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Another increase by 50 basis points takes the rate to 2.35 per cent.
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RBA raises interest rates for fifth month in a row
07 September 2022
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The RBA has raised the cash rate for the fifth month in a row and for the fourth time by 50 basis points, increasing it to 2.35 per cent.
The rise matches those of the past three months with the rapid growth of the cash rate the steepest since 1994.
In his statement, RBA governor Philip Lowe said the board would stay committed to its goal of reducing inflation to the ideal 2 to 3 per cent range by increases to the cash rate.
He expected them to bring inflation under control with it peaking later this year before declining to within the ideal range sometime in 2024.
He said the RBA would monitor the behaviour of household spending which remained unclear as Australians had a financial buffer of increased savings.
The RBA would also carefully observe the tight labour market, which has seen an increase in wage growth resulting in a further cost to businesses.
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CPA Australia general manager media and content Dr Jane Rennie expected further rate increases before the end of the year and said inflation, interest rates, and increasing labour costs were all leaving businesses worse off.
“This is the fifth consecutive month of rate rises by the RBA,” said Dr Rennie. “We expect there will be further rate rises this year, notwithstanding that the RBA has said it’s not on a preset path.”
“Interest rate rises deliver a double whammy to businesses — not only do they see their own costs go up, but consumers often reduce their spending in response.”
“Accountants can play an important role right now advising businesses how to improve their cash flow, such as by collecting debts and reducing stock levels.”
CreditorWatch chief economist Anneke Thompson said the RBA would continue to raise rates even if consumer confidence began to dip as savings were eroded.
“The RBA is not shying away from its goal of bringing inflation back inside the target band, and today further increased the cash rate target,” she said.
“We expect that the RBA will not hit the pause button on cash rate increases until retail trade data starts to better reflect downbeat consumer sentiment.”
“However, increasing the complexity for the RBA is the record low unemployment rate. The question is, will consumers be spooked enough by their savings falling to reduce their spending even when job security is so high?”
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