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The Reserve Bank has announced its cash rate decision following its rate increase last month to start the year.
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RBA reveals March interest rate decision
07 March 2023
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The RBA has decided to increase the cash rate target by 25 basis points to 3.60 per cent, the 10th consecutive rise and highest level since May 2012.
CreditorWatch’s chief economist Anneke Thompson said the rate increase would significantly hamper consumer and business sentiment as borrowers of both are further squeezed.
“In February we learned that while the Australian economy continued to grow in the December quarter, the growth rate slowed substantially,” said Ms Thompson. “Australian Gross Domestic Product grew by 0.5 per cent over the December quarter, down from 0.7 per cent in the September quarter and 0.9 per cent in the June quarter.”
“Importantly, for both the inflation and cash rate outlook, growth in household spending rose by a moderate 0.3 per cent.”
“This will give the RBA comfort – among other important indicators like monthly retail trade and labour force – that its efforts to reduce inflation are working. Unfortunately, the flip side to this success is continued pain for the Australian consumer, and ultimately businesses.”
Ms Thompson said the increasing rate had seen businesses become more cautious with those they deal with due to the tougher economic conditions.
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“Businesses are clearly more concerned about the financial stability of the businesses they are trading with, given the economic conditions and large decline in consumer sentiment,” she said.
“Overall, the picture for Australian businesses is looking increasingly more complicated as we move through 2023, there is no doubt that businesses will find trading conditions far more challenging this year than last.”
“On the bright side, it does appear that inflation has peaked. This gives us confidence that pricing data coming through this year should, based on sentiment levels, show continued moderation in growth levels of inflation.”
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