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It said Australia must move to monthly CPI data because the effect of last month’s rate increase was unknown.
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RBA responding to out-of-date number, says CPA Australia
08 June 2022
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CPA Australia said the RBA’s decision to lift interest rates by 50 bps to 0.85 per cent highlighted the need to report inflation monthly rather than quarterly.
“The RBA has relied on CPI figures for the March quarter,” said senior manager business policy at CPA Australia Gavan Ord.
“These are the same figures it relied on to raise interest rates by a quarter of a per cent in May; and will be the same figures it relies on at its July meeting. “Because Australia only reports CPI data quarterly, we have a limited understanding of the impact May’s interest rate rise had on inflation.”
Australia’s reliance on quarterly CPI figures meant it was out of sync with other major economies, Mr Ord said, with the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England all having access to data within weeks of making a rate decision.
“Current indicators point to inflation having continued a sharp upwards trajectory, and we support today’s decision. With inflation at a 20-year high, the RBA couldn’t afford to wait until June quarter CPI figures are released in late July before acting,” Mr Ord said.
“However, if the RBA had access to monthly CPI figures, like most advanced economies, it would be in a much better position to form a view and respond effectively.
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“This would also give governments, businesses, and other organisations more timely and accurate information to influence financial decisions.”
CPA Australia said in a high inflation environment Australia needed to be agile and the move to monthly reporting was now urgent.
“Relying on quarterly CPI data when the rest of the world gets it monthly, is like waiting at your letterbox for updates when your neighbour gets them on their phone,” CPA Australia said.
The general manager of technical policy at IPA, Tony Greco, said it was a return to business-as-usual for rates following the COVID-induced slowdown and the RBA would be keen to rein in inflationary pressures.
“The inflation genie unfortunately is forcing the RBA [to] fasten the rate of rate rises to combat rising cost pressures in the economy,” he said.
“Whilst some cost pressures are temporary (supply constraints) they are nonetheless forcing businesses to increase prices.
“As these feed into wage demands it can quickly lead to a sustained inflationary cycle something that the Australian economy has not experienced for some time.
“As all levels of government and households are heavily indebted, any rate rises will eat into budgets and discretionary spending. The RBA will be looking for signs to ensure the inflationary pressures do not get out of control as it contemplates the pace of future rate decisions.”
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