RBA slammed for pushing rates 'too far'
The Reserve Bank of Australia (RBA) has been slammed by a leading economic firm Deloitte Access Economics for pushing interest rates “too far”.
“As Deloitte Access Economics has been warning for the past 12 months – and as the Reserve Bank’s own research shows – excessive inflation in Australia has mostly been caused by supply side factors, meaning that interest rate increases have mostly been ineffective at bringing inflation under control,” Deloitte Access Economics partner, Stephen Smith said, as reported by news.com.au.
Mr Smith said new data showing inflation was now running at 6% in the year to June (down from 7% in March) was “further evidence that the Reserve Bank has increased interest rates too far”.
“Rather, inflation has fallen as a result of repairs to global supply chains and an easing of import prices.
“The Australian economy is softening dramatically, the pace of inflation has peaked and is moderating quickly, wage growth is not excessive and medium-term inflation expectations are not rising. In that context there should be no further interest rate increases in Australia.”
“In those areas of the Australian economy that are still seeing strong price growth – namely housing and energy markets – supply side challenges are similarly to blame,’’ he said.
“Higher interest rates will not encourage a faster energy transition, nor unleash a wave of home building. Instead they will make these issues worse.
“A narrow, dogmatic view of the link between unemployment and inflation fails to recognise the key sources of excessive inflation in Australia at present, and therefore misdiagnoses the correct policy response.”
Mr Smith told news.com.au the RBA should’ve lifted interest rates a little but not as sharply as they did.
Little comfort for workers smashed by rate rises
Queensland Council of Unions Acting General Secretary Jacqueline King said the Deloitte findings would present little comfort for workers smashed by rate rises.
“It’s been pretty obvious to workers for a long time now that their pay packets and spending were not driving inflation.
“In fact most workers have been dealing with rising mortgage, rents and living expenses – and making do with far less.”
Ms King said Deloitte’s findings were a damning assessment of the RBA.
“Unions have been saying for many months now that the RBA’s policy failures are harmful to working families, yet the high-handed policy interventions from central bankers have persisted,” she said.
“It’s obvious that the bank has been out of touch with working people and content to see wages stagnate while corporate profits soar.”
Jacqueline said it was important that working peoples’ voices are central in monetary policy decisions.
“We need an economy that works for everyone, an economy that provides good, secure jobs.
“We want to see Australians not just making ends meet, we want to see them with money to spare to live dignified and fulfilling lives.”