RBA faces grilling over interest rates, cost of living
The Reserve Bank of Australia will have a chance to defend its interest rate decisions as households and businesses battle stubborn inflation and mortgage stress.
Governor Michele Bullock and her team will face the House of Representatives economics committee on Thursday, for a twice-yearly roasting.
The Reserve Bank board opted to keep the cash rate unchanged at 4.35 per cent when it met in August, and warned inflation was still too high to warrant rate cuts any time soon.
The central bank continues to calibrate its decisions with a target of two-to-three per cent inflation in mind, despite global uncertainty and domestic cost of living pressures.
The unemployment rate, another key measure for the board, edged up slightly to 4.2 per cent in July, official figures released on Thursday showed, but record workforce participation was expected to keep them wary of cutting rates.
The RBA is closely watching the strength of the labour market as it tries to strike the right balance between taming persistently high inflation and further stalling a slowing economy.
The central bank also views the pace of wage growth as being above sustainable levels, given little improvement in productivity.
To prevent wage gains adding to inflation, they need to be accompanied by productivity improvements to keep the cost of labour contained.
But as Deputy Governor Andrew Hauser recently warned, the chance of forecasts being precisely correct is “zero”.
The latest wage price index showed a rise of 0.8 per cent in the three months to June, down from a 0.9 per cent rise in March but still “very encouraging” for workers, according to Treasurer Jim Chalmers.
The annual growth in wages was higher than the annual inflation rate of 3.8 per cent in June, representing a gain in worker pay in real terms.
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