Reserve Bank forecast: Grim reason 140,000 Aussies will be jobless amid stubborn inflation and soaring rents

The Reserve Bank warns that the fight against inflation may still have some way to go, as a shocking report reveals that sky-high rents and higher energy bills are expected to hurt household budgets as it rises. Unemployment.

The Quarterly Statement on Monetary Policy, released on Friday, has seen the Reserve Bank cut its short-term forecasts and economic growth is expected to falter further.

The unemployment rate is also forecast to rise, with the RBA noting that an additional 140,000 people are expected to be out of a job by June 2025.

In addition to the economic shock experienced during COVID-19, Australia’s economy is expected to grow at its slowest rate since 1992.

In May, the central bank expected the economy to expand 1.2% by 2023, before expanding modestly at 1.4% in fiscal 2023-24.

But based on the new forecasts, the bank has moderated its forecasts and now expects the economy to grow just 0.9 percent by the end of the year. GDP growth will increase to 1.6% by the end of 2024 and 2.3% by the end of 2025.

While a new set of inflation figures released by the ABS in July came in below trader expectations by 6 percent, the Reserve Bank’s inflation outlook has barely changed from three months ago.

It will still take until mid-2025 before inflation reaches the Reserve Bank’s target band of 2% to 3%.

Rental costs, a major contributor to broader inflation measures, are forecast to rise further over the next period as rental vacancy rates remain extremely low and new homes fail to keep up. with booming population growth.

“There is strong population growth taking place at a time when the rental market is already very tight and supply will take time to respond,” the statement read.

“Rental inflation is expected to continue to pick up over the next year or so, with inflation rising significantly over the forecast period.”

While a new set of inflation figures released by the ABS in July came in below trader expectations by 6 percent, the Reserve Bank’s inflation outlook has barely changed from three months ago. Image: NCA NewsWire / Nicholas Eagar

Energy prices are expected to worsen the cost-of-living crisis in the coming year, but rebates and subsidies will help ease some of the pain from energy bills.

“The impact of increases in electricity prices…will be partially offset by government rebates under the Australian government’s energy price relief scheme and various state government initiatives,” the report read.

The RBA said Australia’s wage bill would hit its fastest pace in a decade as workers’ pay packages struggled to keep up with the rising cost of living.

“People with jobs now also seek food assistance more frequently than in the recent past and higher interest rates have contributed to an increase in demand for services from people with a mortgage,” the bank said.

Despite experiencing 12 rate hikes since May 2022, households should brace for future rate hikes after the RBA said Australia could not yet declare victory against runaway price pressures.

However, the central bank also warned that recent government intervention in minimum and award wages could act as a benchmark across the economy. Under this scenario, inflation would be ‘persistently higher’ until the end of 2025.

Despite experiencing 12 rate hikes since May 2022, households should brace for future rate hikes after the RBA said Australia could not yet declare victory against runaway price pressures.

“Further monetary policy tightening may be required to ensure inflation returns to target within a reasonable period of time, but that will depend on data and risk assessment developments,” the report warned.

“The board remains resolute in its determination to bring inflation back on target and will do whatever it takes to achieve that result.”