Sign up for the Breaking News Australia email<\/a><\/p>\nThe stagflationary effect of the oil supply shock would come through a higher peak in inflation, with consumer price growth forecast to reach 4.8% in the year to the June quarter, versus a prewar estimate of 4.2%.<\/p>\n
Bullock said the oil price spike from the war would send prices soaring regardless of interest rate efforts.<\/p>\n
\u201cWe are poorer and there is no way out of that,\u201d she said.<\/p>\n
\u201cThese interest rate rises are not going to do anything for inflation in the next six months. That\u2019s done and dusted.\u201d<\/p>\n
Rate rises were instead aimed at keeping control of local businesses\u2019 price hikes and workers\u2019 wage claims, Bullock said.<\/p>\n
\u201cThese second round effects could lead to even higher and persistent inflation, and if so, would require even more tightening in monetary policy,\u201d she said.<\/p>\n
Eight of the RBA\u2019s board members voted for the increase but one voted to leave rates on hold. Bullock said \u201cone reason for deciding to increase interest rates [was] to give ourselves space now to sit and see what happens\u201d.<\/p>\n<\/p>\n
A week out from what the treasurer, Jim Chalmers, is simultaneously calling his most ambitious and responsible budget yet, the RBA\u2019s decision will deliver a blow to the more than 3m mortgaged households.<\/p>\n
Bullock, who has historically refrained from commenting on government spending, said on Tuesday governments could help fight inflation by limiting their spending.<\/p>\n
\u201cThe extent to which government make up the shortfalls for households by giving them more money, it makes it harder to dampen demand,\u201d Bullock said.<\/p>\n
\u201cIt has to be careful, I guess, in the sense that it needs to be targeting where it\u2019s most needed. . \u2026 You can\u2019t just go out there and add to demand.\u201d<\/p>\n
Chalmers said the budget would respond to the inflation challenge but added government spending was not the main reason for price pressures.<\/p>\n
\u201cWe intend to play a helpful role, not a harmful role, in the fight against inflation,\u201d he said.<\/p>\n
The shadow treasurer, Tim Wilson, said the government\u2019s failure to cut spending was already adding to inflation.<\/p>\n
\u201cWhile Australian households are being told to pull their belt in, the Albanese government seems disinterested and unwilling,\u201d Wilson said.<\/p>\n
The RBA on Tuesday also updated its forecasts for the Australian economy. In its baseline, which assumes a relatively rapid end to the Middle East conflict, Australians would suffer another year of falling living standards, as prices rise faster than pay packets.<\/p>\n
The hit to growth would not see a short-term surge in unemployment, with the jobless rate expected to be at a relatively low 4.3% by the end of this year.<\/p>\n
The RBA also explored two \u201cadverse\u201d scenarios involving a more extended conflict that leaves oil prices higher for longer.<\/p>\n
Under the more extreme version, unemployment was forecast to push above 5% as the economy slows more sharply.<\/p>\n
Even under this more pessimistic scenario, however, the country escapes recession, according to the forecasts, although the RBA said it did not attempt to model what would happen were Australia to run short of fuel.<\/p>\n","protected":false},"excerpt":{"rendered":"The Reserve Bank governor has said surging oil prices in the wake of the US-Israel war on Iran…\n","protected":false},"author":2,"featured_media":577270,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":["post-577269","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/577269","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=577269"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/577269\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/577270"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=577269"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=577269"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=577269"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}