RBA Has Much to Consider Before Deciding on Another Interest Rates Rise: Deputy Governor

An Australian one dollar coin is displayed on May 16, 2012 in Melbourne, Australia. Scott Barbour/Getty Images

The Reserve Bank of Australia (RBA) said it needs to take into account multiple factors before deciding on whether to have another interest rate rise in August.

The comment came after the Australian Bureau of Statistics (ABS) released data showing annual inflation hit 4 percent in May, up from 3.6 percent the month before.

Speaking at the Citi A50 Australian Economic Forum on June 27, RBA deputy governor Andrew Hauser said there was more economic data that needed to be taken into consideration before the next interest rates meeting.

“There’s a whole series of data coming out between now and when we meet in August,” he told the forum.

Mr. Hauser said the RBA will study a multitude of data in the lead-up to its August decision.

Factors to be considered will include statistics on jobs, retail and business, as well as quarterly inflation numbers.

“Inflation remains above target and is proving persistent, the outlook remains highly uncertain, and returning inflation to target is the priority,” he said.

“All three of those things were true a month ago and they are true now.”

The deputy governor noted that services inflation—the increase in the price of services paid by customers—is a problem faced not just by Australia, but by other nations too.

Interest Rate Expected To Rise

Meanwhile, some financial institutions and economists have revised their forecasts for Australia’s cash rate due to increasing uncertainty in the Australian economy’s ability to rein in inflation.

Phil O'Donoghue, the chief economist of Deutsche Bank, one of the largest banks in Europe, predicted that the official cash rate would rise to 4.6 percent in August.

“Underlying inflation is intolerably high in Australia. In fact, Australia is the only G10 country where underlying inflation has increased since December,” he said.

Core inflation in Australia currently sits at a higher level than economies including the United States, United Kingdom, Canada, New Zealand, Japan, Norway, and Switzerland.

Australia’s interest rates have risen 13 times since May 2022.

The 4 percent rise in the 12 months to May took annual inflation to its highest reading in six months and was above consensus forecasts of 3.8 percent.

Labor Announced Budget Surplus

On July 28, Australia’s Treasurer Jim Chalmers announced the nation was on track to hand down a surplus for the financial year.

The federal government is touting its surpluses as proof of sound economic management, but consistent rises in core inflation in Australia while other countries have experienced relief has led to criticism.

Shadow Treasurer Angus Taylor said Labor had failed three budgets, which had put pressure on the RBA to keep interest rates higher for longer.

“There is no relief in sight for struggling families,” he told parliament.