Today the independent Reserve Bank Monetary Policy Board increased the cash rate by 25 basis points.
We already had an inflation challenge in our economy but the war in the Middle East is making this challenge worse.
This will be really tough news for millions of Australians with a mortgage.
At a time of immense global instability, this will put even more pressure on families and businesses.
While today’s decision was expected by many, that doesn’t make it any easier.
Many Australians were already doing it tough and are now feeling the impact of conflict in the Middle East through higher petrol prices as well.
That’s why we’re rolling out responsible cost of living relief and taking action to give consumers a fair go at the bowser, through higher penalties, more surveillance and more supply.
Inflation has moderated significantly from its peak, but it is higher than we would like, and conflict overseas has put upward pressure on global fuel prices.
The duration of the conflict will be the primary determinant of how much pressure it adds to global inflation and how much it is a hit to growth.
Our inflation challenge reflects a mix of both temporary and persistent factors, including the end of energy rebates.
When we came to office, inflation was north of six per cent and rapidly rising, it’s now much lower than that. Underlying inflation was almost five per cent, it’s now also much lower.
The Board’s statement today does not mention government spending. As the RBA has made clear repeatedly this year, the pressure on inflation at the end of last year came from stronger than expected growth in private demand.
The most recent National Accounts showed that within a year, annual private demand growth more than tripled but annual public demand growth more than halved.
We recognise people are still under pressure, which is why we’re continuing to roll out responsible cost of living relief including tax cuts for every taxpayer, slashing student debt, cheaper medicines and more bulk billing.
At the same time, we’re doing what we can to strengthen the budget and address Australia’s longstanding productivity challenge.
The budget is more than $233 billion better than we inherited and we’ve found more than $114 billion in savings since coming to office.
The Australian economy is not immune from challenges overseas but we are well placed and well prepared with faster growth than any major advanced economy, low unemployment and solid wages growth.
The Albanese Government’s three main economic priorities are addressing inflation, productivity and global uncertainty to help make our economy more resilient, and today’s decision highlights why this is so important.