Shock as Australia’s inflation surges despite 11 rate hikes as experts reveal why pain may continue to mount
- Inflation rose 6.8 percent in April
- This was more than the 6.3 percent increase in March
Inflation has risen even as the Reserve Bank has hiked rates 11 times a year – raising fears of another rate hike next week.
The official monthly measurement for April came in at 6.8 percent, up from 6.3 percent in March, Statistics Australia said on Wednesday.
Economist Warren Hogan, chief executive of EQ Economics, said the bad news could result in the Reserve Bank raising rates again next Tuesday.
This would be the 12th hike since May 2022, with rates already posting their sharpest rise since 1989, at 11 hikes a year.
“Bottom line inflation has come off the peak but doesn’t look like it’s going down anytime soon.” Confirms a strong tightening bias. “I can’t rule out an increase next week,” Mr Hogan tweeted.
Inflation has risen despite the Reserve Bank raising interest rates 11 times a year.
The figures came after Reserve Bank of Australia Governor Philip Lowe told a parliamentary hearing that inflation could remain high if wage increases are not matched with productivity gains.
“The problem is weak productivity growth,” he told the Senate Economic Committee on Wednesday.
“There has been no increase in average production per hour worked in Australia over the past three years. No raise for three years and that’s a problem.
“And that means unit labor cost growth in Australia is pretty high.”
“It’s a problem for the country and it’s also a problem for the inflation outlook.”
The Reserve Bank continues to expect headline inflation, also known as the consumer price index, to peak again at its target of two to three percent in June 2025.
It leans more towards the quarterly figure, which fell to 7 percent in March, compared to a 32-year high of 7.8 percent in the December quarter.
But dr Lowe said that was no guarantee that inflation would moderate as planned.
“There is still a lot of uncertainty about budget spending,” he said.
“While inflation expectations are still well anchored for now, we cannot take that for granted.”