As inflation surges past 5 percent, analysts predict that the Reserve Bank of Australia (RBA) would need to take action to ease the pressures of rising living costs on citizens.
The Australian Bureau of Statistics (ABS) announced on Wednesday morning that Australia’s Consumer Price Index (CPI) rose 2.1 percent in the first three months of 2022, or 5.1 percent annually.
Head of Prices Statistics at the ABS, Michelle Marquardt, said the CPI increase was the sharpest single-quarter rise since 1999, when the Goods and Services Tax (GST) was introduced.
“Continued shortages of building supplies and labor, heightened freight costs and ongoing strong demand contributed to price rises for newly built dwellings,” said Marquardt.
She added that food was also above average for price increase, increasing 2.8 percent in the last three months, noting that the increase was a reflection of rising transport and agricultural costs as well as COVID-related disruptions.
Brendan Rynne, the chief economist of financial advisory firm KPMG, told Xinhua on Tuesday that Australia’s interest rates would need to be raised to curb inflation.
“Many economists (believe) that the Reserve Bank is behind the curve with regards to managing inflation in Australia, and that we need to move interest rates up fairly rapidly in order to start to manage the inflation risk that’s occurring at the moment.”
Rynne said that as interest rates are increased, Australians will need to spend more money servicing their home loan and cut back on food and retail spending.
“So, what you’ve already started to see is pressure coming off the housing market … that’s then going to also translate into lower consumption spending, as existing homeowners start to contend with higher interest costs,” Rynne said.
He noted that the disparity between wage growth, which was posted at 2.3 percent annually in early 2022, would begin to have an increasing impact on Australian households.
“The absence of increases in wages growth means that the real purchasing power of households is going to diminish,” he said.
He said KPMG projects inflation rates at 5 percent will “not last” as supply side shortages are solved.
“The drivers to inflation are not uniform … Demand has been improving as the world economy reopens. But there’s been supply-side shortage, both for goods and also for products like oil.” ■