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Rate rise necessary to tame accelerating inflation
07 Jun 2022 | Media Release
The Reserve Bank’s decision to hike the cash rate for a second time in two months by 50 basis points from 0.35 to 0.85 per cent reveals the mounting stresses on the economy.
“While the half a per cent increase was more aggressive than what many analysts predicted, the decisive action taken by the Reserve Bank was understandable to normalise monetary settings and tame inflationary pressures,” ACCI chief executive Andrew McKellar said.
“Inflation is hitting businesses especially hard, particularly surging energy prices.
“Having survived the pandemic, small business owners are now confronted with supply chain constraints and worker shortages, forcing them to raise their prices or absorb increases within already thin margins.
“As well as increasing costs to consumers, small business owners will face higher repayments on existing loans and will need to factor in increased rates on new investments.
“Future consumer spending is also at risk. Although we’ve seen strong growth in household budgets through the pandemic, increasing inflationary pressures are likely to trim consumer spending in the second half of 2022.
“In light of today’s decision, the Fair Work Commission must be cautious not to pursue aggressive wage increases which have the potential to spur greater inflationary pressures.
“The RBA can only do so much. The overriding priority for the new federal government is to pull all the levers it can to address the supply side constraints that are driving up inflation and holding back the economy.