Australian central bank decides first rate hike in 11 years
CANBERRA, Australia — Australia’s central bank on Tuesday lifted its benchmark interest rate for the first time in more than 11 years. The cash rate increased from 0.1% to 0. 35% in a move potentially damaging to a government that will seek reelection on May 21.
Inflation in the latest March quarter was sharply higher than the 3.5% three months earlier. March’s result was driven by an increase in fuel and housing prices, as well as food shortages caused by recent Australian floods.
The Reserve Bank of Australia adjusts its interest rates to maintain inflation within a 2% – 3% target range. Philip Lowe, the bank’s governor, said that inflation had increased more quickly than expected but remained lower in advanced economies than it was.
” The economy has been resilient and inflation has risen faster than expected.
“There are also signs that wages growth is increasing. Lowe said that this, along with the low interest rates, makes it a good time to normalize monetary conditions.
The cash rate had been at a record-low 0.1% since November 2020.
In November, Lowe said the rate could remain that low until 2024, despite pandemic-induced inflation.
The bank last increased interest rates in November 2010. The cash rate then rose a quarter of a percentage point to 4.75%.
Morrison rejected a journalist’s suggestion that the rate hike would cost his government the election.
He stated that his government had already assisted Australians to cope with rising costs by temporarily halving gasoline tax at a cost $3 billion Australian dollars ($2.1B). The government also provided tax offsets and so called Cost of Living Payments to millions of low- and medium-income earners at a cost of AU$8.3 billion ($5.7 billion).
” I sympathize with Australians who are facing high living costs. Morrison stated that he sympathizes with Australians who are facing higher repayments on their homes.
“When looking around the world, you’ll see that there are few places people would rather be than Australia. This is due to the way we’ve guided this country through some of its most difficult times,” Morrison said.
The prices of residential properties in Australia surged by 24% last year, according to the Australian Bureau of Statistics. According to the Australian Bureau of Statistics, the souring cost of housing has made Australians one the most indebted people in the world. They are also ill-prepared for an increase in the cost money.
Opposition treasury spokesperson Jim Chalmers described the rate hike as a “full-blown cost of living crisis on Scott Morrison’s watch.”
“Scott Morrison’s economic credibility was already tattered and now it is completely shredded,” Chalmers said.
The S&P/ASX 200 fell 0.3% to 7,328. 80 on Tuesday.
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