The Reserve Bank of Australia has decided to keep its official interest rate at 0.10 per cent, holding its record low level at this month’s meeting.
With the economy continuing to gradually increase, the RBA indicated that the cash rate won’t be lifted until inflation sustainably hits its desired range between 2 and 3 per cent, with wage rises the main factor.
Inflation rose 0.6 of a percentage point in the first quarter and at the moment, is now sitting at 1.1 per cent.
The RBA expects a temporary spike in the June quarter, it’s not expected for inflation to hit 2 per cent until mid-2023. Most experts are predicting the official interest rate won’t rise until 2023 or early 2024.
House prices have continued their national surge, with Sydney, Melbourne, Hobart, Brisbane and Adelaide hitting new record highs, Perth rebounding fast after years of decline and Darwin recovering ground.
Yet with those kinds of rises, wage growth is more critical than ever, and it’s up to the federal government to move to stimulate it, said Tom Hird of Competition Economists Group Asia Pacific.
It might well be that wage growth will come naturally in industries that are doing well, like the property sector, but others such as the hospitality sector are struggling, said Alex Lambros, director at Loan Market Unlimited. “Until they show real signs of growth, then wages will lag behind, and the RBA won’t change its rate.”