Australians are “furious” about inflation and it will take the nation years to fully get on top on higher post-pandemic living costs, the Reserve Bank’s deputy governor says.
Ahead of the central bank’s meeting later this month on interest rates, Andrew Hauser said inflation remained too high despite Australia’s economy broadly doing well.
“People are furious about inflation,” he told ABC’s 7.30 on Tuesday night.
“Everywhere I go, I hear cost, cost, cost, inflation, inflation, inflation, and that’s our responsibility. We have to put that right.
“I understand why. It’s unfair. It hits people. It hits people on low incomes. It damages price signals. It makes the job of companies difficult.”
But he didn’t agree that an interest rate hike was inevitable, with the cash rate currently sitting at 4.35 per cent.
“Inflation is too high and that’s why we raised interest rates three times at the beginning of this year,” Dr Hauser said.
“The question now, frankly, for us is have we done enough or is more needed.”
Dr Hauser pointed to the ongoing conflict in the Middle East, the global boom driven by artificial intelligence and weakness in the economy’s supply potential as behind higher inflation.
“That is a very lasting and pervasive issue that is a function of the pick-up in inflation after COVID and will take years for us to fully resolve,” he said.
The RBA has a target band of two to three per cent for inflation, which it expects to reach by the end of next year.
Both headline and trimmed mean inflation came in above the RBA’s forecasts in July.
Dr Hauser said falling house prices weren’t a key factor in the bank’s forecasts for inflation, noting house prices were still three per cent higher than a year ago, and almost 50 per cent higher than the beginning of this decade.
“While house prices play a role in the economy, they’re not really as big as … global growth trends, productivity, the risk environment globally,” he said.
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