Australian bank lags global peers on rate hikes
BIn comparison, the main measures of core inflation tracked by central banks in the United States, Canada and New Zealand are all within 20 basis points of their targets.
“We see the RBA as now clearly, almost uniquely, focused on getting inflation back on target and expect it to continue with its highly expansionary parameters for some time to come, in an effort to keep the economy going. hot, ”Bloxham added.
Indeed, RBA Governor Philip Lowe himself believes the conditions for the board to consider policy tightening – high inflation and low unemployment – are unlikely to be in place until 2024.
Stronger-than-expected macroeconomic data in recent months has prompted the RBA to update its forecast for gross domestic product and employment in Australia.
But despite the recovery in economic activity, wage growth in Australia remains stubbornly weak, in large part because there is still sufficient spare capacity in the labor market and companies are not convinced to pass on the losses. higher costs on consumers.
In the sunny state of Queensland, for example, chefs are in high demand, but companies are unable to attract them by raising prices to cover their salaries.
“Businesses are limited by what they can charge their customers,” said Daniel Gschwind, managing director of the Queensland Tourism Industry Council. “At the moment, they are in a very difficult position and under enormous financial pressure.”
The RBA is unlikely to move on interest rates until wage growth exceeds 3%, compared to 1.5% currently.
By comparison, the Bank of Canada last month became the first major central bank to scale back money printing stimulus programs during a pandemic. Earlier this month, the Bank of England decided to slow the pace of its bond purchases, becoming the second central bank in a G7 economy to begin the slow exit from print stimulus programs. currency of the time of the pandemic.
The minutes of the last US Federal Reserve meeting showed that policymakers discussed whether slowing down the pace of asset purchases would be appropriate at some point.
Australia’s neighbor New Zealand is also expected to start tightening soon, with analysts forecasting interest rate hikes in the second half of 2022. Inflation in New Zealand is about 50 basis points lower to the central bank’s 2% median target.
(Reporting by Swati Pandey; Editing by Stephen Coates)
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