel Nine’s Today program on Monday morning, Hogan said the economy was doing well but could “get away from us” and trigger inflation.
That scenario could see interest rates rise dramatically from 4.35 percent to levels similar to those of 1988-89, when they reached 17.5 percent.
“We’re not going to consider that this time, but we don’t want rates of six or seven (percent),” Hogan said.
“That will really lead us into a recession and cause damage.” “It’s about mitigating that risk.”
He said the RBA would try to keep the economy in balance throughout the year, which could mean further rate rises.
“The RBA is definitely not going next week, but there is an emerging risk that we may have to go one or two more times,” Mr Bowen said.
Bowen put pressure on the RBA (file image) not to let inflation get out of control as it could cause rates to rise sharply and send the economy into recession.
Mr Bowen warned the government not to “throw money” into the economy in the upcoming budget in May, adding they must remain “disciplined”.
“We are not going to get rid of this inflation when this year we are creating 25,000 jobs a month so far this year,” he said.
‘The cost of living is hurting everyone. And that’s what we have to get rid of.
The RBA opted to keep the cash rate at 4.35 percent in March and will announce its next decision on May 7.