Governor Philip Lowe has stood by his latest cash rate hike, claiming the economy would be a lot worse if the Reserve Bank did not intervene.
On Tuesday the central bank lifted the cash rate by another 25 basis points to 4.10 per cent, the highest level since 2012.
The decision, which will inflict further pain on households, has led some commentators to condemn the move. It came after the latest Consumer Price Index data revealed annual inflation increased from 6.3 to 6.8 per cent in the year to April.Speaking in Sydney on Wednesday, Mr Lowe said the alternative of not acting to combat inflation would be a lot worse, pointing to the risks of a weaker economy.
“Its effects are felt unevenly across the community, with rising interest rises causing significant financial pressure for some households,” he told a Morgan Stanley forum.“It is certainly true that if the board had not lifted interest rates as it has done, some households would have avoided, for a short period, the financial pressures that come with higher mortgage rates.”
Mr Lowe cautioned that if the Reserve Bank had not acted to attack inflation, the cost-of-living crisis would be a lot worse for struggling households.Getting wages moving again is a deliberate design feature of theWeâre proud of the progress weâve made but we know that we need to do much more to get the real wages growth that people need and deserve.
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