Presented by Jones Partners
Inflation: 7.0 per cent
After a series of aggressive cash rate hikes implemented by the RBA, inflation has most likely peaked, and is now slowly beginning to fall. However, the most recent, surprise hike at the beginning of May demonstrates that inflation remains still too high. The RBA will continue to prioritise the reduction of inflation and will implement more cash hikes if needed. Supply chain issues continue to be a problem, particularly within the construction and food supply industries. The price of goods and services will likely not decrease for many months. There is a long road ahead until inflation is reduced to a healthy level of 2-3 per cent.
Cash Rate Target: 3.85%
The RBA has raised the cash rate twice since February 8th, with statistics showing these hikes are finally beginning to take effect and reduce inflation. However, the progress made is still too little. Further hikes in the future are a definite possibility. The RBA will most likely leave the cash rate for a month or two and monitor economic change closely. Hopefully, inflation will begin to decline more rapidly, as the full impact of the cash rate hikes circulate throughout the economy, reducing spending and slowing activity. The RBA will not lower the cash rate until meaningful progress is made to reduce inflation.
Economic Growth 2.7%
The RBA has been intentionally slowing economic growth, to combat inflation and reduce consumer spending and cash circulating through the economy. This slowed, economic growth is a positive indicator in the battle to reduce inflation. The significant spike in insolvencies is further evidence for slowing economic activity. Let’s hope the recession is avoided!
Wage Growth 3.3 per cent
Wage growth remains relatively consistent since the February update, still falling well behind inflation. Many Australians have expressed frustration with this sluggish statistic, but the reality is an increase in wages in line with inflation would fundamentally undermine the progress made by the RBA to reduce inflation. Australians continue to struggle with a high cost of living.
Unemployment Rate: 3.5 per cent
The unemployment rate remains consistently low. Since our last update, several major construction and supply companies have become insolvent, unable to remain commercially viable with such tight profit margins during high inflation and cost of living. This statistic will likely continue to increase in the coming months. A low unemployment rate is generally a bad indicator for the effort to control inflation. A tight labour market (low unemployment) generally increases wages and keeps demand strong, which causes firms to exhibit price-setting behaviours, perpetuating the inflated price of goods and services.