Reserve Bank governor Michele Bullock says the war in the Middle East has driven up inflation that was already too high in Australia.
“We are all feeling poorer,” Bullock said shortly after the RBA’s announcement of a third interest rate rise this year, which is now expected to push up household expenses.
“Inflation hurts all Australians because its eats away at the purchasing powers of our money … And Australians are poorer because of this shock to energy prices.
“So we are poorer, and there is no way out of that. The trade-off is much worse.”
Asked if the interest rate was now at the right level to drive inflation back down to the RBA’s target, Bullock said: “We’re now in a position where we’ve got space to be alert to the risks … if the war continues.
The new interest rate of “4.35 now might not be quite as restrictive as we thought it was back then, when it was 4.35 the first time”, she added.