Cash rate rises to highest point in more than 11 years

RESERVE BANK LIFTS RATES

The Reserve Bank board has decided at its June meeting to raise the cash rate by 25 basis points to 4.1 per cent, the highest point since April 2012.

* The RBA says wages growth has picked up in response to the tight labour market and high inflation, with public sector wages set to rise and the annual increase in award wages higher than it was last year

* But at the aggregate level, wages growth is still consistent with the inflation target, provided productivity growth picks up

* The path to a ‚Äúsoft landing‚ÄĚ in getting inflation back to two-to-three per cent ‚Äúremains a narrow one‚ÄĚ

* The consumption outlook is ‚Äúa significant source of uncertainty‚ÄĚ, as is the state of the global economy

* The RBA says it needs to take action because high inflation ‚Äúerodes the value of savings, hurts family budgets, makes it harder for businesses to plan and invest, and worsens income inequality‚ÄĚ

* ‚ÄúIf high inflation were to become entrenched in people‚Äôs expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment‚ÄĚ

* While goods price inflation is slowing, services price inflation is still very high

 

Paul Osborne
(Australian Associated Press)

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