Shock as inflation rises in Australia in April despite 11 interest rate hikes

Inflation rose despite the Reserve Bank raising interest rates 11 times in a year, raising fears of another hike next week.

The official monthly measure for April showed a reading of 6.8%, down from 6.3% in March, the Australian Bureau of Statistics revealed on Wednesday.

Economist Warren Hogan, managing director of EQ Economics, said the bad news could see the Reserve Bank raise interest rates again on Tuesday next week.

“Bottom line inflation is down from the peak, but doesn’t appear to be coming down fast,” he tweeted.

‘Confirms a strong tightening bias. Can’t rule out a hike next week.

It would be the 12th hike since May 2022, with rates already rising at the fastest pace since 1989, leading to a 56% increase in monthly variable rate mortgage repayments.

The 11th increase in a year this month took the cash rate to an 11-year high of 3.85%.

ANZ chief economist Adelaide Timbrell said the Reserve Bank of Australia could now raise rates again in June or July, followed by further increases due to this inflation data.

“Risk around our forecast of a 4.1% cash rate in August has been tilted towards earlier and/or larger action by the RBA,” she said.

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Economist Warren Hogan, managing director of EQ Economics, said the bad news could see the Reserve Bank raise interest rates again on Tuesday next week.

Staple food prices continue to rise, with bread and cereal prices climbing 11.4% year-on-year, while dairy prices rose 14.5%.

Food in general was 11.7% more expensive than a year earlier.

Electricity bills rose 15.2%, but that covered the period before Treasurer Jim Chalmers announced $500 relief on energy bills in the May budget.

The latest inflation figures were released shortly after Reserve Bank of Australia Governor Philip Lowe told a parliamentary hearing in Canberra that inflation could still remain high.

“While inflation expectations are still well anchored at the moment, we cannot take this for granted,” he told the Senate Economics Committee on Wednesday morning.

“Given what we are seeing internationally, I think inflation risks are more on the upside and we need to be mindful of that.”

Dr Lowe endorsed the federal government’s electricity price relief, but said that barring further interest rate hikes, only higher taxes would be warranted to curb consumer spending that fuels the economy. ‘inflation.

“The other way to reduce aggregate demand, at the moment, is to raise taxes or cut government spending – that’s tough,” he said.

“People are suffering from cost of living pressure, people are stressed.

“To say we’re going to respond to that with a tax hike – that would be a challenge for any government, wouldn’t it?”

The figures were revealed after Reserve Bank of Australia Governor Philip Lowe told a parliamentary hearing that inflation could still remain high

Dr Lowe argued that the Reserve Bank could do more to reduce inflation because it was independent and not subject to political pressure, but criticized the RBA review for not exploring other approaches to interest rates.

“So you leave the job of managing aggregate demand to the central bank,” he said.

“It’s easier for us to raise interest rates.

“I must say I was disappointed that the Reserve Bank review did not address this issue.”

The Reserve Bank still expects headline inflation, also known as the consumer price index, to return to the peak of its target of 2-3% in June 2025.

It relies more on the fuller quarterly CPI figure, which in March fell to 7% from a 32-year high annual rate of 7.8% in the December quarter.

But Dr Lowe said there was no guarantee that inflation would moderate on schedule.

“There is still a lot of uncertainty about household spending,” he said.

Dr. Lowe Inflation could remain high if wage increases do not occur at the same time as productivity improvements.

“The problem is low productivity growth,” he said.

“Over the past three years there has been no increase in average output produced per hour worked in Australia.

The official monthly measure for April showed a reading of 6.8%, down from 6.3% in March, the Australian Bureau of Statistics revealed on Wednesday (pictured is a Coles supermarket in Sydney)

“And that means unit labor cost growth in Australia is quite high.

“It’s a problem for the country and it’s also a problem for the inflation outlook.”

Dr Lowe, whose seven-year term expires on September 17, slammed the government’s review of the Reserve Bank, published in April, revealing he disagreed with a council’s recommendation monetary policy committee composed of six members.

“I don’t support the idea of ​​the monetary policy board being made up of economists or mostly economists – we have enough economists in the bank,” he said.

“One of my frustrations with the Reserve Bank review was that it made it look like at meetings I was coming in with my recommendation and my models and all my data, and saying ‘this is what we should do” and tell the board members ‘I hope you’re okay, let’s have lunch,'” Dr Lowe said.

“That’s the impression some people got, that’s not how it works at all.

He argued that the existing board, made up of business leaders – such as former Coca-Cola Amatil chief executive Alison Watkins – had experience running a business and was ideal to make interest rate decisions, even though they were not experts in economic theory.

“There is active debate and engagement,” Dr. Lowe said.

“I think we were very well served by having people from diverse backgrounds.

“What I really appreciate are people who have expertise in running private businesses, who understand the labor market and also have some kind of background to make public policy under uncertainty.”